Archive for the ‘Richard Bistrong’ Category

Friday Leftovers

Friday, November 28th, 2014

Roundup2Scrutiny update, a double standard, ripples, that’s interesting, and for the reading stack.  It’s all here in a leftovers edition of the Friday roundup.

Scrutiny Update

One of the longest-lasting instances of FCPA scrutiny concerns PBSJ Corporation (a global engineering and architectural firm) that first disclosed FCPA scrutiny in December 2009.  PBSJ was subsequently acquired by WS Atkins (a U.K. company) and WS Atkins disclosed in a recently regulatory filing as follows.

“There are ongoing discussions regarding the longstanding and previously reported Department of Justice and Securities and Exchange Commission enquiries relating to potential Foreign Corrupt Practices Act violations by the PBSJ Corporation prior to its acquisition by the Group. We anticipate resolution of this matter before the end of the current financial year.”

Double Standard?

Several FCPA enforcement actions or instances of FCPA scrutiny have been based on providing things of value such as meals, entertainment and consulting fees to foreign physicians.

Against this backdrop, the Wall Street Journal reports:

“As it fights to buy Botox maker Allergan Inc.,  Valeant Pharmaceuticals International Inc. is investing cash and time wooing the doctors it would need on its side after a takeover. A centerpiece of the effort: Valeant said it met with a total of 45 influential cosmetic surgeons and dermatologists in September at events in Aspen, Colo., and Palm Beach, Fla. Valeant paid for the physicians’ airfares, two-night stays at luxury hotels and meals. The company also agreed to provide consulting fees that could amount to as much as $30,000, according to doctors who attended the meetings. Valeant, a smaller player than Allergan in cosmetic medicine, must win over doctors if it wrests control of the Botox maker, since it will rely on the physicians for business. Valeant said the pursuit seems to be paying off. Several doctors who attended the sessions, of what Valeant called its special advisory committee, said they were won over by the company’s plans for Allergan—including attracting patients to physicians’ offices and introducing new products.”

Ripples

My recent article “Foreign Corrupt Practices Act Ripples“ highlights that settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement in this new era.

One such ripple is offensive use of the FCPA to further advance a litigating position and that is just what Instituto Mexicano Del Seguro Social (“IMSS”) has done in this recent civil complaint against Orthofix International.

You may recall that in July 2012 Orthofix resolved a $7.4 million FCPA enforcement action based on allegations that its Mexican subsidiary paid bribes totaling approximately $317,000 to Mexican officials in order to obtain and retain sales contracts from IMSS. (See here for the prior post).

In the recent civil complaint, IMSS uses the core conduct at issue in the FCPA enforcement action and alleges various RICO claims, fraud claims, and other claims under Mexican law.

That’s Interesting

As has been widely reported (see here for instance), “President Obama called on the Federal Communications Commission … to declare broadband Internet service a public utility, saying that it was essential to the economy …”.

That’s interesting because – as informed readers know – in the 11th Circuit’s “foreign official” decision the court concluded that an otherwise commercial enterprise can be a “instrumentality” of a government if the “entity controlled by the government … performs a function the controlling government treats as its own.”  Among the factors the court articulated for whether an entity performs a “function the controlling government treats as its own” was “whether the public and the government of that foreign country generally perceive the entity to be performing a governmental function.”

Reading Stack

Several law firm client alerts regarding the DOJ’s recent FCPA Opinion Procedure release concerning successor liability (see herehere, here).  In this alert, former DOJ FCPA Unit Chief Charles Duross leads with the headline “Is DOJ Evolving Away from the Halliburton Opinion Standard?” (a reference to this 2008 Opinion Procedure release).

From Foley & Larder and MZM Legal (India) – “Anti-Bribery and Foreign Corrupt Practices Act Compliance Guide for U.S. Companies Doing Business in India.”

Recent interviews (here and here) with Richard Bistrong, a real-world FCPA violator and undercover cooperator.  See here for my previous Q&A with Bistrong.  As noted here, Bistrong recently spoke to my FCPA class at Southern Illinois University School of Law. Having the ability to hear from an individual who violated the law my students were studying, and being able to hear first-hand of real-world business conditions, was of tremendous value to the students and added an important dimension to the class.

Should the government reconsider its use of deferred prosecution agreements?  That is the question posed in this New York Times roundtable (in the context of recent bank prosecutions).

Finally for your viewing pleasure, an FCPA-related interview here of SciClone’s CEO (a company that has been under FCPA scrutiny since approximately August, 2010).

*****

A good weekend to all.

Richard Bistrong … In His Own Words

Monday, April 14th, 2014

Richard Bistrong.

Most people likely associate his name with the manufactured Africa Sting FCPA enforcement action. The Africa Sting action involved a purported deal to purchase equipment for the presidential guard of an African Government with FBI agents posing as African Government officials and Bistrong working as an undercover informant.

The Africa Sting enforcement action resulted in criminal charges against 22 individuals.  After extensive motions practice and two trials, all charges against all defendants were ultimately dismissed by the DOJ and the action ended with Judge Richard Leon (D.D.C.) calling the entire case a “long and sad chapter in the annals of white collar criminal enforcement.” (See here).

Bistrong was not charged in the Africa Sting case, but previously pleaded guilty to “real-world” Foreign Corrupt Practices Act conduct, including conspiring with others to bribe United Nations officials, Dutch officials, and Nigeria officials.  (See here and here). This charge stemmed from Bistrong’s work as the international sales vice president for a large, successful and publicly traded multi-national corporation.  Bistrong started to cooperate with the DOJ in June 2007 and Judge Leon ultimately credited Bistrong’s extensive cooperation at sentencing.  (See here).

FCPA Professor seeks to highlight a wide range of voices on FCPA issues.  With this goal in mind, I requested to communicate with Bistrong with the permission of his attorney.  Bistrong’s attorney, Brady Toensing (diGenova & Toensing) would not allow his client to discuss questions about the Africa Sting case.

At present, Bistrong is out of prison but still serving the supervised release portion of his sentence.

In this detailed Q&A, Bistrong describes: the circumstances that put him in a position to violate the FCPA; what made him think he could get away with it; his thought process when he realized he was caught; and how he spent his time in federal prison. In the Q&A Bistrong not only looks back, but forward as well and shares what he learned from his experience and what he hopes to accomplish in the future, including through his recently launched blog.

Friday Roundup

Friday, March 28th, 2014

Further trimmed, scrutiny alerts and updates, facts and figures, quotable, and for the reading stack.  It’s all here in the Friday roundup.

Further Trimmed

When the SEC announced its enforcement action against James Ruehlen and Mark Jackson  (a current and former executive of Noble Corp.) in February 2012, I said that this would be an interesting case to follow because the SEC is rarely put to its burden of proof in FCPA enforcement actions – and when it has been put to its ultimate burden of proof – the SEC has never prevailed in an FCPA enforcement action.

Over the past two years, the SEC’s case has been repeatedly trimmed.  (See this recent post containing a summary).  In the latest cut, the SEC filed an unopposed motion for partial voluntary dismissal with prejudice on March 25th.  In pertinent part, the motion states as follows.

“To narrow this case and streamline the presentation of evidence to the jury, the SEC hereby moves for leave to voluntarily dismiss with prejudice all portions of its claims … predicated upon Noble Corporation’s violation of [the FCPA’s internal controls provisions”.

For additional specifics, see the filing.

As highlighted in this previous post, in 2010 the SEC charged Noble Corporation with violating the FCPA’s anti-bribery, books and records and internal controls provisions based on the same core conduct alleged in the Jackson/Ruehlen action. Without admitting or denying the SEC’s allegations, Noble agreed to agreed to an injunction and payment of disgorgement and prejudgment interest of $5,576,998.

In short, the SEC’s enforcement action against Ruehlen and Jackson is a shell of its former self.   Interesting, isn’t it, what happens when the government is put to its burden of proof in FCPA enforcement actions.

Scrutiny Alerts and Updates

Alstom

Bloomberg reports speculation that a future FCPA enforcement action against Alstom could top the charts in terms of overall fine and penalty amounts.  (See here for the current Top 10).

The article states:

“The Justice Department is building a bribery case against Alstom SA , the French maker of trains and power equipment, that is likely to result in one of the largest U.S. anticorruption enforcement actions, according to two people with knowledge of the probe. Alstom, which has a history checkered with corruption allegations, has hindered the U.S. investigation of possible bribery in Indonesia and now faces an expanded probe including power projects in China and India, according to court documents in a related case. Settlement talks haven’t begun, the company said.”

In response to the Bloomberg article, Alston released this statement.

“Robert Luskin of Patton Boggs, Alstom’s principal outside legal advisor in the USA, states that the Bloomberg article published on 27 March 2014, regarding the investigation of Alstom by the US Department of Justice, does not accurately reflect the current situation: “Alstom is cooperating closely, actively, and in good faith with the DOJ investigation. In the course of our regular consultations, the DOJ has not identified any on-going shortcomings with the scope, level, or sincerity of the company’s effort”.

“The discussions with the DOJ have not evolved to the point of negotiating a potential resolution of any claims. Any effort to estimate the size of any possible fine is sheer speculation, as would be any comparison with other cases that have recently been resolved. Alstom has agreed to focus its efforts on investigating a limited number of projects that we and the DOJ have identified in our discussions. We are working diligently with the DOJ to answer questions and produce documents associated with these specific projects so that we can address any possible improper conduct”.

VimpelCom

Netherlands-based and NASDAQ traded telecommunications company VimpelCom recently disclosed:

“[T]hat in addition to the previously disclosed investigations by the U.S. Securities and Exchange Commission and Dutch public prosecutor office, the Company has been notified that it is also the focus of an investigation by the United States Department of Justice. This investigation also appears to be concerned with the Company’s operations in Uzbekistan. The Company intends to continue to fully cooperate with these investigations.”

On March 12, 2014, VimpelCom disclosed:

“The Company received from the staff of the United States Securities and Exchange Commission a letter stating that they are conducting an investigation related to VimpelCom and requesting documents. Also, on March 11, 2014, the Company’s headquarter in Amsterdam was visited by representatives of the Dutch authorities, including the Dutch public prosecutor office, who obtained documents and informed the Company that it was the focus of a criminal investigation in the Netherlands. The investigations appear to be concerned with the Company’s operations in Uzbekistan. The Company intends to fully cooperate with these investigations.”

Orthofix International

As noted in this Wall Street Journal Risk & Compliance post, Orthofix International recently disclosed:

“We are investigating allegations involving potential improper payments with respect to our subsidiary in Brazil.

In August 2013, the Company’s internal legal department was notified of certain allegations involving potential improper payments with respect to our Brazilian subsidiary, Orthofix do Brasil. The Company engaged outside counsel to assist in the review of these matters, focusing on compliance with applicable anti-bribery laws, including the Foreign Corrupt Practices Act (the “FCPA”). This review remains ongoing.”

As noted in this previous post, in July 2012 Orthofix International resolved a DOJ/SEC FCPA enforcement action concerning alleged conduct by a Mexican subsidiary.  In resolving that action, the company agreed to a three year deferred prosecution agreement.  As is typical in FCPA DPAs, in the Orthofix DPA the DOJ agreed not continue the criminal prosecution of Orthofix for the Mexican conduct so long as the company complied with all of its obligations under the DPA, including not committing any felony under U.S. federal law subsequent to the signing of the agreement.

See this prior post for a similar situation involving Willbros Group (i.e. while the company while under a DPA it was investigating potential additional improper conduct).  As noted here, Willbros was released from its DPA in April 2012, the original criminal charges were dismissed and no additional action was taken.

Besso Limited

Across the pond, the U.K. Financial Conduct Authority (“FCA”) recently issued this final notice to Besso Limited imposing a financial penalty of £315,000 for failing “to take reasonable care to establish and maintain effective systems and controls for countering the risks of bribery and corruption associated with making payments to parties who entered into commission sharing agreements with Besso or assisted Besso in winning and retaining business (“Third Parties”).”

Specifically, the FCA stated:

“The failings at Besso continued throughout the Relevant Period [2005-2011] and contributed to a weak control environment surrounding the making of payments to Third Parties. This gave rise to an unacceptable risk that payments made by Besso to Third Parties could be used for corrupt purposes, including paying bribes to persons connected with the insured or public officials. In particular Besso:  (1) had limited bribery and corruption policies and procedures in place between January 2005 and October 2009. It introduced written bribery and corruption policies and procedures in November 2009, but these were not adequate in their content or implementation; (2) failed to conduct an adequate risk assessment of Third Parties before entering into business relationships; (3) did not carry out adequate due diligence on Third Parties to evaluate the risks involved in doing business with them; (4) failed to establish and record an adequate commercial rationale to support payments to Third Parties; (5) failed to review its relationships with Third Parties, in sufficient detail and on a regular basis, to confirm that it was still appropriate to continue with the business relationship; (6) did not adequately monitor its staff to ensure that each time it engaged a Third Party an adequate commercial rationale had been recorded and that sufficient due diligence had been carried out; and (7) failed to maintain adequate records of the anti-bribery and corruption measures taken on its Third Party account files.”

The FCA has previously brought similar enforcement actions against Aon Limited (see here), Willis Limited (see here), and JLT Speciality Limited (see here).    For more on the U.K. FCA and its focus on adequate procedures to prevent bribery , see this guest post.

Facts and Figures

Trace International recently released its Global Enforcement Report (GER) 2013 – see here to download.  Given my own focus on FCPA enforcement statistics and the various counting methods used by others (see here for a recent post), I particularly like the Introduction of the GER in which Trace articulates a similar “core” approach that I use in keeping my enforcement statistics.  The GER states:

“[W]hen a company and its employees or representatives face multiple investigations or cases in one country involving substantially the same conduct, only one enforcement action is counted in the GER 2013.  An enforcement action in a country with multiple investigating authorities, such as the U.S., is also counted as one enforcement action in the GER 2013.”

The Conference Board recently released summary statistics regarding anti-bribery policies.  It found as follows.

39% of companies in the S&P Global 1200; 23% of companies in the S&P 500; and 14% of companies in the Russell 1000 reported having a policy specifically against bribery.

Given the results of other prior surveys which reported materially higher numbers, these results are very surprising.

Quotable

This recent Wall Street Journal article “Global Bribery Crackdown Gains Steam” notes as follows.

“Cash-strapped countries are seeing the financial appeal of passing antibribery laws because of the large settlements collected by the U.S., according to Nathaniel Edmonds, a former assistant chief at the U.S. Department of Justice’s FCPA division.  ”Countries as a whole are recognizing that being on the anticorruption train is a very good train to be on,” said Mr. Edmonds, a partner at Paul Hastings law firm.”

The train analogy is similar to the horse comment former DOJ FCPA enforcement attorney William Jacobson made in 2010 in an American Lawyer article that “[t]he government sees a profitable program, and it’s going to ride that horse until it can’t ride it anymore.”  For additional comments related to the general topic, see this prior post.

Reading Stack

This recent Wall Street Journal Risk & Compliance Journal post contains a Q&A with former DOJ FCPA Unit Chief Chuck Duross.  Contrary to the inference / suggestion in the post, Duross did not bring “tougher tactics” such as wires and sting operations to the FCPA Unit.  As detailed in prior posts here and here, undercover tactics and even sting operations had been used in FCPA enforcement actions prior to the Africa Sting case.

Speaking of the Africa Sting case, the Q&A mentions reasons for why the Africa Sting case was dropped.  Not mentioned, and perhaps relevant, is that the jury foreman of the second Africa Sting trial published this guest post on FCPA Professor after the DOJ failed in the second trial.  Two weeks later, the DOJ dismissed all charges against all Africa Sting defendants.

Further relevant to the Africa Sting case, the Wall Street Journal recently ran this article highlighting the role of Richard Bistrong, the “undercover cooperator” in the case.  Bistrong has recently launched an FCPA Blog – see here.

*****

A good weekend to all.

Richard Bistrong Reports To Prison

Monday, October 1st, 2012

Today’s post is from Paul Calli (Carlton Fields – here).  Calli represented Stephen Giordanella in the Africa Sting case and as noted in this prior post Giordanella was completley exonerated.

*****

Richard Bistrong Reports To Prison

Paul Calli

This Johnny Cash song is an appropriate background song for this post.

Following a lifetime of lying , cheating and stealing, Friday night it all caught up to Richard Bistrong and he turned himself in to serve his 18 month prison sentence at the United States Penitentiary in Lewisburg, PA.   The Federal Bureau of Prisons makes that information available to the public here  and calculates his release date as January 15, 2014.

Bistrong, as you know from previous FCPA Professor posts, as well as articles in the New York Times and Washington Post, became a member of the team with the FBI and the FCPA unit at Main Justice – then led by Hank Bond Walther – to concoct what will perhaps go down as the most ill conceived and greatest failure ever in the enforcement of U.S. criminal law: the “Africa Sting” case.

Bistrong’s lifetime of drug transactions, bribery, tax evasion, prostitution crimes, predilection for “hard core pornography” (you can’t truly appreciate the impact of that phrase until you hear Mike Madigan from Orrick articulate it to a jury), is second to none and turned out to be merely a lead-in to his staggering moral transgressions and self-inflicted personal failures, all of which came out during the trial or in trial preparation.

Against this backdrop, it was not without drama when sometime in November 2011 during the second trial , after two years of pretrial litigation and DOJ’s unsuccessful prosecution that resulted in no convictions and a hung jury in the first Africa Sting trial (during which the government elected to not call its star witness), Bistrong entered the court room to begin a month of testimony.  It really was “all eyes” in the court room on the person about whom everyone had heard so much, and you could hear a pin drop.  After all, in a text message later introduced into evidence Bistrong wrote to Chris Farvour, his FBI handler, “tell Hank (Bond Walther) that I’m an ace on cross exam!”

I remember that after a real short time it became apparent that Bistrong was the most narcissistic person I had ever heard.  It wasn’t just that he could not tell the truth – I think everyone expected that eventuality – it was that he seemed to think he was above criticism and above everyone else.  He was smug and self-righteous.  He didn’t seem contrite at all.  He wanted to argue.  He gave the impression that he felt he was smarter than everyone else, especially than the lawyers cross examining him.  He gave a false portrayal of himself on the witness stand, and tried to get the jury to believe he was someone they could trust.  He tried to make forced eye contact with the jurors, and it was uncomfortable to watch him do so.  Heck, why wouldn’t he think he could pull off that manipulation one last time?  He had been doing it his whole life, including recently.  But it was perplexing, because Bistrong’s words, tone and demeanor recorded on tape and in text messages with his BFF’s in the FBI could not be reconciled with the Bistrong that he tried to sell while on the witness stand.  After a while many of the jurors turned away from him and couldn’t’ look at him even as he testified.  Those who looked at him to me seemed to be interested in him more as a psychology case study than as someone whose testimony they could ever trust.  As the jury foreperson wrote in his FCPA Professor guest post (here), “…more than one juror voiced concern that it would be unjust for the defendants in this case to be convicted when the government relied so heavily on Mr. Bistrong who freely admitted on the stand more illegal acts than the entire group of defendants was accused of…” and “the jury with near unanimity found nearly all of the prosecution witnesses to be evasive and combative.”  In the end, Bistrong’s venality and greed got the best of him.

I can’t imagine a more talented, committed, and passionate group of defense attorneys than the ones with whom I had the honor of trying the Africa Sting case.  It was a remarkable experience to watch them shine throughout, and vindicate their clients.  Notwithstanding all that legal talent, however, the most concise, poignant and important summary of this case came from the bench.   As United States District Judge Richard J. Leon wisely cautioned: “We certainly don’t want the moral of the story to be: Steal big. Violate the law big. Cooperate big.  Probation.”

I hope that everyone on the Bistrong team understands that.

Reading Bistrong’s recent comments in a Forbes article (here), it is clear Bistrong maintains the belief that he is a “victim” and “fallen hero” who did something noble.  In reality, nothing could be farther from the truth. I hope that prison is the place where Richard Bistrong is able to finally right his ship, come clean with himself and learns how to be truthful, and that he comes out prepared and able to be a productive member of society, during his three years on federal supervised release and beyond.

A Final Embarassing Setback For The DOJ Related To The Africa Sting Cases

Wednesday, August 1st, 2012

Yesterday, the DOJ was dealt a final embarrassing setback in connection with the Africa Sting cases as Judge Leon rejected the DOJ’s recommendation of no jail time for Richard Bistrong and sentenced the conductor of the manufactured sting to 18 months in prison followed by three years of supervised release.  (For more on the Africa Sting case, see here, as well as numerous prior posts under the subject matter heading Africa Sting).

Bistrong, of course, was not charged in connection with the Africa Sting case.   As noted in this prior post, in February 2009 he pleaded guilty to real-world conduct including conspiring with others: (i) to obtain for his employer [Armor Holdings] United Nations body armor contracts (valued at $6 million) by causing his employer to pay $200,000 in commissions to an agent while knowing that the agent would pass along a portion of that money to a United Nations procurement officer to cause the officer to award the contracts; (ii) to obtain for his employer, a $2.4 million pepper spray contract with the National Police Services Agency of the Netherlands by paying a Dutch agent approximately $15,000 while knowing that the agent would pass along some of that money to a procurement officer with the Police Services Agency to influence the contract; and (iii) to obtain for his employer (although it was never obtained), a contract to sell fingerprint ink pads to the Independent National Elections Commission of Nigeria by making kickback payments to a commission official indirectly through an intermediary company.

In this letter to Judge Leon, Bistrong candidly acknowledged spending a portion of his adult life ”engaged in dishonest, deceitful and illegal behavior.”  (See here for a copy of Bistrong’s sentencing memorandum).

Nevertheless, in its sentencing memorandum (here) the DOJ stated as follows.  “Given Bistrong’s substantial assistance to law enforcement, the government recommends that Bistrong be sentenced within the guideline range to a sentence that includes a combination of probation, home confinement, and/or community service.”  After detailing Bistrong’s cooperation, the DOJ stated “put simply, the length, depth, breadth, and thoroughness of Bistrong’s proactive cooperation was extraordinary.”  As to the failure of the Africa Sting cases, the DOJ stated as follows.  “[T]he dismissals and acquittals were not caused by a failure of Bistrong’s cooperation or assistance. Like any other case involving cooperating witnesses, the government views Bistrong’s cooperation in the investigation and prosecution of others independently from the outcome of the Gabon case against others. Credit should be based on Bistrong’s truthfulness and the completeness of his cooperation, irrespective of the outcome of any particular investigation, case, or trial.”

As to the DOJ recommending no prison time for Bistong, Judge Leon remarked, as noted in this post by Mike Scarcella at the Blog of LegalTimes, that the DOJ was “asking for the moon.”  In this Wall Street Journal Corruption Currents post, Chris Matthews describes “a courtroom packed with prosecutors, agents from the Federal Bureau of Investigation and a handful of the men Bistrong helped to indict gathered to learn his fate.”  Matthews quotes Judge Leon as follows in rejecting the DOJ’s sentencing recommendation.  “We certainly don’t want the moral of the story to be: Steal big. Violate the law big. Cooperate big. Probation.”

Michael Madigan (Orrick – here) who represented an individual defendant in the Africa Sting case and who was present at yesterday’s sentencing observed as follows.  “Judge Leon had it right on in observing that Bistrong got a huge break on the front side by being charged only with a one count conspiracy despite years of serious criminal conduct both in the US and in England (where he received immunity, with the help of the DOJ).  The Judge’s rejection of the DOJ’s recommendation of probation was well warranted on the facts of the case.  For example, the evidence showed Bistrong made millions illegally and actually made $1.2 million while acting as a government informant which the government allowed him to keep for his personal use (such as paying for his luxury wedding at the Ritz Carlton overlooking the Pacific while he was serving his difficult duty as a government informant).  Bistrong was a one man crime wave who richly deserved his jail sentence.”