Sleepless nights, briefings complete, Africa Sting lawyers recognized, a leader of the FCPA bar on voluntary disclosure, small bribes in Russia, and satire. It’s all here in the Friday roundup.
According to this recent article by Ashby Jones of the Wall Street Journal, FCPA enforcement is one of “three concerns costing big-company lawyers the most sleep.”
One of the bigger FCPA stories of 2012, and one that will reach into 2013 as well, are challenges by foreign defendants in two separate SEC Foreign Corrupt Practices Act enforcement actions.
Defendants in both actions recently filed reply briefs.
Steffen (here) argues in summary fashion, as follows.
“In its opposition, the SEC asks this Court to assert personal jurisdiction over a defendant: (1) who is a German citizen and resident; (2) who conducted no business in the United States; (3) whose only alleged U.S. “contact” resulted from the unilateral actions of another party; (4) whose allegedly improper conduct occurred entirely outside the United States; and (5) whose conduct was not aimed at and caused no injury in the United States. This request should be rejected. Because the SEC has not met its burden to plead legally sufficient allegations establishing personal jurisdiction over Mr. Steffen, its complaint must be dismissed. In addition, the SEC has failed to explain how its action against Mr. Steffen is not barred by the applicable statute of limitations, 28 U.S.C. § 2462. In addition, although the SEC acknowledges that the purpose of the statutory tolling provision is to ensure that a defendant does not evade U.S. prosecution by “fleeing to another country” where he is “difficult to locate and serve,” it ignores that Mr. Steffen did nothing to evade the SEC, and that the SEC was able to locate him and obtain an order to serve him by publication in Germany, the country of his nationality and residency. Under these circumstances, accepting the SEC’s argument would mean that claims against foreign-national defendants who reside abroad are perpetual, not subject to any time limitations. Finally, even if this Court were to accept a continuing violation theory for securities violations, it does not help the SEC’s case because Mr. Steffen did not take any unlawful acts within the limitations period. For all of these reasons, the motion to dismiss should be granted with prejudice.”
Straub, Balogh and Morvai’s reply brief (here) addresses many of the same jurisdictional and statue of limitations issues at issue in the Steffen challenge. In addition, the former Magyar Telekom executive’s brief argues that: (1) the pertinent SEC filing the SEC relies upon in making certain allegations was not even filed with the Commission, (2) the SEC has failed to allege corrupt use of an instrumentality of interstate commerce by the defendants; and (3) the SEC has failed to allege the identity of the alleged foreign bribery recipients.
With both the DOJ and SEC bringing more FCPA enforcement actions against foreign actors – for instance in 2011 90% of DOJ individual prosecutions were against foreign nationals and 100% of SEC individual prosecutions were against foreign nationals – the challenges are noteworthy. Particularly so because Judge Leon, in the Africa Sting case, rejected the DOJ’s jurisdictional theory against U.K. national Pankesh Patel (see here for the prior post) in what was believed to be the first instance of judicial scrutiny concerning FCPA jurisdiction against foreign nationals.
Africa Sting Lawyers Recognized
Two Africa Sting defense lawyers were recently recognized by Law360 as White Collar MVPs.
Michael Madigan (Orrick Herrington & Sutcliffe) represented John Gregory Godsey, who was found not guilty by the jury. (See here for the prior post). Commenting on the Africa Sting cases, Madigan stated as follows. “This case stands out as a significant one. There are certain cases that come along that alter the system of justice and I think this is really one of them.”
In the Law360 article, Madigan was specifically cited for his leadership in leading defense discovery efforts which resulted in the FBI having to turn over its text messages with Richard Bistrong. According to the article, the Africa Sting case was the ”first major criminal trial to achieve court-ordered production in discovery of thousands of text messages between FBI agents of the government’s key cooperating informant.” As noted in the article – “The texts showed FBI agents joking with the informant that ‘you could sell snow to an Eskimo’ — a notion that undercut allegations that Godsey and other defendants were willing participants in a bribery scheme. The texts also revealed FBI agents wondering who would play them when Hollywood made a movie about the investigation.”
Eric Dubelier (Reed Smith) was also recognized for his work on the Africa Sting case, specifically his pro bono representation of R. Patrick Caldwell, a former secret service agent and Vietnam veteran, who was also found not guilty by the jury.
In the Law360 article, Dubelier stated as follows regarding his representation of Caldwell. “Having spent time in the government myself and knowing people like Pat, I thought, You know what? If anyone deserves to represented, this guy does. Pat really had held only two jobs his entire life: the first as a US soldier in combat, the second as a U.S. Secret Service agent. His whole career had been in service to the U.S., but it had earned him nothing close to the resources he needed to defend himself against this prosecution. Providing Pat with the defense he deserved was simply the right thing to do.”
As noted by the Law360 article, “After the acquittals — and the mistrials of three additional defendants — and after a concerned jury foreman penned an open letter expressing deep skepticism about the case, the government ultimately dropped the case against the remaining defendants including those awaiting trial and three who already had pled guilty.”
See here for the February 6, 2012 guest post on FCPA Professor by the Africa Sting jury foreman.
Willkie Farr & Gallagher FCPA attorneys Martin Weinstein, Robert Meyer and Jeffrey Clark recently published a new book, “The Foreign Corrupt Practices Act: Compliance, Investigations and Enforcement.”
In this recent Metropolitian Corporate Counsel interview, the authors answer various questions, including the following.
Q: Do you advise your clients to self-report?
Weinstein: We are very cautious about self-reporting to the government. We certainly sometimes advise companies to self-report, but in general we believe that most companies can handle their compliance problems properly without disclosure or government involvement and can appropriately remediate compliance issues and be prepared to respond should the government ever inquire. Companies across industries fix compliance problems – for instance, in a target company that they are acquiring or have just acquired – every day, without the assistance of the U.S. government. This is good all around: it allows the acquiring company to proceed with the acquisition, raises the standard of compliance in the acquired company, and permits the government to deploy its enforcement resources where they are needed most. Our book clearly sets forth how to proceed down such a path. That said, the book also discusses the kinds of circumstances in which self-disclosure may be necessary or advisable and helps readers navigate through that fact-specific, critical strategic decision.
Small Bribes In Russia
Relevant to the question I often ask – do FCPA violations occur because companies have bribery as a business strategy or because companies are subject to difficult and opaque business conditions abroad – is this recent Washington Post article concerning the prevalence of small bribes in Russia.
If you like satire, you must check out this post by James McGrath at his Internal Investigations blog.
A good weekend to all.