In terms of the number of individual criminal defendants (9), the Haiti Teleco enforcement actions are the largest in FCPA history (minus the manufactured Africa Sting case).  The FCPA charges in the enforcement actions were based on the theory that Haiti Teleco was a “instrumentality ” of the Haitian government, such that Haiti Teleco employees were “foreign officials” under the FCPA.  Seven of the defendants pleaded guilty and two of the defendants, Esquenazi and Rodriguez, exercised their constitutional right to a jury trial and were found guilty of FCPA and related charges.  As noted above, both defendants have appealed their convictions to the Eleventh Circuit.  [Disclosure - I am providing pro bono expert services to defendants' counsel, including my former law firm Foley & Lardner, relevant to the "foreign official" issue].

In addition to the FCPA (and related) charges brought against the above category of defendants, the DOJ also criminally charged three “foreign officials” in connection with the matter (see this prior post titled “Haiti Teleco Roundup” for additional details).  Two of the individuals pleaded guilty to non-FCPA offenses, and one “foreign official,” Jean Rene Duperval, was found guilty by a jury on various money laundering charges.

In short, 12 individuals were criminally charged, pleaded guilty, and/or were found guilty based, in whole or in part, on the theory that Haiti Teleco was an “instrumentality” of the Haitian government.

This prosecution theory of course is a main focus of the Esquenazi and Rodriguez appeal in the Eleventh Circuit.  As noted in this prior post, shortly after their convictions and before their current appeal, a stunning development occurred in the case as the Haitian Prime Minister (Jean Max Bellerive) authored a declaration, on behalf of the Haitian Ministry of Justice, concerning the “Legal Status of Teleco.”  (See here for the declaration).   The declaration asserted, among other things, that “Teleco has never been and until now is not a state enterprise.”  The declaration was dated ten days before the jury reached its verdict in the Esquenazi and Rodriguez trial and subsequent filings in the cases suggest that the origins of the declaration was in response to a letter sent by Paul Calli (Carlton Fields - then an attorney for Patrick Joseph (one of the “foreign officials” who pleaded guilty in the case)) inquiring about the status of Haiti Teleco and whether it was a private company or a government owned company.

In a further stunning development, and as noted in this prior post, after the Bellerive declaration surfaced, the DOJ contacted the Prime Minister and he filed a revised declaration (here), in which he backtracked from many of his prior declaration statements, and stated that he did not know his original declaration  “was going to be used in criminal legal proceedings in the United States or that it was going to be used in support of the argument that [...] Teleco was not part of the Public Administration of Haiti.”

The trial court judge in the Esquenazi and Rodriguez case denied defendants’ request for a new trial and this denial is among the issues on appeal in the Eleventh Circuit.

And now for the interesting and notable recent development alluded to in this Main Justice story.

Duperval, the key “foreign official” at the center of the Haiti Teleco prosecutions, filed an appeal (here) in the Eleventh Circuit earlier this week challenging his convictions.  One issue on appeal is stated as follows.  “The evidence was insufficient to prove beyond a reasonable doubt that Haiti Teleco was a government instrumentality and that Jean Rene Duperval was a foreign official as required to prove that a violation of the Foreign Corrupt Practices Act generated proceeds of a specified unlawful activity – a necessary predicate for the convictions on the money laundering conspiracy and substantive money laundering charges.”

Separately, Duperval’s brief discusses the Bellerive declarations in connection with his due process challenges.  Among other things, the brief notes that the DOJ’s “explanation and Bellerive’s statements in his second declaration, are nothing short of disingenuous, border on the nonsensical, and are expressly contradicted by the previous correspondence, which established that Bellerive signed the first declaration in response to an inquiry from an attorney representing Patrick Joseph …”.    The brief then asserts that “but for the government’s unjustified interference with Prime Minister Bellerive, Mr. Duperval could have availed himself of a favorable witness to demonstrate quite simply that Teleco was not a government instrumentality and he was not a foreign official.”

Duperval’s brief also challenges the sufficiency of the trial court evidence regarding “foreign official” and whether Duperval was a “foreign official as required to prove a charge of money laundering related to the proceeds of a violation of the FCPA.”  The substantive arguments on this issue largely mirror previous defense arguments in the Lindsey Manufacturing and Carson “foreign official” challenges as well as Esquenazi’s and Rodriguez’s arguments on appeal.  Duperval’s argument includes discussion and several citations to my “foreign official” declaration (see here).

Another interesting aspect of Duperval’s appeal is his challenge that the “trial court erred in not charging the jury in accordance with Duperval’s proffered theory of defense instruction.”  Specifically, Duperval argues that the trial court denied Duperval’s FCPA facilitation payments exception instruction.  The brief asserts that the “language in the instruction was extracted verbatim” from the FCPA and that there was “ample evidence in the record to support the giving of the instruction.”

In this regard, it is interesting to note that in Judge Keith Ellison’s (S.D. Tex.) December 2012 Jackson / Ruehlen decision (see here for the prior post regarding the SEC enforcement action) he concluded, in what is believed to be an issue of first impression, that the SEC must bear the burden of negating the facilitation payments exception.

Burma With Conditions

Yesterday Miller Chevalier released this informative alert concerning business opportunities in Burma.  As noted in the alert, the U.S. Government recently “enacted measures that dramatically ease the Burmese Sanctions Regulations (“BSR”) that has been in place for over 15 years. On July 11, 2012, the Treasury Department’s Office of Foreign Assets Control (“OFAC”) authorized new investments and the exportation of U.S. financial services into Burma for the first time since 1997 and 2003 respectively through the issuance of two new general licenses.”

As noted in the alert, on the same day that OFAC released the two new general licenses, the State Department published draft reporting requirements [here] relating to investment in Burma.”  Pursuant to the draft reporting requirements, “any U.S. person whose aggregate investment in Burma exceeds $500,000″ must provide information regarding, among other things, its policies and procedures as they relate to its operations and supply chain in Burma concerning, among other things, “policies and procedures on anti-corruption in Burma.”  The State Department document specifically references the OECD Guidelines, Section VII. Combating Bribery, Bribe Solicitation and Extortion [here], and the OECD Good Practice Guidance on Internal Controls, Ethics, and Compliance.” [here].

It’s a bit ironic isn’t it.  A company seeking to do business in Burma can obtain the necessary U.S. government licenses by disclosing its pre-existing FCPA compliance policies and procedures consistent with best practices guidance, but if any employee in its organization acts inconsistent with those policies and procedures without management or senior executive knowledge, the U.S. government may criminally prosecute the organization subject only to the non-reviewable, opaque, internal discretion of DOJ enforcement attorneys.  See here for “Revisiting a Foreign Corrupt Practices Act Compliance Defense.”

SEC Attorney Sees “The Spotlight As An Opportunity”

This recent Texas Lawbook article profiles Michael King (Assistant Director of Enforcement with the SEC’s Forth Worth office) reportedly heading up the SEC’s Wal-Mart inquiry.  King is quoted in the article as saying he views “the spotlight as an opportunity.”  Other lawyers quoted in the article stated as follows.  “I think King is under tremendous pressure to make Wal-Mart the poster child for what happens when corporations violate [the] Foreign Corrupt Practices Act and then don’t self report.”

Am I the only one alarmed when a government enforcement attorney uses the word ”spotlight” and “opportunity” in the same sentence?

An interesting tidbit discussed in the article is that King also headed up the SEC’s enforcement actions against Panalpina and Pride International (see here and here for prior posts).  These enforcement actions, as well as others in the so-called CustomsGate actions, reached the outer bounds of the FCPA (and likely involved conduct Congress did not seek to capture in passing the FCPA) and it is likely the same result will occur in any Wal-Mart action as I discussed in this previous post.

FCPA Inc. Marketing

“Firms face increasing exposure to anti-bribery and corruption laws and regulations. Laws such as the Foreign Corrupt Practices Act (FCPA) have been in place in the U.S. for 35 years.  Despite this length of time, each year shows increasing non-compliance and growing fines, penalties and judgments by the U.S. Department of Justice.  [...] The financial impact is more significant than the fine alone. Investigation and litigation costs can easily equal the cost of the fine itself. The firm must then also bear the weight of interaction with a corporate monitor to validate its compliance program for the next 10 to 20 years [really, show me an FCPA monitor or FCPA NPA or DPA that has a 10 to 20 year term] and report to the Federal government. Not to mention the reputation and brand impact that bribery and corruption has upon the firm. If the FCPA is not enough, the United Kingdom approved the U.K. Bribery Act (UKBA) legislation in 2010, which went into force in July 2011.  This anti-corruption law brings broader scope and implications to anti-corruption compliance.  [...] This is the era of the corporate bounty hunter.  Government is increasingly turning to insiders (e.g., employees), incenting them to report wrongdoing and non-compliance.  [...] In an era of increased scrutiny and judgments for anti-corruption, this is a significant concern that keeps executives, the board, legal and compliance professionals up at night.”

So writes AccuitySolutions in a recent white paper titled “Addressing Anti-Bribery and Corruption Compliance.”

The solution, why of course ComplianceMAX and the Anti-Bribery and Corruption Solution “a flexible compliance management platform. The Solution eases the compliance burden by delivering operational effectiveness, human and financial efficiency and agility to compliance processes. The solution enables a firm to manage anti-bribery and corruption programs including monitoring and enforcing policy through workflow management; screening and tracking of high-risk entities and relationships; reporting and communicating compliance issues; and ensuring a state of readiness for inspections and audits.”

Next.

“The US FCPA and UK Bribery Act are far-reaching acts; they reach deep into the organization, leaving almost no part of the business untouched. The acts are taken very seriously both by governments, as well as by the general public. There is little empathy to bribes in the general public. This makes non-compliance, more than many other acts, a reputational risk in itself.”

So writes BWise in a recent white paper titled “US FCPA and UK Bribery Act.”

The solution, why of course The BWise GRC [Governance, Risk and Compliance] Platform “with a best-in-class method to address corruption and bribery, and achieve company-wide compliance and transparency.” (See here).

Next.

Another entrant into the FCPA insurance market (see here and here for previous posts).

Navigators recently announced (here) that “its Navigators Pro division has introduced “Side A Global InNAVation,” a directors and officers (D&O) liability policy to address emerging global risks. This new policy offers dedicated excess coverage for individual directors and officers for specific non-indemnifiable claims, including where the company they serve is insolvent. The policy provides coverage for civil fines and penalties, where insurable by law, when they are assessed pursuant to Section 308 of the Sarbanes Oxley Act of 2002, the Foreign Corrupt Practices Act, the U.K. Bribery Act or similar laws.”

Finally, an informative white paper (here) by FTI Consulting Technology titled “E-Discovery Strategies for International Anti-Bribery Investigations.”  The paper discusses the “complexity of issues that may arise during an international anti-bribery investigation” such as data privacy laws, blocking statutes, secrecy laws and ill-defined privilege rules” that are a ”common feature of an FCPA investigation.”  And by the way “FTI Technology helps clients manage the risk and complexity of e-discovery” and collaborates with clients to develop and implement defensible e-discovery strategies with keen focus on the productivity of document review.”

It truly is an FCPA world.

The Lacey Act Meets the FCPA

The Lacey Act prohibits trafficking in wildlife and plant products in violation of foreign law.

Arnold & Porter attorneys Marcus Asner, Samuel Witten, and Jacklyn DeMar write in “The Foreign Corrupt Practices Act and Overseas Environmental Crimes: How Did We Get Here and What Happens Next?” (Bloomberg Law – see here) as follows.

“Environmental regulation by any country creates a series of touch points between the private sector and government authorities, any one of which may provide an opportunity and a temptation for an unscrupulous employee or agent of a company to seek to corruptly influence a government official. Opportunities for corruption occur, for example, from the moment officials decide how to regulate local natural resources through laws and regulations; how and when they decide who may harvest resources and in what amounts; how permit requests are reviewed; and how local laws are actually enforced in practice. Each point of contact creates an opportunity for offering or making bribes or otherwise seeking improper influence.”

The authors further state as follows.  “Though there is no explicit statutory link between the Lacey Act and the FCPA, the possibilities are endless: Potential bribe takers in forestry and fishery schemes could run the gamut from the police, to forestry and fishery officials, to guards, to regulators, to customs and export officials, and even to officials at state-owned companies. All of these are government officials within the meaning of the Foreign Corrupt Practices Act. While there has been no public case charging both Lacey Act and FCPA violations thus far, we believe such investigations may well be just around the corner, and, in any event, responsible companies should do what it takes to protect themselves from the risks.”

Haiti Teleco Roundup

This recent post summarizing the expansive Haiti Teleco related enforcement actions has been updated to reflect Patrick Jospeh’s recent 366 day sentence.  Joseph, an alleged “foreign official” at Haiti Teleco previously pleaded guilty to money laundering conspiracy in connection with the bribery scheme.  As noted in this recent Wall Street Journal Corruption Currents post by Chris Matthews, Joseph was also ordered to forfeit nearly $1 million.

FCPA Monitor

Rajat Soni recently launched FCPA Monitor (here).  FCPA Monitor examines news and cases about the Foreign Corrupt Practices Act and the UK Bribery Act of 2010.  Soni is an attorney with several years of experience conducting global internal investigations related to the FCPA.  He has worked on large FCPA investigations including those arising from the UN Oil-for-Food Program and Siemens AG.

*****

A good weekend to all.

Distributor Due Diligence

David Simon and Alex Kramer (Foley & Lardner – here and here) recently authored “Here’s How U.S. Companies Can Practically Manage FCPA Risks That Come With Global Distribution Networks” in Bloomberg BNA, Prevention of Corporate Liability, Current Report.

The authors note as follows.  “While in some areas of the law selling a product to a distributor may insulate a company from liability, the same cannot be said for the FCPA. When a distributor purchases a product, title technically shifts, but if the distributor is seen as acting as a representative of the company whose goods it sells in foreign countries, and that distributor engages in bribery of foreign officials, FCPA liability may very well attach to the company. Consequently, companies need to be careful when working with distributors to ensure they do not engage in corrupt conduct that may wind up costing a company millions in fines and penalties and investigation and defense costs.”

The article next states as follows.  “Many companies employ vast distributor networks, sometimes including hundreds, if not thousands, of distributors around the world. Many distributors are more like customers than agents; they merely purchase a product and resell it to others, often in conjunction with other products purchased from other manufacturers. Is it really practical and necessary to conduct full FCPA due diligence on every one of those distributors? Do the U.S. companies in these situations even have the leverage to insist on FCPA representations and warranties in the written agreements, to demand audit rights, and to require certifications by and training of these distributors? The question thus arises whether U.S. companies are faced with a difficult choice either to accept substantial FCPA risk or to devote disproportionate resources to running an FCPA compliance program that fully vets all distributors. We think the answer to this question is ‘‘no’’ and that there is a practical way to minimize the FCPA risk associated with a global distributor network without devoting an unreasonable and disproportionate amount of resources to compliance.”

The practical way?

The authors suggest as follows.  “We recommend that companies following a risk-based approach take this risk analysis a step further and focus on the nature of their relationships with their distributors. The goal should be to determine which distributors are the most likely to qualify as agents, for whose acts the company can be held responsible. Think about this as a continuum of risk. On the low-risk end are distributors that are nothing more than resellers with little actual affiliation with the supplier company. On the high-risk end are distributors who are very closely tied to the supplier company, who effectively represent the company in the market and end up looking more like a quasisubsidiary than a customer. [...]  Once a company segregates the high-risk distributors that likely qualify as agents and potentially subject the company to FCPA liability from those that are mere resellers and pose little FCPA risk, FCPA compliance procedures can be tailored appropriately. For those distributors that qualify as ‘‘agents’’ and also pose FCPA risk, full FCPA due diligence, certifications, training, and contract language are imperative. For those that do not, more limited compliance measures that reflect the risk adjusted potential liability are perfectly appropriate.”

Say What?  (1)

A recent op-ed in the Minneapolis Star-Tribune (here) was titled “Good Companies Don’t Bribe. Period.”

Say what?

To be sure, certain Foreign Corrupt Practices Act enforcement actions are based on allegations that executive management or the board was involved in or condoned the improper conduct at issue.  For this type of FCPA enforcement action, the title of the article is indeed spot-on.   However, this type of FCPA enforcement action is not typical.  As noted in this prior post, there are several companies that I call the “World’s Most Ethical FCPA Violators.”  These are companies who have earned designation as one of the “World’s Most Ethical Companies” by Ethisphere yet still, during the same general time period, have resolved an FCPA enforcement action or are otherwise the subject of FCPA scrutiny.  Companies on this list include:  General Electric, Statoil, Deere & Company, Hewlett-Packard, Rockwell Automation, AstraZeneca, Novo Nordisk, and Sempra Energy.  For more, see this article from Corporate Crime Reporter titled “World’s Most Ethical Companies and the FCPA.”  See also this prior post discussing W.W. Grainger’s recent FCPA disclosure and noting that the company is consistently ranked as one of the “world’s most admired companies” by Forbes.

Say What? (2)

This recent post on the FCPA Blog states as follows.  “There’s a reason why you don’t see many of the biggest U.S.-based government contractors on the FCPA top ten list [...]. Not that they didn’t struggle with compliance during the early years of enforcement, but they moved quickly to update their compliance and ethics programs once they saw the tide of FCPA enforcement turning. Then they moved on.”

Say what?

Here is the list of the largest contractors in the government market based on an analysis of government procurement data during fiscal 2010.  Seven of the companies in the top twenty-one have, in the past few years, resolved FCPA (or related) enforcement actions or are otherwise the subject of FCPA scrutiny:  Raytheon, H-P, KBR, Dyncorp, ITT Corp., IBM, and BAE.

The “U.S.-based” and “FCPA top ten list” qualifiers were apparently chosen carefully in the FCPA Blog post.

World Bank News

Earlier this week, the World Bank announced (here) publication “for the first time a set of decisions issued by the World Bank Group’s Sanctions boards in cases of alleged fraud and corruption.”  World Bank Managing Director Sri Mulyani Indrawati stated as follows.  “The World Bank Group takes a hard line against corruption, and we believe that greater transparency must be part of that effort. By publishing Sanctions Board decisions, we are making all parties involved in the sanctions process more accountable. This move should deepen the deterrent effect of debarments and enhance the educational value of the Sanctions Board’s findings.”

The Sanctions Board decisions can be found here.

Antoine’s FCPA-Related Sentence Reduced

This recent post provided a Haiti Teleco roundup.  As noted in the prior post, the Haiti Teleco case (minus the manufactured and now former Africa Sting case) is the largest in FCPA history in terms of defendants charged – 13.  Among the group of defendants were three “foreign officials” charged with non-FCPA offenses including Robert Antoine, the former director of international affairs at Haiti Teleco who pleaded guilty in March 2010 to conspiracy to commit money laundering.  In June 2010, he was sentenced to 48 months in prison.

As Samuel Rubenfeld (Wall Street Journal Corruption Currents) noted in this recent post, Antoine, ”who testified twice at trial on behalf of prosecutors in foreign bribery cases had [his] four-year prison sentence reduced to 18 months, and he will soon be out of prison.”

*****

A good weekend to all.

Guidance

Earlier this week, Global Financial Integrity, Open Society Foundations, and others released this letter to the DOJ and SEC concerning upcoming FCPA guidance.  The letter addresses “foreign official,” a compliance defense, voluntary disclosure, declination decisions, parent-subsidiary liability, successor liability, de minimis gifts and hospitality, and mens rea and corporate criminal liability.

As to “foreign official” the letter states “that ownership of companies around the world, including in the U.S., is impossible to determine independently” and that “the staff of a U.S. company is not likely to be able to independently verify the direct and indirect ownership of foreign companies.”  The letter also states, as to control of an instrumentality by a foreign government, that control can be conferred, among other ways, by “unspoken custom.”

Should one laugh or cry when reading such statements concerning a key element of the most important U.S. law governing international business transactions?  Perhaps the groups don’t care.  After all, as noted here, some of the groups have previously stated as follows regarding “foreign official” – “The U.S. Chamber is promoting the creation of a definition of “foreign official” so that companies have greater legal certainty. Greater certainty of what? Greater certainty of who they are permitted to bribe and who they are not permitted to bribe.  [...]  In short, defining the term “foreign official” would underscore the idea that it is OK to bribe certain people and not others, a principle the United States surely does not want to promulgate.”

Duperval Sentenced

Earlier this week, the DOJ announced (here) that “Jean Rene Duperval, a former director of international relations for Telecommunications D’Haiti S.A.M. (Haiti Teleco), a Haitian state-owned telecommunications company, was sentenced [by U.S. District Court Judge Jose Martinez in the Southern District of Florida] to nine years in prison for his role in a scheme to launder bribes paid to him by two Miami-based telecommunications companies.”  The stiff sentence continues the trend of the Southern District of Florida (and Judge Martinez in particular) handing out the toughest FCPA or FCPA-related sentences in the country.

As noted in the release,  Duperval was convicted in March 2012 of two counts of conspiracy to commit money laundering and 19 counts of money laundering. According to the release, ”Judge Martinez also ordered Duperval to forfeit $497,331.”  Assistant Attorney General Lanny Breuer stated as follows.  “Mr. Duperval took bribes in exchange for giving companies an unfair and illegal advantage in the marketplace, and then tried to hide these illicit transactions behind the cloak of shell corporations and fake invoices.  Just as we prosecute corrupt businesspeople under the FCPA, we will hold accountable corrupt foreign officials when they seek to launder the proceeds of that bribery through the U.S. financial system.  Today’s nine-year prison sentence sends a strong message to foreign officials and others who would facilitate foreign corruption that they will face serious consequences.”

As noted in this prior post, the Haiti Teleco case (minus the manufactured and now former Africa Sting case) is the largest in FCPA history in terms of defendants charged – 13.  The prior post provides a summary of all the enforcement actions.

The Latest FCPA Reform Volley

If your third cousin received a speeding ticket years ago does this prohibit you from forever seeking reform of speed limit laws?  Probably not the best analogy, but Representatives Elijah Cummings and Henry Waxman seem to think so.  As noted in this previous post, Cummings (Ranking Member of the House Committee on Oversight and Government Reform) and Waxman (Ranking Member of the House Committee on Energy and Commerce) sent letters to the Chairman of the Board of Directors of the Retail Industry Leaders Association and the President of the U.S. Chamber of Commerce stating as follows.  “We are concerned about the role that Wal-Mart officials may have played in the Chamber’s Institute for Legal Reform (“ILR”).  It would appear to be a conflict of interest for Wal-Mart officials to advise on ways to weaken the Foreign Corrupt Practices Act at a time when the leadership of the company was apparently aware of corporate conduct that may have violated the law.”

Earlier this week, Representatives Cummings and Waxman again put pen to paper and sent this letter to the President of the U.S. Chamber of Commerce stating as follows.  “A new analysis by our staff reveals that Wal-Mart is not the only company represented on the ILR’s board that has faced allegations that it violated the Foreign Corrupt Practices Act. Our review of ILR’s tax filings from 2007 to 20 10, member companies’ filings with the U.S. Securities and Exchange Commission (SEC), and other documents reveals that 14 out of 55 ILR board members-almost one in four- were affiliated with companies that were reportedly under investigation for violations or had settled allegations that they violated the Foreign Corrupt Practices Act.”  See here for more.

Closing with the analogy, perhaps Representatives Cummings and Waxman should instead inquire about how the speeding laws are being enforced – or at the very least – read this prior post titled “The Sun Rose, A Dog Barked, And A Company Disclosed FCPA Scrutiny.”

Thumbs Up

To Howard Sklar for this recent post on his Open Air Blog.  I agree with the general thrust of Howard’s argument.  So did Congress when it passed the FCPA.  For that reason, and here is where I disagree with Howard, the issues he identifies are legal issues, not merely policy issues.

*****

A good weekend to all.

Assistant Attorney General Lanny Breuer stated as follows.  “Mr. Duperval was convicted by a Miami jury of laundering $500,000 paid to him as part of an elaborate bribery scheme.  As the director of international relations for Haiti’s state-owned telecommunications company, Duperval doled out business in exchange for bribes and then used South Florida shell companies to conceal his crimes.  This Justice Department is committed to stamping out corruption wherever we find it.”  Duperval is scheduled to be sentenced on May 21st.

The Haiti Teleco case (minus the manufactured and now former Africa Sting case) is the largest in FCPA history in terms of defendants charged – 13.  Below is a brief summary of the actions.

Individuals Charged With FCPA and/or Related Offenses

Antonio Perez.  In April 2009, Perez pleaded guilty to conspiracy to violate the FCPA.  As noted in this prior post, in January 2010, he was sentenced to 24 months in prison.

Juan Diaz.  In May 2009, Diaz pleaded guilty to conspiracy to violate the FCPA.  As noted in this prior post, in July 2010, he was sentenced to 57 months in prison.

Jean Fourcand.  As noted in this DOJ release, in February 2010, Fourcand pleaded guilty to one count of money laundering for receiving and transmitting bribe monies in the Haiti Teleco scheme.  In May 2010, Fourcard was sentenced to 6 months in prison.

Joel Esquenazi and Carlos Rodriguez.  As noted in this prior post, in August 2011, Esquenazi and Rodriguez were convicted by a jury for conspiracy to violate the FCPA, FCPA violations, and other offenses.  As noted in this prior post, in October 2011, Esquenazi was sentenced to 180 months in prison and Rodriguez was sentenced to 84 months in prison.  As noted below, Esquenazi and Rodriguez are appealing their convictions to the 11th Circuit.

Marguerite Grandison.  As noted in this DOJ release, in December 2009, Grandison was charged with one count of conspiracy to violate the FCPA and commit wire fraud, seven counts of FCPA violations, one count conspiracy to commit money laundering and 12 counts of money laundering.  According to a recent docket search, in February 2012, Grandison entered a not guilty plea and shortly thereafter the docket states as follows – “docket restricted/sealed until further notice.”

Washington Vasconez Cruz, Amadeus Richers and Cecilia Zurita.  These individuals (associated with Cinergy Telecommunications) are fugitives according to the DOJ.

“Foreign Officials” Charged With Non-FCPA Offenses

Duperval – see above.

Patrick Joseph. As noted in this prior post, the former director of international relations at Haiti Teleco pleaded guilty in February 2012 to conspiracy to commit money laundering. In July 2012, he was sentenced to 366 days in prison.

Robert Antoine.  As noted in this prior post, the former director of international affairs at Haiti Teleco pleaded guilty in March 2010 to conspiracy to commit money laundering.  In June 2010, he was sentenced to 48 months in prison.

Entity Charged

Cinergy Telecommunications.  As noted in this prior post, in February the DOJ moved to dismiss charges against Cinergy because it is a non-operational entity with no assets of any real value.

*****

Carlos Rodriguez and Joel Esquenazi are appealing their convictions to the 11th Circuit.  See here for the prior post regarding Rodriguez and his appellate counsel.  Recently, T. Markus Funk and Michael Sink (here and here of Perkins Coie) began representing Esquenazi in connection the appeal.  Funk, a former federal prosecutor in Chicago and US State Department lawyer co-chairs the ABA’s Global Anti-Corruption Task Force (here).

*****

This prior post discussed Haiti Teleco’s other preferred providers – namely IDT Corp. and Fusion Telecommunications – and linked to a recent Wall Street Journal article titled the “Looting of Haiti Teleco.”  The WSJ article was shortly countered with this post by Lucy Komisar.

The enforcement action(s) principally allege payments by various defendants to obtain preferred telecommunication rates from Haiti Teleco.  See here for the indictment of Joel Esquenazi, Carlos Rodriguez and others.  See here for the information as to Juan Diaz.  See here for the information as to Antonio Perez.  See here for the superseding indictment of various Cinergy Telecommunications employees and others.

Even though the Haiti Teleco enforcement action(s) are already broad in scope, other companies also obtained preferred telecommunication rates from Haiti Teleco -  and allegations or suspicions have been raised as to how.  However, at present, there have not been any enforcement actions as to the below companies.

Prior SEC filings by IDT Corporation (here), starting in 2008, have stated as follows.  “On April 1, 2004, D. Michael Jewett, a former employee, [...] sent a copy of the complaint he had filed against the Company to the United States Attorney’s Office. In the complaint, Jewett had alleged, among other things, that improper payments were made to foreign officials in connection with an IDT Telecom contract. As a result, the Department of Justice (“DOJ”), the SEC and the United States Attorney in Newark, New Jersey conducted an investigation of this matter. The Company and the Audit Committee of the Company’s Board of Directors initiated independent investigations, by outside counsel, regarding certain of the matters raised in the Jewett complaint and in these investigations. Neither the Company’s nor the Audit Committee’s investigations have found any evidence that the Company made any such improper payments to foreign officials.”

The substance of IDT’s disclosure on this issue has not changed since 2008.  In 2010, IDT entered into a confidential settlement agreement with Jewett. In its most recent quarterly filing, IDT stated as follows as to the above issue.  “The Company continues to cooperate with these investigations, which the SEC and DOJ have confirmed are still ongoing.”  For more on the IDT – Haiti Teleco contract, see this 2009 article from Forbes.

This March 2010 editorial in the Wall Street Journal “Democrats and Haiti Telecom” raises questions about a 1999 contract between Fusion Telecommunications (here) and Haiti Teleco (as well as Fusion board member, Joseph P. Kennedy II – the article also states that “numerous [Bill] Clinton cronies were also on Fusion’s board”).   The article asserts that Fusion had access to the Teleco network at a 75% discount from the official rate on file at the Federal Communications Commission.  For additional Wall Street Journal coverage of Fusion’s Haiti Teleco contract – see here and here - from today’s Wall Street Journal titled “The Looting of Haiti Teleco.”

Jean-Bertrand Aristide served two stints as Haiti’s President, most recently between 2001-2004.  According to this article over the weekend in the Miami Herald, Aristide is believed to be “Official B” in the second superseding indictment (here) filed in January 2012 against various defendants.  The indictment states that “from in or around 2011 to in or around 2004, Official B was an official in the executive branch of the Haitian Government.”  According to the article, Aristide allegedly pocketed “millions of dollars in bribes from Miami businesses that brokered long-distance phone deals” with Haiti Teleco.

Aristide’s lawyer, Ira Kurzban (here), is quoted in the article as follows.  “I view this as part of the same smear campaign that the United States has orchestrated against Aristide since he was first elected in 1990.”

Guidance

The conventional wisdom is that when the DOJ announced in November 2011 (see here for the prior post) that it would be issuing FCPA guidance in 2012, that this stalled introduction of an FCPA reform bill.  The current conversation thus seems to be focused on DOJ’s promised guidance.

This prior post highlighted how Senator Charles Grassley is curious about DOJ’s guidance and this prior post highlighted how Senators Amy Klobuchar and Chris Coons are as well.

Earlier this week, the Chamber of Commerce (and approximately 30 other trade associations or councils ranging from the American Gaming Association, the Financial Services Roundtable, the Poultry Federation, and the West Virginia Bankers Association) sent a letter (here) to Assistant Attorney General Lanny Breuer and SEC Director of Enforcement Robert Khuzami titled “Guidance Concerning the Foreign Corrupt Practices Act.”

The letter begins as follows.  “On behalf of the more than three million businesses and organizations whose interests we represent, we the undersigned organizations, write to request that this guidance address several issues and questions of significant concern to businesses seeking in good faith to comply with the FCPA. Detailed, authoritative guidance on these matters will enhance companies’ compliance with the FCPA by clarifying the “rules of the road” and by mitigating the significant interpretive challenges that companies face when applying the text of the statute to complex real-world circumstances.”

Topics addressed in the letter include:  “definitions of ‘foreign official’ and ‘instrumentality’”; “consideration of compliance programs in enforcement decisions”; “parent-subsidiary liability”; “successor liability”; “de minimis gifts and hospitality”; “mens rea standard for corporate criminal liability”; and “declination issues.”

In this previous post regarding the DOJ’s promised guidance I commented that while a welcome development, DOJ’s promise of FCPA guidance in 2012 will not cure many of the issues that are being debated in good faith during this new era of FCPA enforcement.  Furthermore, I expect DOJ’s guidance to be little more than a compilation in one document of information that is already in the public  domain for those who know where to look.  The Chamber letter similarly states as follows concerning compliance programs.  “If the forthcoming guidance on this issue consists merely of a recitation in summary form of specific corporate compliance programs that have been adopted pursuant to deferred prosecution agreements, non-prosecution agreements or SEC settlements, the marginal utility of such guidance to the cause of FCPA compliance in the business community will be limited.”

Whenever released and whatever it says, the DOJ’s guidance will be merely that – guidance.  What the FCPA needs is not guidance, but limited structural reforms  (such as a compliance defense) as well as a change in DOJ policy (such as  elimination of non-prosecution and deferred prosecution agreements).

A Re-Run Worth Watching

If you missed “The FCPA Compliance: Yes Or No” debate between Howard Sklar and I earlier this week on Securities Docket, here is the audio replay (approximately 70 minutes) along with the presentation slides.  At the end of the presentation participants were asked to vote “yes” or “no” and the vote tally was 68% “yes” 32% “no.”  Many thanks to Bruce Carton at Securities Docket for hosting.

Cinergy Telecommunications

In July 2011, Cinergy Telecommunications was added to the Haiti Teleco enforcement action (see here for the prior post).  In a superceding indictment, the privately-held telecommunications company incorporated in Florida was charged
with one count of conspiracy to violate the FCPA and to commit wire fraud, six counts of FCPA violations, one count of conspiracy to commit money laundering and 19 counts of money laundering.  In addition, Washington Vasconez Cruz (the president of Cinergy) was also charged as was Amadeus Richers (a former director of Cinergy).  As noted in this January post by Samuel Rubenfeld (Wall Street Journal Corruption Currents) in a second superceding indictment Cecilia Zurita (a former vice president of Cinergy as well as Cruz’s wife) was also added to the case.

Earlier this week, the DOJ moved to dismiss (see here) its case against Cinergy.  The motion states as follows.  “The government has recently learned that defendant Cinergy Telecommunications, Inc. is a non-operational entity that effectively exists only on paper for the benefit of two fugitive defendants, Washington Vasconez Cruz and Cecilia Zurita.  For several years, these defendants took actions making it appear as though Cinergy was an on-going operational company.”  The motion states that “defense counsel recently confirmed that Cinergy is in fact now non-operational, has no employees, and has no assets of any real value.”  The motion concludes as follows.  “In light of persuasive information the government has developed that Cinergy no longer exists in any real sense and that it was portrayed as existing at least in part to further fugitive defendants’ litigation strategy, the government in its discretion and under the circumstances presented has elected not to proceed with a trial against Cinergy.”

Joel Hirschhorn (here - Hirschhorn & Bieber P.A.) represents Cinergy as well as certain individual defendants in the case.

This Week’s FCPA Disclosure

In this prior post, I commented (somewhat tongue-in-cheek) that every week another company seems to be disclosing FCPA scrutiny.  So far so good.  This week’s disclosure is from Cobalt International Energy which disclosed as follows in its recent annual report.

“In connection with entering into our RSAs for Blocks 9 and 21 offshore Angola, two Angolan-based E&P companies were assigned as part of the contractor group by the Angolan government. We had not worked with either of these companies in the past, and, therefore, our familiarity with these companies was limited. In the fall of 2010, we were made aware of allegations of a connection between senior Angolan government officials and one of these companies, Nazaki Oil and Gáz, S.A. (“Nazaki”), which is a full paying member of the contractor group. Nazaki has repeatedly denied the allegations in writing. In March 2011, the SEC commenced an informal inquiry into these allegations. To avoid non-overlapping information requests, we voluntarily contacted the U.S. Department of Justice (“DOJ”) with respect to the SEC’s informal request and offered to respond to any requests the DOJ may have. Since such time, we have been complying with all requests from the SEC and DOJ with respect to their inquiry. In November 2011, a formal order of investigation was issued by the SEC related to our operations in Angola. We are fully cooperating with the SEC and DOJ investigations, have conducted an extensive investigation into these allegations and believe that our activities in Angola have complied with all laws, including the FCPA. We cannot provide any assurance regarding the duration, scope, developments in, results of or consequences of these investigations.”

World Bank Debarment

Earlier this week, the World Bank announced (here) “debarment of Alstom Hydro France and Alstom Network Schweiz AG (Switzerland) – in addition to their affiliates – for a period of three years following Alstom’s  acknowledgment of misconduct in relation to a Bank-financed hydropower  project.”  According to the release, “in 2002, Alstom made an improper payment of €110,000, to an entity controlled by a  former senior government official for consultancy services in relation to the  World Bank-financed Zambia Power Rehabilitation Project.”  The release further states as follows. ”The  debarment is part of a Negotiated Resolution Agreement between Alstom and the  World Bank which also includes a restitution payment by the two companies  totaling approximately $9.5 million. The debarment can be reduced to 21 months -  with enhanced oversight – if the companies comply with all conditions of the  agreement.”

What to make of the debarment based on conduct 10 years ago is a bit difficult.  This Wall Street Journal Story by Dionne Searcey and David Crawford states as follows.  “There was some confusion about the company’s official response. Early Wednesday, Alstom spokesman Patrick Bessy said Alstom didn’t admit guilt in its settlement with the World Bank. “The World Bank made assumptions which were not proved,” he said, adding that because the matter was so old, “Alstom was unable to find evidence it could present in its own defense so we decided to settle.”  Mr. Bessy said the blacklisting won’t affect Alstom Group, which has had only one project that involved World Bank funding since 2007. He said the company has several other subsidiaries engaged in hydroelectric projects that aren’t affected by the ban and will be eligible for World Bank funding of their projects. In all only about 5% of Alstom sales are in the hydroelectric field, Mr. Bessy said. In a later statement, the company rejected Mr. Bessy’s comments: “Alstom’s general counsel … stated that any comments that were previously made by Alstom are not valid.”

Reflecting On The New Era of FCPA Enforcement

As discussed in this previous post, in November 2010 Assistant Attorney General Lanny Breuer declared as follows.  “We are in a new era of FCPA enforcement’ and we are here to stay.”  Thomas Gorman (Dorsey Whitney) runs the always informative SEC Actions blog – see here.  In this post, titled “The New Era of FCPA Enforcement:  A Time For Reflection” Gorman hit the ball out of the park when he states as follows.

“Perhaps now is a good time to stop and reflect on what the courts and jurors have said about the “new era” of FCPA enforcement. Surely that era should be more than a dazzling array of ever increasing monetary payments by corporations or actions against individuals built on questionable blue collar tactics. Surely it should be more than business organizations spending ever increasing sums to conduct far reaching and perhaps at times unnecessary investigations at huge expense in a effort to win cooperation credit. Surely it should be more than brining increasing numbers of charges against individuals and demanding longer and longer prison terms. Perhaps now is the time to craft meaningful reform to the Act and enforcement policy to ensure clearer guidance and a more balanced application of the statutes to ensure that the laudable goals of the statute in a fair and balanced manner in the future. That would truly be a “new era” of FCPA enforcement.”

For additional reflections on this “new era” of FCPA enforcement, see this piece I published with the ABA Global Anti-Corruption Task Force.

*****

A good weekend to all.

From the Dockets

Last month when Judge Lynn Hughes dismissed, at the close of the DOJ’s case, the FCPA charges against John Joseph O’Shea (see here for the prior post), it was only a partial victory as O’Shea still faced non-FCPA charges.  Complete victory is imminent as yesterday the DOJ filed a motion to dismiss (here) the remaining charges (conspiracy, money laundering and obstruction) against O’Shea.

In July 2011, Patrick Joseph (a former general director for telecommunications at Haiti Teleco and thus a “foreign official” according to the DOJ) was added to the extensive Haiti Teleco case.  (See here for the prior post).  Because the FCPA does not apply to bribe recipients, the DOJ charged Joseph with a non-FCPA offense: one count of conspiracy to commit money laundering.  Earlier this week, Joseph pleaded guilty to the charges (see here).  Pursuant to the plea agreement, Joseph agreed to forfeit approximately $956,000.  It is clear from the plea agreement that Joseph was likely an early cooperator in the Haiti Teleco case as the plea agreement refers to a June 2009 proffer agreement with the DOJ.  Many of the other individual defendants in the Haiti Teleco case were charged in December 2009 (see here).  The plea agreement requires Joseph’s continued cooperation and later this month a trial is to begin as to other defendants in the wide-ranging Haiti Teleco case.

FCPA Compliance Defense – Yes or No?

That is the title of a free webcast on February 21st to be hosted by Bruce Carton’s Securities Docket (see here to sign up and for more information).  I will be discussing my  paper “Revisiting a Foreign Corrupt Practices Act Compliance Defense”and will argue in favor of Congress creating an FCPA compliance defense.  On the other side of the issue, Howard Sklar (Senior Counsel, Recommind and a frequent commentator on FCPA issues at, among other places, his Open Air Blog) will argue that Congress should not include a compliance defense to violations of the FCPA.

Former Employee Alleges FCPA Issues at GE

As previously reported by Chris Matthews at Wall Street Journal Corruption Currents (see here) Khaled Asadi (a dual U.S. and Iraqi citizen) who was previously employed by G.E. Energy (USA) LLC (“GE Energy”) as its Country Executive for Iraq, located in Amman, Jordan, has filed a civil complaint (here) in the Southern District of Texas against G.E. Energy.   GE Energy is a wholly-owned subsidiary of General Electric Company (“GE”).

The complaint alleges that G.E. harassed, pressured Asadi to vacate his position, and ultimately terminated him after he informed his supervisor and G.E.’s Ombudsperson “regarding potential violations of the Foreign Corrupt Practices Act committed by G.E. during negotiations for a lucractive, multi-year deal with the Iraqi Ministry of Electricity.”  The substance of Asadi’s complaint is that “on or about June of 2010 Mr. Asadi was alerted by a source in the Iraqi Government that GE had hired a woman closely associated with the Senior Deputy Minister of Electricty (Iraq) to curry favor with the Ministry while in negotiation for a Sole Source Joint Venture Contract with the Ministry of Electricity. (According to the complaint, the Joint Venture Agreement between GE and the Ministry of Electricity was signed in Baghdad on December 30, 2010 and that the exclusive materials and repairs provision is estimated to be valued at $250,000,000 for the seven year agreement.)

Hiring friends, family members, etc. of a ”foreign official” at the request of the ‘foreign official” has been the basis, in part, for previous FCPA enforcement actions – particularly if the hired individual was not qualified for the position, did not engage in any meaningful work, or was paid an unreasonably high salary.  For instance, the 2011 FCPA enforcement action against Tyson Foods (see here for the prior post) involved, in part, allegations that a company subsidiary placed the wives of Mexican ”foreign officials” on its payroll and provided them with “a salary and benefits, knowing that the wives did not actually perform any
services” for the company.

In the WSJ Corruption Currents article, a GE spokesman stated as follows.  “Mr. Asadi’s termination had absolutely nothing to do with any allegations he is making.  Regarding our contracts in Iraq, GE followed all requirements and his allegations are false.”

Travel Act Readings

A few informative Travel Act readings to pass along.

In this article from Thomson Reuters News & Insight, Mike Emmick (Sheppard Mullin Richter & Hampton) calls the Travel Act the “FCPA’s red-haired stepchild” and says that in conducting an internal investigation “there are some additional rocks to flip over” before celebrating findings of no payments to “foreign officials.”

In this article from Bloomberg Law Reports, John Rupp and David Fink (Covington & Burling) note that a “move by U.S. authorities to target commercial bribery robustly is a distinct possibility.”  The piece discusses the laws that could be used by U.S. authorities to prosecute foreign commercial bribery.”

*****

A good weekend to all.

In the DOJ’s release (here), Assistant Attorney General Lanny Breuer stated as follows.  “This sentence – the longest sentence ever imposed in an FCPA case – is a stark reminder to executives that bribing government officials to secure business advantages is a serious crime with serious consequences.  A company’s profits should be driven by the quality of its goods and services, and not by its ability and willingness to pay bribes to corrupt officials to get business.   As today’s sentence shows, we will continue to hold accountable individuals and companies who engage in such corruption.”

Esquenazi and Rodriguez were two of the defendants in the so-called Haiti Teleco case, the largest FCPA enforcement action in history (minus the manufactured Africa Sting case) in terms of individual defendants – 12.  As noted in this prior post, the Haiti Teleco case stands in stark contrast to many corporate FCPA enforcement actions (enforcement actions that sometimes involve tens or hundreds of millions of dollars in bribe payments) that often yield no individual enforcement actions.  Indeed, as noted in this prior post, since 2008 approximately 70% of corporate DOJ FCPA enforcement actions have not (at least yet) resulted in any DOJ charges against company employees.

It is likely that this case will now move to a next stage.   Among other things, the case involved a “foreign official” challenge (see here for the prior post) as well as the baffling declaration / revised declaration of Haiti’s Prime Minister (see here for the prior post).

With several individual FCPA defendants currently exercising their constitutional right to a jury trial (Esquenazi and Rodriguez were convicted by a jury), what effect will this record-setting sentence have?