DOJ Compliance Counsel
As highlighted in this previous post, last month word spread that “the [DOJ] is hiring a compliance counsel who will help prosecutors determine whether companies facing corruption allegations are victims of rogue employees or willfully blind.”
According to this Global Investigations Review article:
“According to two people familiar with the matter, the US Department of Justice (DoJ) has hired Hui Chen, Standard Chartered’s former head of anti-bribery and corruption compliance, as its new compliance counsel. [...] Before joining Standard Chartered, Chen served as an assistant general counsel at US pharmaceutical company Pfizer between June 2010 and September 2013. In this position, she oversaw the drug-maker’s internal investigations in the Asia-Pacific region, and also led compliance reviews in Latin America, Europe and the Middle East. Chen previously worked for Microsoft for 13 years, serving first in the intellectual property litigation team and later as a compliance officer in China. During the 1990s, Chen worked as a DoJ trial lawyer in Washington, DC, and as an assistant US attorney in Brooklyn.”
PetroTiger Exec Sentences
The DOJ’s FCPA enforcement action against former PetroTiger executives has concluded with additional thuds.
By way of background, the DOJ’s prosecution of Joseph Sigelman fell apart after a key cooperating witness acknowledged giving false testimony. The DOJ effectively pulled its case although Sigelman did plead guilty to substantially reduced charges. In sentencing Sigelman to probation, Judge Joseph Irenas (D.N.J.) blasted the DOJ. (See here for the prior post).
Recently, Judge Irenas sentenced the two remaining defendants in the case: Gregory Weisman and Knut Hammarskjold.
Weisman was sentenced to two years probation and ordered to pay a $30,000 fine. Hammarskjold was likewise sentenced to two years probation and ordered to pay a $15,000 fine as well as approximately $106,000 in restitution for the benefit of PetroTiger.
According to a media source: “before pronouncing the sentence[s], Judge Irenas said he had to reflect the reality that the ultimate sentence here is influenced by the Sigelman case.”
Scrutiny Alerts and Updates
In the “you don’t see this everyday” category, as indicated in this press release, it appears someone hired a public relations company to issue a release stating:
“[C]omplaints were [recently] filed with the United States Department of Justice regarding the conduct of NextEra Energy Inc. and RES Americas subsidiaries under the Foreign Corrupt Practices Act related to each company’s attempts to win renewable energy contracts in Addington Highlands, Ontario and North Frontenac, Ontario, from the Government of Ontario through the Independent Electricity System Operator.”
The company which has been under FCPA scrutiny since 2011 recently disclosed:
“As initially disclosed in our Annual Report on Form 10-K for the fiscal year ended July 31, 2011, we identified certain transactions involving our Danish subsidiary BK Medical ApS, or BK Medical, and certain of its foreign distributors, with respect to which we have raised questions concerning compliance with law, including Danish law and the U.S. Foreign Corrupt Practices Act, and our business policies. We have commenced discussions with the Securities and Exchange Commission concerning the resolution of the SEC inquiry into the matter and have proposed a payment of $1.6 million in settlement of such inquiry. During the three months ended July 31, 2015, we accrued a $1.6 million charge in connection with our settlement proposal. We are uncertain whether the U.S. Department of Justice or the Danish Government will seek to impose any sanctions or penalties against us and have not engaged in settlement discussions with either of these entities. There can be no assurance that we will enter into any settlement with the SEC, the DOJ or the Danish Government, and the cost of any settlements or other resolutions of these matters could materially exceed our accruals.”
A fruitful source of unscripted, “real-person” talk about FCPA issues is earnings conference calls and other investor calls. A recent Expeditors (a global logistics company headquartered in Seattle, Washington) investor day conference call caught me eye.
During the call, an analyst asked: ”Do you see any limits to, whether it’s Europe or Africa or any other geographies, where maybe that’s a difficult – that’s a barrier that kind of prevents as much growth or marketplace capture as you would like, that there’s maybe less receptivity to that?”
Jeff Musser, Senior V.P. and CFO stated:
“When we look at other markets [besides Europe], some of the challenges that we have seen in other markets really have nothing to do with our model and how we roll out our model. The bigger concerns are compliance in some of those markets.So you look at places like Africa, you look at places like Russia. There’s tremendous pressure on us and on our customers to deal with things like the Foreign Corrupt Practices Act. We may — as we decide to go into those markets, we may have to do it in a little bit different way that incentivizes the right behavior and drives the right thing, so those are things that are in the back of our mind as we start thinking about these markets. We don’t think that we are limited in these markets. It just may take a little bit different approach.”
For the Reading Stack
Consistent with my own observations in “The Facade of FCPA Enforcement” (2010) and numerous articles and posts thereafter, Brian Whisler (Baker & McKenzie) writes in “Why DOJ Struggles to Convict Individuals in FCPA Cases” as follows.
“Given the enormous litigation and reputational risk, companies are generally averse to contesting criminal charges at trial. As a result, the FCPA practice has primarily evolved through a series of corporate settlement agreements, over which courts have little to no supervision and in which the burden of proof for evidentiary purposes has less impact. The relative absence of case law in the field has meant that the Justice Department has been able to advance expansive views regarding the scope and applicability of the FCPA, largely unhindered by skeptical juries and contrary case law. However, these settlements carry little to no precedential value, and if individual prosecutions multiply as the Justice Department has promised, then prosecutors will increasingly be held to the high burden of proof and forced to defend their theories before judges. It is already clear that the Justice Department will face difficulties in advancing some of its more aggressive theories in court. Last month, a federal judge rejected the Justice Department’s contention that a nonresident foreign national who worked for a U.S. company’s foreign affiliate could be convicted of conspiracy to violate the FCPA based on traditional accomplice liability theories. See United States v. Lawrence Hoskins, 3:12cr238 (D. Conn. Aug. 13, 2015). Instead, the Justice Department must show that the defendant acted as an agent for the U.S. company itself, a harder task given the defendant’s lack of a direct relationship to the U.S. company. Over the last few years, the Justice Department has used increasingly expansive views of conspiracy and accomplice liability to assert jurisdiction over potentially improper payments paid by employees and agents of foreign subsidiaries and affiliates of U.S.-listed companies. As a result, companies have routinely entered into massive FCPA settlements regarding conduct that has only minimal connections to the United States, U.S. citizens or even U.S. companies. The court’s ruling may ultimately encourage other nonresident foreign nationals, and corporations that only face exposure due to the conduct of their foreign affiliates’ employees, to resist settling future charges with the government. Hoskins is likely to be one of a number of adverse legal rulings regarding the scope of the FCPA if the Justice Department maintains its commitment to increase individual FCPA prosecutions. Adverse case law seems to beget more adverse case law for the DOJ; Hoskins heavily relied on the reasoning of one of the other rare FCPA cases to go to trial, United States v. Castle, 925 F.2d 831 (5th Cir. 1991), which rejected prosecutors’ efforts to charge officials who accept bribes under the FCPA.”
A good weekend to all.