Archive for the ‘United Kingdom’ Category

A Suggested Read On A Variety Of Topics

Monday, November 10th, 2014

Read ThisSeveral prior posts (here, here, and here) have focused on basic causation issues in connection with many Foreign Corrupt Practices Act enforcement actions.

The lack of causation between an alleged bribe payment and any alleged business obtained or retained is not a legal defense because the FCPA’s anti-bribery provisions prohibit the offer, payment, promise to pay or authorization of the payment of any money or thing of value.  Indeed, several FCPA enforcement actions have alleged unsuccessful bribery attempts in which no business was actually obtained or retained.

Nevertheless, causation ought to be relevant when calculating FCPA settlement amounts, specifically disgorgement.  However, the prevailing FCPA enforcement theory often seems to be that because Company A made improper payments to allegedly obtain or retain Contract A, then all of Company A’s net profits associated with Contract A are subject to disgorgement.

Call it the “but for” theory. “But for” the alleged improper payments, Company A would not have obtained or retained the business.

However, this basic enforcement theory ignores the fact that Company A (as is often the case in FCPA enforcement actions) is generally viewed as selling the best product for the best price and because of this, or a host of other reasons, probably would have obtained or retained the business in the absence of any alleged improper payments.

If this general issue is of any interest to you (and it ought to be because it is instructive on many levels) you should read a recent U.K. decision in a civil case arising out of the same core facts alleged in the 2010 FCPA enforcement action against Innospec (see here for the prior post).

In addition, if the so-called “victim” issue in FCPA enforcement actions is of interest to you (i.e. because the FCPA involves bribery and corruption, when there is an FCPA enforcement action, there must be a victim) , you also should read the recent U.K. decision because it is instructive on this issue as well.

Prior to discussing the recent U.K. decision, a bit of background is necessary.

In 2010, Innospec agreed to pay approximately $26 million to resolve DOJ and SEC enforcement actions (see here).  The conduct was wide-ranging in that the enforcement action involved alleged violations of U.S. sanctions regarding doing business in Cuba in addition to alleged conduct in violation of the FCPA.  Even as to the FCPA conduct, the enforcement action was wide-ranging and included “standard” Iraq Oil-for-Food allegations found in a number of previous enforcement actions (i.e. inflated commission payments to an agent which were then used to pay kickbacks to the government of Iraq) as well as alleged conduct in Indonesia.

The bulk of the enforcement action though concerned DOJ allegations that Ousama Naaman (Innospec’s agent in Iraq) paid various bribes to officials in Iraq’s Ministry of Oil (“MoO”) to “ensure” that a competitor’s product “failed a field trial test and therefore would not be used by the MoO” as well as other allegations that Naaman paid other bribes to officials of the MoO to obtain and retain contracts with MoO on Innospec’s behalf.

The DOJ’s criminal information alleged (or perhaps merely assumed) a casual connection between the alleged bribes and the failed field test, as well as two specific contracts: a 2004 Long Term Purchase Agreement (“LTPA”) and a 2008 Long Term Purchase Agreement.

As often happens in this day and age, an Innospec competitor used the core conduct alleged in the DOJ’s enforcement action “offensively” in bringing civil claims against Innospec and various individuals in a U.K. court.

As highlighted in the U.K. decision, the claims were brought by a Jordanian company which alleged that Innospec “conspired to injure the claimants by engaging in corrupt practices, in particular the bribery of officials within the [MoO] with the intention of inducing its refineries to buy TEL rather than MMT …”.

TEL refers to a lead based fuel additive called tetraethyl lead and MMT refers to methylcyclopentadienyl manganese tricarbonyl, a product developed as a manganese based octane boosting and antiknock additive which was less toxic than TEL.

The U.K. decision is extremely dense as to the facts and circumstances surrounding the MoO’s decision to use TEL vs. MMT.

Relevant to the “but for” causation topic of this post, and as described by the U.K. court, the claimants “claim damages for the losses they allege they have suffered as a consequence of the conspiracy on the basis that, but for the bribery and corruption, the MoO would have started to purchase MMT ….”.  As further described by the U.K. court, ”the claimants also allege that between 2002 and 2008 payments were authorized by Innospec for travel and other expenses, including pocket money for Iraqi officials to incur goodwill and ensure continued orders of TEL.”

In the words of the U.K. court, in order for the claims to succeed, the claimants had to establish, among other things, that the decision to replace TEL with MMT “was not implemented because the promise of bribes by Mr. Naaaman procured the MoO to enter into the 2004 LTPA and that prevented sales of MMT” and “that, but for the promise of bribes, the decision would have been implemented and the MoO would have replaced TEL with MMT from early 2004 onwards, so that the counterfactual scenario on which the claim is based would have occurred.”  (Confusing verbiage to be sure, but that is what the decision says).

As noted in the U.K. decision, Innospec denied that bribes or the promise of bribes induced the 2004 LTPA, lead to the requirement of the field test or its result, or induced the 2008 LTPA.  Innospec argued that despite its admissions in the FCPA enforcement actions, the “court must look carefully and analytically at the evidence there is as to what bribes were paid and promised and when and whether any bribes paid or promised actually led to a decision different from that which would have been made anyway.”

In short, instead of merely alleging or assuming causation between alleged bribe payments and business or other benefits like the U.S. did in the FCPA enforcement action, the U.K. court held approximately 15 days of hearings with multiple witnesses to actually determine if there was a casual link between the alleged bribe payments or other benefits that Innospec obtained.

The end result of this process is that the U.K. court did not find any casual links and indeed found false certain allegations in the DOJ’s FCPA enforcement action.

For instance, as to the DOJ’s allegations that “Naaman, on behalf of Innospec, paid approximately $150,000 in bribes to officials of the MoO to ensure that MMT … failed a field trial test and therefore would not be used by the MoO as a replacement for TEL,” the U.K. court concluded that Naaman never made such payments.  Indeed, the U.K. court noted Naaman’s admission (which occurred after resolution of Innospec’s FCPA enforcement action) ”that he had never in fact paid the U.S. $150,000 in bribes to MoO officials to fail the field test, but had simply pocketed the money himself.”

In the words of the court, ”this has an important impact on the issue of causation.”

Regarding Innospec’s admission in the FCPA enforcement action that Naaman did indeed make such payments, the U.K. court stated:

“Unbeknownst to Innospec at the time they admitted these allegations, Mr. Naaman never in fact paid any of these monies to Iraqi officials, but notwithstanding that, Innospec had committed the relevant offense under the Foreign Corrupt Practices Act by making payments to him, believing they were reimbursing him for bribes paid, even though in truth they were not.”

In the words of the U.K. court, Naaman became upset that Innospec was not reimbursing him for certain expenses he viewed as being owed to him and that Naaman “saw the field test on MMT as an opportunity to recoup those expenses and informed Innospec that he proposed bribing the Iraqi engineers to fail the field test.  Innospec readily agreed and paid him some U.S. $150,000, expecting it would be used for bribes.  He kept the funds himself, believing that MMT would fail the field test [...]  On the material before the court, this was the first time it had emerged (some 10 months after Innospec signed the [U.S.] Plea Agreement) that money Innospec had paid to Mr. Naaman believing he had paid or promised to pay bribes was not so paid but simply pocketed by him.”

Regarding the 2004 LTPA that the DOJ alleged was a result of alleged improper payments to Iraqi officials, the U.K. court first noted the following about the U.S. invasion of Iraqi:

“[T]he U.S. authorities put Kellogg, Brown & Root in charge of procurement for the requirements of the Iraqi refineries, effectively replacing the finance department within the MoO.  All spending had to be approved by KBR which was the only entity which could actually conclude contracts and purchase products.”

“It seems to me that claimants’ case overlooks the fact that any switch to MMT would have had to be approved by KBR, and the weight of evidence at this time in August 2003 and thereafter is that KBR was not particularly enamoured of MMT, pointing strongly to the likelihood that, even if the claimants were right that there was a decision to continue with TEL and not to switch to MMT, which was in some way induced by bribery, the MoO may well have been driven to the same decision irrespective of bribery, because of the attitude of KBR.”

Elsewhere, the U.K. court termed it “fanciful in the extreme” certain of claimants’ evidence which sought to establish causation between the alleged bribes and business to Innospec.

In short, the U.K. court concluded that the 2004 LTPA was not procured by bribery.  Further the U.K. court stated:

“[T]he decision to enter the LTPA had to be and was endorsed by the American authorities .  Since there is no basis for saying that they were corrupted by the payment or promise of bribes, that is further demonstration that the LTPA was not procured by bribery.”

Indeed, in the words of the U.K. court, “bribery [was] the least likely explanation” for certain MoO decisions regarding the conduct at issue.  Elsewhere, the court stated that any suggestion that considerations made by the MoO “was induced or influenced by bribery by Innospec would be frankly ridiculous” and a “logical non-sequitur and a step too far.”

In closing, the U.K. court stated that even if it were wrong – and that the 2004 LTPA was procured by bribery ” that the MOO would always have followed the course they did, of continuing to use TEL given the octane boost they needed …”.

In terms of the 2008 LTPA, the U.K. court found that “no orders were ever placed under the LTPA, since the investigations by the U.S. authorities intervened.”

In short, what happened in the U.K. action was rather remarkable.

Certain facts alleged in a DOJ FCPA enforcement were subjected to an adversarial process and the resulting judicial scrutiny found certain facts false.  Moreover, instead of merely alleging or assuming causation, as if often the case in FCPA enforcement actions as relevant to determining settlement amounts, the U.K. court analyzed causation and found it lacking.

The U.K. action is also instructive when it comes to analyzing whether there are so-called “victims” in all FCPA enforcement actions.  In the past several years, there has been calls by some for portions of FCPA settlement amounts to be paid out to “victims” of the conduct alleged in the FCPA enforcement action.  (See here and here for prior posts). The general theory seems to be – for example – that if an FCPA enforcement action alleges bribes paid in Nigeria, Nigerian citizens must therefore be the “victims” of the conduct and thus somehow entitled to compensation.

As highlighted in prior posts, while this proposal “feels good,” it is not warranted for many different reasons.  In short, this proposal assumes two things:  (i) that FCPA enforcement actions always represent provable FCPA violations; and (ii) that there is a always a casual connection between the alleged bribes influencing “foreign official” conduct, that then always causes harm to the citizens of the “foreign official’s” country.

As to the first issue, such an assumption is not always warranted given that the vast majority of FCPA enforcement actions are resolved via non-prosecution agreements, deferred prosecution agreements, neither admit nor deny SEC settlements, or SEC administrative orders.  These resolution vehicles often represent the end result of a risk adverse business decision, not necessarily provable FCPA violations.  For instance, in the words of the Second Circuit, SEC neither admit nor deny settlements are not about the truth, but pragmatism.  For this reason, a typical FCPA resolution vehicle should not automatically trigger other actions or issues (whether plaintiff litigation, whistleblower bounties, or payments to an ill-defined group of alleged victims).

As to the second issue, such an assumption is also not always warranted.  Several FCPA enforcement actions fit into one of the following categories: (i) unsuccessful bribery attempts; (ii) payments to receive what the company was otherwise legitimately owed by a foreign government; or (iii) other situations where – for a variety of reasons – there would seem to be a lack of causation between the alleged bribes influencing “foreign official” conduct, that then causes harm to the citizens of the “foreign official’s” country. Indeed, most corporate FCPA enforcement actions involve companies that are otherwise viewed as selling the best product for the best price.  Moreover, as highlighted in this prior post, in one FCPA enforcement action a court found that an alleged bribery scheme benefited a foreign country.

Despite the above observations which I have long held, the failed field test allegations in the Innospec FCPA enforcement action legitimately caused me to ponder victim issues in FCPA enforcement actions.  After all, the DOJ alleged that Iraqi MoO officials were induced to sabotage a field test of a competitor product that resulted in the more harmful product, from a public health standpoint, to stay on the market.

It was a relatively convincing casual connection between an FCPA enforcement action and potential victims.

However, as highlighted above, the U.K. court found the failed field test allegation false and otherwise found deficient other causal links between other alleged conduct and actual business or benefits obtained or retained.

In short, the U.K. action should instruct the proponents of “victim” compensation that hinging a policy proposal on FCPA resolution documents is not always sound or warranted.

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?

Bryant

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.

Calio

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

Bryant

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.

Bryant

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.

Bryant

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.

Westlake

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.

Bryant

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.

Westlake

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

Bryant

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.

[...]

Westlake

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.

Bryant

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.

Westlake

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.

Bryant

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?

Bryant

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 thebriberyact.com.

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?”

Spot-on.

*****

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.

Friday Roundup

Friday, August 1st, 2014

When the dust settles, scrutiny alerts and updates, quotable and for the reading stack.  It’s all here in the Friday roundup.

When the Dust Settles

Given the ease in which information now flows and the world-wide interest in corruption and bribery, FCPA enforcement actions are read around the world.  It is thus not surprising that when the dust settles on the U.S. FCPA enforcement action, many are left wondering … who are those “foreign officials”?

Most recent case in point concerns this week’s FCPA enforcement action against Smith & Wesson which involved alleged conduct in Indonesia, among other countries.  According to the SEC:

“In 2009, Smith & Wesson attempted to win a contract to sell firearms to a Indonesian police department by making improper payments to its third party agent in Indonesia, who indicated that part of the payment would be provided to the Indonesian police officials under the guise of legitimate firearm lab testing costs. On several occasions, Smith & Wesson’s third-party agent indicated that the Indonesian police expected Smith & Wesson to pay them additional amounts above the actual cost of testing the guns as an inducement to enter the contract. The agent later notified Smith & Wesson’s Regional Director of International Sales that the price of “testing” the guns had risen further. Smith & Wesson’s Vice President of International Sales and its Regional Director of International Sales authorized and made the inflated payment, but a deal was never consummated.”

As noted in this Jakarta Post article:

“The Indonesian Corruption Watch (ICW) has called for an investigation into an alleged attempt by US gunmaker Smith & Wesson to bribe officials at the National Police.  [...] In response to the SEC [action], ICW legal researcher Donal Fariz urged the Corruption Eradication Commission (KPK) to look into the scandal.  The National Police may face a conflict of interest by handling the case. So, it is better to entrust the investigation with the KPK. The KPK needs to ask for the detailed report [from the SEC] on the police officials who were involved in the scandal,” he said on Wednesday in a telephone interview”

Nominate

If FCPA Professor adds value to your practice or business or otherwise enlightens your day and causes you to contemplate the issues in a more sophisticated way, please consider nominating FCPA Professor for the ABA Journal’s Blawg 100 list (see here).

Scrutiny Alerts and Updates

Bloomberg reports here:

“British prosecutors told several former employees of Alstom SA that they’ll be charged as part of its prosecution of the French train-maker, according to two people with knowledge of the situation.The prosecutor contacted the individuals yesterday to offer to start plea discussions, the people said, asking not to be identified because the correspondence isn’t public. Some may appear with the company at a London court on Sept. 9, according to the people. The U.K. Serious Fraud Office charged Alstom’s U.K. subsidiary with corruption and conspiracy to corrupt yesterday following a five-year investigation. The company was charged in relation to transport projects in India, Poland and Tunisia, the agency said. The SFO contacted at least five individuals about two months ago inviting them for plea discussions, people with knowledge of the matter said in June. The SFO then decided to postpone the talks until it decided whether to prosecute Alstom.”

Bloomberg reports here:

“Wynn Resorts said it has been contacted by Macau’s anti-corruption agency regarding the company’s land purchase for its new resort-casino on the Cotai Strip. “We are working cooperatively with” the city’s Commission Against Corruption, the Las Vegas-based company said in an e-mailed reply to questions yesterday. The Macau Business newspaper reported July 11 that the agency is investigating why Wynn Resorts was made to pay 400 million patacas ($50 million) for the land rights, citing Commission Chief Fong Man Chon.  Wynn Resorts had to buy the rights from certain mainlanders, though the Land Public Works and Transport Bureau said it wasn’t aware of their involvement, according to the Macau Business report.”

As highlighted in this February 2012 e-mail, Wynn Resorts was under FCPA scrutiny for its $135 million donation to the University of Macau. See here for an update based on the company’s disclosures.

Quotable

Thomas Baxter (Executive Vice President and General Counsel of the Federal Reserve Bank of New York) stated, in pertinent part, as follows in a recent speech:

“[T]here is one part of the FCPA that makes me uncomfortable.  The FCPA’s bribery prohibition, and the compliance officers in the audience will know this well, contains a narrow exception for “facilitating or expediting payments” made in furtherance of routine governmental action.  [...]  The real mischief is what this exception might do to an organizational value system.  When an organizational policy allows some types of official corruption (and we have come up with candy coated names for this, like facilitation or expediting payments), this diminishes the efficacy of compliance rules that are directed toward stopping official corruption.  Again, the best compliance cultures are formed when the rules and the organizational value system are in perfect harmony.  So, for U.S. chartered institutions, perhaps this is a place where your organizational value system should go beyond black-letter U.S. law.  If you tolerate a little corruption, watch out!”

I generally agree and as highlighted in this recent post when it comes to employee FCPA training, companies should consider omitting reference to the FCPA’s facilitating payments exception and affirmative defenses.  The Global Anti-Bribery Course I have developed in partnership with Emtrain best assists companies in reducing their overall risk exposure by omitting reference to the FCPA’s facilitating payments exception and affirmative defenses in rank-and-file employee training.

To learn more about the course, see here.

To read what others are saying about the course, see here.

Michael Volkov at the Corruption, Crime & Compliance site often tells-it-like-it-is and this post begins as follows.

“The Internet is littered with FCPA Mid-Year Assessments and reports on enforcement activity and so-called trends and developments. Talk about making mountains out of molehills. Some of the reports are excellent; others are rehashes filled with “analysis” that are intended to promote FCPA fear marketing.”

Reading Stack

This recent article in the Corporate Law & Accountability Report details comments made by SEC FCPA Unit Chief Kara Brockmeyer.  In the article Brockmeyer talks about:

  • SEC administrative proceedings;
  • the 11th Circuit’s recent “foreign official” decision; the recent conclusion of the SEC’s enforcement action against Mark Jackson and James Ruehlen which she called “a very good settlement for us”;
  • the origins of SEC FCPA inquiries; and
  • holistic compliance and typical risk areas.

Friday Roundup

Friday, July 25th, 2014

The U.K. SFO flexes its pre-Bribery Act muscle in criminally charging an Alstom subsidiary, other scrutiny alerts and updates, nominate, double standard, quotable, and for the reading stack.  It’s all here in the Friday roundup.

Alstom

As has been widely reported (see here and here for instance), the U.K. Serious Fraud Office announced:

“Alstom Network UK Ltd, formerly called Alstom International Ltd, a UK subsidiary of Alstom, has been charged with three offences of corruption contrary to section 1 of the Prevention of Corruption Act 1906, as well as three 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 June 2000 and 30 November 2006 and concern large transport projects in India, Poland and Tunisia.”

According to the release, “the SFO investigation commenced as a result of information provided to the SFO by the Office of the Attorney General in Switzerland concerning the Alstom Group, in particular Alstom Network UK Ltd.”

I inquired with the SFO press office regarding any original source charging documents and was informed as follows.  ”Beyond our press release today, the nearest date for documents likely to be made available would be the charge sheet at the first court hearing – presently arranged for 9 September, at Westminster Magistrates’ Court.”

As readers likely know, since April 2013 the DOJ has charged four individuals associated with Alstom Power Inc., a subsidiary of Alstom, in connection with an alleged bribery scheme involving the Tarahan coal-fired steam power plant project in Indonesia. (See more below for a recent guilty plea).

As was the case in the U.S. – U.K. enforcement action against BAE (see here for the prior post) there may have been and/or currently is turf war issues between the agencies as to which agency is going to prosecute alleged conduct occurring in various countries.

Speaking of the DOJ action against various individuals associated with Alstom Power, last week, the DOJ announced that William Pomponi, a former vice president of regional sales at Alstom Power, pleaded guilty to a criminal information charging him with conspiracy to violate the FCPA in connection with the awarding of the Tarahan power project in Indonesia.

Assistant Attorney General Leslie R. Caldwell stated:

“The Criminal Division of the Department of Justice will follow evidence of corruption wherever it leads, including into corporate boardrooms and corner offices.  As this case demonstrates, we will hold both companies and their executives responsible for criminal conduct.”

As noted in the DOJ release:

“Pomponi is the fourth defendant to plead guilty to charges stemming from this investigation.   Frederic Pierucci, the vice president of global boiler sales at Alstom, pleaded guilty on July 29, 2013, to one count of conspiracy to violate the FCPA and one count of violating the FCPA; and, David Rothschild, a former vice president of regional sales at Alstom Power Inc., pleaded guilty to conspiring to violate the FCPA on Nov. 2, 2012.  Marubeni Corporation, Alstom’s consortium partner on the Tarahan project, pleaded guilty on March 19, 2014, to one count of conspiracy to violate the FCPA and seven counts of violating the FCPA, and was sentenced to pay a criminal fine of $88 million.   FCPA and money laundering charges remain pending against Lawrence Hoskins, the former senior vice president for the Asia region for Alstom, and trial is scheduled for June 2, 2015.”

See here for the original post highlighting the enforcement action against the individuals associated with Alstom and here for the original post regarding the Marubeni enforcement action.

Scrutiny Alerts and Updates

SEC Enforcement Action Against Former Magyar Telekom Executives

From Law360:

“The SEC has slimmed down its FCPA case against three former Magyar Telekom PLC executives, dropping claims they bribed government officials in Montenegro, according to a new complaint …  The amended complaint alleged former Magyar CEO Elek Straub and two other former executives, Andras Balogh and Tamas Morvai, authorized bribe payments to government officials in the Republic of Macedonia in exchange for regulations designed to hurt a competitor. The SEC, in its initial complaint in December 2011, had also alleged the defendants engaged in a second bribery scheme in Montenegro.  The agency said in a July 14 court filing that it would “continue to pursue the same legal causes of action alleged in its original complaint,” but without the claims related to Montenegro.  The SEC previously advised the court and defense attorneys in January 2014 of its intention to narrow the suit.”

Interesting, isn’t it, what happens when the SEC is put to its burden of proof.

Kowalewski Pleads Guilty

The DOJ announced:

“Bernd Kowalewski, the former President and CEO of BizJet, pleaded guilty … to conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and a substantive violation of the FCPA in connection with a scheme to pay bribes to officials in Mexico and Panama in exchange for those officials’ assistance in securing contracts for BizJet to perform aircraft maintenance, repair and overhaul services.”

Assistant Attorney General Leslie Caldwell stated:

“The former CEO of BizJet, Bernd Kowalewski, has become the third and most senior Bizjet executive to plead guilty to bribing officials in Mexico and Panama to get contracts for aircraft services.  While Kowalewski and his fellow executives referred to the corrupt payments as ‘commissions’ and ‘incentives,’ they were bribes, plain and simple.  Though he was living abroad when the charges were unsealed, the reach of the law extends beyond U.S. borders, resulting in Kowalewski’s arrest in Amsterdam and his appearance in court today in the United States.  Today’s guilty plea is an example of our continued determination to hold corporate executives responsible for criminal wrongdoing whenever the evidence allows.”

U.S. Attorney Danny Williams (N.D. Okla.) stated:

“I commend the investigators and prosecutors who worked together across borders and jurisdictions to vigorously enforce the Foreign Corrupt Practices Act. Partnership is a necessity in all investigations. By forging and strengthening international partnerships to combat bribery, the Department of Justice is advancing its efforts to prevent crime and to protect citizens.”

See here and here for posts regarding the 2012 DOJ enforcement action against BizJet and here and here for the 2013 DOJ enforcement action against Kowalewski and others associated with BizJet.

Cilins Sentenced

As noted in this prior post, in April 2013 the DOJ announced (here) 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 charged 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.  Cilins was linked to Guernsey-based BSG Resources Ltd and in March 2014 the DOJ announced that Cilins pleaded guilty “to obstructing a federal criminal investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.”  (See this prior post).

Last week, the DOJ announced that Cilins was sentenced to 24 months in prison.  In the DOJ release, U.S. Attorney Preet Bharara said:

“Frederic Cilins went to great lengths to thwart a Manhattan federal grand jury’s investigation into an alleged bribery scheme in the Republic of Guinea. In an effort to prevent the federal authorities from learning the truth, Cilins paid a witness for her silence and to destroy key documents. Today, Cilins learned that no one can manipulate justice.”

Assistant Attorney General Leslie Caldwell said:

“Cilins offered to bribe a witness in an FCPA investigation to stop the witness from talking to the FBI. Today’s sentence holds Cilins accountable for his effort to undermine the integrity of our justice system, and sends a message that those who interfere with federal investigations will be prosecuted and sent to prison.”

FBI Assistant Director-in-Charge George Venizelos said:

“Cilins obstructed the efforts of the FBI during the course of this investigation. His guilty plea and sentence demonstrate our shared commitment with the U.S. Attorney’s Office to hold accountable those who seek to interfere with the administration of justice. This case should be a reminder to all those who try to circumvent the efforts of a law enforcement investigation: the original crime and the cover-up both lend themselves to prosecution.”

According to the release, Cilins was also ordered to pay a fine of $75,000 and to forfeit $20,000.

GSK

From Reuters:

“GlaxoSmithKline faces new allegations of corruption, this time in Syria, where the drugmaker and its distributor have been accused of paying bribes to secure business, according to a whistleblower’s email reviewed by Reuters. Britain’s biggest drugmaker said on Thursday it was investigating the latest claims dating back to 2010, which were laid out in the email received by the company on July 18. The allegations relate to its former consumer healthcare operations in Syria, which were closed down in 2012 due to the worsening civil war in the country.  [...]  GSK has been rocked by corruption allegations since last July, when Chinese authorities accused it of funneling up to 3 billion yuan ($480 million) to doctors and officials to encourage them to use its medicines. The former British boss of the drugmaker’s China business was accused in May of being behind those bribes.  Since then, smaller-scale bribery claims have surfaced in other countries and GSK is now investigating possible staff misconduct in Poland, Iraq, Jordan and Lebanon. Syria is the sixth country to be added to the list. The allegations there center on the company’s consumer business, including its popular painkiller Panadol and oral care products. Although rules governing the promotion of non-prescription products are not as strict as for prescription medicines, the email from a person familiar with GSK’s Syrian operations said alleged bribes in the form of cash, speakers’ fees, trips and free samples were in breach of corruption laws. The detailed 5,000-word document, addressed to Chief Executive Andrew Witty and Judy Lewent, chair of GSK’s audit committee, said incentives were paid to doctors, dentists, pharmacists and government officials to win tenders and to obtain improper business advantages.”

Separately, this Reuters article states that the U.K. SFO  ”is working with authorities in China in a first for such Anglo-Chinese cooperation as it carries out its own investigation into alleged corruption at GSK.”  The article quotes SFO Director David Green as follows:  ”Certainly, so far as I am aware it is the first time we have had cooperation with the Chinese on an SFO case.”

Separately, in the U.S. this Wall Street Journal article states:

“Federal Bureau of Investigation agents have been interviewing current and former GSK employees in connection with bribery allegations made against the drug maker in China, according to a person familiar with the matter, as fresh claims of corruption surfaced against Glaxo’s operations in Syria. The interviews have taken place in Washington, D.C., in the past few months and are part of a Justice Department investigation into GSK’s activities in China, the person added. The U.S. Securities and Exchange Commission also is investigating the company’s business in China, according to people familiar with the matter.”

Key Energy Services

The company stated as follows in its Second Quarter 2014 Update and Earnings Release.

“Pre-tax expenses of approximately $5 million were incurred in connection with the previously disclosed Foreign Corrupt Practices Act investigations.”

Nominate

If FCPA Professor adds value to your practice or business or otherwise enlightens your day and causes you to contemplate the issues in a more sophisticated way, please consider nominating FCPA Professor for the ABA Journal’s Blawg 100 list (see here).

Double Standard

Beginning in 2009, I began writing about the “double standard” and how – despite the similarities between the FCPA and 18 USC 201 (the domestic bribery statute) – a U.S. company’s interaction with a “foreign official” is subject to more scrutiny and different standards than interaction with a U.S. official.  Since 2009, approximately 30 posts have appeared under the “double standard” subject matter tag.

Against this backdrop, I was happy to see another individual tackle the same general topic.  See here from the Global AntiCorruption Blog – “Is U.S. Campaign Finance Law More Permissive of Corruption Than the FCPA?”

Quotable

In this Corporate Crime Reporter interview, former U.S. Attorney Neil MacBride (E.D. Va.) says the following regarding the use of non-prosecution and deferred prosecution agreements:  “The Department now has the ability to reach more ambiguous conduct where it might be more difficult to prove a criminal conviction in court.”

Wait a minute!

If the conduct is ambiguous and the DOJ would have a difficult time to prove a criminal conviction in court, there should be no non-prosecution or deferred prosecution agreement.  Period.  End of story. The rule of law commands such a result.

Reading Stack

Over at the FCPA Compliance & Ethics blog, Tom Fox recently published a three-part series on M&A issues and the FCPA.  See Part I, Part II, and Part III.

Sherman & Sterling’s mid-year FCPA Digest, including its “Trends and Patterns” is here.  Among the trends and patterns:

“Recent paper victories by the SEC could be perceived as setbacks in the Commission’s actions against
individual defendants; and

The SEC has continued its practice of pursuing its theory of strict liability against a parent corporation
for the acts of its corporate subsidiaries.”

Kudos to Sherman & Sterling for adopting the “core” approach to keeping FCPA statistics.  (See here for the prior post regarding my suggested “core” approach).  The Digest states:

“We count all actions against a corporate “family” as one action. Thus, if the DOJ  charges a subsidiary and the SEC charges a  parent issuer, that counts as one action. In  addition, we count as a “case” both filed  enforcement actions (pleas, deferred prosecution agreements, and complaints)  and other resolutions such as  non-prosecution agreements that include  enforcement-type aspects, such as financial  penalties, tolling of the statute of  limitations, and compliance requirements.”

The most recent edition of Miller & Chevalier’s FCPA Update is here.  Debevoise & Plimpton’s always informative FCPA Update is here and Mayer Brown’s FCPA mid-year update is here.

Warning, the enforcement statistics cited in certain of the above updates will cause confusion because they do not adopt the “core” approach.

*****

A good weekend to all.