Archive for the ‘Guest Posts’ Category

International Efforts in Support of the Recovery of Stolen Assets

Wednesday, November 4th, 2015

Asset RecoveryProfessor Juliet Sorensen (Northwestern University School of Law) and Northwestern Law students Michelle Kennedy and Cassandra Myers are attending the Sixth Conference of the State Parties (CoSP) to the United Nations Convention against Corruption in St. Petersburg, Russia. For more on the opening of the Conference, see here and hereOver the next few days, FCPA Professor will be publishing various posts regarding the proceedings.  

This post is from Michelle Kennedy.

*****

A central challenge to addressing corruption is the recovery of assets that were stolen through the course of the corrupt activity. This process, which requires complex international cooperation when the assets are secreted overseas, was explored in depth at an all-day special event that joined several important actors.

The Stolen Asset Recovery Initiative (“StAR”), a partnership between the World Bank Group and the UN Office on Drugs and Crime, facilitates the return of stolen assets by setting international standards and enhancing communication among countries. In order to act as an effective intermediary, StAR must receive an official request from the country itself, not from private parties. Surprisingly, the average time that StAR takes to respond to country requests ranges between just twenty-one days and four and a half months. StAR also provides case-based technical training to enable the participating countries to effectively deal with the asset recovery issues themselves. A common critique of the program, however, is that developing countries do not have the necessary resources to retain and maintain the components of an effective domestic asset recovery program, such as investigators and experts. StAR’s response that its purpose is to aid countries in asset recovery, not to do the job for them.

A central challenge StAR faces involves countries that have and continue to undergo dramatic changes in governance, which disrupts any programs StAR has helped implement. Similarly, a lack of mobilization and good will from certain countries creates roadblocks for compliant countries to effectively recover stolen assets. Overall though, StAR has successfully returned $28.8 million in stolen assets as well as $58 million worth of physical assets. In two examples discussed today, StAR aided Tunisia in overcoming the influx of corruption after its 2011 revolution by organizing meetings between Tunisian judges and their foreign counterparts to aid them in dealing with corruption cases. It also recently helped Mongolia in equipping its domestic law enforcement organizations with the necessary tools to trace, identify, and recover stolen assets as well as draft a handbook that is to be formally approved within the month.

In terms of available resources, the UNODC has created a Digest of Asset Recovery Cases, which highlights notable corruption cases and traces the recovery of the stolen assets involved. Within the next year, the UNODC will release a new resource, entitled the Effective Management and Disposal of Seized/Frozen and Confiscated Assets, to help states strengthen their domestic management of assets that are seized from corrupt networks. Countries who manage asset recovery funds in a transparent manner are more likely to receive support from other countries, which highlights the prominent theme that international cooperation is essential to improving the overall recovery of stolen assets. Another new resource is the “Silver Notice” now issued by Interpol, which aids countries in locating, identifying, monitoring, and seizing or freezing the confiscation of assets. This provides countries the opportunity to alert one another of any movement of illicit assets and thus enhance the speed of international cooperation.

To conclude the panel, Switzerland presented its 2014 draft of Proposed Practical Guidelines for Efficient Asset Recovery, which has yet to be officially adopted. The overall message was that the preliminary investigation phase of asset recovery is the most important, given that corrupt individuals are becoming increasingly clever and more aware of when they are suspected of possessing illegal proceeds or fruits of crime. States must therefore carefully identify their targets, create a clear strategy, and exhibit patience to ensure that their investigation of stolen assets and eventual recovery proves successful.

Finding A Solution To The Public – Private Corruption Dichotomy

Wednesday, November 4th, 2015

public-privateProfessor Juliet Sorensen (Northwestern University School of Law) and Northwestern Law students Michelle Kennedy and Cassandra Myers are attending the Sixth Conference of the State Parties (CoSP) to the United Nations Convention against Corruption in St. Petersburg, Russia. For more on the opening of the Conference, see here and hereOver the next few days, FCPA Professor will be publishing various posts regarding the proceedings.  

This post is from Cassandra Myers.

*****

In the context of the international market, anticorruption measures are a necessary component to cultivating a thriving public and private economy.

As Alexander Govorunov, the vice-governor of St. Petersburg, simply put it: “Corruption is evil . . . The whole arsenal needs to be put into work here.” During the Convention Against Corruption’s special event on partnerships between the public and private center in combating corruption, Russia outlined its strategies for becoming a world leader in bridging the private/public sector gap.

Encouraging countries to adopt legislation wherein cooperation between public and private sectors can flourish increases the anticorruption movement’s credibility and impact. The way to do this, according to the Executive Director of the United Nations Office on Drugs and Crime Yuri Fedotov, is to make anticorruption measures part of an overall management scheme to be implemented, rather than a compliance exercise to be fulfilled. Proponents aim to show the private sector that “combatting corruption is good for business,” as it lowers prices, enhances reputations among consumers, and creates meaningful competition.

A significant management program serves as the blueprint for a strong anticorruption foundation; it must include partnerships between private companies and local governments in their countries. This “joining [of] forces” entails both parties investing in strengthening and sustaining public infrastructure as well as skills development training for employees. While anticorruption initiatives are helpful, effective cooperation where all parties are invested will yield the ideal results.

For Russia, in its hope to become an example to the world and enhance its global reach, the public-private partnership plan focuses on four factors: openness, transparency, prevention of conflicts of interest, and responsibility. Oleg Plokhoy, the head of the Department on Combating Corruption of the Presidential Administration of Russia, outlined how their plan translates from the public to the private sector, noting that while corruption is “mostly associated with public servants,” it remains widespread in private business. In the current anticorruption measures, 1.5 million public employees are covered, but in the 1000 criminal cases of public corruption filed, nearly 1/3 include criminal corruption activity with a private business. This shows the pivotal need for private anticorruption measures.

By reducing the presence of conflicts of interest between public and private employees and increasing enforcement while stiffening penalties for private corruption, Russia intends to combat corruption from both the “acquaintance” route, that is, relationship-based governance, and the profit, or “thing of value” route.  Thorough conflicts checks will deter patronage, and increased criminal and administrative penalties for private businesses will make corruption less profitable and thus, less appealing to private business.

All of the speakers cited the standards articulated in Article 12 of the UNCAC treaty, which includes recommendations for better implementation and enforcement of anticorruption policies for private businesses. The Dean and Executive Secretary of the International Anti-Corruption Academy, Martin Kreutner, pointed out that “For every contract globally, [at least] 10% of the expenses go to corruption.” It’s time the parties to the convention adopted more specific resolutions focusing on the private sector. The last time any such resolutions were adopted was at the 2013 Convention Against Corruption in Panama City, Panama.

The final question broached by panelists considered just how much involvement private actors—businesses and NGOs alike—could have in the discussion and implementation of anticorruption measures. On one hand, allowing businesses to be involved in the decision-making process encourages greater accountability and responsibility in the partnerships. On the other, the practice may encourage lobbying efforts, something that the member countries may want to deter. Anatoly Vyborniy, Chairman of the Russian Chamber of Commerce for Business Security, called for more regulation of lobbying efforts, as the practice hurts mutual trust and undermines the value of high level dialogue between the public and private sectors.

The member countries will continue to foster public and private cooperation and craft solutions to that end, with Russia aiming to lead by example.

FIFA – A Beautiful Cesspit Of Corruption?

Wednesday, October 28th, 2015

FIFAToday’s post is from Professor Bruce Bean (Michigan State University College of Law). Professor Bean, who had a diverse practice career including at various law firms and in-house counsel positions, will be leading a panel discussion about the FIFA bribery scandal at International Law Weekend at Fordham University in New York City on November 7th.  (See here for more information).

*****

FIFA, the organization controlling the world’s most popular sport, “football,” (“soccer” to those in North America), is formally known as Fédération Internationale de Football Association. FIFA is very big business. 209 national and other football associations from Andorra to Russia and the Faroe Islands to Australia make up FIFA membership. See here.  In the past three decades television and other broadcast rights, plus corporate sponsorships by international brands like Nike, Coca Cola and Visa have vastly increased the resources now involved in global football and, in particular, its quadrennial world championship, the FIFA World Cup. Between 2007 to 2014 FIFA had $10 billion in revenues and, as a Swiss registered NGO, it paid no taxes on its $969 million in profits.

Perhaps the greatest player of all time, Brazil’s legendary Pelé, published My Life and the Beautiful Game in 1977. The phrase the “beautiful game” is still synonymous with football.  In 2014, however, a whistleblower leaked “hundreds of millions” of FIFA documents to journalists at the London Sunday Times. Early in 2015 Heidi Blake and Jonathan Calvert published The Ugly Game: The Corruption of FIFA and the Qatari Plot to Buy the World Cup, describing a decidedly not very beautiful game.

In fact, FIFA has a decades-long, undistinguished, undisturbed history of involvement in scandals, bribery and corruption. In 2009, the Financial Action Task Force, the international anti-money laundering organization, released a report describing FIFA’s role in money-laundering, game-fixing, illegal gambling, and more. See here. Despite the great popularity of football in Europe and the rest of the world, and unending reports of FIFA corruption, no significant action had ever been taken against FIFA and its allegedly corrupt officials by a nation where football reigns supreme.  In the United States, international football is a minor sport, although there is a growing number who participate.  Nevertheless, on May 20, 2015 the United States Department of Justice an indictment in the U.S. District Court for the Eastern District of New York.  See here.  A Brooklyn Grand Jury returned the Indictment against nine current and former FIFA officials and five businessmen involved with FIFA. The release of the Indictment was coordinated with simultaneous raids and arrests by U.S. and Swiss officials at FIFA facilities in Miami and FIFA headquarters in Zurich. In addition to 14 defendants specifically charged, the Indictment refers to 25 unnamed co-conspirators.

The Indictment details $150 million in bribes paid on behalf of privately-held sports marketing companies to secure broadcast and marketing rights from FIFA for its various regional competitions and for the FIFA World Cup.  The charges filed include racketeering, conspiracy, wire fraud, money laundering, obstruction of justice, tax evasion, and, in one case, the unlawful procurement of naturalization.

Shortly after the US Department of Justice intruded into the world’s most popular sport by announcing the Indictment, Russia’s President Putin declared “This is another blatant attempt to extend [U.S.] jurisdiction to other states.” See here.  Offering a decidedly differing view, the Economist commented on the fact that it was the United States, where football is not that popular, that had finally taken steps regarding FIFA.  “America has a long history of being tougher on white collar crime and corruption than other countries….   Most of Europe is happy [with the U.S. bringing this action], believing that FIFA has long been a cesspit of corruption in desperate need of fresh faces and reform.”   See here.

Strangely, notwithstanding the fact that the U.S. has both the FCPA and the best record of prosecuting international bribery, there are no FCPA allegations in the entire 161 pages of the Indictment.  Why does this year’s highest profile bribery and corruption case not include a single allegation of an FCPA violation?  See this prior FCPA Professor post. FCPA charges were not eliminated because the Department of Justice suddenly decided to abandon its (over)broad view of the jurisdictional nexus required to apply U.S. law to foreigners.  See here.

Rather, there are no FCPA allegations because the FIFA officials allegedly involved with the bribes the Indictment describes are not “foreign officials” as described in the FCPA.  The FCPA defines the “term “foreign official” [as] any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization….”  The FCPA further provides that “’public international organization’ means any … international organization that is designated by the President by Executive order for the purposes of this section, effective as of the date of publication of such order in the Federal Register.”   See here.

The current list of public international organizations includes 80 entities, ranging from the United Nations to the International Fertilizer Development Institute and the Pacific Salmon Commission.  Adding FIFA by Executive Order seems logical and straight-forward.  While FIFA is a private organization, it is responsible to no one and exercises extraordinary power over sovereign nations.  For instance, in October 2015 FIFA banned the Kuwaiti national football team from international play because of a dispute over a Kuwaiti law. See here.  In connection with the FIFA World Cup held in Brazil in 2014, FIFA insisted that Brazil exempt all twelve Brazilian World Cup venues from a 2003 national law prohibiting the sale of alcohol at football matches.  As the FIFA General Secretary announced on a trip to Brazil prior to the commencement of World Cup activities,  ”Alcoholic drinks are part of the FIFA World Cup, so we’re going to have them. Excuse me if I sound a bit arrogant but that’s something we won’t negotiate.” See here .

Given the supreme importance of the sport of football in most countries, the long history of scandalous allegations about FIFA and the fact that FIFA is entirely self-governing, responsible to absolutely no one outside itself, there is a strong argument that FIFA should be added to our list of international public organization.

This is not necessarily an easy task, however.

When concerns about corruption possibly related to the Salt Lake City Olympics arose in the late 1990s, three bills were introduced in Congress seeking to bring the International Olympic Committee within the FCPA.  As the FCPA Professor has previously noted, “None of these bills made it out of committee.”  See here.

Given that Congress has been unable to accomplish anything recently, let’s hope the President will act.  He (or perhaps she in the near future) has the authority under 22 USC 288 to designate “public international organizations.”  Adding FIFA to this list will finally bring the ultimate power over international football within the scope of the FCPA.  

A Recent Decision in France Applies “International Double Jeopardy” Principles to U.S. DPAs

Thursday, October 15th, 2015

Double JeopardyToday’s post is from Frederick Davis and Antoine Kirry of Debevoise & Plimpton. The post originally appeared in the firm’s always stellar FCPA Update and is republished below with permission.

The post provides a comprehensive summary and analysis of a recent French court decision that applies double jeopardy principles to U.S. deferred prosecution agreements.

*****

Multi-national corporations – and the individuals who work for them – increasingly confront criminal investigations by authorities in two (or even more) countries at once for essentially the same acts. A very recent decision in France rules, for the first time, that companies that signed Deferred Prosecution Agreements (“DPAs”) in the United States cannot be further prosecuted in France.

The practical effect of the decision may for the moment be limited to multinational investigations involving France (and since it is subject to appeal, it may not definitively state the current status of the law even there). But the issue of “international jeopardy” is of increasing concern and importance, and this decision may well have an impact in the development of the law.

The Problem

There are several scenarios that could lead to multiple (or parallel) prosecutions: often the acts constituting a criminal offense may have occurred in several different countries, thereby making each country potentially competent to investigate the entire crime of which the acts that took place on its territory were a part; most countries’ criminal laws provide that the government can prosecute its own nationals for criminal acts committed outside the national territory, which may overlap with “territorial” jurisdiction in other countries; and some countries – notably the United States – are expansive in determining their own power to prosecute, and may base a criminal investigation, for example, on the mere fact that a target used U.S. dollars to consummate an activity that otherwise took place entirely abroad. Generally speaking, a company or person in this situation faces a difficult (and often critical) strategic challenge of how to manage the various threats. One obvious risk is that if a target enters into any agreed-upon outcome – such as a guilty plea, a Deferred Prosecution Agreement or Non-Prosecution Agreement (“NPA”) – or even if he/she/it enters into discussions with authorities in one country in the hope of persuading them not to prosecute, the authorities in another country may learn of the underlying issues – either independently or because of publicity of the outcome of the first set of negotiations – and begin a new investigation seeking further penalties.

Most countries recognize that it is unfair to subject the same person or company to multiple prosecutions for the same acts. This principle is enshrined in the U.S. Constitution in the well-known Double Jeopardy Clause appearing in the Bill of Rights; in Europe and elsewhere the principle is generally known under the Latin phrase “ne bis in idem.” While such domestic constitutional provisions or laws are quite similar, there does not exist a universally accepted international norm, and the protection afforded by the laws in one country may offer no protection in another. As a result, targets of multiple investigations and their counsel generally rely more on their strategic negotiating skills than on a research of legal rights to avoid (or minimize) the risk of multiple prosecutions across borders. As multi-national investigations increase, however, the issue is receiving renewed attention in academia, in colloquia, and in “blog” discussions of the subject.Corporate counsel often inveigh against the threat of multiple prosecutions, and call for reform.

A very recent decision of the Criminal Court in Paris has taken a bold step in advancing this debate: In a decision announced on June 18, 2015, but explained in a written decision released only in September 2015, the Court acquitted four French corporations that were facing trial under French anti-corruption laws on the ground that they (or their corporate parents) had already signed DPAs with the United States Department of Justice (“DoJ”) and thus could not, consistently with French international obligations, be prosecuted a second time for what the Court found to be the same facts. The significance of this ruling remains to be seen: as a non-common law country, France does not consider such decisions to be “precedent,” and in any event the Public Prosecutor is appealing this acquittal (which French criminal procedures permit him to do) and the Paris Court of Appeals may reach a different conclusion when it rules on the matter, presumably in 2016. At a minimum, however, the decision provides an interesting and useful perspective on a matter of increasing importance.

The Basic Framework

Multiple prosecutions are not new, and can occur under a wide variety of criminal laws; the current prosecution and continuing investigation of senior officials of the international soccer organization FIFA for alleged fraud and corruption is perhaps the most noteworthy recent example. In terms of numbers, however, the surge of multiple prosecutions dates to international efforts to fight overseas corruption, and in particular to the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, adopted by the Organization for Economic

Co-Operation and Development (“OECD”) in 1997, which has been signed by all the major countries of Europe as well as many others, and which led to the transposition into domestic laws of signatory nations of criminal prohibitions generally similar to the U.S. Foreign Corrupt Practices Act (“FCPA”). A person or company engaging in overseas corruption anywhere in the world now faces the risk of prosecution in any signatory country where he/she/it may have sufficient contacts, either by citizenship or place of incorporation, or as a place where relevant acts took place.

The OECD Convention clearly contemplated the likelihood of multiple or parallel investigations. Article 4.1 of the Convention obligates each signatory country to “take such measures as may be necessary to establish its jurisdiction over the bribery of a foreign public official when the offense is committed in whole or in part in its territory” (emphasis added), and in Article 4.2 contemplates that each signatory country may have jurisdiction “to prosecute its nationals for offenses committed abroad . . . .”

Having recognized the conditions that create a risk of multiple investigations, the Convention then provided for no legally enforceable ban on multiple prosecutions, but rather stated (in Article 4.3) as follows:

When more than one Party [i.e., signatory country] has jurisdiction over an alleged offence described in this Convention, the Parties involved shall, at the request of one of them, consult with a view to determining the most appropriate jurisdiction for prosecution.

This provision clearly envisioned that each offender should ideally face no more than one prosecution, since it directs the multiple nations that may have had “jurisdiction over an alleged offense” to consult “with a view to determining the most appropriate jurisdiction for prosecution.” What the drafters apparently hoped was that, through such consultations, one, but only one, country would actually prosecute. While this provision has been cited for the proposition that a unitary prosecution should be a goal, arguments that it requires a single prosecution by prohibiting multiple ones have been routinely rejected, as illustrated by United States v. Jeong, 624 F.3d 706 (5th Cir. 2010), a case in which a businessman already convicted of corruption in Korea claimed that Article 4.3 of the OECD Convention preluded further prosecution in the United States for the same facts. The Court rejected this argument, noting:

[W]e conclude that the plain language of Article 4.3 does not prohibit two signatory countries from prosecuting the same offense. Rather, the provision merely establishes when two signatories must consult on jurisdiction.

As a result, multiple prosecutions for the same acts have in fact occurred with some regularity. One of the earliest under an OECD Convention-compliant national prosecution involved the Norwegian state oil giant, StatOil. As is well known, StatOil was prosecuted by Norwegian authorities and ultimately paid a significant penalty there. Apparently to its shock – and to the surprise of the Norwegian prosecutors – the United States Department of Justice thereupon commenced an independent investigation, which resulted in StatOil agreeing to additional fines for what apparently was the same set of facts that had been involved in the Norway case.

The Approach in the United States

The Double Jeopardy Clause found in the Fifth Amendment to the United States Constitution provides that no person shall be “subject for the same offense to be twice put in jeopardy of life or limb . . . .” This provision, however, has been subject to two interpretive limitations that restrict its scope.

First, it has always been the law in the United States that the Clause applies only to prosecutions by the “same sovereign” – that is, it prohibits the federal government, or any individual state, from twice prosecuting someone for the same facts, but does not prohibit the federal government from prosecuting a person convicted or acquitted by a state, or vice versa, or one state from prosecuting a person convicted or acquitted by another.

And, second, U.S. laws provide very few restrictions on the ability of the government to pursue simultaneous (and cumulative) criminal and administrative remedies for the same conduct, even if the latter results in painful financial penalties that are difficult to distinguish from criminal ones. In United States v. Hudson, 522 U.S. 93 (1997), the Supreme Court held that separate administrative sanctions can follow criminal conviction or acquittal, unless there is the “clearest proof ” that the legislature intended the administrative sanction to be penal in nature (which is virtually never the case) or if the sanctions are “so punitive” as to render them, in essence, criminal. As one commentator has written, after Hudson, “double jeopardy protection from civil sanctions will attach now only in the rarest of circumstances.” As a result, it is very common for a company to face simultaneous, or even successive, investigations by the DoJ and the SEC for the same conduct.

The absence of legally-enforceable protections noted here is tempered to some degree by self-imposed – but not legally binding – “guidelines” or “principles” announced by the Department of Justice. The most important of these is the socalled “Petite Policy,” known more formally as the “Dual and Successive Prosecution Policy,” which provides that a prosecution in a state will generally bar a federal prosecution, absent some unusual circumstances such as indications that the state result was affected by incompetence or fraud, or in cases where there is an important federal interest. These principles are real in the sense that the federal government rarely engages in double prosecution domestically, but they nonetheless do not state rights that can be enforced in court.

Internationally, the DoJ admits of no legal requirement that it give any legal standing or significance to a prosecution elsewhere in the world. With respect to corporations, the announced general policy of the Department of Justice – when faced with a situation that has already resulted in a criminal prosecution elsewhere – is that the Department of Justice, in those situations where it considers that it has jurisdiction to do so and sees any U.S. interest, will determine whether the foreign outcome was “adequate”; further, as a matter of both announced principle and observed practice, the Department of Justice gives credit for fines actually paid outside the United States by deducting them from its calculation of a fine or other payment that would be due under U.S. laws. As a result, counsel advising parties involved in potentially multiple investigations can prepare for negotiations with the U.S. Department of Justice and argue that a non-U.S. outcome should bar any U.S. proceedings at all, or, at a minimum, should limit a U.S. prosecution to those areas not already addressed elsewhere. Recently, the former argument – that the U.S. government should do nothing at all – appears to have been successful in the case of SBM Offshore, where the Department of Justice announced that it would drop its two-year investigation after the target, a Dutch oil services company, announced an agreed-upon outcome in the Netherlands, where it paid a significant fine. Many other cases result in joint or coordinated negotiations where the prosecuting authorities have agreed on the charges to be admitted, and the respective payments made, by the investigated corporation; a “credit” is then given for payments made in each country. But these negotiations are based entirely on the discretion of the American prosecutor; in the absence of judicially enforceable rules, and heeding the adage that “adequacy” may well be “in the eye of the beholder,” it is often problematic to start a defense or negotiations in another country if there is a likelihood that the U.S. government may consider itself jurisdictionally competent to proceed and will later get involved.

The Developing Law in Europe and France

The legislatures and courts in Europe have, over time, engaged in a number of efforts to provide some semblance of coherence with respect to prosecutions in that continent. Traditionally, European countries have recognized some form of the “dual sovereignty” principle which, as in the United States, permits multiple prosecutions. In France, via legislation going back to the 19th century, this approach has been amended to distinguish between cases in which prosecutions in France are based on a “territorial” application of its criminal laws to acts committed in France, on the one hand, and, on the other, “extra-territorial” applications of them – such as occurs if conduct taking place abroad is committed by a French person or corporation, or where a French person or corporation is a victim. In the latter case, Article 692 of the French Code of Criminal Procedure provides that “no prosecution can take place with respect to a person who has been definitively convicted in another country for the same facts, and, in case of conviction, where the penalty has been performed or suspended.” However, for all “territorial” prosecutions, domestic French law does not provide any ne bis in idem protection for prosecutions overseas.

A number of European treaties have contributed to the debate regarding this issue. Protocol Number 7 of the Convention for the Protection of Human Rights and Fundamental Freedoms, adopted in 1984 by the Council of Europe and signed by most but not all of its members, provides in its Article 4 that “no-one shall be liable to be tried or punished again in criminal proceedings under the jurisdiction of the same State for an offense for which he has already been finally acquitted or convicted in accordance with the law and penal procedure of that State.” While by its terms – and specifically the mention of “the same State” – this provision did not purport to “internationalize” the principle of ne bis in idem, its appearance in this Convention may have contributed to a heightened perception of the importance of the rule. The Council of Europe also took a step towards recognizing – and in fact internationalizing – the principle of ne bis in idem when in 1975 it modified its procedures for trans-European arrest warrants set forth in the European Convention on Extradition of 1957 by providing, in the First Additional Protocol, that a requested country need not extradite a person to a requesting country if that person had already been convicted or acquitted in a third country. This principle was also recognized in Article 4(5) of the Council Framework Decision of 13 June 2002 on the European Arrest Warrant,15 which was transposed into French law in Article 695-22(2) of the French Code of Criminal Procedure. Separately, in 1996, France’s highest administrative court, the Council of State, reviewed, at the request of the Prime Minister, the then-working version of what became Article 20 of the Treaty of Rome (which provides that the International Criminal Court cannot prosecute individuals convicted or acquitted in national courts – nor vice versa – absent a showing that the prior judgment was not conducted “independently and impartially.”) Noting that the issue was of an important and constitutional dimension, the Council expressed the view that “international law” recognized as an exception to the principle of ne bis in idem only circumstances involving a situation in which a prior judgment was based on fraud.

As of 2009, when the Charter of Fundamental Rights of the European Union entered into full legal effect, citizens in the European Union are now protected, under Article 50 of the Charter, by the provision that states:

No one shall be liable to be tried or punished again in criminal proceedings for an offence for which he or she has already been finally acquitted or convicted within the Union in accordance with the law.

In 1966, the United States, France and a number of other countries signed the International Covenant on Civil and Political Rights (“ICCPR”); the ICCPR, which was central to the recent French decision, will be explored in greater detail in the next section.

Thus, the situation in France and in Europe generally has been that the principle of ne bis in idem has achieved increasingly important status and widespread acceptance. This evolution in approach has accompanied changes in European laws with respect to the vulnerability of companies to be pursued for both criminal and administrative sanctions, the issue that was largely resolved in the United States in favor of permitting multiple actions by the Hudson decision mentioned above. In 2014, the European Court for Human Rights ruled in the Grande Stevens decision that administrative penalties obtained by the Italian Companies and Stock Exchange Commission precluded a criminal prosecution for the same acts by the same company, a decision echoed in 2015 in France by a decision of the Constitutional Court, which barred an imminent criminal trial of a number of individuals and companies accused of insider trading of shares in EADS on the ground that the same defendants had already been absolved of responsibility after an administrative investigation by the French Autorité des Marchés Financiers, the rough equivalent of the SEC.

The Recent French Decision

In 2007, French authorities commenced an investigation into approximately 20 French companies suspected of having violated the terms and conditions of the so-called “Oil for Food” program administered by the United Nations that provided for strictly limited and supervised humanitarian transactions with the Iraq regime headed by Saddam Hussein. Four of those companies had – either directly or through agreements negotiated by their corporate parents – already entered into Deferred Prosecution Agreements with the Department of Justice and, in some instances, into similar agreements with the Securities and Exchange Commission, whereby they had paid significant fines. Under the terms of the various DPAs, the period during which the Department of Justice could reopen the investigations had expired, and thus through the DPAs the respective companies benefitted from the commitment that they would not be prosecuted for the matters set forth therein. During the course of the investigation in France, these four companies all asked that the investigation be dismissed as to them on the basis of ne bis in idem, which was denied, and as a result the four of them, together with the others, all proceeded to be tried on the merits. In a decision publically announced on June 18, 2015, but not fully explained until the written judgment was released some months later, the Court acquitted all of the defendants. With respect to the four that had signed DPAs, the Court concluded that the principle of ne bis in idem precluded prosecution in France; the other corporations were acquitted on the basis of the factual insufficiency of the proof against them.

On the issue of protection against multiple prosecutions, the Court first rejected the argument that it was bound by Article 692 of the Code of Criminal Procedure, cited above, which applies to French prosecutions based upon its extraterritorial principles, noting that some of the acts alleged to have been committed took place on French territory, and thus this was a “territorial” prosecution and did not benefit, under French domestic law, from the principle of ne bis in idem because judgments of foreign criminal tribunals have no res judicata effect when they concern facts committed on French territory. The Court was, however, convinced that it was bound by Article 14(7) of the ICCPR which provides as follows:

No one shall be liable to be tried or punished again for an offence for which he has already been finally convicted or acquitted in accordance with the law and penal procedure of each country.

The Court concluded that this text is not limited to guard against multiple prosecutions by the same state, but rather by its open-ended terms appeared to protect against multiple prosecutions wherever the events had taken place. And noting that France had not only signed but implemented the ICCPR, the Court felt constrained to apply it in the case before it.

In order to apply this reasoning to the specific facts, the Court then took two steps. First, with respect to each defendant, it compared the facts recited in its respective DPA and concluded that they appeared to be the same general facts as those appearing in the accusations in France. And second, the Court concluded that the DPAs had the essential qualities of a “judgment,” thereby qualifying the companies for ne bis in idem protection. The Court’s reasoning on this second issue is a bit unclear. It notably does not refer to any specific act by a U.S. court as having been the basis for the prior act, but rather referred to the DPA as “a decision from the Department of Justice [in French: Ministère Public].” In so concluding, the Court noted that it was relying on an expert opinion submitted by a well-known international criminal legal specialist and professor of law in Paris, Didier Rebut. Its apparent reasoning is that the combination of a significant payment together with a protection against further prosecution had all the hallmarks of a prior “judgment.”

This decision is noteworthy in at least two respects: First, it may be the first time that a European court has turned to the ICCPR and relied on it to reject an otherwise procedurally appropriate prosecution on the basis of a prior prosecution in the United States. And second, the Court took a large step forward in interpreting an executed (and completed) DPA as a “judgment” worthy of ne bis in idem / double jeopardy application. Particularly since neither French criminal procedure nor its traditions and culture recognize DPAs as a means of addressing criminal investigations, and given the “asymmetry” noted below (because the United States will not recognize a French criminal judgment as preclusive under the ICCPR), this leg of the Court’s reasoning may be subject to scrutiny on appeal.

The Implications of the Decision

The Oil-for-Food decision is likely to have short-term and longer-term impacts.

In the short term, the Public Prosecutor has appealed the decision. In France, an appeal is in essence a new trial, and the Prosecutor can appeal an acquittal, even if based on insufficiency of evidence; thus, it is possible that both the acquittal of four companies on the basis of ne bis in idem but also of the other companies may be reviewed. Further review of the ne bis in idem decision may well occur in France’s Supreme Court (Cour de Cassation), which reviews only questions of law.

The decision will certainly affect defensive strategies for companies involved in multi-national investigations that involve or may involve France. With respect to any actual or threatened prosecutions in France in which companies have already signed a DPA (or equivalent agreement) in the United States and any other country, or will do so in the future, counsel will certainly urge acceptance of the Court’s reasoning.

The more intriguing implications, however, are longer term.

First, the decision may inadvertently increase the predominance of U.S. investigations relative to the efforts in other countries: if it is established that U.S. negotiated outcomes preclude prosecutions elsewhere, it would become especially useful to reach such an agreement. This is particularly true because the French Court’s decision will not be “symmetrical” in the sense of contemplating that U.S. courts would give similar recognition to French judgments of any sort (let alone negotiated outcomes): the United States signed the ICCPR (the cornerstone of the French decision) but expressly stated upon signature that it did not create any enforceable rights in the United States, and the legislature did not implement it by adopting conforming legislation. As a result, all efforts in the United States to rely on it in the courts have routinely failed on the ground that the treaty is not “self-executing,” and as such may have “moral authority” but does not provide a right or defense in U. S. courts. Thus, the decision may in fact encourage a “race to the courthouse” in countries that offer attractive outcomes, of the very sort that some commentators have predicted as an unwelcome side-effect of any effort to adopt an “international double jeopardy” regime.

Second, the decision reflects a situation that cries out for international collaboration. Ideally, the signatories to the OECD Convention might contemplate a more procedurally comprehensive, and binding, version of Article 4.3 that would allocate responsibilities for pursuits of corruption that spread across borders. More practically, the principal countries involved should, and undoubtedly will, engage in more effective and transparent cooperation. Officials in the United States, as by far the most active, aggressive and effective enforcers, should in particular be more clear in articulating the standards for the “adequacy” of non-U.S. prosecutions that they would find sufficient, which would have the salutary effect of encouraging non-U.S. outcomes like that in the SBM Offshore case.

Avoid Trial At All Costs!

Tuesday, September 22nd, 2015

CallFearToday’s post is from Paul Calli and Chas Short of Calli Law based in Miami.

Calli and Short, along with their former partner Steve Bronis, successfully represented Stephen Giordanella, the first person acquitted at trial in the Africa Sting case, briefly represented Patrick Joseph in the Haiti Teleco FCPA prosecution, before Joseph elected to cooperate with DOJ to avoid trial and hired different attorneys, and have counselled publicly traded companies doing business abroad, on the FCPA .

*****

At least, that’s the apparent directive if you’re a DOJ prosecutor tasked with trying to win the ever-elusive conviction against an individual DOJ claims violated the FCPA.

Earlier this month, Deputy Attorney General Sally Yates issued a memorandum titled “Individual Accountability for Corporate Wrongdoing.”

Taking into consideration the Department of Justice’s dismal rate of failure when put to its burden of proof in FCPA enforcement actions (see here for the article titled “What Percentage of DOJ FCPA Losses is Acceptable” and here for the most recent example) Ms. Yates’ memo could easily be titled “Government Strategy for Extracting Cooperation and Guilty Pleas from Individuals Against Whom DOJ Lacks Sufficient Evidence of Criminality When a Neutral Federal Judge Will Likely Reject the Deficient Investigation and Prosecution, by Deputizing Corporate Employers Who Stand to Lose Everything To Entice and Incentivize Those Publicly Traded Companies to Partner With DOJ and Manufacture Prosecutions That Result In Guilty Pleas So DOJ Can Falsely Claim a Successful Conviction Rate Against Individuals By Diluting its Many Trial Losses With Pleas of Convenience.”

The proposed title is a little wordy, but it seems more transparent and accurate.  The title could be shortened to “DOJ’s FCPA Cooperation Playbook.”

Not surprisingly, after suffering so many embarrassing losses in failed prosecutions against individuals over the past 10 years, DOJ is looking for a quick fix.  The Yates Memo discusses the government’s view of how prosecutors, DOJ civil attorneys, and lawyers who represent companies that cooperate with government investigations should be looking at a number of issues regarding individual and corporate culpability.

We focus our discussion here on the Yates Memo’s statements about companies identifying “all individuals involved in or responsible for” misconduct in order to get “any” cooperation credit.

It’s important to recognize that the “guidelines” or “best practices” discussed in the Yates Memo do not supply anything in the way of hard guidance. The principles discussed are much the same as in prior memoranda and the Yates memo is in many ways a self-serving puff piece (those inclined to be more charitable to our often-overreaching government might call it “rhetoric”).

That’s not to say the Yates Memo is meaningless – it reiterates government interest in pursuing individuals as well as corporations for alleged misconduct.  More importantly, the Memo provides a clear indication that the DOJ has learned its lessons from a decade of overwhelmingly failed prosecutions against individuals and has shifted its strategy.   The Memo makes plain DOJ’s focus regarding prosecuting individuals will shift from trying to prove its case in an open trial, before a neutral judge, pursuant to our adversary system of Justice, where the accused can fight back with counsel, before a jury, to the closed door plea meetings held in the bowels of DOJ that lack transparency, precedent or any deterrent effect to individuals who may find themselves implicated in an FCPA investigation in the future.

The Yates Memo memorializes the government’s ardor for pinning a tin badge to corporations and requiring increasing levels of cooperation in order for the government to unilaterally deem that cooperation valuable. The memo is full of statements like:

“To be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.” (Emphasis in original).

“[T]o be eligible for any credit for cooperation, the company must identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status, or seniority, and provide to the Department all facts relating to that misconduct.”

“If a company seeking cooperation credit declines to learn of such facts or to provide the Department with complete factual information about individual wrongdoers, its cooperation will not be considered a mitigating factor . . . .”

Once a company meets the threshold requirement of providing all relevant facts with respect to individuals, it will be eligible for consideration for cooperation credit.”

The current FCPA enforcement environment focuses in large part on investigations of large corporations that end in non-prosecution and deferred prosecution agreements. The process is non-public, and the government press releases that follow agreements tell only the government view of the facts. Accordingly, there is a lack of transparency and predictability of outcomes for corporations that consider cooperating with government investigations.

The Yates Memo introduces more uncertainty regarding what concrete investigative steps a corporation must make to satisfy the government and highlights the potential risks if the government thinks the corporation should have done more. There’s a clear risk, for example, that the government might view a choice not to engage in certain investigative steps as “declining[ing] to learn” of relevant facts. The language of the Yates Memo provides prosecutors with more excuses or talking points for saying that the corporation has not done enough. This of course is always the risk of cooperation and calls to mind the saying that one can’t be “a little pregnant.”

In setting these fuzzy but tough-sounding standards, the Yates memo underscores why individuals and corporations should consider holding the government to its burden of proof and going to trial. In FCPA cases, a plea and cooperation should not be the default position.

In FCPA trials, individuals often win and the government has been frequently embarrassed (see for example the recent Sigelman trial and the failed “Africa Sting” enforcement action). We are hard pressed to identify an area of white collar enforcement where there is a bigger gap between the theories that support pleas or deferred/non-prosecution agreements versus the kind of facts for which the government can obtain convictions at trial. The price of cooperation continues to be high for companies and, if you accept the Yates memo on in its face, those costs are likely to be higher now.

The Yates Memo’s discussion of cooperation is a reminder to individual businesspeople that in many investigations, the lawyers representing the company are not your friends. As with all cooperation, there is a tremendous pressure to point fingers – regardless of the truth – a pressure that the Yates Memo adds to.   Individuals confronted with the pressure outlined in the government’s new cooperation playbook should consider the downside to the government’s diminution of our Constitutional adversary system of justice effectuated by the government’s “shock and awe” pretrial tactics designed to avoid trial.

Trial is the great equalizer.  Everyone knows that people plead guilty when they are not guilty to avoid the risk of possibly serving a more lengthy jail sentence should DOJ get lucky a second time in an FCPA trial and win. But agreeing to plead guilty, become a federal convicted felon, and serve time in prison where you should not do so, without putting the government to its burden of proof, might well be a decision a person may regret for the rest of their lives.

A person facing the trial decision must work hard to confront the fear of the unknown that is trial – and not allow DOJ to succeed in exploiting that fear to extract a guilty plea that absolves the government of the responsibility of proving its case.

Coercion and cooperation are dangerous.  In the instance where an individual accused of FCPA violations pleads guilty because, like Richard Bistrong, he is actually guilty, wrist-slap probationary sentences reward criminality and deter law-abiding behavior.  As the Honorable Richard Leon stated when rejecting DOJ’s plea for probation and no jail for its criminal partner Bistrong in the DOJ’s failed Africa Sting case, “We certainly don’t want the moral of the story to be: Steal big. Violate the law big. Cooperate big. Probation.” (See here).

Individuals accused of FCPA crimes should consider trial, at all costs.  After all, just ask these persons who the DOJ formerly dubbed “Corporate Wrong-doers,” and who sent the DOJ packing and walked away vindicated.

  • Stephen Giordanella
  • Patrick Caldwell
  • John Godsey
  • Andrew Bigelow
  • Pankesh Patel
  • John Weir
  • Lee Tolleson
  • John Mushriqui
  • Jeana Mushriqui
  • Mark Morales
  • Helmie Ashiblie
  • Yochanan Cohen
  • Amaro Goncalves
  • Saul Mishkin
  • David Painter
  • Lee Wares
  • Ofer Paz
  • Israel Weisler
  • Michael Sacks
  • Jonathan Spiller
  • Haim Geri
  • Daniel Alvirez
  • John O’Shea
  • Si Chan Wooh
  • Keith Lindsey
  • Steve Lee
  • John Iacobucci
  • Ronald Schultz
  • Alfredo Duran
  • John Blondek
  • Vernon Tull
  • Arthur Klein
  • Thomas Spangenberg
  • George McLean