Archive for the ‘Serious Fraud Office’ Category

Developments From Across The Pond

Monday, June 8th, 2015

Across the PondA few developments from the United Kingdom worth highlighting.

The SFO Loses Another Bribery Trial

It is one thing for a law enforcement agency to allege a crime.

It is quite another for a law enforcement agency to prove a crime to someone other than itself.

In legal systems based on the rule of law, the later matters more than the former; however it seems that more attention is paid to the former rather than the later.

In December 2013, the U.K. Serious Fraud Office’s (SFO) case against Victor Dahdaleh on bribery and corruption charges collapsed after the SFO concluded there was no “longer a realistic prospect of conviction.”

Recently the SFO lost another bribery trial when put to its burden of proof.

As stated in this SFO release:

“Three employees of Swift Technical Solutions Ltd were found not guilty at Southwark Crown Court of corruption offences in relation to the tax affairs of a Nigerian subsidiary.  The jury was unable to reach a verdict on one count against the third defendant and was discharged.  The SFO today indicated in court that it did not intend to seek a retrial on that count and a verdict of not guilty was entered.

The defendants were:

Bharat Sodha (age 51) of Middlesex, the former International Tax Manager

Nidhi Vyas (age 49) of Middlesex, the former Financial Controller

Trevor Bruce (age 46) of Northern Ireland, the former Area Director for Nigeria

Bharat Sodha was acquitted of two counts of conspiracy to make corrupt payments. Nidhi Vyas was acquitted of one count of conspiracy to make corrupt payments on the direction of the judge at the close of the prosecution case and was acquitted by the jury of another similar count. Trevor Bruce was acquitted of one count of conspiracy to make corrupt payments and the jury was unable to reach a verdict on the other.

The prosecution case was that these defendants conspired to make corrupt payments to officials of two Nigerian Boards of Internal Revenue, one in Rivers State and the other in Lagos State.  Swift co-operated with the SFO, providing documents and making staff available for interview.  It was not charged with any offence.”

Despite the loss, the SFO deserves credit for issuing the above release.

By comparison, when the DOJ loses an FCPA trial, it’s as if it never happened because the normally robust DOJ press office suddenly develops a case of writer’s cramp (see here for the prior post).


SFO Official Gives U.S. Style Speech

Ben Morgan (Joint Head of Bribery and Corruption at the SFO) recently delivered this speech.  It was very much a U.S. style speech that encouraged corporates to engage early with the SFO and cooperate.  In the speech, Morgan also championed U.K. style DPAs.

Prior to excerpting the speech, a brief comment.

Regarding Morgan’s comment that corporates should “live your corporate values” by submitting to the SFO’s every wishes, corporate leaders on both sides of the Atlantic should reject such self-serving enforcement agency rhetoric that somehow it is immoral or unethical to do the following when faced with an internal potential bribery or corruption issue: thoroughly investigate the issue, promptly implement remedial measures, and effectively revise and enhance compliance policies and procedures – all internally and without disclosing to the enforcement agencies.

Such as response is a perfectly acceptable, legitimate, and legal response to potential bribery and corruption issues in but all the rarest of circumstances.

In pertinent part, Morgan stated as follows.

“Although I am billed in a section entitled “regulator update”, actually the SFO is not a regulator, and I’m not going to tell you how to “remain compliant in an evolving regulatory environment”. The SFO is a prosecutor, and that is not just a semantic distinction, it is a practical one. As our Director has memorably said in the past, “we are not in the business of telling people how not to rob banks”. We are in the business of catching those that do, and holding them to account.

We were created by the Criminal Justice Act 1987 and our statutory remit is to investigate and prosecute the most serious or complex fraud, a concept that includes bribery and corruption. The unusual feature of the SFO is that combination of both investigators and prosecutors under the same roof, something I think is absolutely essential for the work we do. So for any given case we will have a multi-disciplinary team from day one – investigators, accountants, digital forensic experts, lawyers, and other specialists, looking into the case, gathering evidence to understand whether any criminal offences have taken place.

So that is the world we are in – one in which the SFO is investigating precisely what has happened in order to pursue the most appropriate criminal justice outcome if the evidence of an offence is there. It is important to emphasise that if you do find yourself in our world there are a range of possible outcomes and that is why I’d like to explain to you what the SFO is doing at the moment; so that you have a chance, if you want to, to positively influence what happens if something does go wrong.

If there is one message to take away from what I say today it’s this – if you find out about a problem I think it is overwhelmingly in your best interests to engage with us early and to do so fully, honestly and with integrity. Just as you urge those in your business not to treat the compliance process as a passive, box-ticking exercise but rather something that needs substance more than just form, so too engaging with us at the back-end of that process needs substance. If it is worth doing at all, it is worth doing properly.

There are three reasons why I say that I think engaging with us properly is in your interests, and I’ll expand on those in the time I have left. The first is that we will be unimpressed if we find out about a problem from someone other than you, and there is a good chance we will. The second is that when we do find out about it, if the evidence is there we will prosecute those who didn’t tell us about their own wrong-doing, or who did so in an artificial, less-than-frank way. And thirdly – a more positive note- for those who do engage with us properly, there is an opportunity to deal with a problem in something other than a traditionally adversarial way. And while we don’t start from this point, it seems to me this option has the potential to be, by some distance, the most effective commercial outcome for a responsible company wanting to resume honest business quickly.

Taking these three things in turn then – what if the SFO finds out about a problem from someone else? Well, it is more likely than ever that we will so if anyone is thinking that just sitting on something is a sensible strategy they need to reflect on that. In complex business like yours there are just too many people in the know, too many channels through which the truth might surface.


[W]e know the problem is there and we are working with whistle-blowers, disgruntled competitors, domestic partner agencies and international colleagues who share our interest to find out what’s happening. I think the very existence of a conference like this, on this scale, and this well attended, shows we are on the same page in terms of appreciating the inherent risk in the mining sector. There are obviously problems, so I would urge you to come and talk to us about yours before someone else does. It is easy for you to do, but it is just as easy for someone else to do, so be careful assuming you have a head start on us.

My second point is that if you don’t tell us, or you do and don’t engage with us properly, prosecution is a likely outcome. As I said earlier, the SFO is a prosecutor first and foremost and our Director has made it very clear that that is our function. We are not in the business of cosy deals, short-cuts or easy targets. We have the stamina and resources to take on the most demanding cases …


Not only do we have that case load though, but in terms of trial outcomes relating to corruption we have built a good trajectory over the last year – we’ve had our first contested conviction of individuals for overseas corruption (senior managers of Innospec who got custodial sentences), our first contested conviction of a corporate for overseas corruption (Smith & Ouzman, paying bribes into Africa, in relation to election ballot papers, of all things), and our first convictions of individuals under the Bribery Act – and in total the SFO convicted 18 defendants (corporates and individuals) in the last calendar year. If that trajectory continues through our current case load, then common sense tells you that we will soon have convictions of major organisations under the Bribery Act – the kind of work the SFO exists to do, and the public expect us to deliver. So if you try to hide a problem, or engage with us in anything less than a full and frank way, if the evidence is there you can expect to be prosecuted.

So what about that more positive note I mentioned earlier? Well, there is an alternative. If you have a problem somewhere in your network and you are prepared to engage with us honestly then we can have a different relationship. The Deferred Prosecution Agreement regime provides a structure for those wanting to resolve their criminal liability to do so quickly and with a degree of control and certainty largely absent from traditional prosecution. A DPA responds to criminal liability – as I said, no cosy deals – so don’t be under any illusion. In a process scrutinised by a Crown Court judge, criminal proceedings will be commenced against the organisation but immediately suspended pending compliance with the terms of the agreement. Those terms can pack a hefty punch too – a fine, compensation, remedial measures, in some cases a monitor and other possible terms. But it has a lot going for it too – speed and certainty, as I have said; a level of compatibility that enables us to get a bit closer to that hallowed ground of a global resolution for conduct that crosses borders, as I suspect much of the activity in your sector inevitably would; and also the chance to really live your corporate values – integrity around facing up to what’s gone wrong and putting it right rather than being on the back foot, having to be defensive. That’s a much better message for your stakeholders is it not? – employees, customers, shareholders, potential investors, the media, regulators even. You could show that it isn’t just rhetoric: that the ‘tone from the top’ means something in real life in your business, not just on paper. And while it’s not my area of expertise, from attending conferences like this one I always get the impression that the way you talk about compliance and ethics now isn’t about moral high ground, nor about threat even, but actually about adding commercial value. Well if that’s right, I put it to you that genuine engagement with us is the consistent extension of that message; the appropriate and commercial way to fix problems that your well-considered compliance procedures identify.

So those are my three reasons for cooperating with us – if you don’t, we stand a good chance of finding out anyway; anything other than proper cooperation risks prosecution; yet proper cooperation offers the chance to resolve risk sensibly.

The final thing I want to say is a word on proper cooperation. I’ve mentioned a few times how important it is to do things properly if you do choose to engage with us, if you set off down that fork in the road as opposed to electing to be a traditional adversary. And it is really important – it’s what I want you to take away from this. We are no longer, at the SFO, in the world of having to talk up DPAs like some sort of salesmen; corporates want them and some will get them. We have issued our first invitation letters giving corporates the opportunity to enter into DPA negotiations. Where we are now is working with corporates on how best to go through that process – not “why DPA”, but “how DPA”. And when it comes to “how”, the DPA Code is clear; we and the court need you to cooperate fully with our investigation. I and others at the SFO have spoken in some detail about what that looks like so I’m not going to go over that ground extensively again, I will just say this. We have made clear what we expect. It’s all there in the DPA Code. Crucially, where suspicions of corrupt activity arise, we do not require you to carry out internal investigations; investigation is our job. And while we do understand that up to a point you will need to do some work to look into allegations of bribery, we find internal investigations that ‘trample over the crime scene’ to be unhelpful. Our stance is to ask for genuine cooperation with our investigation, not duplication of it. We don’t expect you to keep us in the dark while you carry out extensive private investigations and some months or even years later present us with a package of your findings. If there is suspected criminal conduct, that is our job and there are some important issues around access to, and integrity of, evidence (especially regarding witness accounts) and we expect those to be respected in the same way they would be in any other criminal investigation. We expect you to engage with us early, and to work with us as we investigate, not to rush ahead and, whether intentionally or not, complicate the work we need to do. This is, we appreciate, to some extent a departure from the way things used to be and the way certain practices have built up in other jurisdictions, but we make no apology for that. Our job is to investigate possible criminal offences and we take a very dim view of anything anyone does that makes that job more difficult than it needs to be.

You should know that from where I sit, there appear to be emerging two schools of practice among those advising companies like yours. There are those who seem to view our requests for cooperation as some sort of game, to be instinctively resisted but, I’m sure they would think, cleverly managed nevertheless. They roll out the same stale tactics we have come to know well. And then there are those who seem to actually listen to what we are saying, and take the more innovative approach of genuinely trying to respond to it. It is very clear to me which of those approaches is in the respective companies’ best interests, but until the examples of those who have co-operated filter out across the market I suppose there will continue to be people who want to do things the old way. That’s fine, but you can expect no credit for doing your minimum legal duty. You don’t have to cooperate with us, it is your choice. If you do want to then you have to move beyond that, really make the effort to make our job of investigating a possible crime easier. That is what it takes – not the “impression of cooperation”, saying one thing while really working a more guarded agenda (we know all about that) but actually helping us, being fully frank and honest with us, as little by little, some companies now are.

Remember also that engaging with us doesn’t necessarily mean a criminal sanction at all. We are not looking for scalps. If the evidence is not there then we must conclude that it is not a matter that should be prosecuted. That is an entirely valid and appropriate outcome, and one we are perfectly content to reach. We must be – and will be – fair, and make decisions based on evidence and the public interest alone. So there is that safety-valve built into any engagement you have with us. You can come to us early, before you have gone to the four corners of the earth to form a final view of what has happened, and we can work together to understand what has happened. It could well be the case that having done so, no further action on our part is appropriate – you are not committing yourselves to an inevitable sanction, but you are giving yourselves the best shot at a controlled outcome if it turns out there is criminal conduct that needs to be resolved.”

U.K. Serious Fraud Office Announces Corruption Charges Against Individual Well-Known In The Compliance Community

Wednesday, May 13th, 2015

SurpriseTalk about a head-scratching moment.

If you are even an occasional attendee or participant of anti-bribery and corruption conferences you likely know or recognize Jean-Daniel Lainé who, prior to his retirement in April 2013, was Senior Vice President Ethics & Compliance, and a director of Alstom International Limited.  Laine currently runs jdl.ethiconsult.

As highlighted in this 2010 article, “since 2006, Laine has overseen the rapid development of Alstom’s compliance and ethics programmes, as the threat of corruption investigations has risen up the agenda for companies around the world.”

The article quotes him as follows. ”I know a lot of my peers in the compliance community. I participate in a lot of conferences on the anti-corruption subject. I have the opportunity to review all these topics and issues, and I consider that we are among the best in class.”

Among other things, Laine co-authored the Risk Assessment Chapter of the International Chamber of Commerce’s Ethics and Compliance Training Handbook (see here for a video interview) and Laine was a frequent writer on compliance topics, see here for instance “How Do You Manage Third Party Relationship Risks?”

Against this backdrop, it comes as a shocker to say the least that yesterday the U.K. Serious Fraud Office announced:

“Mr Lainé, 68, … a French national … attended court to answer two charges of corruption contrary to section 1 of the Prevention of Corruption Act 1906, as well as two offences of conspiracy to corrupt contrary to section 1 of the Criminal Law Act 1977. The alleged offences are said to have taken place between 1 January 2006 and 18 October 2007 and concern the supply of trains to the Budapest Metro.”

As noted in the SFO release, also charged was Michael John Anderson and named as a co-conspirator with Mr Anderson and Mr Lainé is Altan Cledwyn-Davies, director and company secretary of Alstom International Ltd. Mr Cledwyn-Davies died in 2010 before charges were brought.

As further noted in the SFO release:

“In July 2014 the SFO charged Alstom Network UK Ltd, and British nationals Graham Hill and Robert Hallett with corruption in India, Poland and Tunisia. That matter awaits trial in May 2016. In addition, the SFO charged Alstom Power Ltd, Nicholas Reynolds and Johanes Venskus with corruption in Lithuania. That matter awaits trial in January 2017.”

See prior posts here and here for recent Alstom-related enforcement actions in the U.S.

Friday Roundup

Friday, December 26th, 2014

Roundup2Scrutiny alerts and updates, guilty pleas, across the pond, and admiration.  It’s all here in the Friday roundup.

Scrutiny Alerts and Updates


The largest FCPA enforcement action of all-time (Siemens) began with a raid by Munich law enforcement on company offices.  Will this be the origin of another large FCPA enforcement action?  Reuters reports:

“Munich prosecutors are carrying out an investigation at Airbus’s defence unit over alleged corruption linked to contracts with Romania and Saudi Arabia [...] The Munich prosecutor’s office said it was investigating EADS, as Airbus Group was formerly called, over suspicion of paying bribes to foreign officials and tax evasion in connection with business in the two countries. It said a small number of people were under investigation and that material confiscated from searches related to those people and different companies was now being evaluated. Prosecutors searched offices on suspicion that bribes were paid to enable the company to obtain contracts worth 3 billion euros (2.3 billion pounds) in Saudi Arabia and Romania [...] Airbus said prosecutors were investigating irregularities in border security projects awarded to Airbus’s defence business, but declined to confirm details.”

Airbus has American Depositary Receipts that trad on U.S. exchanges.

Och-Ziff Capital Management Group

The Wall Street Journal recently reported:

“U.S. investigators probing Och-Ziff Capital Management Group LLC’s  dealings in Libya are focused on a multimillion-dollar payment by the big hedge-fund firm they believe was funneled in part to a friend of Col. Moammar Gadhafi’s son, said people briefed on the inquiry. The scrutiny is part of a broad, three-year foreign bribery investigation by the Justice Department and Securities and Exchange Commission into how Wall Street firms obtained investments from the regime of the former dictator, who was deposed and killed in the country’s 2011 revolution. A key part of the Och-Ziff investigation relates to a fee that Och-Ziff paid to the company of a London middleman for help winning a $300 million investment in Och-Ziff funds from the Gadhafi regime, the people briefed on the matter said.”


In Petrobras-related news and further to “Foreign Corrupt Practices Act Ripples,” Reuters reports:

“State-controlled oil company Petroleo Brasileiro SA and its top executives face a class-action lawsuit in a federal court in New York over an alleged contract fixing, bribery and kickback scheme that lawyers say inflated the value of the company’s assets. The suit was filed by law firm Wolf Popper LLP in the Southern District of New York on Monday on behalf of investors who bought U.S.-traded shares of the Brazilian company, commonly known as Petrobras, between May 20, 2010, and Nov. 21, 2014. [...] The complaint alleges that Rio de Janeiro-based Petrobras “made false and misleading statements by misrepresenting facts and failing to disclose a culture of corruption at the company that consisted of a multi-billion dollar money-laundering and bribery scheme embedded in the company since 2006.”

Guilty Pleas

As highlighted in this prior post, in April 2014 two additional individual defendants (Benito Chinea and Joseph DeMeneses, the Chief Executive Officer and a Managing Partner, respectively of Direct Access Partners) were added to the FCPA (and related) enforcement action against individuals associated with broker dealer Direct Access Partners.  (See here for the original May 2013 enforcement action against Jose Hurtado and Tomas Clarke and here for an additional individual, Ernesto Lujan, being added to the enforcement action in June 2013). Like in the previous enforcement actions, the additional defendants Chinea and DeMeneses  were criminally charged in connection with alleged improper payments to Maria Gonzalez (V.P. of Finance / Executive Manager of Finance and Funds Administration at Bandes, an alleged Venezuelan state-owned banking entity that acted as the financial agent of the state to finance economic development projects).

The DOJ recently announced that:

Chinea and DeMeneses pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act and the Travel Act.  Chinea and De Meneses have also agreed to pay $3,636,432 and $2,670,612 in forfeiture, respectively, which amounts represent their earnings from the bribery scheme.  Sentencing hearings are scheduled for March 27, 2015.

In the release, DOJ Assistant Attorney General Leslie Caldwell stated:

“Benito Chinea and Joseph DeMeneses are the fifth and sixth defendants to plead guilty in connection with this far-reaching bribery scheme, which ranged from Wall Street to the streets of Caracas. The guilty pleas and the forfeiture of assets once again demonstrate that the Department is committed to holding corporate executives who engage in foreign bribery individually accountable and to deny them the proceeds of their corruption.”

Across the Pond

Alstom-Related Charges

The recent FCPA enforcement action against Alstom and related entities was just one prong of the enforcement action.

The enforcement action also involved a United Kingdom component as the Serious Fraud Office announced charges against Alstom Power Limited, Nicholas Reynolds, and John Venskus for violating section 1 of the Prevention of Corruption Act 1906 and conspiracy in violation of section 1 of the Criminal Act 1977.

The charges were based on the following allegation.

Alstom Power Limited, Nicholas Reynolds, John Venskus and others, between February 14, 2002 and March 31, 2010 “did corruptly give or agree to give an official or officials or other agents of AB Lietuvos Elektrine, gifts or consideration, namely money, disguised as payments in respect of a Consultancy Agreement with Vilmentrona UAB as an inducement or reward for showing favour to the Alstom Group in relation to the award or performance of a contract between Alstom Power Limited and said AB Lietuvos Elektrine for the Low NOx Burners project at the Elektrenai Power Plant in Lithuania.”

See here for Alstom’s January 2012 release regarding the project.

According to a SFO release, ”Alstom Power Ltd, Nicholas Reynolds and John Venskus’ case has been formally sent from Westminster Magistrates’ Court, for a Preliminary Hearing at Southwark Crown Court on 5 January 2015.”

Smith and Ouzman Ltd., et al

Earlier this week, the SFO announced:

“Smith and Ouzman Ltd and two employees were convicted today at Southwark Crown Court as a result of a Serious Fraud Office investigation into corrupt payments made for the award of business contracts to the company.  The corrupt payments totalling £395,074 were made to public officials for business contracts in Kenya and Mauritania. The company, Smith and Ouzman Ltd, a printing firm based in Eastbourne which specialises in security documents such as ballot papers and certificates, was convicted of three counts of corruptly agreeing to make payments, contrary to section 1(1) of the Prevention of Corruption Act 1906. Christopher John Smith, former chairman of Smith and Ouzman, age 71, from East Sussex, was convicted of two counts of corruptly agreeing to make payments. Nicholas Charles Smith, former sales and marketing director of Smith and Ouzman, age 43, from East Sussex was convicted of three counts of corruptly agreeing to make payments. Timothy Hamilton Forrester, former international sales manager of Smith and Ouzman, age 57, from East Sussex was acquitted of all three counts of corruptly agreeing to make payments. Mr Abdirahman Mohamed Omar, a sales agent for Smith and Ouzman, age 38, from London, was acquitted of one count of corruptly agreeing to make payments in relation to a contract in Somaliland.”

Director of the SFO, David Green commented:

“This is the SFO’s first conviction, after trial, of a corporate for offences involving bribery of foreign public officials. Such criminality, whether involving companies large or small severely damages the UK’s commercial reputation and feeds corrupt governance in the developing world. We are very grateful to the Kenyan authorities for their assistance in this case.”

Sentencing is due to take place on 12 February 2015.

Anti-Corruption Plan

The U.K. government recently released this ”Anti-Corruption Plan.” It is described as “bring[ing] together, for the first time, all of the UK’s activity against corruption in one place.”

The pamphlet-style document is so general in nature, it is difficult to offer any constructive comments.


My admiration for Judge Jed Rakoff (S.D.N.Y.) continues.

In this recent piece titled “Why Innocent People Plead Guilty,” Judge Rakoff writes:

“The criminal justice system in the United States today bears little relationship to what the Founding Fathers contemplated, what the movies and television portray, or what the average American believes. To the Founding Fathers, the critical element in the system was the jury trial, which served not only as a truth-seeking mechanism and a means of achieving fairness, but also as a shield against tyranny. As Thomas Jefferson famously said, “I consider [trial by jury] as the only anchor ever yet imagined by man, by which a government can be held to the principles of its constitution.” The Sixth Amendment guarantees that “in all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury.” The Constitution further guarantees that at the trial, the accused will have the assistance of counsel, who can confront and cross-examine his accusers and present evidence on the accused’s behalf. He may be convicted only if an impartial jury of his peers is unanimously of the view that he is guilty beyond a reasonable doubt and so states, publicly, in its verdict. The drama inherent in these guarantees is regularly portrayed in movies and television programs as an open battle played out in public before a judge and jury. But this is all a mirage. In actuality, our criminal justice system is almost exclusively a system of plea bargaining, negotiated behind closed doors and with no judicial oversight. The outcome is very largely determined by the prosecutor alone.”

Job Opening

Sig Sauer Inc. (based in Newington, NH) is actively looking for an Associate General Counsel and Chief Compliance Officer with corporate compliance experience. If interested, please contact


A good weekend to all.


Friday Roundup

Friday, September 5th, 2014

Knox to FCPA Inc., DOJ response brief filed, SFO speeches, and asset recovery.  It’s all here in the Friday roundup.

Knox to FCPA Inc.

As highlighted in this prior post, over the summer Jeffrey Knox (DOJ Fraud Section Chief) followed the same tired script on a number of FCPA issues.  It will be interesting to hear / read of Knox’s positions in the future as – following a well-traveled career path for DOJ FCPA enforcement attorneys – he is leaving government service for the private sector to provide FCPA investigative and compliance services to business organizations subject to the current era of FCPA enforcement.  (See here from the Washington Post, here from the Wall Street Journal, and here from the New York Times).

Knox is headed to Simpson Thatcher (also home to former SEC FCPA Unit Chief Cheryl Scarboro – see here for the prior post). This Simpson Thatcher release states in pertinent part:

“Mr. Knox will be a partner based in the Firm’s Washington, D.C. office and a member of the Firm’s Government and Internal Investigations Practice. During his tenure at the DOJ, Mr. Knox served as the Chief and, before then, the second-ranking official of the Criminal Division’s Fraud Section, which has responsibility for some of the nation’s most significant fraud cases, including … Foreign Corrupt Practices Act (FCPA) criminal investigations and prosecutions in the United States.”


“We are pleased to welcome Jeff back to the Firm,” said Bill Dougherty, Chairman of Simpson Thacher’s Executive Committee. “His deep experience in overseeing high-stakes government investigations and enforcement actions will be a significant asset to our clients as they navigate an increasingly complex enforcement landscape.” “We are very excited that Jeff is joining our Government and Internal Investigations team here at Simpson Thacher. As Chief of the Fraud Section, Jeff has presided over many of the most significant financial fraud, healthcare fraud, and FCPA investigations in recent years, and we know that he is greatly respected within both the DOJ and the white collar bar. His experience and insight will provide substantial value to our clients,” added Mark J. Stein, Head of the Firm’s Government and Internal Investigations Practice.”

The release further states: “[Knox] was a contributor to the DOJ and SEC’s A Resource Guide to the FCPA, published in 2012.”

As I have done in all previous instances of high-ranking DOJ or SEC FCPA enforcement attorneys leaving government services for lucrative FCPA related jobs in the private sector (see here for instance), I will restate my position.

As to DOJ and SEC FCPA enforcement attorneys who have supervisory and discretionary positions and articulate government FCPA policies, it is in the public interest that such individuals be prohibited, upon leaving government service, from providing FCPA defense or compliance services in the private sector for a five-year period.

DOJ Response Brief Filed

This previous post highlighted the motion to dismiss filed by former Alstom executive Lawrence Hoskins in the criminal FCPA action against him.  In short, the motion to dismiss stated that the DOJ’s indictment “charges stale and time-barred conduct that occurred more than a decade ago; it asserts violations of U.S. law by a British citizen who never stepped foot on U.S. soil during the relevant time period; and, it distorts the definition of the time-worn legal concept of agency beyond recognition.”  As noted in the prior post, much of Hoskins’s brief focuses on the issue of whether he withdrew from the alleged criminal conspiracy involving alleged improper payments at the Tarahan power plant project in Indonesia.

Earlier this week, the DOJ filed this response brief.  In pertinent part, the DOJ’s brief states:

“The defendant seeks to have the Court take the extraordinary step of dismissing the Indictment against him at this pretrial phase based on his interpretation of the legal import of  certain allegations contained in the Indictment, supplemented by his own selective version of events contained in an affidavit attached to his motion. The Indictment, however, sets forth more than sufficient facts to support the charged crimes. Moreover, at trial the Government expects to present substantial additional evidence supporting the charges, including facts that bear directly on the arguments raised by the defendant in his motion. The defendant’s motion thus represents a novel effort to – in effect – invent and obtain summary judgment in the criminal process based on the claim that he has established the factual basis for his defenses. For good reason, the law provides that only after the Government has presented its case should a judge and jury grapple with the legal and factual sufficiency of that evidence. Thus, the defendant’s motion should be denied. Even addressing the merits of his arguments at this premature stage, however, the defendant’s motion should fail.

In particular, the defendant’s motion fails because: (1) the issue of withdrawal is necessarily a factual one to be decided by a jury and, nonetheless, the defendant did not withdraw from the charged conspiracies; (2) the Indictment has adequately alleged, and the Government will prove at trial, that the defendant was an “agent” of a domestic concern under the Foreign Corrupt Practices Act (“FCPA”), the charged conduct is domestic (not extraterritorial), and Congress has not specially excepted the defendant from prosecution under the FCPA and, thus, he can be liable for causing, aiding and abetting, or conspiring to commit an FCPA violation even if he is not guilty as a principal; and (3) the Indictment alleges continuing transactions (the bribe payments) that were initiated from Connecticut and alleges that the defendant aided and abetted the transactions through acts in Connecticut, and thus the money laundering charges are properly venued in the District of Connecticut.”

SFO Speeches

David Green’s (Director of the U.K. Serious Fraud Office) recent speech regarding a “cross-section of SFO cases” included the following in the foreign bribery space:

  • Barclays/Qatar: is an investigation, begun in 2012, into the circumstances surrounding Barclays’ £8bn recapitalisation in 2008.
  • Rolls Royce: concerns allegations of bribery carried out by local agents in return for orders in various markets, touching several divisions of Rolls Royce business activity.
  • GlaxoSmithKline: this is an investigation into allegations that bribes were paid in order to increase business in several jurisdictions.
  • GPT: this investigation concerns a subsidiary’s business relationship with the Saudi National Guard.
  • Alstom: this is an ongoing investigation into the use of British subsidiaries of a major French multinational to dispense bribes in several jurisdictions in order to secure large infrastructure contracts. Charges have already been laid against a subsidiary.
  • The Sweett Group: this investigation concerns allegations of bribes paid in return for building contracts in North Africa.

For another recent speech by Alun Milford (General Counsel of the SFO) on cooperation and disclosure, see here.

Asset Recovery

In news related to the DOJ’s Kleptocracy Asset Recovery Initiative (under which prosecutors in the DOJ Asset Forfeiture and Money Laundering Section work in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption – see this 2009 post highlighting Attorney General Holder’s announcement of the program), the DOJ announced:

“The Department of Justice has seized approximately $500,000 in assets traceable to corruption proceeds accumulated by Chun Doo Hwan, the former president of the Republic of Korea.   This seizure brings the total value of seized corruption proceeds of President Chun to more than $1.2 million.  [...] Chun Doo Hwan orchestrated a vast campaign of corruption while serving as Korea’s president,” said Assistant Attorney General Caldwell.   “President Chun amassed more than $200 million in bribes while in office, and he and his relatives systematically laundered these funds through a complex web of transactions in the United States and Korea.   Today’s seizure underscores how the Criminal Division’s Kleptocracy Initiative – working in close collaboration with our law enforcement partners across the globe – will use every available means to deny corrupt foreign officials and their relatives safe haven for their assets in the United States.”


A good weekend to all.


Friday Roundup

Friday, August 8th, 2014

Scrutiny alerts and updates, an FCPA fumble, checking in with the SFO, and for the reading stack.  It’s all here in the Friday roundup.

Scrutiny Alerts and Updates

Cobalt International Energy

Cobalt has been under FCPA scrutiny since 2011 for its alleged business relationships in Angola.  (See here and here for prior posts).

In this recent SEC filing, the company states:

“As previously disclosed, the Company is currently subject to a formal order of investigation issued in 2011 by the SEC related to its operations in Angola.  [...] In connection with such investigation, on the evening of August 4, 2014, the Company received a “Wells Notice” from the Staff of the SEC stating that the Staff has made a preliminary determination to recommend that the SEC institute an enforcement action against the Company, alleging violations of certain federal securities laws. In connection with the contemplated action, the Staff may recommend that the SEC seek remedies that could include an injunction, a cease-and-desist order, disgorgement, pre-judgment interest and civil money penalties. The Wells Notice is neither a formal allegation nor a finding of wrongdoing. It allows the Company the opportunity to provide its reasons of law, policy or fact as to why the proposed enforcement action should not be filed and to address the issues raised by the Staff before any decision is made by the SEC on whether to authorize the commencement of an enforcement proceeding. The Company intends to respond to the Wells Notice in the form of a “Wells Submission” in due course.

The Company has fully cooperated with the SEC in this matter and intends to continue to do so. The Company has conducted an extensive investigation into these allegations and the receipt of the Wells Notice does not change the Company’s belief that its activities in Angola have complied with all laws, including the U.S. Foreign Corrupt Practices Act. The Company is unable to predict the outcome of the SEC’s investigation or any action that the SEC may decide to pursue.”

Rare are so-called Wells Notices in the FCPA context for the simple reason that few issuers actually publicly push back against the SEC.  However, this is the second instance in the past four months of the SEC sending an issuer a Wells notice in connection with an FCPA inquiry. (See here for the prior post regarding Qualcomm).

As highlighted by the below excerpts, the Wells notice was a hot topic during Cobalt’s most recent quarterly earnings call.  The below excerpts also capture the candid statements of Cobalt’s CEO concerning the SEC’s position.

Joseph Bryant - Chairman and Chief Executive Officer

Before we get into the Q&A, let me say a few words about our 8-K disclosure from earlier this morning. As it noted, last evening, less than 24 hours ago, we received a Wells Notice from the Securities and Exchange Commission related to the investigation the agency has been conducting relating to Cobalt’s operations in Angola and the allegations of Angolan government official ownership of Nazaki Oil and Gas, one of the other working interest owners in Blocks 9 and 21 offshore Angola. In the notice, the staff of the SEC stated that it had made a preliminary and, in our view erroneous, determination to recommend that the SEC move forward with an enforcement action against the company. I think it’s important to point out that the Wells Notice is neither a formal allegation nor a finding of wrongdoing. It merely allows Cobalt the opportunity to provide its reasons of law, policy and fact as to why the proposed enforcement action should not be filed before any enforcement decision is made by the SEC. As you know, we have fully cooperated with the SEC and the investigation since it began nearly 3.5 years ago. And we will continue to do so. In the same vein, we will, of course, take this opportunity and respond to the SEC as part of the Wells process. But let me be very clear. This Wells Notice does nothing to change our prior conclusion that our activity in Angola have fully complied with all laws, including the Foreign Corrupt Practices Act, and Cobalt continues to strongly refute any allegation of any wrongdoing.”


Evan Calio – Morgan Stanley, Research Division

I appreciate your comments on the Wells Notice and underlying FCPA claims. Is there any — can you comment if there’s any potential collateral effect in a negative outcome scenario, meaning other than a potential fine? Could it affect your career or anything in your leases?


Well, good question, Evan. We obviously disagree with the staff’s position in the Wells Notice and we’ll respond to the notice in due course. As we’ve stated repeatedly over the past several years, Cobalt has and always will conduct all aspects of our business to the highest ethical standards and in full compliance with all laws and regulations in all jurisdictions, not just Angola, where we operate. This is the case of all of our Angolan operations. We fully plan and expect to pursue the exploration, appraisal and development of all of our Angolan assets, including Cameia development in a timely manner as we’ve previously discussed. And that’s about all I can say, Evan.


Okay, that’s great. And do you have a hearing date on the Wells Notice? Or is that — just not at this time?


No. There’s a process, but to be honest, it’s just like some other things, it can just wander on.


Joseph Allman - JP Morgan Chase & Co, Research Division

So just back to the Wells Notice for a few minutes, John. Are you planning on taking a reserve? I assume it’s not estimable at this point if there is any fine, so I assume the answer is no. And then just — could you just describe the next steps a little bit? I think you guys have to write a response. If I’m not mistaken, you’ve got about 2 weeks to file that response. Is that correct? Could you just give us some more details on that?

John Wilkerson – Chief Financial Officer, Principal Accounting Officer and Executive Vice President

We are not planning on taking a reserve.


And yes, there is a formal process that we respond to. Our view of the facts — and of course, we know the facts incredibly well since we’ve been investigating this for a very long time, and so we will submit our facts to the SEC here in the next several weeks.


Edward Westlake – Crédit Suisse AG, Research Division

Let’s then get into the Wells Notice as well. So I mean, my understanding, which may be incorrect, of the FCPA is that one aspect of it is doing due diligence, which is the standard of reasonable inquiries, and then the other aspect of it is if some exchange took place in order to get access to the block. It seems from the outside to me that perhaps some disagreements with you and the SEC on how much due diligence was needed could be a civil sort of issue whereas if there was some exchange, that seem to me would be more criminal. So I’m just trying to get a sense of what it is that the SEC, if you know, disagree with you on in terms of their assessment as to why they’d want to go towards an enforcement.


Well, the way the process works is it’s somewhat opaque, to be honest with you, on one side, but it’s fully transparent on our side. So we know all the facts, we know them very well. And I’ve said many times that we built Cobalt the right way from day 1 before we ever considered leases in Angola. All of our FCPA, all of our compliance, all of our due diligence systems were built into the company from day 1. I didn’t fall off the turnip truck yesterday and neither did any of these guys around the table. We know all about FCPA and we weren’t about to wander into anything there unknowingly. So all I can say for sure is we know what we’ve done. We know what compliance is required. We’ve gone above and beyond that and we’ll stand firm on our actions.


Okay. And all of the due diligence which I’ve done also suggests that your staff has done a very good job in terms of doing their due diligence. But maybe a different way of asking the question, do you think it’s just the level of due diligence which the SEC disagree with you on? Or do you think that there has been some exchange? I understand that Nazaki is a full paying member of the consortium, in fact, was imposed on you rather than something that you chose. But I’m just trying to get some understanding as to what it is you think they disagree with you on.


Ed, I appreciate your probing nature, but I really can’t answer that. Again, what I can tell you is, again, we understand the requirements. We understand the law, we understand compliance, we understand due diligence. And we have gone above and beyond in every case. And we sit here today confident in our position, and I cannot and will not speculate on what the SEC’s views are.


Okay. And then have there been any inquiries from the DOJ?


We have — at every step of the last 3.5 years, we have managed both the SEC and the DOJ simultaneously to make sure that both of those federal agencies are fully up to speed on what we’ve done and what we know about. So I would say constant communication with both agencies has been a routine over the past 3 years.



Right. And maybe just a follow-up on the Wells Notice. Will we ever see the actual SEC letter? Is that a public domain or is it private in terms of their allegations, when eventually they make them.


It’s currently private, and we’ll — I hope we’re demonstrating how transparent we are. When we know something, we’ll tell you. And when we have something we can release, we’ll release it. That’s about all really I can say about it.


I mean, it would be helpful, I think, for investors to see what the allegation specifics are to be able to make a judgment call but, obviously, I leave that up to you.


Got it.


Al Stanton – RBC Capital Markets, LLC, Research Division

[J]ust back to the Wells notice. Can I ask whether the letters are addressed to the company or do they actually name specific individuals?


The company.

Staying with Cobalt-related issues, Global Witness recently issued this press release stating:

“BP and its partners including Houston-based Cobalt have contributed US$175 million over the past two-and-a-half years to fund a project in Angola known as the Sonangol Research and Technology Center (SRTC), with another US$175 million due to be paid by January 2016. Global Witness asked BP and Cobalt to provide any information that confirms the SRTC exists. The companies did not provide this information in their responses. BP stated that Sonangol, Angola’s state-owned oil company, “has informed BP that the SRTC is still in planning stage.” Cobalt said they “monitor the progress of our social contributions in Angola, including the Research and Technology Center” but did not provide any further information about the project. Global Witness asked Sonangol for information to confirm the existence of the SRTC, but the company did not respond. We commissioned interviews with well-placed industry insiders, but none of them could confirm that the SRTC exists.  Global Witness is calling on the Angolan authorities to disclose where this money has gone.”

SBM Offshore

The company has been under FCPA (and related scrutiny) since 2012 concerning allegations primarily in Equatorial Guinea and Angola and disclosed in this press release as follows.

“As previously disclosed in various press releases, SBM Offshore voluntarily reported in April 2012 an internal investigation into potentially improper sales practices involving third parties to the relevant authorities, and has since been in dialogue with these authorities. SBM Offshore is discussing a potential settlement of the issues arising from the investigation. While these discussions are ongoing, it is sufficiently clear that a resolution of the issues will have a financial component, and consequently SBM Offshore has recorded a non-recurring charge of US$240 million in the first half of 2014, reflecting the information currently available to the Company. Until the matter is concluded, SBM Offshore cannot provide further details regarding a possible resolution of the issues arising from the investigation, and no assurance can be given that a settlement will actually be reached. As always, the Company will inform the market as soon as further information can be provided.”

FCPA Fumble

U.S. Senator Roger Wicker (R-MS) is not the first member of Congress to fumble an FCPA issue, just the latest.  As noted in this Radio Free Europe article:

“A U.S. senator has asked federal authorities to investigate whether a powerful Russian media mogul seen as the mastermind behind the Kremlin-funded RT network used dirty money to purchase pricey California real estate.   U.S. Senator Roger Wicker (Republican-Mississippi) has asked the Justice Department to investigate whether Mikhail Lesin, Russian President Vladimir Putin’s former press minister, violated the Foreign Corrupt Practices Act or laundered money by acquiring multimillion-dollar homes in the Los Angeles area.”  [See here for Senator Wicker’s letter to the DOJ].

Dear Senator Wicker, alleged “foreign officials” are not subject to the FCPA.  See U.S. v. Castle, 925 F.2d 831 (5th Cir. 1991).

Checking In With the SFO

The U.K. Serious Fraud Office recently announced the following sentences of individuals in connection with the Innospec prosecution.

Dennis Kerrison, 69, of Chertsey, Surrey, was sentenced to 4 years in prison. Paul Jennings, 57, of Neston, Cheshire, was sentenced to 2 years in prison. Miltiades Papachristos, 51 of Thessaloniki, Greece, was sentenced to 18 months in prison. David Turner, 59, of Newmarket, Suffolk, was sentenced to a 16 month suspended sentence with 300 hours unpaid work

Mr Kerrison and Dr Papachristos were convicted of conspiracy to commit corruption in June 2014 in relation to Indonesia only. Mr Jennings pleaded guilty in June 2012 to two charges of conspiracy to commit corruption and in July 2012 to a further charge of conspiracy to commit corruption in relation to Indonesia and Iraq. Dr Turner pleaded guilty to three charges of conspiracy to commit corruption in January 2012 in relation to Indonesia and Iraq.

Further information on the guilty verdict delivered in the trial of Mr Kerrison and Dr Papachristos can be found here, while information on the guilty pleas entered into by Dr Turner and Mr Jennings can be found here and here.

Upon sentencing the defendants, HHJ Goymer said:

“Corruption in this company was endemic, institutionalised and ingrained… but despite being a separate legal entity it is not an automated machine; decisions are made by human minds.

“None of these defendants would consider themselves in the same category as common criminals who commit crimes of dishonesty or violence….. but the real harm lies in the effect on public life, the effect on community and in particular with this corruption, its effect on the environment.  If a company registered or based in the UK engages in bribery of foreign officials it tarnishes the reputation of this country in the international arena.”

Concerning the sentencing of Dr Turner, the Judge also said:

“It is necessary to give encouragement to those involved in serious crime to cooperate with authorities.  You [Dr Turner] very narrowly indeed escaped going to prison.”

David Green CB QC, Director of the SFO said:

“This successful conclusion to a long-running investigation demonstrates the SFO’s ability and determination to bring corporate criminals to justice.”

Innospec itself pleaded guilty in March 2010 to bribing state officials in Indonesia and was fined $12.7 million in England with additional penalties being imposed in the USA.

Dr Turner was also ordered to pay £10,000 towards prosecution costs and Mr Jennings was ordered to pay £5000 towards these costs.  Dr Turner and Mr Jennings have already been subject to disgorgement of benefit by the US Securities and Exchange Commission.  The matter of costs for Mr Kerrison and Dr Papachristos has been adjourned pending the hearing of confiscation proceedings against them.”

For more on the sentences, see here from

Reading Stack

Professor Stephen Bainbridge knows Delaware corporate law and related corporate governance issues as well as anyone.  In regards to the Wal-Mart Delaware action (see here for the prior post noting that despite the hype, the decision was much to do about little), Professor Bainbridge writes:

“There’s been a fair bit of blawgosphere chatter about [the Wal-Mart Delaware action].”  [...]  Personally, it just doesn’t seem that big a deal. Somebody want to explain to me why I should care more?”



Sometimes a suitable proxy for potential red flags may be whether, upon reading a certain set of facts and circumstances, one becomes dizzy.  This recent New York Times article regarding former U.K. Prime Minister Tony Blair may make you dizzy.


A good weekend to all.