Archive for the ‘Individual Enforcement Action’ Category

DOJ Prosecution Of Individuals – Are Other Factors At Play?

Tuesday, January 21st, 2014

Yesterday’s post (here) focused on DOJ FCPA individual prosecutions and highlighted the following facts and figures.

  • Since 2008, the DOJ has charged 89 individuals with FCPA criminal offenses.
  • 53% of the individuals charged by the DOJ with FCPA criminal offenses since 2008 have been in just four cases and 75% of the individuals charged by the DOJ since 2008 have been in just nine cases.
  • There have been 60 corporate DOJ FCPA enforcement actions since 2008 and of these actions, 44 (or 73%) have not (at least yet) resulted in any DOJ charges against company employees.

These statistics should cause alarm, including at the DOJ as it has long recognized that a corporate-fine only enforcement program is not effective and does not adequately deter future FCPA violations.   For instance, in 1986 John Keeney (Deputy Assistant Attorney General, Criminal Division, DOJ) submitted written responses in the context of Senate hearings concerning a bill to amend the FCPA. He stated as follows:

“If the risk of conduct in violation of the statute becomes merely monetary, the fine will simply become a cost of doing business, payable only upon being caught and in many instances, it will be only a fraction of the profit acquired from the corrupt activity. Absent the threat of incarceration, there may no longer be any compelling need to resist the urge to acquire business in any way possible.”

In 2010 Hank Walther (Deputy Chief Fraud Section) stated that a corporate fine-only FCPA enforcement program allows companies to calculate FCPA settlements as the cost of doing business.

Most recently, in 2013 Daniel Suleiman (DOJ Deputy Chief of Staff, Criminal division) stated that “there is no greater deterrent to corporate crime that the prospect of prison time … if people don’t go to prison, then enforcement can come to be seen as merely the cost of doing business.”

In my 2010 Senate FCPA testimony (here), I noted that the absence of individual FCPA charges in most corporate FCPA enforcement actions causes one to legitimately wonder whether the conduct giving rise to the corporate enforcement action was engaged in by ghosts.  Others have rightly asked the “but nobody was charged” question, including James Stewart in a New York Times column highlighted in this previous post.

However, as I stated in my Senate testimony, there is an equally plausible reason why no individuals have been charged in connection with many corporate FCPA enforcement actions.  The reason has to do with the quality and legitimacy of the corporate enforcement action in the first place.

Readers know well of the prevalence of non-prosecution and deferred prosecution agreements (NPA / DPA)  in the FCPA context and how these agreements, not subject to any meaningful judicial scrutiny, are often agreed to by companies for reasons of ease and efficiency, and not necessarily because the conduct at issue violates the FCPA.  For more on this dynamic, see my article “The Facade of FCPA Enforcement.”  As highlighted in this recent post, since 2010, 93% of corporate DOJ enforcement actions have been resolved via NPAs or DPAs.

Individuals, on the other hand, face a deprivation of personal liberty, and are more likely to force the DOJ to satisfy its high burden of proof as to all FCPA elements.  In other words, perhaps the more appropriate question is not “but nobody was charged,” but rather do NPA and DPAs always represent provable FCPA violations?

I set out to test this with the following working hypothesis.

  • Instances in which the DOJ brings actual criminal charges against a company or otherwise insists in the resolution that the corporate entity pleads guilty to FCPA violations, represent a higher quality FCPA enforcement action (in the eyes of the DOJ) and is thus more likely to result in related FCPA criminal charges against company employees.
  • Instances in which the DOJ resolves an FCPA enforcement action solely with an NPA or DPA, represent a lower quality FCPA enforcement action and is thus less likely to result in related FCPA criminal charges against company employees given that an individual is more likely to put the DOJ to its high burden of proof.

The below statistics provide a compelling datapoint concerning the quality and legitimacy of many corporate DOJ FCPA enforcement actions.

Since NPAs and DPAs were first introduced to the FCPA context in December 2004 (see here), there have been 76 corporate DOJ FCPA enforcement actions.

  • 12 of these corporate enforcement actions were the result of a criminal indictment or resulted in a guilty plea by the corporate entity to FCPA violations.  10 of these corporate enforcement actions – 83% – resulted in related criminal charges of company employees.
  • 51 of these corporate enforcement actions were resolved solely with an NPA or DPA.  In only 5 instances – 9.8% – was there related criminal charges of company employees.
  • A third type of corporate FCPA enforcement action is what I will call a hybrid action in which the resolution includes a guilty plea by some entity in the corporate family – usually a foreign subsidiary – and an NPA or DPA against the parent company.  Since the introduction of NPAs and DPAs in the FCPA context, there have been 13 such corporate enforcement actions.  In 4 of these actions – 31% -  there was related criminal charges of company employees. This percentage is what one might expect compared to the two types of corporate FCPA enforcement actions discussed above, although it is interesting to note the following regarding 3 of these 4 instances.  The DOJ ended up dismissing the charges against Si Chan Wooh (Schnitzer Steel), John O’Shea (ABB) was not found not guilty, and Bobby Elkin (Alliance One) received a probation sentence after the sentencing judge questioned many aspects of the enforcement action (see here for the prior post).

If the above statistics do not cause you to question the quality and legitimacy of many corporate FCPA enforcement actions, no empirical data ever will.  For those who believe NPAs and DPAs always represent provable FCPA violations, the ball is now in your court to offer credible explanations for following datapoints.

If a corporate DOJ FCPA enforcement action is the result of a criminal indictment or resulted in a guilty plea by the corporate entity to FCPA violations, there is a 83% chance that related criminal charges will be brought against a company employee.  If a corporate DOJ FCPA enforcement action is resolved solely with an NPA or DPA, there is a 9.8% chance that criminal charges will be brought against a company employee.

At a conference last May (and as highlighted in this post), I presented the above numbers and put the ball in the court of Denis McInerney (DOJ, Deputy Assistant Attorney General) and asked him to explain the gap.  He described two enforcement actions resolved via an NPA or DPA in which there were indeed related individual prosecutions, but otherwise said that he did not know where these numbers are coming from.  As I explained, it was really quite easy calculating the numbers.  One simply takes all DOJ corporate enforcement actions since 2004, tracks how those enforcement actions were resolved, and then looks to see if there have been related individual actions against company employees.

[Note - the above data was assembled using the "core" approach as well as the definition of an FCPA enforcement action described in this prior post]

A Focus On DOJ FCPA Individual Prosecutions

Monday, January 20th, 2014

Some have proclaimed 2013 to be the year of the individual.  (See here and here).

Yes, in 2013 FCPA criminal charges were filed or announced against 12 individuals and this figure was higher than in 2012 and 2011.  Yet at the same time, 0 of the 8 DOJ corporate FCPA enforcement actions in 2013 have resulted (at least yet) in any related charges against company employees.  Going back to 2012, only 1 of the 9 DOJ corporate FCPA enforcement actions (11%) in 2012 have resulted (at least yet) in any related charges against company employees.

Certain individual FCPA enforcement actions filed or announced in 2013 (see here for the individual actions announced in connection with the 2012 BizJet enforcement action and here for the individual action announced in connection with the 2011 Maxwell Technology enforcement action) remind us that there can be a lag time between a corporate FCPA enforcement and any related individual enforcement action.

Nevertheless, the statistics are what they are at the present moment and this post highlights certain facts and figures concerning the DOJ’s prosecution of individuals for FCPA offenses.

Since 2000, the DOJ has charged 123 individuals with FCPA criminal offenses.  The breakdown is as follows.

  • 2000 – 0 individuals
  • 2001 – 8 individuals
  • 2002 – 4 individuals
  • 2003 – 4 individuals
  • 2004 – 2 individuals
  • 2005 – 3 individuals
  • 2006 – 6 individuals
  • 2007 – 7 individuals
  • 2008 – 14 individuals
  • 2009 – 18 individuals
  • 2010 – 33 individuals (including 22 in the Africa Sting case)
  • 2011 – 10 individuals
  • 2012 – 2 individuals
  • 2013 – 12 individuals

An analysis of the numbers reveals some interesting points.

Most of the individuals – 89 (or 72%) were charged since 2008.  Thus, on one level the DOJ is correct when it states that individual prosecutions are a “cornerstone” of its FCPA enforcement strategy and that it has been “vigorous about holding individuals accountable” – at least as measured against the historical average given that between 1978 and 1999, the DOJ charged 38 individuals with FCPA criminal offenses.

Yet on another level, a more meaningful level given that there was much less overall enforcement of the FCPA between 1978 and 1999, the DOJ’s statements about its focus on individuals represents hollow rhetoric as demonstrated by the below figures.

Of the 89 individuals criminally charged with FCPA offenses by the DOJ since 2008:

  • 22 individuals were in the Africa Sting case;
  • 9 individuals (minus the “foreign officials” charged) were in the Haiti Teleco case;
  • 8 individuals were in the Control Components case;
  • 8 individuals were in the Siemens case;
  • 4 individuals were in the Lindsey Manufacturing case;
  • 4 individuals were  in the LatinNode / Hondutel case;
  • 4 individuals were in the Nexus Technologies case;
  • 4 individuals were in the BizJet case; and
  • 4 individuals were associated with Alstom (the company’s FCPA scrutiny is still ongoing).

In other words, 53% of the individuals charged by the DOJ with FCPA criminal offenses since 2008 have been in just four cases and 75% of the individuals charged by the DOJ since 2008 have been in just nine cases.

Considering that there has been 60 corporate DOJ FCPA enforcement actions since 2008, this is a rather remarkable statistic.  Of the 60 corporate DOJ FCPA enforcement actions, 44 (or 73%) have not (at least yet) resulted in any DOJ charges against company employees.

This FCPA specific figure is higher than the general 66% figure calculated by Professor Brandon Garrett and recently profiled in this Wall Street Journal article (“The Justice Department hasn’t charged employees at two-third of nearly 400 companies that have settled criminal investigations or been convicted of crimes in recent years.”)

In short, and as demonstrated by the statistics, DOJ FCPA individual enforcement actions are significantly skewed by just a few enforcement actions and the reality is that 73% of DOJ corporate enforcement actions since 2008 have not (at least yet) resulted in any DOJ charges against company employees.

A very interesting and significant picture emerges when analyzing DOJ individual prosecution data based on whether the corporate entity employing or otherwise involved with the individual charged was a public or private entity.

Of the 89 individuals charged by the DOJ with FCPA criminal offenses since 2008, 61 of the individuals (69%) were employees or otherwise affiliated with private business entities.  This is a striking statistic given that 48 of the 60 corporate DOJ FCPA enforcement actions since 2008 (80%) were against publicly traded corporations.

In the 12 private entity DOJ FCPA enforcement actions since 2008, individuals were charged in connection with 7 of those cases (58%).  In contrast, in the 48 public entity DOJ FCPA enforcement actions since 2008, individuals were charged in connection with 9 of those cases (19%).  In short, and based on the data, a private entity DOJ FCPA enforcement is approximately three times more likely to have a related DOJ FCPA criminal prosecution of an individual than a public entity DOJ FCPA enforcement action.

Are other factors at play when it comes to the fact that 73% of DOJ corporate enforcement actions since 2008 have not (at least yet) resulted in any DOJ charges against company employees?  A future post will highlight a relevant datapoint.

[Notes - the above data was assembled using the "core" approach - see this prior post for an explanation.  The term "public entity"  is not limited to "issuers" under the FCPA, but rather a public entity regardless of which market it shares trade on.  Thus, for instance, JGC Corp. of Japan and Bridgestone are both public entities even though its shares are not traded on a U.S. exchange.]

DOJ Announces FCPA Enforcement Action Against Former CEO’s and General Counsel Of PetroTiger

Tuesday, January 7th, 2014

Yesterday the DOJ announced FCPA and related charges against former executives of PetroTiger Ltd., a British Virgin Islands oil and gas company with operations in Colombia and offices in New Jersey, “for their alleged participation in a scheme to pay bribes to foreign government officials in violation of the FCPA, to defraud PetroTiger, and to launder proceeds of those crimes.”

The individuals charged were former co-CEOs of PetroTiger Joseph Sigelman and Knut Hammarskjold and former general counsel Gregory Weisman.

According to the DOJ release, Sigelman and Hammarskjold “were charged by sealed complaints filed in the District of New Jersey on Nov. 8, 2013″ and “Hammarskjold was arrested Nov. 20, 2013, at Newark Liberty International Airport” and “Sigelman was arrested on Jan. 3, 2014, in the Philippines and appeared [yesterday] in Guam before a U.S. Magistrate Judge” and “will have an initial appearance in New Jersey federal court on a date to be determined.”  According to the release, Weisman “pleaded guilty on Nov. 8, 2013, to a criminal information charging one count of conspiracy to violate the FCPA and to commit wire fraud.”

Sigelman

This criminal complaint, charges Sigelman with conspiracy to violate the FCPA’s anti-bribery provisions as well as three substantive FCPA charges.  The FCPA charges are based on allegations that Sigelman and others made at least four transfers of money in the approximate amount of $333,500 to an account in Colombia of a “foreign government official in Colombia.”

Elsewhere, the complaint identifies the foreign official as “an official at Ecopetrol [who] had influence over the approval and award of contracts by Ecopetrol, including the Mansarovar Contract.”  Ecopetrol is alleged to be “the state-owned and state-controlled petroleum company in Colombia” and the complaint states as follows.

“Ecopetrol was created by national law, and it was required by law that Colombia conserve, at a minimum, eighty percent of the shares in circulation, with voting rights. During the relevant time period, Colombia controlled 89.9% of Ecopetrol’s outstanding capital stock, and held the right to elect the majority of the members of the company’s board of directors. Ecopetrol’s board of directors included the Minister of Mines and Energy, the Minister of Finance, and the Director of the National Planning Agency of Colombia. Ecopetrol was responsible for approving contracts to drill or perform services on oil fields in Colombia, including the Mansarovar Contract.”

The complaint also refers to the official’s wife and states that “the Official’s Wife purportedly provided finance and management related consulting services for PetroTiger [when] in reality, the Official’s Wife served as a conduit for bribe payments to the Official.”

Under the heading “Bribery Scheme,” the complaint alleges that Sigelman and other PetroTiger executives [Hammarskjold and Weisman] ”attempted to secure the Mansarovar Contract” and ”because Ecopetrol had ultimate authority for approving projects and contracts to perform oil-related services in Colombia, Sigelman [and the other executives] were required to obtain approval from Ecopetrol for the Mansarovar Contract.”

According to the complaint, Sigelman and others “in order to secure Ecopetrol’s approval for the Mansarovar Contract,” “paid bribes to the Official, who had the ability to influence the approval process.”

The complaint states that Sigelman and others “attempted to conceal the bribes by funneling the payments through the Official’s Wife and by falsely claiming in documents that the payments were for finance and management consulting services that the Official’s Wife purportedly performed for PetroTiger.”  The complaint further states that “when transfers to the bank account in the name of the Official’s Wife failed as a result of incorrect account information,” Sigelman and others “transferred the money directly to a bank account in the name of the Official.”

According to the complaint, PetroTiger was successful in “obtaining Ecopetrol’s approval, and secured the Mansarovar Contract” which was valued “at approximately $39.6 million, and has resulted in a gross profit to date, of approximately $3.5 million.”

The Sigelman complaint also charges one count of conspiracy to commit money laundering and one count of conspiracy to commit wire fraud.  These charges are based, in pertinent part, on allegations that an owner of a company ”being acquired by Sigelman and others” transferred approximately $262,000 “as part of an illegal kickback scheme” to Sigelman’s bank account and that Sigelman then “divided up the money and transferred portions of the money” to other PetroTiger executives.  According to the complaint, Sigelman and the others “did not disclose to their investing partners that they were receiving a kickback in exchange for the additional money that the investing partners would be paying in connection with the acquisition of the Target Company.  As a result, the investing partners were deprived of money and property and the honest services of” Sigelman and others.  According to the complaint, this “Target Company” was “an oil services company with operations in Colombia” that PetroTiger acquired in 2009 for approximately $53 million.

Hammarskjold

This criminal complaint also charges Hammarskjold with conspiracy to violate the FCPA’s anti-bribery provisions as well as three substantive FCPA charges based on the same conduct alleged in the Sigelman complaint.

The Hammarskjold complaint also charges one count of conspiracy to commit money laundering and one count of conspiracy to commit wire fraud based on the same kickback scheme alleged in the Sigelman complaint.

Weisman

This criminal information alleges the same bribery scheme and kickback scheme as the Sigelman and Hammarskjold complaints.  However, the information only charges one count of conspiracy to violate the FCPA and to commit wire fraud.

The Weisman information further states as follows.

“On or about September 28, 2010, at board meeting of PetroTiger, Executive A [Sigelman] stated that he and others were dealing with non-transparent commercial practices in Colombia.  On or about September 28, 2010, at the board meeting … in response to a question about whether Executive A was upholding PetroTiger’s Code of Business Principles, which included a prohibition on bribery, Executive A stated that he was.”

The Weisman information also contains a forfeiture allegation seeking forfeiture of approximately $52,000 (the amount of the alleged kickback Weisman received).

In the DOJ’s release, Acting Assistant Attorney General Mythili Raman stated:

“We have said – repeatedly and emphatically – that foreign corruption, whether committed by companies or by the individuals entrusted to run those companies, will not be tolerated.   And, our track record in vigorously enforcing the FCPA has shown that message to be undeniably true.  The charges unsealed today against two former CEOs of PetroTiger and the guilty plea announced today of the former General Counsel reaffirm our clear message that we will prosecute corruption and fraud wherever we find it.   Bribery distorts what should be a level playing field and deprives corporations and governments of funds that should instead be used to strengthen those institutions.   Today’s announcement should be a reminder to CEOs and other executives who seek to corrupt the system at the expense of honest businesses:   we are not going away.”

U.S. Attorney Paul Fishman of the District of New Jersey stated:

“Bribery of public officials, whether at home or abroad, corrupts business opportunity and undermines trust in government.  The under-the-table deals alleged in today’s charges are not an acceptable way of doing business.”

Special Agent in Charge Aaron Ford of the FBI’s Newark Division stated:

“The FBI is committed to pursuing those who disrupt the level playing field to which companies in the U.S. and around the world are entitled.  We will continue to investigate these matters by working with law enforcement agencies, both foreign and domestic, to ensure that both corporations and executives who bribe foreign officials for lucrative contracts are punished.”

The DOJ’s release further states:

“The department has worked closely with and has received significant assistance from its law enforcement counterparts in the Republic of Colombia and greatly appreciates their assistance in this matter.   The department also thanks the Republic of the Philippines, including the Bureau of Immigration, for its assistance in this matter.   Significant assistance was also provided by the Criminal Division’s Office of International Affairs.”

Did Richard Liedo Win Or Lose?

Monday, December 23rd, 2013

[This post is part of a periodic series regarding "old" FCPA enforcement actions]

This previous post highlighted the 1989 Foreign Corrupt Practices Act enforcement action against NAPCO International in connection with military sales to the Republic of Niger.  The previous post noted that the DOJ also criminally charged the Vice President of the Aerospace Division of NAPCO and that this individual exercised his constitutional right to a jury trial and put the DOJ to its burden of proof.

That person was Richard Liedo and his enforcement action is worthy of its own post.

Among other things, the Liebo enforcement action resulted in a rare appellate FCPA decision, and an often overlooked one at that given that the court concluded that a jury could find that a subordinate who acted at his supervisor’s direction in providing a thing of value to a foreign official lacked “corrupt” intent.

In this lengthy 62 page criminal indictment, the DOJ charged Liebo in connection with the same bribery scheme alleged in the NAPCO action.  In pertinent part, the DOJ alleged that in connection with aircraft sales to Niger, Liebo conspired with others to violate the FCPA by making payments or authorizing payments of money to “officials of the Government of Niger, that is, Tahirou Barke Doka [the First Counselor of the Embassy of Niger in Washington, D.C.] and Captain Ali Tiemogo [Chief of Maintenance for the air force component of the Niger Ministry of Defense] and “Fatouma Mailelel Boube and Amadou Mailele, both relatives of Tiemogo, while knowing that all or a portion of such money would be offered, given or promised, directly or indirectly, to foreign officials, namely Barke and Tiemogo” for the purpose of “influencing the acts and decisions of Barke and Tiemogo in their official capacities, and inducing them to use their influence with the Ministry of Defense.”

In addition to the conspiracy charge (count 1), the DOJ also charged Liebo with 10 counts of violating the FCPA’s anti-bribery provisions (counts 2 – 11), one count of violating the FCPA’s books and records provisions (count 12), three counts of aiding and abetting in the preparation of false corporate income tax returns (counts 13 – 15), and five counts of making false statements to the Defense Security Assistance Agency (DSAA) of the U.S. Department of Defense in connection with the sales (counts 16 – 20).

Liebo exercised his constitutional right to a jury trial and put the DOJ to its burden of proof.

The jury considered 19 charges against Liebo (on the first day of trial, the court granted the DOJ’s motion to dismiss one of the false statement charges) and he was acquitted of 17 charges.  The only charges Liebo was convicted of was one count of violating the FCPA’s anti-bribery provisions and one count of making a false statement to DSAA.  The FCPA charge related to the payment of $2,028 “for the airline tickets purchased for Barke’s wedding and honeymoon travel.”

As noted in this judgment, Liebo was sentenced to 18 months in federal prison.  However, as noted in a Trace Compendium entry, “Liebo only served two of the 18 months, having petitioned for, and eventually received, a retrial.”

As noted in this Eighth Circuit opinion, Liebo appealed and argued on appeal that “his convictions should be reversed because of insufficient evidence and because the district court erred in instructing the jury” and that the “district court abused its discretion by denying his motion for a new trial based on newly discovered evidence.”

As to the FCPA anti-bribery charge Liebo was found guilty on, he argued on appeal that: (1) there was insufficient evidence to show that the airline tickets were given to obtain or retain business; and (2) that there was no evidence to show that his gift of honeymoon tickets was done corruptly.

After setting forth the standard of review (i.e. considering the evidence in the light most favorable to the government with all reasonable inferences and credibility determinations made in support of the jury’s verdict), the court stated as follows as to obtain or retain business.

“There is sufficient evidence that the airplane tickets were given to obtain or retain business. Tiemogo testified that the President of Niger would not approve the contracts without his recommendation. He also testified that Liebo promised to “make gestures” to him before the first contract was approved, and that Liebo promised to continue to “make gestures” if the second and third contracts were approved. There was testimony that Barke helped Liebo establish a bank account with a fictitious name, that Barke used money from that account, and that Barke sent some of the money from that account to Tiemogo. Barke testified that he understood Liebo deposited money in the account as “gestures” to Tiemogo for some “of the business that they do have together.”

Although much of this evidence is directly relevant to those counts on which Liebo was acquitted, we believe it appropriate that we consider it in determining the sufficiency of evidence as to the counts on which Liebo was convicted.

[…]

Moreover, sufficient independent evidence exists that the tickets were given to obtain or retain business. Evidence established that Tiemogo and Barke were cousins and best friends. The relationship between Barke and Tiemogo could have allowed a reasonable jury to infer that Liebo made the gift to Barke intending to buy Tiemogo’s help in getting the contracts approved. Indeed, Tiemogo recommended approval of the third contract and the President of Niger approved that contract just a few weeks after Liebo gave the tickets to Barke. Accordingly, a reasonable jury could conclude that the gift was given “to obtain or retain business.”

As to corrupt intent, the court stated as follows.

“Liebo also contends that the evidence at trial failed to show that Liebo acted “corruptly” by buying Barke the airline tickets. In support of this argument, Liebo points to Barke’s testimony that he considered the tickets a “gift” from Liebo personally. Liebo asserts that “corruptly” means that the offer, payment or gift “must be intended to induce the recipient to misuse his official position….”  […] Because Barke considered the tickets to be a personal gift from Liebo, Liebo reasons that no evidence showed that the tickets wrongfully influenced Barke’s actions.

We are satisfied that sufficient evidence existed from which a reasonable jury could find that the airline tickets were given “corruptly.” For example, Liebo gave the airline tickets to Barke shortly before the third contract was approved. In addition, there was undisputed evidence concerning the close relationship between Tiemogo and Barke and Tiemogo’s important role in the contract approval process. There was also testimony that Liebo classified the airline ticket for accounting purposes as a “commission payment.” This evidence could allow a reasonable jury to infer that Liebo gave the tickets to Barke intending to influence the Niger government’s contract approval process. We conclude, therefore, that a reasonable jury could find that Liebo’s gift to Barke was given “corruptly.” Accordingly, sufficient evidence existed to support Liebo’s conviction.”

As to Liebo’s argument on appeal that the “district court abused its discretion by denying his motion for a new trial based on newly discovered evidence,” Liebo noted that “two months after his conviction, a NAPCO employee provided Liebo with a memorandum showing [a superior's] approval to the charge of the airline tickets.”  Liebo argued that the discovery of this evidence warranted a new trial.  In support, Liebo argued that “he was acquitted on all other bribery counts for which there was evidence that the payment in question was approved [by a superior].  Liebo argued that evidence of a superior’s approval of the wedding trip was a determinative factor in the jury’s verdict by “pointing to a question sent out by the jury during their deliberations asking whether there was ‘any information regarding authorization for payment of wedding trip.’”

After noting that motions for a new trial based on newly discovered evidence are looked upon with disfavor, the court also noted that “courts have granted a new trial based on newly discovered evidence especially when the evidence supporting the defendant’s conviction is weak.”

The court closed its opinion as follows.

“[T]he evidence against Liebo, while sufficient to sustain the conviction, was not overwhelming. Indeed, we believe that the company president’s approval of the purchase of the tickets is strong evidence from which the jury could have found that Liebo acted at his supervisor’s direction and therefore, did not act “corruptly” by giving the tickets to Barke. Furthermore, we are highly persuaded that the jury considered such approval pivotal, especially in light of the question it submitted to the court during its deliberations and its acquittal of Liebo on the other bribery counts in which evidence of approval existed. Accordingly, we hold that the district court clearly abused its discretion in denying Liebo’s motion for a new trial.”

In the re-trial, Liebo was convicted of aiding and abetting FCPA anti-bribery violations and making a false statement to the DSAA.  He was then sentenced to three years probation, two months home detention, and 400 hours of community service.

Based on all of the above, the question is raised – did Richard Liedo win or lose when he put the DOJ to its burden of proof?

In this the exam grading season, I know where I come out when the one with the burden is 90% unsuccessful.

One Of The More Dubious FCPA Enforcement Actions Of All-Time

Wednesday, December 18th, 2013

[This post is part of a periodic series regarding "old" FCPA enforcement actions]

If one were to compile a list of the most dubious Foreign Corrupt Practices Act enforcement actions of all-time, near the top of the list would be the DOJ’s 1994 enforcement action against Vitusa Corporation and its President Denny Herzberg.

In this criminal information, the DOJ alleged that Vitusa (a New Jersey corporation engaged in the business of selling commodities and other goods) “entered into a lawful contract to sell milk powder to the Government of the Dominican Republic.”

The DOJ then alleged as follows.

“Although Vitusa delivered the milk powder to the Government of the Dominican Republic, the Dominican government did not pay Vitusa promptly for the milk powder received and, in fact, maintained an outstanding balance due for an extended period of time.  Vitusa, therefore, made various efforts to collect the outstanding balance due, including contacting officials of the United States and Dominican Governments to obtain their assistance in securing payment in full.”

According to the DOJ, “during the pendency of the contract, Servio Tulio Mancebo (a citizen of the Dominican Republic) communicated to Herzberg a demand made by a foreign official [a senior official of the Government of the Dominican Republic] which called for the payment of a ‘service fee’ to that official in return for the official using that official’s influence to obtain the balance due to Vitusa for the milk powder contract from the Dominican Government.”

According to the DOJ, “Herzberg agreed to Mancebo’s proposal that Vitusa would pay a ‘service fee’ indirectly to the foreign official.”  Thereafter, the DOJ alleged that the Government of the Dominican Republic made payment of $63,905.12 to Vitusa on the contract, but that following Herzberg’s instruction, “Mancebo retained $20,000 from that payment.”

According to the DOJ, Vitusa and Herberg knew “that all or a portion of the money would be given to the foreign official for the purpose of inducing the official to use that official’s position and influence with the Government of the Dominican Republic in order to obtain and retain business, that is, full payment of the balance due for Vitusa’s prior sale of milk powder to the Government of the Dominican Republic.”

Based on the above allegations, the DOJ charged Vitusa with violating the FCPA’s anti-bribery provisions.

Based on the same allegations, the DOJ also charged Herzberg with violating the FCPA’s anti-bribery provisions.  (See here for the DOJ’s Statement of Facts).

Vitusa pleaded guilty and agreed to pay a $20,000 criminal fine (see here).

Herzberg also pleaded guilty and was placed on two years probation (see here).  Herzberg was also ordered to pay a $5,000 criminal fine, but the judgment notes that “this fine shall be applied to the $20,000 fine to be paid by Vitusa Corp.”

In the DOJ’s sentencing document (as to both Vitusa and Herberg – see here and here) the DOJ stated:

“The unlawful payments to the foreign official were made in order to obtain payment of a legitimate and lawful obligation owed by the Government of the Dominican Republic to Vitusa.  There was no loss to any party and no individual victim exists.”

See here Vitusa Corp.’s current website.

FCPA aficionados know that the Vitusa / Herzberg action is not the only FCPA enforcement action in which an enforcement agency alleged that payments in connection with securing a bona fide receivable violated the anti-bribery provisions.  See here for the prior post on the SEC’s 2010 FCPA enforcement action against Joe Summers.