Statute of Limitations « FCPA Professor

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“Total”ly Milking The FCPA Cash Cow?

Monday, June 3rd, 2013

There are many who believe that certain aspects of FCPA enforcement represent a cash cow for the government.

This previous post on the White Collar Crime Prof Blog stated as follows. “FCPA is a cash cow. Big companies, most of whom are quite vulnerable, will do anything to avoid a civil or criminal trial. FCPA becomes a cost of doing business. The money flows into the government.”

In this article, a former Assistant Director in the SEC Division of Enforcement stated that one reason for the increase in FCPA enforcement is a “very simple reason–it’s lucrative.”

This post from the Chamber of Commerce titled “Justice’s FCPA Cash Cow” stated that “FCPA prosecutions have turned into a cash cow for the Justice Department” and the author noted as follows. “I’m pretty sure using the justice system as an ATM wasn’t what the authors of the FCPA had in mind.”

This Business Insider article notes that “the profitability enforcement has garnered for the government” is one of the reasons for the increase in FCPA enforcement. The article states “quite simply, [FCPA enforcement] is lucrative for the government” and it quotes David Krakoff, (BuckleySandler and a former federal prosecutor) as follows. ” You have to think of the SEC and the DoJ as businesses. They are looking for growth areas, too.”

As noted in this previous post, Adam Siegel (co-chair of the global white collar group at Freshfields Bruckhaus Deringer and a former federal prosecutor) stated as follows concerning increased enforcement. “We’re in an economic climate today where I don’t think there’s a single government in the world that isn’t struggling to find resources. This area has emerged … as a money making center, which is kind of bizarre.”

This Forbes contributor noted as follows. “FCPA enforcement has long been considered a cash cow for the Department of Justice.”

See also this prior post titled ”Is the FCPA a Government Cash Cow” as well as my comments to the New York Times in this article.

And who can forget the comments of William Jacobson, a former DOJ Assistant Chief for FCPA enforcement. Referencing a different member of the animal kingdom, he stated in a 2010 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.”

Those who believe that certain aspects of FCPA enforcement represent a government grab for easy settlement money will find new support in the recent $398 million Total enforcement action (see here for the prior post).

The salient points as to the third largest settlement in FCPA history are as follows.

The enforcement action was against a French oil and gas company for making improper payments to an Iranian Official through use of an employee of a Swiss private bank and a British Virgin Islands company.
The vast majority of the alleged improper conduct took place between 1995 and 1997 (that is 16 to 18 years ago).
The sole U.S. jurisdictional nexus (a required legal element for an anti-bribery violation since Total is a foreign issuer) is a 1995 wire transfer of $500,000 (representing less than 1% of the alleged bribe payments at issue) from a New York based account.
The same exact conduct at issue is the focus of a French law enforcement investigation (i.e. Total’s “home” country).

So old is the conduct giving rise to the Total enforcement action, that the DOJ made the unusual statement in the DPA that “evidentiary challenges” were present for both parties given that “most of the underlying conduct occurred in the 1990s and early 2000s.”

A $398 million U.S. enforcement action against a French company for allegedly making improper payments to an Iranian Official with the sole U.S. jurisdictional nexus being an immaterial wire transfer through a U.S. account 18 years ago does not exactly dispel beliefs that certain aspects of FCPA enforcement represent a U.S. government cash cow.

Rather the Total enforcement action supports the legitimacy of this belief.

Friday Roundup

Friday, April 19th, 2013

Docket exploration in this Friday roundup.

SEC v. Jackson & Ruehlen

My first post concerning the SEC’s enforcement action against Mark Jackson and James Ruehlen asked – will the SEC be put to its burden of proof? I noted that the case would be most interesting to follow as the SEC is rarely put to its burden of proof in Foreign Corrupt Practices Act enforcement actions and I highlighted, at the time, how the last time that happened (in 2002) the SEC lost.

As time would demonstrate, Jackson and Ruehlen indeed did put the SEC to its burden of proof and in December 2012 Judge Keith Ellison (S.D. of Tex.) granted Defendants’ motion to dismiss the SEC’s claims that sought monetary damages while denying the motion to dismiss as to claims seeking injunctive relief. (See here for the prior post). Even though Judge Ellison granted the motion as to SEC monetary damage claims, the dismissal was without prejudice meaning that the SEC was allowed to file an amended complaint. As noted in this prior post, that is indeed what happened next, and as noted here a second round of briefing began anew.

In the Defendant’s renewed motion to dismiss (filed Feb. 22nd) they argued that the SEC could not rely on the fraudulent concealment or continuing violations doctrine to extend the limitations period to cover certain claims that accrued before May 12, 2006. A week later the Supreme Court issued its unanimous decision in SEC v. Gabelli (see here for the prior post) and soon thereafter on March 11th the Defendants filed a notice of supplemental authority with the court arguing that Gabelli “bolstered” their position.

On March 22nd, the same day the SEC’s opposition brief was due, the parties jointly notified the court “that in lieu of opposing the [motion to dismiss] the SEC intends to file a Second Amended Complaint.” The filing noted that the then proposed Second Amended Complaint “moots the relief sought in the [the motion to dismiss] because it clarifies that, among the violations alleged, the SEC seeks civil penalties … only to the extent such violations accrued on or before May 12, 2006.

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Speaking of statute of limitations, a recent article highlights how the DOJ is “testing a novel argument” to extend statute of limitations in certain cases. The theory. We are at war … in Afghanistan … and regardless of whether the conduct at issue has anything to do with that war in Afghanistan, the 1948 Wartime Suspension of Limitations Act gives prosecutors unlimited time to go after alleged fraud during times of war.

No this article was not in the Onion, it was in the Wall Street Journal (see here).

Former Siemens Executive Sharef Settles 2011 SEC Enforcement Action

The SEC announced earlier this week (here) that Uriel Sharef, ”a former officer and board member of Siemens” agreed to settle – as had long been expected – the SEC’s action against him. As noted in this previous post, Sharef, along with others was charged (both by the DOJ and SEC) in December 2011 in connection with an Argentine bribery scheme that was also the focus, in part, of the 2008 Siemens corporate enforcement action.

As noted in the SEC’s release, without admitting or denying the SEC’s allegations, Sharef consented to entry of a final judgment prohibiting future FCPA violations and he agreed to pay a $275,000 civil penalty – a penalty the SEC called “the second highest penalty assessed against an individual in an FCPA case.”

[In connection with the Innospec FCPA enforcement action, in August 2010, Ousama Naaman resolved an SEC enforcement action by agreeing to disgorge $810,076, pay prejudgment interest of $67,020 and pay a civil penalty of $438,038. See here for the prior post].

The burning question of course is whether the SEC would have prevailed against Sharef if he put the SEC to its burden of proof. As highlighted in this previous post, Sharef’s co-defendant, Herbert Steffen, did just that and in February Judge Shira Scheindlin dismissed the SEC’s complaint against Steffen finding that personal jurisdiction over Steffen exceeded the limits of due process.

The SEC’s allegations against Sharef mention the phone call Sharef placed in the U.S. to Steffen. As to this call, Judge Scheindlin stated as follows in the Steffen decision.

“Neither Sharef’s call to Steffen from the United States nor the fact that a portion of the bribery payments were deposited in a New York bank provide sufficient evidence of conduct directed towards the United States to establish minimum contacts. First, Steffen did not place the calls to Sharef. Further, Steffen did not direct that the funds be routed through a New York bank. [...] His conduct was focused solely on ensuring the continuation of the Siemens contract in Argentina.”

The SEC complaint did however state the following additional as to Sharef.

“Sharef met in New York, NY [in January 2003] with payment intermediaries and agreed to pay $27 million in bribes to Argentine officials in connection with the [contract at issue].

Obstruction Charges Filed Against French Citizen in Connection With FCPA Investigation

The DOJ announced (here) earlier this week that “Frederic Cilins a French citizen, has been arrested and accused of attempting to obstruct an ongoing investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.”

The Criminal Complaint charges Cilins with one count of tampering with a witness, victim, or informant; one count of obstruction of a criminal investigation; and one count of destruction, alteration, and falsification of records in a federal investigation.

Under the heading “Overview of the Defendant’s Crimes” the complaint states, in pertinent part, as follows.

“Cilins … has made repeated efforts to obstruct an ongoing federal grand jury investigation … concerning potential money laundering violations and potential violations of the Foreign Corrupt Practices Act, including such violations by a domestic concern as defined by the FCPA, relating to bribes to officials of a former government of the country of Guinea for the purpose of obtaining valuable mining concessions in Guinea. During monitored and recorded phone calls and face-to-face meetings with a cooperating witness “CW” [identified as the former wife of a now deceased high-ranking official in the Government of Guinea who is cooperating with the government "in the hopes of obtaining immunity for her own potential criminal conduct"] assisting in this investigation, Cilins, among other things, agreed to pay large sums of money to the cooperating witness to induce the cooperating witness to: (1) provide to Cilins, for destruction, documents Cilins knew had been requested from the cooperating witness by special agents of the FBI and which were to be produced before a federal grand jury; and (2) sign an affidavit containing numerous false statements regarding matters within the scope of the grand jury investigation. Cilins repeatedly told the cooperating witness that the documents needed to be destroyed ‘urgently’ and that Cilins needed to be present to personally witness the documents being burned.”

Various reports (see here for instance) have linked Cilins to Guernsey-based BSG Resources Ltd and the Criminal Complaint would seem to reference this company as a “particular business entity not based in the United States engaged in the mining industry” (the “Entity”). The Criminal Complaint sketches a bribery scheme and states, in pertinent part, as follows.

“CW was visited by several individuals including Cilins who identified themselves as representatives of the Entity. According to the CW, these individuals told the CW, on behalf of the Entity, that they wished to invest in mines in Guinea and asked the CW for help with the Guinean Official, who was then CW’s spouse. Cilins offered the CW $12 million, to be distributed to the CW and ministers or officials within the Government of Guinea who might be needed to secure the mining rights if all went well after their introduction to the Guinean Official.”

The Criminal Complaint further states that “some of the money paid to the CW by the Entity and its affiliates or agents was wired to a bank account in Florida controlled by the CW.”

It would appear from the Criminal Complaint that BSG Resources is not the sole focus of the U.S. investigation. Indeed, BSG Resources does not fit the description of a “domestic concern” as referenced in the Criminal Complaint which further states that “subjects of the grand jury investigation include one or more “domestic concerns” within the meaning of the FCPA …”.

Contrary to this assertion, obstruction charges were not first used in the FCPA enforcement against Hong Carson. Prior to Carson (in which the charge was ultimately dropped) obstruction charges have been used in several FCPA enforcement actions since the FCPA’s first-mega case in 1982 (see here for the prior post). Although not always successful prosecuted, the following FCPA defendants were nevertheless also charged with various obstruction charges: Gerald Green, David Kay and Douglas Murphy, Leo Winston Smith and John O’Shea

TJGEM, LLC Complaint

In another example of the noticeable trend of increasing “offensive” use of the FCPA, in late March, Missouri-based TJGEM, LLC filed this civil complaint in U.S. District Court for the District of Columbia alleging a variety of claims, including RICO, against various Ghana officials and New Jersey-based Conti Construction Co. Inc. in connection with a sewer project. AllAfrica reports here as follows.

”TJGEM is claiming that [a Ghanian official] inflated the contract sum for the construction of the sewer system, which has now been awarded to Conti Construction, also an American company, by $10 million … According to [the complaint] because TJGEM’s representatives, who were negotiating with [the official] for the contract, were totally non-receptive and unresponsive to the [official's] corrupt practices and solicitations, and refused to neither entertain nor accede to same, but instead, rejected said corrupt practices, the contract was taken away from them. [TJGEM] argues that the selection of a company whose price for the reconstruction of the sewer project was some $10,000,000 in excess of the price fixed by TJGEM, leads to a reasonable inference that the [official] inflated the price of the sewer project, in order to receive said $10,000,000 as a bribe and kickback in the award of the sewer project contract to his own use and benefit, and to the use and benefit of other Ghanaian public officials with whom he is acting in concert in the said criminal enterprise.”

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A good weekend to all.

Gabelli’s Broader Implications

Tuesday, March 5th, 2013

Today’s post is from Russ Ryan (Partner, King & Spalding). Prior to joining King & Spalding, Ryan spent ten years in the SEC’s Division of Enforcement, including his last three years as Assistant Director of the Division.

*****

Professor Koehler has already ably analyzed (see here) the Supreme Court’s recent statute of limitations decision against the SEC in Gabelli. The Court’s opinion obviously was limited to the precise statute of limitations question before it, but I view it – perhaps with a generous helping of wishful thinking – as an encouraging sign that the justices may be ready, willing, and able to take on other troubling issues that arise as federal law enforcement agencies continue to blur the lines between traditional criminal prosecution and increasingly punitive “civil” prosecution.

SEC enforcement is a classic example of such civil prosecution. And, in a nod to the primary focus of this website, SEC enforcement of FCPA violations comes perhaps closest to the bull’s eye, because in nearly all cases the SEC works side-by-side with criminal prosecutors in investigating and announcing its own civil cases.

So why is Gabelli so encouraging in this regard? For starters, the Court’s unanimous opinion explicitly rejected the notion that the SEC should be treated like a private plaintiff when it sues people in its law enforcement capacity. To the contrary, the opinion correctly notes that when the SEC accuses private businesses and citizens of breaking the law, and seeks government-imposed punishment for those violations, the SEC is “a different kind of plaintiff” seeking “a different kind of relief.”

Specifically, the SEC’s role is much closer to that of a traditional criminal prosecutor than that of an injured shareholder seeking compensation for investment losses. At one point, in fact, the Court explicitly characterized the SEC’s role in Gabelli as “a prosecutor seeking penalties.”

This recognition – which was long overdue – logically invites much broader questions than simply the starting gun for the SEC’s statute of limitations. If the SEC’s enforcement role is more like that of a criminal prosecutor than a private plaintiff, why shouldn’t the SEC be held to some of the same procedural and evidentiary burdens of a prosecutor rather than benefitting from the more relaxed standards accorded to private plaintiffs?

For example, why should the SEC be able to prosecute and punish private citizens under the relatively forgiving “preponderance of evidence” burden of proof rather than “guilt beyond reasonable doubt” – or at least “clear and convincing evidence”? As Justice Scalia pointed out in his questioning of the government’s lawyer during oral argument in Gabelli, “You just call it a civil penalty and you don’t have to prove it beyond a reasonable doubt.”

Why too should the SEC be entitled to infer guilt from a defendant’s exercise of his or her constitutional right to remain silent, or to hammer that adverse inference home before the judge and jury deciding the case? And why should the SEC be entitled to seek additional law enforcement penalties even after the defendant has already been punished in a parallel federal criminal case involving the same offense? Finally, why shouldn’t an accused securities law violator facing a government law enforcement prosecution – even if nominally civil – have an absolute right to the assistance of competent counsel, paid for by the government if the defendant can’t afford it?

The Supreme Court didn’t have to address these questions in Gabelli, and for the most part lower courts have generally sided with the SEC whenever such questions have arisen. But I’m not sure the SEC will have compelling answers to these questions if they should ever reach the Supreme Court. And given the Supreme Court’s decisive rejection of the SEC’s position in Gabelli – unanimously, less than two months after oral argument, and requiring only a 11-page opinion – those answers may not come easy for the SEC.

Supreme Court Unanimously Rejects SEC’s Statute Of Limitations Position

Thursday, February 28th, 2013

February’s issue of the month is statute of limitations in SEC enforcement actions.

28 U.S.C. 2462 provides as follows.

“Except as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued if, within the same period, the offender or the the property is found within the United States in order that proper services may be made thereon.”

28 U.S.C. 2462 was at the heart of Judge Sullivan’s recent order in an SEC FCPA enforcement action (SEC v. Straub) in which he denied the motion to dismiss brought by former Magyar Telekom executives. (See here for the prior post). As highlighted in this post yesterday regarding the same case, 28 U.S.C. 2462 is a ground on which the defendants are seeking an interlocutory appeal to the Second Circuit.

28 U.S.C. 2462 is also at the heart of Round 2 of the briefing in the SEC’s FCPA enforcement actions against Mark Jackson and David Ruehlen. (See here for the post earlier this week).

Yesterday, in a unanimous decision authored by Chief Justice Roberts, the Supreme Court, in Gabelli v. SEC, rejected the SEC’s expansive interpretation of 28 U.S.C. 2462 in cases involving civil penalties. I previously flagged (see here) the Gabelli case as one to watch given that the limitations period in most SEC FCPA enforcement actions would seemed to be stretched. Indeed, dig into the details of most FCPA enforcement actions and one quickly discovers that the conduct at issue is old – in some cases very old.

This post provides a summary of the Supreme Court’s decision and analyzes its relevance to SEC FCPA enforcement.

In 2008, the SEC brought a civil enforcement actions against Bruce Alpert and Marc Gabelli under the Investment Advisors Act which makes it illegal for investment advisors to defraud their clients, and authorizes the SEC to seek civil penalties. The SEC’s complaint alleged that from 1999 to 2002, Alpert and Gabelli allowed an investor to engage in “market timing” in an investment fund they operated. The defendants moved to dismiss, arguing in part, that the SEC’s claim was untimely under § 2462. The trial court agreed and dismissed the SEC’s civil penalty claim as time barred. The Second Circuit reversed and accepted the SEC’s argument that “because the underlying violations sounded in fraud, the ‘discovery rule’ applied to the statute of limitations. ” As explained by the Second Circuit, “under the discovery rule, the statute of limitations or a particular claim does not accrue until that claim is discovered, or could have been discovered with reasonably diligence, by the plaintiff.”

On appeal to the Supreme Court, the defendants argued that a “claim based on fraud accrues – and the five year clock begins to tick – when a defendants’ allegedly fraudulent conduct occurs.” The Supreme Court found that this position “is the most natural reading of the statute” and declined to read a discovery rule into § 2462.

In doing so, the Supreme Court rejected the SEC’s argument that a discovery rule should be read into § 2462 under which accrual is delayed until a plaintiff has ‘discovered’ the cause of action. The Supreme Court stated that a discovery rule has merit where the plaintiff is a defrauded victim seeking recompense, but that a discovery rule does not have merit when the plaintiff is the SEC in an enforcement action seeking civil penalties.

In pertinent part, the Supreme Court noted as follows (internal citations omitted).

“There are good reasons why the fraud discovery rule has not been extended to Government enforcement actions for civil penalties. The discovery rule exists in part to preserve the claims of victims who do not know they are injured and who reasonably do not inquire as to any injury. Usually when a private party is injured, he is immediately aware of that injury and put on notice that his time to sue is running. But when the injury is self-concealing, private parties may be unaware that they have been harmed. Most of us do not live in a state of constant investigation; absent any reason to think we have been injured, we do not typically spend our days looking for evidence that we were lied to or defrauded. And the law does not require that we do so. Instead, courts have developed the discovery rule, providing that the statute of limitations in fraud cases should typically begin to run only when the injury is or reasonably could have been discovered.

The same conclusion does not follow for the Government in the context of enforcement actions for civil penalties. The SEC, for example, is not like an individual victim who relies on apparent injury to learn of a wrong. Rather, a central “mission” of the Commission is to “investigat[e] potential violations of the federal securities laws.” SEC, Enforcement Manual 1 (2012). Unlike the private party who has no reason to suspect fraud, the SEC’s very purpose is to root it out, and it has many legal tools at hand to aid in that pursuit. It can demand that securities brokers and dealers submit detailed trading information. It can require investment advisers to turn over their comprehensive books and records at any time. And even without filing suit, it can subpoena any documents and witnesses it deems relevant or material to an investigation.

[...] Charged with this mission and armed with these weapons, the SEC as enforcer is a far cry from the defrauded victim the discovery rule evolved to protect.

In a civil penalty action, the Government is not only a different kind of plaintiff, it seeks a different kind of relief. The discovery rule helps to ensure that the injured receive recompense. But this case involves penalties, which go beyond compensation, are intended to punish, and label defendants wrongdoers.”

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In two footnotes, the Supreme Court noted two issues that were not before it. First statute of limitations for SEC claims for injunctive relief and disgorgement were not before the court. Second, tolling doctrines such as when a defendants takes steps beyond the challenged conduct itself to conceal the conduct from the plaintiff were not before court.

It should also be mentioned that the specific clause in § 2462 in dispute in SEC v. Straub – found within the United States – was not addressed by the Supreme Court.

Subject to these potential limitations, the Supreme Court’s decision in Gabelli is significant from a Foreign Corrupt Practices Act enforcement perspective – at least in terms of individual enforcement actions as individuals are more likely than corporate defendants to put the SEC to its burden of proof and assert valid and legitimate defenses based on fundamental legal concepts.

From the perspective of SEC FCPA enforcement against corporations, the Gabelli case is, unfortunately unlikely to have much impact. Cooperation will continue to be the name of the game and corporations facing FCPA scrutiny will likely continue to waive statute of limitations arguments or otherwise toll statute of limitations as evidence of their cooperation.

I say unfortunate because there is a reason why the law has statute of limitations. As stated by the Supreme Court in Gabelli:

“Statute of limitations are intended to ‘promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared. They provide ‘security and stability to human affairs. [They] are ‘vital to the welfare of society [and] ‘even wrongdoers are entitled to assume that their sins may be forgotten.’”

Citing former Chief Justice John Marshall, the Court in Gabelli stated that it “would be utterly repugnant to the genius of our laws if actions for penalties could ‘be brought at any distance of time.”

Even though, for the reasons stated above, the Gabelli decision may not be directly on point to pending challenges in SEC FCPA enforcement actions, you can be sure that the above language will be cited in future briefs in those cases.

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Commenting on the Gabelli case, this Wall Street Journal editorial stated, in pertinent part, as follows.

“It isn’t easy to lose 9-0 on the current ideologically divided Supreme Court. So ironic congratulations are in order for the Securities and Exchange Commission, which managed the feat in a unanimous ruling on Wednesday.”

[...]

As Justice Elena Kagan noted at January’s oral argument, “The government, which has not asserted this power for 200 years, is now coming in and saying, ‘We want this.’” Justice Antonin Scalia asked the government’s attorney, “Is there much difference between the rule you are arguing for and a rule that there is no statute of limitations?” Chief Justice John Roberts wrote for the Court that “we have never applied the discovery rule in this context.”

The abuse here is fundamental to the rule of law. If regulators can rewrite statutes on their own whim so they can put a pelt on the wall, then no citizen is safe from unjust prosecution. The people at the SEC who invented and pursued this legal humiliation deserve to be fired.”

Former Magyar Telekom Executives Seek Second Circuit Review Of Recent Ruling

Wednesday, February 27th, 2013

On the heels of Judge Richard Sullivan’s February 8th pre-trial order denying their motion to dismiss (see here for the prior post), former Magyar Telekom executives Elek Straub, Andras Balogh and Tamas Morvai have moved to certify Judge Sullivan’s order for interlocutory appeal to the Second Circuit.

Last week’s filing (here) states, in pertinent part, as follows (internal citations omitted).

“To satisfy the statutory prerequisites to certification [... the defendants] must show that there is substantial ground for difference of opinion on the issues presented.

“The defendants respectfully submit that there is substantial ground for difference of opinion regarding the following three questions that lie at the heart of the Order: (i) whether the Court may exercise personal jurisdiction over the defendants; (ii) whether the SEC’s actions is barred by the applicable statute of limitations; and (iii) whether the SEC has adequately pled the use of an instrumentality of interstate commerce. As explained more fully below, immediate appellate consideration of these questions is warranted in view of the overwhelming cost in time and money of proceeding to full-blown merits discovery and trial in this case. As the parties have already informed the Court by letter and proposed scheduling order dated October 3, 2012, merits discovery is expected to last approximately thirty months and will require teams of lawyers to traverse thousands of miles, review millions of documents in foreign languages, depose scores of foreign witnesses in foreign languages and in multiple countries, and negotiate the complexities of foreign law – all with the Court’s frequent oversight and assistance with regard to the Hague Convention process for gathering evidence abroad and related matters. The extraordinary resources needed to develop a complete factual record and bring this case to trial, which would include many millions of dollars to finance the defense of the case and the SEC’s prosecution of it, will be wasted if the Second Circuit reverses any part of the Order after trial, and would thus render unreasonable requiring these Hungarian defendants to travel thousands of miles from their homes to defend themselves. The defendants respectfully submit that the questions presented here for certification, coupled with the huge resource outlay contemplated already by both sides if merits discovery should proceed, make this case ripe for early albeit limited appellate review. This case is simply not a run-of-the-mill piece of litigation.

With regard to the first question presented of personal jurisdiction, prior to the Order no court had ever held that personal jurisdiction may be asserted in an FCPA action over foreign defendants whose sole contact with the United States involved signing allegedly false management certifications and sub-certifications, which the complaint fails to allege even reached or had any impact in the United States. Absent a clear directive from Second Circuit or Supreme Court precedent, the caution that attends application of the Constitutional ‘minimum contacts’ standard in the international context in evaluating a foreign national defendant’s motion to dismiss on jurisdictional grounds - acknowledged most recently by another judge of this Court in SEC v. Sharef - should militate against an unprecedented broadening of the reach of United States courts. Furthermore, relying on the defendants’ alleged preparation of either non-alleged or unfiled SEC filings to anchor the assertion of jurisdiction over them specifically as to the bribery counts in the complaint – which the SEC conceded at oral argument have ‘little, if any, connection to the United States,’ strayed from the obligation to evaluate personal jurisdiction on a per-claim basis. Second, turning to the timeliness question, the Order represents the first modern interpretation and application of 28 USC 2462 to foreign defendants who are not found within the United States during the pertinent five-year period but who are nevertheless readily served. Despite the Order’s ‘plain language’ analysis, the text and legislative history of the statute are ambiguous and there is a dearth of controlling authority on point, causing reasonable minds to disagree about the statute’s meaning. It seems doubtful that Congress intended to toll the statute indefinitely for defendants residing outside the United States who can be readily served, as the SEC contends, and comparable authority suggests an outcome different from that reached in the Order. Third, as the Court itself recognized, whether the use of an instrumentality of interstate commerce includes an intent or even some knowledge element is an issue of first impression in the FCPA context for which the text of the statute offers inadequate guidance.”

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A footnote in the above brief indicates that the SEC intends to oppose the motion for interlocutory appeal.

The case cite, SEC v. Sharef, refers to Judge Shira Scheindlin’s February 19th decision in the SEC’s enforcement against Herbert Steffen (a former Siemens executive). See here for the prior post.