Archive for the ‘Multimedia’ Category

A Debate Regarding The General Upward Trend Of FCPA Enforcement Actions

Thursday, February 27th, 2014

Recently, I had the pleasure to again visit with Thomas Fox for his Foreign Corrupt Practices Act Compliance and Ethics Report in a two-part series.

In Part II of our discussion (approximately 25 minutes) we debate the reasons for the general upward trend of FCPA enforcement over the last several years.  I disagree with Tom’s conclusion that a “main reason for the increase – indeed the explosion (as he calls it)” of FCPA enforcement over the last several years has to do with the U.S. fight against terrorism.  (See this recent post from Fox advancing the same theory).  I make the following points in the debate.

  • For starters, calling 10-15 core enforcement actions per year an explosion is strange when one considers that all U.S. business organizations, over 1,000 foreign companies with shares listed on a U.S. exchange, and theoretically all foreign companies if certain jurisdictional requirement are met, are subject to the FCPA;
  • It is a fact that approximately 35% of all corporate enforcement action since 2007 are the result of just three unique events:  (1) Iraq Oil for Food; (2) Bonny Island, Nigeria; and (3) various oil and gas services companies utilizing the services of Panalpina.  (See here for the prior post).
  • Approximately 50% of the remaining FCPA enforcement actions are the result of corporate voluntary disclosures.
  • Numerous practical reasons (there are provocative reasons as well) easily explain the general upward trend of FCPA enforcement actions:

(1) In 1998 the FCPA was expanded through the dd-3 prong of the statute and the DOJ has used this prong to bring several FCPA enforcement actions;

(2) There has been a general increase in international business activity including in high risk jurisdictions.  For instance, approximately 50% of sales from companies in the S&P 500 are non-U.S. sales compared to approximately 30% a decade ago.  It is thus not surprising that there has been more FCPA enforcement given the increase in international business activity for the same reason that more cars on the road results in more accidents, traffic violations and speeding tickets.

(3) In 2004, NPAs and DPAs were introduced to the FCPA context and this third option of “enforcing” the FCPA is one of the more obvious reasons for the general upward trend in FCPA enforcement.  For instance, the former chief of the DOJ’s FCPA unit stated that if the DOJ did not have the option of resolving FCPA enforcement actions with NPAs and DPAs, the DOJ “would certainly bring fewer cases.”  Likewise, the OECD Report on U.S. FCPA enforcement stated that “it seems quite clear that the use of these agreements is one of the reasons for the impressive FCPA enforcement record in the U.S.”

(4) Sarbanes Oxley was passed in 2002 – a law that resulted from Enron, Worldcom, etc. (not terrorism).  In 2004, SOX’s internal controls provisions became effective and this new requirement caused issuers to more actively assess internal controls across its business operations particularly in foreign subsidiaries.  In both the 2010 Senate FCPA hearing and 2011 House FCPA Hearing, the DOJ witness identified SOX as being one of the reasons for the increase in FCPA enforcement.

In Part I of our discussion (approximately 30 minutes) the following topics are discussed:

  • How long FCPA scrutiny tends to last;
  • A plethora of FCPA enforcement statistics (see here);
  • The most accurate and reliable way to keep FCPA statistics (see here);
  • The “three buckets” of FCPA financial exposure including pre-enforcement action professional fees and expenses;
  • My new FCPA training course (see here).

This And That

Monday, December 16th, 2013

Today’s post is short on written words, but long on content.

Recently, I had the pleasure to return to the Foreign Corrupt Practices Act Compliance and Ethics Report series run by Tox Fox.

Part 1 of the discussion (approximately 25 minutes) focuses on recent speeches by DOJ and SEC officials concerning the FCPA, or issues relevant to FCPA enforcement (see here, here, and here for prior posts), as well as Judge Rakoff’s recent speech (see here) in which he called certain DOJ enforcement policies “both technically and morally suspect.”

Part 2 of the discussion (also approximately 25 minutes) focuses on how trade distortions and barriers often serve as the root cause of many FCPA enforcement actions (see here), how FCPA settlement amounts have come a long way in a short amount of time (see here), and various survey data collected from students in my FCPA class at Southern Illinois University School of Law (see here).

Once Again, Not The Media’s Finest FCPA Moment

Wednesday, November 6th, 2013

As readers no doubt know, I have my fair share of concerns regarding this new era of Foreign Corrupt Practices Act enforcement.  (See here for my article “The Facade of FCPA Enforcement,” and here for my 2010 Senate testimony, among other things).

Peter Schweizer has concerns about this new era of FCPA enforcement as well.

However, attributing various aspects of FCPA enforcement to the Obama administration is just simply off-base.

That is what Schweizer, author of the new book “Extortion:  How Politicians Extract Your Money, Buy Votes and Line Their Own Pockets,” recently did on CNN’s Lou Dobbs Tonight.  Set forth below is what he said – see here for the video.

DOBBS: The Obama administration has a long history of  rewarding its friends and punishing its political enemies. Joining me now to  explain the administration’s — well, what he calls extortion tactics and  maneuvers, Peter Schweizer, president of the Government Accountability Institute  and author of the explosive new best-seller “Extortion: How Politicians Extract  Your Money, Buy Votes and Line” — of course — “Their Own Pockets.” I added the  “of course.”

Peter, great to have you back with us.

SCHWEIZER:  Thank you, Lou. It’s  great to be on with you.

DOBBS: You know, last night  here, we talked about Congress and the ways in which it is lining its pockets,  doing business, and in fact, institutional corruption is what much of it appears  to be. The executive branch is certainly — certainly in every bit the same  league, and its — its favorite device, you write, is the Foreign Corrupt Practices Act.

What are some — what are some of the companies that it  has attacked with this?

SCHWEIZER: Well, here’s what’s  interesting about the Foreign Corrupt  Practices Act. It was created in 1977. It was actually written by  attorneys at Covington and Burling, which is the law firm that Eric Holder  and a lot of top DOJ people came from.

And for 30  years, Lou, it was pretty much a dormant law. You had on average three cases a  year. When President Obama came into office, it exploded. And what’s concerning  about how this law has been used is it’s been targeted against companies or  entities that the administration deemed to be anti-Obama or not supportive of  his policies.

So over the last several years, you saw  everyone from Koch Industries to News Corp., your parent company, to HP, who’s  headed by a Republican, to Las Vegas Sands, which, of course, is — is largely  owned by a gentleman who’s funneled tens of millions of dollars into Republican  causes…

DOBBS: Sheldon Adelson, the billionaire.

SCHWEIZER: Exactly. And you’ve also seen industries that  were very, very supportive in 2010 of the Republican takeover of Congress,  namely the independent oil and gas industry and the hedge fund industry were  targeted with so-called search — sorry, with sweep letters where they basically  said, We’re going after your industry. And so it’s a major intimidation tool.

DOBBS: An intimidation tool and an intimidation tool to be  used as intimidation often is any  part of life to — to raise money…

SCHWEIZER: Yes.

DOBBS: …  whether it be contributions, whether it is to line the pocket of a specific  friend of this administration, correct?

SCHWEIZER: Yes,  that’s exactly right. And actually, there — there is academic evidence,  statistical studies that have been done that shows that if you are a company or  an individual who gives campaign donations, if your corporate PAC gives campaign  donations to the right people, you basically are going to cut in half the  chances that you are going to have the book thrown at you and face criminal  charges and civil charges.

So there’s evidence that  this works. And the timing is also very, very disconcerting. For example, days  after the 2010 election, and only a couple weeks after President Obama had said  in a radio interview, we’re going to punish our political enemies, that’s when  they send out the industry sweep letters to the independent oil and gas industry  and they said we are now coming after you. And the oil and gas industry in 2010  had basically gone four to one for Republicans as opposed to Democrats so the  timing is very, very suspect as well.

DOBBS: Let me –  let me share with our — with our viewers that quote from — from the President  telling an audience, quote, “We’re going to — we’re going to punish our enemies  and we’re going to reward our friends who stand with us on issues that are  important to us” — a blatant declaration of purpose and intent of which as you  document they seemed to have fulfilled.

By the way I do  want to point out 120 of those investigations under the Foreign Practices Act in  2009 about the same number in 2010 then it drops to about half of that in 2011  and 2012 does that the extortion rate is declining that there is some constraint on the administration?

SCHWEIZER: No there is not any constraint unfortunately the problem is that a lot of companies are  realizing you know what we’re not even going to fight this we’re basically going to cave and give them what they want because even if we end up winning in some sort of trial it’s going to be so costly to us in terms of legal fees, it’s also  going to affect our stock price.

And it needs to be  pointed out Lou that part of the problem part of what’s happen is that this Department of Justice is more politicized than really any I would say since the  Nixon administration. And you don’t have to look any further than the fact that  when Obama was elected in 2008 the Department of Justice was populated at top  with no less than five major campaign bumpers including — including the  attorney general himself Eric Holder. These are people that were raising huge  sums of money for President Obama’s election. That’s unprecedented — that has  not happened before.

DOBBS: Peter thanks so much for  being with us. It’s fascinating and if you want to know how your government  works, Peter Schweizer he’ll tell you in here. His book is “Extortion” it’s  available online at bookstores now. We recommend it to you highly. We need a lot  of people who understand how this government works. Peter thanks for being here  and thanks for your contribution to our knowledge. We’re coming right back.

Where to start?

FCPA enforcement has not exploded under President Obama.  For starters, this is yet another example why having accurate and reliable FCPA enforcement statistics is important because inaccurate and unreliable FCPA enforcement statistics muddy the conversational waters.  (See this prior post for more information on what is an FCPA enforcement action and how the “core” approach yields the most reliable answer).

Sure, if one counts the Africa Sting cases (announced in early 2010 – see here) as 22 enforcement actions instead of 1 core enforcement action, one can make it appear that FCPA enforcement has increased under Obama.  If you look at many FCPA Inc. enforcement statistics and see the “blip” for 2010 this is why.

Sure, if one counts the Siemens individual enforcement actions (announced in 2011 see here) as 15 enforcement actions (the DOJ charged 8 individuals and the SEC charged 7 individuals) instead of 1 core enforcement action, one can make it appear that FCPA enforcement has increased under Obama.  If you look at many FCPA Inc. enforcement statistics, this one core action comprises a meaningful chuck of 2011 FCPA enforcement.

Wholly apart from how one counts enforcement actions is the issue that very little FCPA enforcement activity since January 2009 (when Obama became President) can be attributed to his presidency.

For instance, the Africa Sting enforcement action (a manufactured FCPA case involving FBI agents posing as a representative of a Gabon “foreign official”) was set into motion before Obama became President.  Likewise, the Siemens individual enforcement actions are the direct result of the 2008 Siemens corporate enforcement action.

The most recent Stryker enforcement action from October happened during Obama’s presidency, but that enforcement action was set into motion in 2007 when SEC requested information from the company concerning its FCPA compliance.

Perhaps most importantly, the majority of corporate FCPA enforcement actions are the result of voluntary disclosures, not pro-active enforcement actions!

The above information is not complex nor difficult to learn about … if one wants to.

Another claim from the Schweizer interview is that Sheldon Adelson (the CEO of Las Vegas Sands) has somehow been targeted for FCPA scrutiny because he supports Republican causes.    As highlighted in this previous post, the origins of Las Vegas Sands’s FCPA scrutiny is a civil complaint filed in Nevada state court in 2010 by Steven Jacobs (the former President of Macau Operations for Las Vegas Sands).

Likewise, this information is not complex nor difficult to learn about … if one wants to.

Another claim from the Schweizer interview is that the oil and gas industry has been targeted by the Obama administration.  Sure, if you want to make that claim you could easily reference the 2010 enforcement actions against various oil and gas companies that utilized the services of freight forwarder Panalpina.  (See here - as well as posts under CustomsGate on the search feature of this website).  However, those enforcement actions were the direct result of the 2007 Veto Gray FCPA enforcement action (see here).

Once again, this information is not complex nor difficult to learn about … if one wants to.

In short, while I share Schweizer’s concerns about certain aspects of FCPA enforcement, his attempt to pin this on the Obama administration is completely off-base.

Having a proper perspective on FCPA enforcement statistics (see here for the prior post) is so very important as – once again – demonstrated by the Schweizer CNN interview.

The CNN interview – in providing a platform for an author to articulate completely off-base opinions – was once again not the media’s finest FCPA moment.  (See here and here for other examples).

Re-Scripting The Bourke Case

Monday, October 28th, 2013

Frederic Bourke, “another whistleblower put in prison by the Obama administration.”

So begins this recent lengthy depiction of the Bourke case on Democracy Now.  Over the course of the approximate 45 minute video, the viewer is lead to believe that it has been a miscarriage of justice that Bourke is currently in a minimum security prison after being found guilty of, among other charges, conspiring to violate the FCPA.

Yes, I agree (as highlighted in this prior post) that the Bourke case is arguably the most complex and convoluted case in Foreign Corrupt Practices Act history.

Yes, the presiding judge in the Bourke trial - Judge Shira Scheindlin (S.D.N.Y.) – did reject the DOJ’s 10 year sentencing recommendation in sentencing Bourke to 366 days in prison.

Yes, Judge Scheindlin did comment at the sentencing hearing that – “after years of supervising this case, it’s still not entirely clear to me whether Mr. Bourke is a victim or a crook or a little bit of both.”  This comment did not exactly leave one with warm fuzzy feelings regarding the case.

However, the facts and enforcement theories at issue in Bourke have also received the most judicial scrutiny in the history of the FCPA - something seemingly glossed over in the lengthy Democracy Now video.

There was extensive pre-trial motion activity resulting in several written decisions by the S.D. of N.Y. as well as the Second Circuit (see 493 F.Supp.2d 693, 541 F.3d 166, and 582 F.Supp.2d 535), reconsideration of pre-trial rulings (see 2008 WL 5329960), and a written decision denying Bourke’s request for a judgment of acquittal (see 638 F.Supp. 2d 348).

In July 2009, Bourke was found guilty after a six week trial by a federal jury of conspiracy to violate the FCPA, among other charges.  There was a post-trial reconsideration of the motion to deny a judgment of acquittal (664 F.Supp.2d 369).

From there, Bourke’s case went to the Second Circuit and the primary issue on appeal was Bourke’s knowledge of the alleged bribery scheme in connection with the privatization of Azerbaijan’s alleged state oil company.  The issues on appeal were dissected in prior posts here and here.

In December 2011, the Second Circuit affirmed Bourke’s conviction of conspiring to violate the FCPA, among other charges.  (see here for the prior post).  In pertinent part, the court held that Bourke enabled himself to participate in a bribery scheme without acquiring actual knowledge of the specific conduct at issue and that such conscious avoidance, even if supported primarily by circumstantial  evidence, is sufficient to warrant an FCPA-related charges.

Specifically, the Second Circuit stated:

“While the government’s primary theory at trial was that he had actual knowledge of the bribery scheme, there is ample evidence to support a conviction based on the alternate theory of conscious avoidance. The testimony at trial demonstrated that Bourke was aware of how pervasive corruption was in Azerbaijan generally.  Bourke knew of Kozeny’s reputation as the “Pirate of Prague.”  Bourke created the American advisory companies to shield himself and other American investors from potential liability from payments made in violation of FCPA, and joined the boards of the American companies instead of joining the Oily Rock board.   In so doing, Bourke enabled himself to participate in the investment without acquiring actual knowledge of Oily Rock’s undertakings. The strongest evidence demonstrating that Bourke willfully avoided learning whether corrupt payments were made came from tape recordings of a May 18, 1999 phone conference with Bourke, fellow investor Friedman and their attorneys, during which Bourke voiced concerns about whether Kozeny and company were paying bribes.  [...]  Finally, Bourke’s attorney testified that he advised Bourke that if Bourke thought there might be bribes paid, Bourke could not just look the other way. Taken together, a rational juror could conclude that Bourke deliberately avoided confirming his suspicions that Kozeny and his cohorts may be paying bribes.”

With the Second Circuit appeal pending, Bourke filed motions requesting a new trial based on the theory that a key prosecution witness offered false testimony.  The motion was denied.

As noted in this prior post, Bourke then appealed this denial to the Second Circuit.  The Second Circuit affirmed the trial court decision and rejected Bourke’s request for a new trial.  In short, the Second Circuit concluded that Bourke failed to present newly discovered evidence or that the key trial witness in fact committed perjury.

As highlighted in this prior post, Bourke then petitioned the Supreme Court to hear his case.  In April 2013, the Supreme Court declined to hear Bourke’s appeal.

The Democracy Now program glossed over the extensive judicial scrutiny of the facts and enforcement theories at issue in Bourke in an attempt to re-script the Bourke case as “another whistleblower put in prison by the Obama administration.”

Once again, not the media’s finest FCPA moment.  (See here and here for prior posts on the same subject).

In short, I agree with the DOJ statement (included at the very end of the approximate 45 minute video) which stated:

“After three years of Mr. Bourke’s trying to overturn a jury’s verdict of guilty, his two unsuccessful appeals to the Court of Appeals, and a denial of review by the U.S. Supreme Court, there is not much left say, other than that Mr. Bourke has had every opportunity in numerous forums to make every argument he chose to make, and every challenge to his conviction has been rejected.”

This And That

Tuesday, October 15th, 2013

Today’s post is short on written words, but long on content.

Recently, I had the pleasure to visit with Tox Fox for his Foreign Corrupt Practices Act Compliance and Ethics Report series.  The following topics are discussed in this approximate 30 minute discussion (audio only because of a technology glitch).

  • What do DOJ and SEC FCPA attorneys actually do and why this is an appropriate question to ask;
  • The nature and quality of much FCPA information in the public domain;
  • How the enforcement agencies create confusing and conflicting compliance messages to business organizations subject to the FCPA; and
  • Teaching the FCPA, FCPA enforcement and related issues