Archive for the ‘Herbert Steffen’ Category

The SEC Has Never Prevailed In An FCPA Enforcement Action When Put To Its Ultimate Burden Of Proof

Wednesday, March 5th, 2014

This recent Wall Street Journal article highlighted how the SEC’s win rate at trials has slipped.  According to the article:

“[The SEC has] won 55% of its trials since October [2013], a sharp drop after three consecutive years when it prevailed more than 75% of the time.”

There has never been an SEC Foreign Corrupt Practices Act trial, but the above percentages are downright stellar when one considers that the SEC has never prevailed in an FCPA enforcement action when put to its ultimate burden of proof.

As highlighted in this previous post, in 2002 the S.D. of Texas dismissed an SEC complaint against Eric Mattson and James Harris.  The enforcement action involved alleged goodwill payments to an Indonesian tax official for a reduction in a tax assessment.  The SEC claimed that the FCPA’s unambiguous language plainly encompassed the goodwill payment and the issue before the Court was whether the plain language of the FCPA prohibited goodwill payments for the purpose of reducing a tax assessment.  When Mattson and Harris was decided, the S.D. of Texas in U.S. v. Kay case had already dismissed that case finding that the plain language of the FCPA does not prohibit goodwill payments to foreign government officials to reduce a tax obligation.  The SEC attempted to distinguish the trial court’s Kay ruling by arguing that in the civil enforcement context, the Court should interpret the FCPA’s language more liberally than in criminal cases.  The Court rejected the SEC’s arguments and followed the trial court’s analysis in Kay that the payments at issue to the Indonesian tax official did not violate the FCPA because it did not help Mattson’s and Harris’s employer (Baker Hughes) “obtain or retain business.”  See here for the court’s Memorandum and Order.

As highlighted in this previous post, in 2013 the S.D. of New York dismissed an SEC complaint against Herbert Steffen.  In dismissing the case against the German national, the judge concluded, as an initial threshold matter, that personal jurisdiction over Steffen exceeded the limits of due process.  The judge stated, in pertinent part, as follows.

“If this Court were to hold that Steffen’s support for the bribery scheme satisfied the minimum contacts analysis, even though he neither authorized the bribe, nor directed the cover up, much less played any role in the falsified filings, minimum contacts would be boundless.  [...] [U]nder the SEC’s theory, every participant in illegal action taken by a foreign company subject to U.S. securities laws would be subject to the jurisdiction of U.S. courts no matter how attenuated their connection with the falsified financial statements.  This would be akin to a tort-like foreseeability requirement, which has long been held to be insufficient.”

The other two instances in FCPA history in which the SEC is being put its burden of proof are in the pending Straub and Jackson cases.  To state the obvious, when an SEC complaint is allowed to proceed past the motion to dismiss stage, the SEC has not prevailed when put to its ultimate burden of proof.  Rather the standard at the motion to dismiss stage is whether the complaint pleads enough facts to state a claim that is plausible on its face.

As highlighted in this previous post, in February 2013 the S.D. of New York denied the motion to dismiss of Elek Straub and other foreign national defendants (formerly associated with Magyar Telekom) in an SEC FCPA case concerning an alleged bribery scheme in Macedonia.  A trial date has not been set in the case, the current discovery deadline is May 2015.

As highlighted in this previous post, in December 2012 the S.D. of Texas granted – in an SEC FCPA enforcement action involving alleged conduct in Nigeria –  Mark Jackson and James Ruehlen’s motion to dismiss the SEC’s claims that sought monetary damages while denying the motion  to dismiss as to claims seeking injunctive relief.  Even though court granted the motion as to SEC monetary damage claims, the dismissal was without prejudice meaning that the SEC was allowed to file an amended complaint.  As noted in this prior post, that is indeed what happened next, and as noted here a second round of briefing began anew.  As noted in this previous post, in the Defendant’s renewed motion to dismiss they argued that the SEC could not rely on the fraudulent concealment or continuing violations doctrine to extend the limitations period to cover certain claims.  A week later the Supreme Court issued its unanimous decision in SEC v. Gabelli (see here for the prior post) and soon thereafter the Defendants filed a notice of supplemental authority with the court arguing that Gabelli “bolstered” their position.  On the same day the SEC’s opposition brief was due, the parties jointly notified the court “that in lieu of opposing the [motion to dismiss] the SEC intends to file a Second Amended Complaint.”  The filing noted that the then proposed Second Amended Complaint “moots the relief sought in the [the motion to dismiss] because it clarifies that, among the violations alleged, the SEC seeks civil penalties … only to the extent such violations accrued on or before [a certain date].  In short, after being put to its initial burden of proof, the SEC’s case against Jackson and Ruehlen remains a shell of its former self.  The SEC’s case against Jackson and Ruehlen is currently scheduled for trial to begin on July 9, 2014.

“Far Too Attenuated” – Judge Grants Herbert Steffen’s Motion To Dismiss In SEC FCPA Enforcement Action

Wednesday, February 20th, 2013

Earlier this month Judge Richard Sullivan (S.D.N.Y.Y) denied a motion to dismiss in an SEC FCPA enforcement action against foreign national defendants.  (See here for the prior post discussing the decision in SEC v. Straub).  Judge Sullivan concluded that “the SEC has met its burden” at the early stages of the case to establish personal jurisdiction over the defendants in that the defendants had sufficient “minimum contacts” with the U.S. such that the exercise of personal jurisdiction over the defendants was “reasonable.”  Judge Sullivan only then proceeded to address statute of limitations issues as well as whether the jurisdictional element of an FCPA anti-bribery violation had been properly alleged.

It was noted in the prior post that similar issues were also presented in the SEC’s FCPA enforcement action against former Siemens executive Herbert Steffen, also in the S.D.N.Y.

Yesterday, Judge Shira Scheindlin (a federal court judge well versed in FCPA issues giving her involvement in the Bourke case) granted Steffen’s motion to dismiss the SEC’s complaint.  (See here for the opinion and order).  Because Judge Schneindlin concluded, as an initial threshold matter, that personal jurisdiction over Steffen exceeded the limits of due process, she did not address Steffen’s other challenges, including as to statute of limitations issues.  Unlike the defendants in Straub, Steffen was not alleged to have signed any management representation letters used in connection with financial reporting.

In short, Judge Scheindlin stated as follows.

“If this Court were to hold that Steffen’s support for the bribery scheme satisfied the minimum contacts analysis, even though he neither authorized the bribe, nor directed the cover up, much less played any role in the falsified filings, minimum contacts would be boundless.  [...] [U]nder the SEC’s theory, every participant in illegal action taken by a foreign company subject to U.S. securities laws would be subject to the jurisdiction of U.S. courts no matter how attenuated their connection with the falsified financial statements.  This would be akin to a tort-like foreseeability requirement, which has long been held to be insufficient.”

The remainder of this post provides context and summarizes Judge Scheindlin’s decision.

As noted in this previous post summarizing the allegations in the SEC’s December 2011 complaint against seven former Siemens executives, the conduct at issue involved a sliver of the overall conduct at issue in Siemens high-profile 2008 FCPA enforcement action.  In short, the allegations concerned an alleged bribery scheme in Argentina concerning a national identity card contract and - as to Steffen (the former CEO of Siemens S.A. Argentina who retired in 2003) Judge Scheindlin summarized the allegations as follows.

 ”The Complaint alleged that [Defendant] Sharef recruited Steffen ‘to facilitate the payment of bribes’ to officials in Argentina because of his longstanding connections in Argentina, which he acquired during his tenure at Siemens Argentina.  Following the cancellation of the contract, beginning in December 2000, Steffen and Sharef began renegotiating with the Argentine government, including the newly elected President, which demanded that Siemens paid it bribes in order to reinstate the contract.  In order to facilitate payment of bribes to the Argentine officials, Steffen met several times with [Defendant] Regendantz, who become the Chief Financial Officer of [Siemens Business Services - SBS] in February 2002, and ‘pressured’ Regendantz to authorize bribes from SBS to Argentine officials.  In April 2002, Steffen told Regendantz that SBS had a ‘moral duty’ to make at least an ‘advance payment’ of ten million dollars to the individuals who had previously handled the bribes because he and other individuals were being threatened as a result of the unpaid bribes.  Once Regendantz authorized the bribes, the allegations against Steffen are limited to participation in a phone call initiated by Sharef from the United States in connection with the bribery scheme, and that in the first half of 2003, defendants including Steffen ‘urged Sharef to meet the demands [of Argentine officials] and make the additional payments.”

Judge Scheindlin next addressed whether the SEC’s complaint alleged sufficient facts to establish the two components of the due process – minimum contacts and reasonableness.  Judge Scheindlin noted that because the SEC alleged specific jurisdiction over Steffen, this required that he “purposefully directed his activities towards [the U.S.] and the litigation arises out of or is related to [Steffen's ] contact with the forum.

Judge Scheindlin then stated as follows.

“It is well-established that a court may exercise personal jurisdiction over a foreign defendant who causes an effect in the forum by an act committed elsewhere.  However, ‘this is a principle that must be applied with caution, particularly in an international context.’  ‘Foreseeability’ alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause.’  Rather defendants must have ‘followed a course of conduct directed at … the jurisdiction of a given sovereign, so that the sovereign has the power to subject the defendant to judgment concerning the conduct.  The effects in the United States must ‘occur as a direct and foreseeable result of the conduct outside the territory’ and defendant ‘must know,or have good reason to know, that his conduct will have effects in the [forum] seeking to assert jurisdiction over him.”

After noting the legal standards for “reasonableness,” Judge Scheindlin concluded that the court lacked personal jurisdiction over Steffen in that the SEC did not establish minimum contacts and that the exercise of jurisdiction over Steffen was not reasonable.

As to minimum contacts, Judge Scheindlin stated as follows.

“The SEC’s allegations are premised on Steffen’s role in encouraging Regendantz to authorize bribes to Argentine officials that ultimately resulted in falsified filings.  While Steffen’s actions may have been a proximate cause of the false filings – and that is a matter of some doubt – Steffen’s actions are far too attenuated from the resulting harm to establish minimum contacts.  Steffen was brought into the alleged scheme based solely on his connections with Argentine officials.  In furtherance of his negotiations with those officials, Steffen ‘urged’ and ‘pressured’ Regendantz to make certain bribes.  However, Regendantz did not agree to make the bribes until he communicated with several ‘higher ups’ whose responses he perceived to be instructions to make the bribes.  Once Regendantz agreed to make the bribes – following receipt of instructions from Siemens’ management rather than Steffen – Steffen’s alleged role was tangential at best.  Steffen did not actually authorize the bribes.  The SEC does not allege that he directed, ordered or even had awareness of the cover ups that occurred at SBS much less that he had any involvement in the falsification of SEC filings in furtherance of those cover ups.”

In a footnote, Judge Scheindlin then stated as follows.

“Neither Sharef’s call to Steffen from the United States nor the fact that a portion of the bribery payments were deposited in a New York bank provide sufficient evidence of conduct directed towards the United States to establish minimum contacts.  First, Steffen did not place the calls to Sharef.  Further, Steffen did not direct that the funds be routed through a New York bank.  [...]  His conduct was focused solely on ensuring the continuation of the Siemens contract in Argentina.”

Judge Scheindlin then noted that in SEC v. Straub, the defendants not only orchestrated a bribery scheme aimed at the Macedonia government but also as part of the bribery scheme “signed off on misleading management representations to the company’s auditors and signed false SEC filings.”

Judge Scheindlin next stated as follows.

“If this Court were to hold that Steffen’s support for the bribery scheme satisfied the minimum contacts analysis, even though he neither authorized the bribe, nor directed the cover up, much less played any role in the falsified filings, minimum contacts would be boundless.  Illegal corporate action almost always requires cover ups, which to be successful must be reflected in financial statements.  Thus, under the SEC’s theory, every participant in illegal action taken by a foreign company subject to U.S. securities laws would be subject to the jurisdiction of U.S. courts no matter how attenuated their connection with the falsified financial statements.  This would be akin to a tort-like foreseeability requirement, which has long been held to be insufficient.  The allegations against Steffen fall far short of the requirement that he ‘follow a course of conduct directed … the jurisdiction of a given sovereign, so that the sovereign has the power to subject the defendant to judgment concerning that conduct.  Absent any alleged role in the cover ups themselves, let alone any role in preparing false financial statements the exercise of jurisdiction here exceeds the limts of due process, as articulated by the Supreme Court and the Second Circuit.”

As to reasonableness, Judge Scheindlin stated as follows.

“The decision not to exercise jurisdiction in this case is bolstered by my conclusion that requiring Steffen to defend this case in the United States would be unreasonable.  [...]  When a defendant is not located in the United States, ‘great care and reserve should be exercised when extending our notions of personal jurisdiction into the international context.  Steffen’s lack of geographic ties to the United States, his age, his poor proficiency in English, and the forum’s diminished interest in adjudicating the matter, all weight against personal jurisdiction.  [...] [I]t would be a heavy burden on this seventy-four year old defendant to journey to the United States to defend against this suit.  Further, the SEC and the Department of Justice have already obtained comprehensive remedies against Siemens and Germany has resolved an action against Steffen individually.  The SEC’s interest in ensuring that this type of conduct does not go unpublished will not be furthered by continuing the suit against Steffen, in light of his age, the burden to defend this suit, and the previous adjudications.”

*****

Steffen was represented by  Skadden lawyers Erich Schwartz (here – former Assistant Director of the SEC Enforcement Division) and Amanda Grier (here).  In an e-mailed statement, Schwartz stated as follows.  “We are extremely pleased with this decision, and in particular that the Court recognized the unreasonableness under the circumstances of forcing Mr. Steffen to answer these charges in the U.S.”

Friday Roundup

Friday, December 28th, 2012

Sleepless nights, briefings complete, Africa Sting lawyers recognized, a leader of the FCPA bar on voluntary disclosure, small bribes in Russia, and satire.  It’s all here in the Friday roundup.

Sleepless Nights

According to this recent article by Ashby Jones of the Wall Street Journal, FCPA enforcement is one of “three concerns costing big-company lawyers the most sleep.”

Briefings Complete

One of the bigger FCPA stories of 2012, and one that will reach into 2013 as well, are challenges by foreign defendants in two separate SEC Foreign Corrupt Practices Act enforcement actions.

Prior posts here and here have discussed the briefing in SEC v. Herbert Steffen (a former Siemens executives).

Prior posts here and here have discussed the briefing in SEC v. Elek Straub, Andras Balogh and Tamas Morvai (former Magyar Telecom executives).

Defendants in both actions recently filed reply briefs.

Steffen (here) argues in summary fashion, as follows.

“In its opposition, the SEC asks this Court to assert personal jurisdiction over a defendant: (1) who is a German citizen and resident; (2) who conducted no business in the United States; (3) whose only alleged U.S. “contact” resulted from the unilateral actions of another party; (4) whose allegedly improper conduct occurred entirely outside the United States; and (5) whose conduct was not aimed at and caused no injury in the United States. This request should be rejected. Because the SEC has not met its burden to plead legally sufficient allegations establishing personal jurisdiction over Mr. Steffen, its complaint must be dismissed. In addition, the SEC has failed to explain how its action against Mr. Steffen is not barred by the applicable statute of limitations, 28 U.S.C. § 2462. In addition, although the SEC acknowledges that the purpose of the statutory tolling provision is to ensure that a defendant does not evade U.S. prosecution by “fleeing to another country” where he is “difficult to locate and serve,” it ignores that Mr. Steffen did nothing to evade the SEC, and that the SEC was able to locate him and obtain an order to serve him by publication in Germany, the country of his nationality and residency. Under these circumstances, accepting the SEC’s argument would mean that claims against foreign-national defendants who reside abroad are perpetual, not subject to any time limitations. Finally, even if this Court were to accept a continuing violation theory for securities violations, it does not help the SEC’s case because Mr. Steffen did not take any unlawful acts within the limitations period. For all of these reasons, the motion to dismiss should be granted with prejudice.”

Straub, Balogh and Morvai’s reply brief (here) addresses many of the same jurisdictional and statue of limitations issues at issue in the Steffen challenge.  In addition, the former Magyar Telekom executive’s brief argues that: (1) the pertinent SEC filing the SEC relies upon in making certain allegations was not even filed with the Commission, (2) the SEC has failed to allege corrupt use of an instrumentality of interstate commerce by the defendants; and (3) the SEC has failed to allege the identity of the alleged foreign bribery recipients.

With both the DOJ and SEC bringing more FCPA enforcement actions against foreign actors – for instance in 2011 90% of DOJ individual prosecutions were against foreign nationals and 100% of SEC individual prosecutions were against foreign nationals – the challenges are noteworthy.  Particularly so because Judge Leon, in the Africa Sting case, rejected the DOJ’s jurisdictional theory against U.K. national Pankesh Patel (see here for the prior post) in what was believed to be the first instance of judicial scrutiny concerning FCPA jurisdiction against foreign nationals.

Africa Sting Lawyers Recognized

Two Africa Sting defense lawyers were recently recognized by Law360 as White Collar MVPs.

Michael Madigan (Orrick Herrington & Sutcliffe) represented John Gregory Godsey, who was found not guilty by the jury.  (See here for the prior post).  Commenting on the Africa Sting cases, Madigan stated as follows.  “This case stands out as a significant one. There are certain cases that come along that alter the system of justice and I think this is really one of them.”

In the Law360 article, Madigan was specifically cited for his leadership in leading defense discovery efforts which resulted in the FBI having to turn over its text messages with Richard Bistrong.   According to the article, the Africa Sting case was the ”first major criminal trial to achieve court-ordered production in discovery of thousands of text messages between FBI agents of the government’s key cooperating informant.”  As noted in the article – “The texts showed FBI agents joking with the informant that ‘you could sell snow to an Eskimo’ — a notion that undercut allegations that Godsey and other defendants were willing participants in a bribery scheme. The texts also revealed FBI agents wondering who would play them when Hollywood made a movie about the investigation.”

Eric Dubelier (Reed Smith) was also recognized for his work on the Africa Sting case, specifically his pro bono representation of R. Patrick Caldwell, a former secret service agent and Vietnam veteran, who was also found not guilty by the jury.

In the Law360 article, Dubelier stated as follows regarding his representation of Caldwell.  “Having spent time in the government myself and knowing people like Pat, I thought, You know what? If anyone deserves to represented, this guy does.  Pat really had held only two jobs his entire life: the first as a US soldier in combat, the second as a U.S. Secret Service agent.  His whole career had been in service to the U.S., but it had earned him nothing close to the resources he needed to defend himself against this prosecution. Providing Pat with the defense he deserved was simply the right thing to do.”

As noted by the Law360 article, “After the acquittals — and the mistrials of three additional defendants — and after a concerned jury foreman penned an open letter expressing deep skepticism about the case, the government ultimately dropped the case against the remaining defendants including those awaiting trial and three who already had pled guilty.”

See here for the February 6, 2012 guest post on FCPA Professor by the Africa Sting jury foreman.

Voluntary Disclosure

Willkie Farr & Gallagher FCPA attorneys Martin Weinstein, Robert Meyer and Jeffrey Clark recently published a new book, “The Foreign Corrupt Practices Act:  Compliance, Investigations and Enforcement.”

In this recent Metropolitian Corporate Counsel interview, the authors answer various questions, including the following.

Q: Do you advise your clients to self-report?

Weinstein: We are very cautious about self-reporting to the government. We certainly sometimes advise companies to self-report, but in general we believe that most companies can handle their compliance problems properly without disclosure or government involvement and can appropriately remediate compliance issues and be prepared to respond should the government ever inquire.  Companies across industries fix compliance problems – for instance, in a target company that they are acquiring or have just acquired – every day, without the assistance of the U.S. government.  This is good all around: it allows the acquiring company to proceed with the acquisition, raises the standard of compliance in the acquired company, and permits the government to deploy its enforcement resources where they are needed most. Our book clearly sets forth how to proceed down such a path. That said, the book also discusses the kinds of circumstances in which self-disclosure may be necessary or advisable and helps readers navigate through that fact-specific, critical strategic decision.

Small Bribes In Russia

Relevant to the question I often ask – do FCPA violations occur because companies have bribery as a business strategy or because companies are subject to difficult and opaque business conditions abroad  – is this recent Washington Post article concerning the prevalence of small bribes in Russia.

FCPA Satire

If you like satire, you must check out this post by James McGrath at his Internal Investigations blog.

*****

A good weekend to all.

SEC Responds To Steffen’s Motion To Dismiss

Thursday, November 29th, 2012

Overshadowed by FCPA guidance waiting and now the guidance, the foreign official challenge in the 11th Circuit, and the DOJ’s “Kool-Aid” stand in the Morgan Stanley so-called declination (see here for the prior post), one of the most significant FCPA stories of 2012 is that the SEC is being put to its burden of proof in an FCPA enforcement action.  Not once, not twice, but three times. (See this prior post for discussion of the three cases and links to previous posts).

As noted in the previous post, two of the challenges focus on the SEC’s alleged jurisdiction over foreign nationals.  With both the DOJ and SEC bringing more FCPA enforcement actions against foreign actors – for instance in 2011 90% of DOJ individual prosecutions were against foreign nationals and 100% of SEC individual prosecutions were against foreign nationals – the challenges are noteworthy.  Particularly so because Judge Leon, in the Africa Sting case, rejected the DOJ’s jurisdictional theory against U.K. national Pankesh Patel (see here for the prior post) in what was believed to be the first instance of judicial scrutiny concerning FCPA jurisdiction against foreign nationals.

Recently the SEC filed its opposition brief (here) to Herbert Steffen’s motion to dismiss.  Steffen is a former Siemens executives who was charged in December 2011 (see here for the prior post).

In summary, the SEC states as follows.

“Steffen’s motion contends (1) that the Court lacks personal jurisdiction over him and (2) that the SEC’s claims are time-barred under the five-year statute of limitations set forth in 28 U.S.C. § 2462. The Court should deny the motion on both grounds.

Steffen is subject to personal jurisdiction in this Court because his conduct caused foreseeable consequences in the United States. The complaint alleges that Steffen played a central role in a long-running bribery scheme at Siemens Aktiengesellschaft (“Siemens”); that he coerced a reluctant lower-ranking official to authorize and cover up bribe payments; and that his actions caused Siemens to file annual and quarterly reports with the SEC in the United States that misrepresented the company’s financial statements and that included false Sarbanes-Oxley certifications. The exercise of personal jurisdiction over Steffen on these facts is consistent with a long line of Second Circuit case law and entirely reasonable. Because Section 27 of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78aa, provides for nationwide service of process, the Court need not look to New York’s long-arm statute, the N.Y. C.P.L.R., as a basis for jurisdiction.

Nor are the SEC’s claims time-barred. The plain language of 28 U.S.C. § 2462 provides that the five-year limitations period runs only “if, within the same period, the offender . . . is found within the United States in order that proper service may be made thereon.” 28 U.S.C. § 2462. Steffen is a German national who, by his own admission, has lived outside the United States during the entire relevant period. And even if he had spent the last five years in this country, the bribery scheme Steffen was a part of did not conclude until February 6, 2007, when Siemens realized the scheme’s objective, a $217 million arbitration award against the Argentine government. The SEC filed its complaint less than five years later, on December 13, 2011. Finally, as a long line of decisions in the Southern District of New York have recognized, the SEC’s claims for equitable relief — in this case, an injunction and disgorgement — are not subject to Section 2462 at all.”

In addition to its “foreseeable consequences” assertion, the SEC brief also contains the following sentence as to its alleged jurisdiction.

“Steffen also discussed the bribery scheme over the telephone with defendant Sharef while Sharef was in the United States, and a portion of the payments that Steffen pressured Regendantz to make were deposited in a New York bank.”  [As noted in this previous post, Sharef has agreed in principle to a settlement with the SEC and Regendantz previously settled with the SEC].

In its brief, the SEC acknowledges that there is no case law interpreting its Section 2462 tolling position.

Strange Things Happen In Threes – Another Challenge In A SEC FCPA Enforcement Action Filed

Monday, October 22nd, 2012

It’s been said that strange things happen in threes.

Until very recently, the last time the SEC was challenged in a Foreign Corrupt Practices Act enforcement action was 2002 in the Eric Mattson and James Harris enforcement action.  As noted in this previous post, the SEC lost.

After a 10 year period enforcing the FCPA against cooperating corporate and individual defendants, this past summer Mark Jackson and James Ruehlen’s challenged the SEC in an FCPA enforcement action.  (See here for the briefing, oral arguments are set for Halloween).

This post last week noted that former Maygar Telekom executives Elek Straub, Andras Balogh and Tamas Morvai plan on challenging the SEC’s enforcement action against them.  Briefing is to be completed in mid-December and oral arguments are scheduled for mid-January 2013.

Strange things happen in threes.

Last week, Chris Matthews (Wall Street Journal – Corruption Currents) reported here that former Siemens executive Herbert Steffen has filed a motion to dismiss the SEC’s charges against him.

As noted in this previous post, Steffen is among a group of former Siemens executives charged by the SEC (and DOJ) in connection with the Argentina conduct at issue in the widespread Siemens enforcement action from 2008.

In his motion to dismiss (here) Steffen moves to dismiss the SEC complaint for lack personal jurisdiction and for the SEC’s failure to file the complaint within the applicable five-year statute of limitations.

The motion states as follows.

“Mr. Steffen, 74 years of age, is a German citizen residing in Germany. He is trained as an engineer, and spent his entire career at Siemens Aktiengesellschaft (“Siemens”) and its subsidiaries with postings in Germany, Brazil, and Argentina. He was never employed in the United States, and never travelled to the United States on business for Siemens during the entire period alleged in the complaint. The complaint alleges he had managerial positions in Siemens’ Argentina business from 1983 through 1989 and again in 1991.   There are no allegations of any improprieties during the period he had such responsibilities. He retired from Siemens nearly ten years ago and has not been employed since.  The complaint alleges that between 2000 and 2003, when Mr. Steffen was Group President of Siemens Transportation Systems in Germany, he was recruited to assist in efforts to recover a contract that the Argentine government planned to terminate.  It further alleges that in that capacity he engaged in conduct that the SEC contends violated or aided and abetted violations of Sections 13(b)(2), 13(b)(5) and 30A of the Securities Exchange Act of 1934.  The last alleged act attributed to Mr. Steffen in the complaint is alleged to have occurred sometime in “the first half of 2003.”  The complaint does not allege that Mr. Steffen ever entered the United States. Nor does it allege that he initiated any contact with anyone in the United States. Although it alleges that he participated in “one or more telephone conversations with defendant Sharef” (another Siemens employee), it expressly alleges that Mr. Sharef “called him from the United States.”  Because the complaint fails to plead facts sufficient to establish personal jurisdiction over Mr. Steffen, and because the SEC’s claims are barred because they were not filed within the applicable five-year statute of limitations, we respectfully move to dismiss all the claims against Mr. Steffen pursuant to Fed R. Civ. P. 12.”

The statute of limitations portion of Steffen’s states, among other things, as follows.

“At the September 28, 2012 scheduling conference before this Court, the SEC expressed the view that the applicable statute of limitations was tolled indefinitely because Mr. Steffen is a foreign defendant who has not been in the United States and does not own property in the United States. The SEC’s rationale for this novel argument was language in a sixty-year-old statute that neither expressly mentions tolling the statute of limitations nor has been held by any court to support the interpretation offered by the SEC.  The interpretation advanced by the SEC is particularly nonsensical, given the relative ease with which service of process can be effected on foreign defendants residing abroad. Moreover, the proposed interpretation—which as a practical matter would extend indefinitely the statute of limitation as to those individuals with the least connection to the United States— disregards, with no indication from Congress, the strong judicial policy favoring statute of limitations. [… Because the SEC cannot overcome its lack of diligence in pursuing its claims within the five-year statute of limitations, its claims against Mr. Steffen should be dismissed.”

Steffen is represented by Skadden lawyers Erich Schwartz (here - former Assistant Director of the SEC Enforcement Division) and Amanda Grier (here).

As noted in Chris Matthew’s Corruption Currents post, “the SEC said in a court letter filed last Friday it had reached an agreement with Uriel Sharef, a former member of Siemens’ managing board, to settle the foreign bribery charges pending against him.”

On the same day the SEC enforcement action was brought in December 2011, the SEC announced settlement of the charges against Bernd Regendatz.  As to the other defendants charged by the SEC, the docket notes a default by Ulrich Bock and Stephan Singer and that Andrews Truppel was recently served.  The docket contains no information as to Carlos Sergi.

As noted in the December 2011 post, the DOJ also charged several former Siemens executives as well.  The docket does not contain any entries since December 2011.