January 21st, 2015

DOJ Prosecution Of Individuals – Are Other Factors At Play?

What woudl you doYesterday’s post (here) focused on DOJ FCPA individual prosecutions and highlighted the following facts and figures.

  • Since 2008, the DOJ has charged 99 individuals with FCPA criminal offenses.
  • 58% of the individuals charged by the DOJ with FCPA criminal offenses since 2008 have been in just five cases and 78% of the individuals charged by the DOJ since 2008 have been in just eleven cases.
  • There have been 67 corporate DOJ FCPA enforcement actions since 2008 and of these actions, 50 (or 75%) have not (at least yet) resulted in any DOJ charges against company employees.

These statistics should cause alarm, including at the DOJ as it has long recognized that a corporate-fine only enforcement program is not effective and does not adequately deter future FCPA violations.   For instance, in 1986 John Keeney (Deputy Assistant Attorney General, Criminal Division, DOJ) submitted written responses in the context of Senate hearings concerning a bill to amend the FCPA. He stated as follows:

“If the risk of conduct in violation of the statute becomes merely monetary, the fine will simply become a cost of doing business, payable only upon being caught and in many instances, it will be only a fraction of the profit acquired from the corrupt activity. Absent the threat of incarceration, there may no longer be any compelling need to resist the urge to acquire business in any way possible.”

In 2010 Hank Walther (Deputy Chief Fraud Section) stated that a corporate fine-only FCPA enforcement program allows companies to calculate FCPA settlements as the cost of doing business.

In 2013 Daniel Suleiman (DOJ Deputy Chief of Staff, Criminal division) stated that “there is no greater deterrent to corporate crime that the prospect of prison time … if people don’t go to prison, then enforcement can come to be seen as merely the cost of doing business.”

More recently, Patrick Stokes (DOJ FCPA Unit Chief) stated that DOJ is “very focused” on prosecuting individuals as well as companies and that “going after one or the other is not sufficient for deterrence purposes.”

Earlier this week, Deputy Assistant Attorney General Sung-Hee Suh rightly acknowledged that “corporations do not act criminally, but for the actions of individuals.”

In my 2010 Senate FCPA testimony (here), I noted that the absence of individual FCPA charges in most corporate FCPA enforcement actions causes one to legitimately wonder whether the conduct giving rise to the corporate enforcement action was engaged in by ghosts.

Others have rightly asked the “but nobody was charged” question, including James Stewart in a New York Times column highlighted in this previous post.

However, as I stated in my Senate testimony, there is an equally plausible reason why no individuals have been charged in connection with many corporate FCPA enforcement actions.  The reason has to do with the quality and legitimacy of the corporate enforcement action in the first place.

Readers know well of the prevalence of non-prosecution and deferred prosecution agreements (NPAs / DPAs)  in the FCPA context. As highlighted in this recent post, since 2010, 86% of corporate DOJ enforcement actions have involved either an NPA or DPA.

Informed observers also understand how NPAs and DPAs, not subject to any meaningful judicial scrutiny, are often agreed to by companies for reasons of ease and efficiency, and not necessarily because the conduct at issue violates the FCPA.

Indeed, prior to becoming SEC Chair, Mary Jo White stated a “fear [that] the deferred prosecution [agreement] is becoming a vehicle to show results” (here) and former Attorney General Alberto Gonzales has stated as follows.

“It is “easy, much easier quite frankly” for the DOJ to resolve FCPA inquiries with NPAs and DPAs; such resolution vehicles have “less of a toll” on the DOJ’s budget and such agreements “provide revenue” to the DOJ.  It is all “unfortunate”

“In an ironic twist, the more that American companies elect to settle and not force the DOJ to defend its aggressive interpretation of the [FCPA], the more aggressive DOJ has become in its interpretation of the law and its prosecution decisions.”

Moreover, Mark Mendelsohn (former chief of the DOJ’s FCPA Unit), has talked about the “danger” of NPAs and DPAs and how “it is tempting for the [Justice Department] or the SEC…to seek to resolve cases through DPAs or NPAs that don’t actually constitute violations of the law.” (See “Mark Mendelsohn on the Rise of FCPA Enforcement,” 24 Corporate Crime Reporter 35, September 10, 2010).

For more on the above dynamics, see my article “The Facade of FCPA Enforcement.”

Individuals, on the other hand, face a deprivation of personal liberty, and are more likely to force the DOJ to satisfy its high burden of proof as to all FCPA elements.

In other words, perhaps the more appropriate question is not “but nobody was charged,” but rather do corporate NPAs and DPAs always represent provable FCPA violations?  For a recent excellent article asking the same general question, see here.

I set out to test this with the following working hypothesis.

  • Instances in which the DOJ brings actual criminal charges against a company or otherwise insists in the resolution that the corporate entity pleads guilty to FCPA violations, represent a higher quality FCPA enforcement action (in the eyes of the DOJ) and is thus more likely to result in related FCPA criminal charges against company employees.
  • Instances in which the DOJ resolves an FCPA enforcement action solely with an NPA or DPA, represent a lower quality FCPA enforcement action and is thus less likely to result in related FCPA criminal charges against company employees given that an individual is more likely to put the DOJ to its high burden of proof.

The below statistics provide a compelling datapoint concerning the quality and legitimacy of many corporate DOJ FCPA enforcement actions.

Since NPAs and DPAs were first introduced to the FCPA context in December 2004 (see here), there have been 83 corporate DOJ FCPA enforcement actions.

  • 14 of these corporate enforcement actions were the result of a criminal indictment or resulted in a guilty plea by the corporate entity to FCPA violations.  10 of these corporate enforcement actions – 71% – resulted in related criminal charges of company employees.
  • 53 of these corporate enforcement actions were resolved solely with an NPA or DPA.  In only 5 instances – 9% – was there related criminal charges of company employees.
  • A third type of corporate FCPA enforcement action is what I will call a hybrid action in which the resolution includes a guilty plea by some entity in the corporate family – usually a foreign subsidiary – and an NPA or DPA against the parent company.  Since the introduction of NPAs and DPAs in the FCPA context, there have been 16 such corporate enforcement actions.  In 5 of these actions – 31% -  there was related criminal charges of company employees. This percentage is what one might expect compared to the two types of corporate FCPA enforcement actions discussed above, although it is interesting to note the following regarding 3 of these 5 instances.  The DOJ ended up dismissing the charges against Si Chan Wooh (Schnitzer Steel), John O’Shea (ABB) was not found not guilty, and Bobby Elkin (Alliance One) received a probation sentence after the sentencing judge questioned many aspects of the enforcement action (see here for the prior post).

Although NPAs and DPAs were first introduced to the FCPA context in 2004, their use by the DOJ was sporadic at first and such alternative resolution vehicles did not become a fixture of FCPA enforcement until approximately 2007.

Thus, in testing the above hypothesis, 2007 is perhaps the best starting point.  Since 2007, there have been 77 corporate DOJ FCPA enforcement actions.

  • 12 of these corporate enforcement actions were the result of a criminal indictment or resulted in a guilty plea by the corporate entity to FCPA violations.  9 of these corporate enforcement actions – 75% – resulted in related criminal charges of company employees.
  • 50 of these corporate enforcement actions were resolved solely with an NPA or DPA.  In only 5 instances – 10% – was there related criminal charges of company employees.
  • A third type of corporate FCPA enforcement action is what I will call a hybrid action in which the resolution includes a guilty plea by some entity in the corporate family – usually a foreign subsidiary – and an NPA or DPA against the parent company.  Since 2007, there have been 15 such corporate enforcement actions.  In 4 of these actions – 26% -  there was related criminal charges of company employees. This percentage is what one might expect compared to the two types of corporate FCPA enforcement actions discussed above.

If the above statistics do not cause one to question the quality and legitimacy of many corporate FCPA enforcement actions, no empirical data ever will.  For those who believe NPAs and DPAs always represent provable FCPA violations, the ball is now in your court to offer credible explanations for following datapoints.

Since NPAs and DPAs were introduced to the FCPA context in 2004, if a corporate DOJ FCPA enforcement action is the result of a criminal indictment or resulted in a guilty plea by the corporate entity to FCPA violations, there is a 71% chance that related criminal charges will be brought against a company employee.  If a corporate DOJ FCPA enforcement action is resolved solely with an NPA or DPA, there is a 9% chance that criminal charges will be brought against a company employee.

Since 2007, when NPAs and DPAs become a fixture of DOJ FCPA enforcement, if a corporate DOJ FCPA enforcement action is the result of a criminal indictment or resulted in a guilty plea by the corporate entity to FCPA violations, there is a 75% chance that related criminal charges will be brought against a company employee.  If a corporate DOJ FCPA enforcement action is resolved solely with an NPA or DPA, there is a 10% chance that criminal charges will be brought against a company employee.

[Note – the above data was assembled using the “core” approach as well as the definition of an FCPA enforcement action described in this prior post]

Posted by Mike Koehler at 12:04 am. Post Categories: Deferred Prosecution AgreementsDOJFCPA StatisticsIndividual Enforcement ActionNon-Prosecution Agreement




January 20th, 2015

A Focus On DOJ FCPA Individual Prosecutions

Criminal LawThis post highlights certain facts and figures concerning the DOJ’s prosecution of individuals for FCPA offenses in 2014 and historically.

As highlighted in recent posts herehere, and here, the DOJ frequently talks about the importance of individual FCPA prosecutions. Assistant Attorney General Leslie Caldwell has stated that “certainly…there has been an increased emphasis on, let’s get some individuals” and that it is “very important for [the DOJ] to hold accountable individuals who engage in criminal misconduct in white-collar (cases), as we do in every other kind of crime.” DOJ FCPA Unit Chief Patrick Stokes has said that the DOJ is “very focused” on prosecuting individuals as well as companies and that “going after one or the other is not sufficient for deterrence purposes.”

Against this backdrop, what do the facts actually show?

Since 2000, the DOJ has charged 133 individuals with FCPA criminal offenses.  The breakdown is as follows.

  • 2000 – 0 individuals
  • 2001 – 8 individuals
  • 2002 – 4 individuals
  • 2003 – 4 individuals
  • 2004 – 2 individuals
  • 2005 – 3 individuals
  • 2006 – 6 individuals
  • 2007 – 7 individuals
  • 2008 – 14 individuals
  • 2009 – 18 individuals
  • 2010 – 33 individuals (including 22 in the Africa Sting case)
  • 2011 – 10 individuals
  • 2012 – 2 individuals
  • 2013 – 12 individuals
  • 2014 – 10 individuals

An analysis of the numbers reveals some interesting points.

Most of the individuals – 99 (or 74%) were charged since 2008.  Thus, on one level the DOJ is correct when it states that there has been an “increased emphasis” on individual prosecutions – at least as measured against the historical average given that between 1978 and 1999, the DOJ charged 38 individuals with FCPA criminal offenses.

Yet on another level, a more meaningful level given that there was much less overall enforcement of the FCPA between 1978 and 1999, the DOJ’s statements about its focus on individuals represents hollow rhetoric as demonstrated by the below figures.

Of the 99 individuals criminally charged with FCPA offenses by the DOJ since 2008:

  • 22 individuals were in the Africa Sting case;
  • 9 individuals (minus the “foreign officials” charged) were in the Haiti Teleco case;
  • 8 individuals were in connection with the Control Components case;
  • 8 individuals were in connection with the Siemens case;
  • 5 individuals were associated with DF Group in the Indian mining licenses case;
  • 5 individuals were associated with Direct Access Partners;
  • 4 individuals were in connection with the Lindsey Manufacturing case;
  • 4 individuals were  in connection with the LatinNode / Hondutel case;
  • 4 individuals were in connection with the Nexus Technologies case;
  • 4 individuals were in connection with the BizJet case; and
  • 4 individuals were in connection with the Alstom case.

In other words, 58% of the individuals charged by the DOJ with FCPA criminal offenses since 2008 have been in just five cases and 78% of the individuals charged by the DOJ since 2008 have been in just eleven cases.

Considering that there has been 67 corporate DOJ FCPA enforcement actions since 2008, this is a rather remarkable statistic.  Of the 67 corporate DOJ FCPA enforcement actions, 50 (or 75%) have not (at least yet) resulted in any DOJ charges against company employees.  (See here for the chart with details – current when published in October 2014).

In short, and as demonstrated by the statistics, DOJ FCPA individual enforcement actions are significantly skewed by a small handful of enforcement actions and the reality is that 75% of DOJ corporate enforcement actions since 2008 have not (at least yet) resulted in any DOJ charges against company employees.

Another very interesting and significant picture emerges when analyzing DOJ individual prosecution data based on whether the corporate entity employing or otherwise involved with the individual charged was a public or private entity.

Of the 99 individuals charged by the DOJ with FCPA criminal offenses since 2008, 71 of the individuals (72%) were employees or otherwise affiliated with private business entities.  This is a striking statistic given that 53 of the 67 corporate DOJ FCPA enforcement actions since 2008 (79%) were against publicly traded corporations.

In the 14 private entity DOJ FCPA enforcement actions since 2008, individuals were charged in connection with 7 of those actions (50%).  In contrast, in the 53 public entity DOJ FCPA enforcement actions since 2008, individuals were charged in connection with 10 of those cases (19%).  In short, and based on the data, a private entity DOJ FCPA enforcement is approximately three times more likely to have a related DOJ FCPA criminal prosecution of an individual than a public entity DOJ FCPA enforcement action.

Are other factors at play when it comes to the fact that 75% of DOJ corporate enforcement actions since 2008 have not (at least yet) resulted in any DOJ charges against company employees?  A future post will highlight a relevant datapoint.

[Notes – the above data was assembled using the “core” approach – see this prior post for an explanation.  The term “public entity”  is not limited to “issuers” under the FCPA, but rather a public entity regardless of which market it shares trade on.  Thus, for instance, JGC Corp. of Japan and Bridgestone are both public entities even though its shares are not traded on a U.S. exchange.]

Posted by Mike Koehler at 12:03 am. Post Categories: DOJFCPA StatisticsIndividual Enforcement ActionYear in Review 2014




January 19th, 2015

Year End Review Of Anti-Corruption Law North Of The 49th Parallel

CanadaA guest post  from Mark Morrison (Blake, Cassels & Graydon), the Canada Expert for FCPA Professor, and Blakes attorneys Michael Dixon and James Reid.

*****

This past year has been one of mixed results for Canadian authorities under Canada’s Corruption of Foreign Public Officials Act (CFPOA), Canada’s equivalent to the FCPA. On the one hand, Canada increased its rating on Transparency International’s well known Exporting Corruption: Progress Report 2014: Assessing Enforcement of the OECD Convention on Combating Foreign Bribery to a “Moderate Enforcement” rating from 2013’s classification of  a “Limited Enforcement” rating. In addition, 2014 saw precedent setting court decisions and sentencing of individuals.

Despite these developments, it has now been two full years since the last penalty was imposed on a corporate defendant under the CFPOA, that being Griffith’s Energy who was sentenced to a $10.35 million dollar fine in January 2013.  The lack of proceedings against corporations in 2014 may be reflective of the considerable resources being dedicated by the Royal Canadian Mounted Police (RCMP) to the ongoing, high profile investigation of Canada’s largest construction and engineering company, the resolution of which is widely anticipated to make headlines in 2015.  This post discusses some of the developments in Canada’s anti-corruption efforts in 2014 and what can be expected in the year ahead.

Enforcement Proceedings

In 2014, Canadian authorities appear to have focused their attention on pursuing individuals who had violated the provisions of the CFPOA. Noteworthy for corporate officers, 2014 marked the first jail sentence for an individual, and several other individuals are being pursued by authorities in Canada. Notable enforcement proceedings are discussed below.

Karigar – On May 23, 2014, Nazir Karigar was sentenced to three years in prison for offering to bribe foreign officials.  This sentence was the most significant development in Canadian anti-corruption enforcement proceedings in 2014, as it marks the first time a jail term has been handed out to an individual convicted under the CFPOA. This case will likely stand as a precedent for sentencing in future corruption cases.

Karigar was convicted on August 15, 2013.  The case concerned an agreement to pay approximately US $450,000 in cash as well as certain shares to Air India officials and the Indian Minister of Civil Aviation to secure a contract.  At the time, Karigar was acting for Cryptometrics Canada.  Karigar was convicted despite Cryptometrics not being awarded the contract or there being any evidence the bribe was actually offered or paid to Indian officials, as the internal agreement amongst Karigar and Cryptometrics management to offer a bribe was held to be an offence.

In sentencing, Justice Hackland of the Ontario Superior Court took Karigar’s age (67) and other circumstances into account as mitigating factors.  However, the bribery scheme was viewed as a serious crime.  Accordingly, principles of denunciation and deterrence were placed at the forefront in administering the three year sentence.

It is also important to note, that at the time Karigar was charged, the maximum prison sentence for a CFPOA violation was only five years. Since then, the 2013 amendments to the CFPOA raised the maximum penalty from five years to 14 years.

Chowdhury – Five individuals were jointly charged with bribing a foreign public official to obtain a contract to provide consulting services for building the World Bank funded Padma Bridge Project in Bangladesh.  One of the individuals charged, Abdul Hasan Chowdhury, was a Bangladeshi citizen and resident who had never been to Canada.  On this basis, and without submitting to the jurisdiction of the Canadian Court, Chowdhury applied to prohibit the Crown from proceeding in Canada with the charge against him under the CFPOA.

Ultimately, the Court found that Canada did have jurisdiction over the offence since many of the acts making up the offence took place in Canada, the investigation was conducted in Canada and the bulk of the evidence was gathered in Canada. However, Justice Nordheimer held that the CFPOA does not give the Court jurisdiction over foreign nationals who do not reside, or are not otherwise present (such as through extradition or otherwise) in Canada.  The Court held that the mere fact Chowdhury was a party to the offence was not sufficient to give the Canadian courts personal jurisdiction over him unless he either physically came to Canada or Bangladesh offers to surrender him to Canada. Notably, Canada does not have an extradition treaty in place with Bangladesh.  In result, the charges against Chowdhury were stayed.

The allegations in question in this case pre-dated the 2013 amendments to the CFPOA which expanded the jurisdictional reach of the CFPOA from territoriality to nationality based jurisdiction.  Notwithstanding this expanded jurisdictional scope of the CFPOA, however, the key point to be taken from this case is that a Canadian court needs to have jurisdiction over both the offence and the person before it may exert jurisdiction.

Ongoing Cryptometrics Investigations – Following the Karigar sentencing in May, on June 4, 2014, the RCMP charged US nationals Robert Barra (former Cryptometrics CEO) and Dario Berini (former Cryptometrics COO) for bribery offences under CFPOA.  UK national Shailesh Govindia, an agent for Cryptometrics, has also been charged with bribery under CFPOA and with one count of fraud contrary to the Criminal Code of Canada.  Canada-wide warrants have been issued for all three accused.  These charges go to show that Canadian authorities will continue to pursue enforcement proceedings, even against foreign nationals, despite being unsuccessful in the Chowdhury case discussed above.  One key difference between these charges and Chowdhury, however, is that Canada does have extradition treaties in place with the US and UK, creating a potential avenue by which Canadian authorities could assume personal jurisdiction over these individuals.

Ongoing Investigations – The most significant Canadian anti-corruption enforcement action is the ongoing, high profile corruption investigation relating to allegations that Canada’s largest construction and engineering company (the Company) bribed foreign public officials to secure contracts in a number of foreign countries, including Libya, Bangladesh and Algeria (the Engineering Investigation).  Canadian authorities have been carrying out the Engineering Investigation since 2011 with the cooperation of others, including the World Bank and Swiss authorities.  It is reported that the Company is providing its full cooperation with authorities.

To date, at least three former executives of the Company and two others connected with the Padma Bridge Project in Bangladesh have been charged under the CFPOA and are awaiting trial. On the domestic front, the Company has also faced corruption allegations related to the construction of a $1.3 billion hospital in Montreal, regarding which several former executives are facing charges, including, fraud, conspiracy and breach of trust.

The allegations currently subject to the Engineering Investigation are the most serious to involve a Canadian company to date and onlookers are intently watching what will unravel in 2015, when it is expected that a resolution of this high profile case will likely occur.

New Legislation and Government Policy

Extractive Sector Transparency Measures Act – In October 2014, the Canadian Government introduced the Extractive Sector Transparency Measures Act (ESTMA) which will create mandatory public reporting of payments to governments and government officials by the extractive sector.  The reporting obligations in ESTMA will apply to companies that are engaged in the commercial development of oil, gas or minerals in Canada or abroad and are either listed on a stock exchange in Canada or have a place of business in Canada, do business in Canada or have assets in Canada, and meet certain size thresholds.

ESTMA, which is expected to come into force in the spring of 2015,  is designed to further Canada’s fight against corruption by enacting reporting obligations with respect to payments made to foreign and domestic governments (and government officials), and will eventually include aboriginal governments.  These proposed mandatory reporting requirements are in line with other countries implementing similar requirements, including the European Union and the United States.

Amendments to the Federal Government Integrity Provisions – In March 2014, the Federal Government announced it had made significant changes to its Integrity Provisions, which are incorporated in all solicitations administered by Public Works and Government Services Canada (PWGSC).  PWGSC handles the majority of Federal Government procurement transactions.  By adding a requirement that bidders certify that neither the bidder, nor any of the bidder’s affiliates, has been convicted of (or received an absolute or conditional discharge) under any foreign offense that PWGSC regards as having “similar constitutive elements” to listed Canadian offenses (including fraud, money laundering and bribing a foreign public official), the new Integrity Provisions establish rules for debarring corporations and individuals where they or their affiliates have committed an integrity offence.

The integrity provisions impose rigorous certification provisions, which, if not complied with can result in significant consequences including debarment from participating in Government procurements for 10 years from the date of conviction and the right for the Government to terminate a contract for default.  The Canadian Government also maintains the right to pursue other remedies available, including the ability to sue for damages that may occur as a result of termination.

Conclusion

The introduction of ESTMA and the new Integrity Provisions continue the trend towards a stronger legislative commitment to anti-corruption enforcement in Canada, which began with the 2013 amendments that strengthened the CFPOA.  Given this clear legislative direction and the likely freeing up of enforcement resources, expected after the imminent resolution of the Engineering Investigation, our forecast is that 2015 will be an active year for Canadian anti-corruption enforcement.

Posted by Mike Koehler at 12:03 am. Post Categories: CanadaGuest PostsYear in Review 2014




January 16th, 2015

Friday Roundup

Roundup2Hollywood film studios, more FBI agents, asset recovery, quotable, and for the reading stack.  It’s all here in the Friday roundup.

Hollywood Film Studios

A recent Wall Street Journal article went in-depth regarding the FCPA scrutiny of Hollywood film studios doing business in China. According to the article, Sony received a subpoena from the SEC in June 2013 regarding possible violations of the U.S. Foreign Corrupt Practices Act.  The article states:

“The SEC’s questions to Sony dealt primarily with potential bribery related to the release of “Resident Evil: Afterlife” in China in 2010, according to email communication between Sony’s in-house and outside legal counsel. A Sony-led investigation that followed the SEC subpoena examined the company’s distribution efforts more broadly, the emails show. The subpoena indicates an escalation of an inquiry that began in 2012 when the SEC requested that every major studio voluntarily provide information about their movie-distribution practices in China, a request that was publicly reported at the time. However the SEC’s specific concerns weren’t disclosed nor was it previously known that the agency had stepped up its probe with a subpoena. Sony documents show that the SEC refers to its probe as “In the Matter of Lions Gate Entertainment Corp,” indicating that the rival Hollywood studio behind “The Hunger Games” has been asked questions as well.”

Many FCPA enforcement actions have, as a root cause, a foreign trade barrier or distortion.  This appears to be true in the case of the Hollywood film studios.  As stated in the article, the companies ran into “China’s quota and censorship systems to secure distribution for their films in that country.”  According to the article:

“Hollywood studios are barred from distributing films on their own in China, but instead work with the state-owned China Film Group to secure one of the 34 highly coveted spots offered each year for imported movies. [Third party distribution firms] help studios navigate the bureaucracy.”

More FBI Agents

The Wall Street Journal reports:

“The Federal Bureau of Investigation’s foreign corruption program will more than triple the number of agents focused on overseas bribery this year to more than 30 from around 10, according to bureau officials. The agents will focus on both sides of corruption, hunting down executives that pay off foreign officials, while also helping other nations recoup funds stolen by corrupt leaders. The FBI usually can’t directly arrest corrupt foreign leaders, but at the request of foreign law enforcement the bureau can help locate funds stolen by kleptocrats. [...]  “With the growing global economy and the growing nature of international commerce with globalization of more companies and economies, it’s creating more opportunities for the potential of FCPA and corruption,” said Joseph Campbell, assistant director of the bureau’s criminal division, in an interview. The newly assigned agents will work out of field offices in New York, Washington, D.C., San Francisco, Los Angeles, Miami and Boston, with backup from forensic analysts and other specialists in headquarters, which is also located in the capital. Currently, the bureau’s foreign anti-corruption field agents are managed out of a field office in Washington, D.C. and split their time while pursuing other white collar crimes, bureau officials said.”

Asset Recovery

As part of its Kleptocracy Asset Recovery Initiative, the DOJ recently announced the filing of a “civil forfeiture complaint seeking the forfeiture of nine properties worth approximately $1,528,000 that were allegedly purchased with funds traceable to a $2 million bribe paid by a Honduran information-technology company to the former Executive Director of the Honduran Institute of Social Security.”

According to the DOJ:

“From 2010 to 2014, Dr. Mario Roberto Zelaya Rojas, 46, of Tegucigalpa, Honduras, served as the Executive Director of the Honduran Institute of Social Security (HISS), a Honduran Government agency that provides social security services, including workers’ compensation, retirement, maternity, and death benefits.  According to allegations in the forfeiture complaint, Zelaya solicited and accepted $2.08 million in bribes from Compania De Servicios Multiples, S. de R. L. (COSEM) in exchange for prioritizing and expediting payments owed to COSEM under a $19 million contract with HISS.  Zelaya also allegedly instructed COSEM to make bribe payments to two members of the Board of Directors of HISS charged with overseeing the COSEM contract.  To conceal the illicit payments, COSEM allegedly sent the bribes through its affiliate company, CA Technologies.  As further alleged in the complaint, the bribe proceeds were then laundered into the United States and used by Zelaya and his brother, Carlos Alberto Zelaya Rojas, to acquire real estate in the New Orleans area.  Certain properties were titled in the name of companies nominally controlled by Zelaya’s brother in an effort to conceal the illicit source of the funds as well as the beneficial owner.  The current action seeks forfeiture of nine properties acquired with the proceeds of Zelaya’s alleged bribery scheme.”

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

“Our action today highlights how the Criminal Division’s Kleptocracy Initiative, with our network of law enforcement partners around the globe, will trace and recover the ill-gotten gains of corrupt officials.  Criminals should make no mistake:  the United States is not a safe haven for the proceeds of your crimes.  If you hide or invest your stolen money here, we will use all the legal tools we have to find it and seize it.”

Quotable

In this Global Investigations Review article, Timothy Dickinson (Paul Hastings and a veteran of the FCPA bar) states:

“Ten years ago, I would have been happy to bet anyone a doughnut that I could accurately define what a foreign official is. Now, with various court definitions and a lack of clarity from the DoJ, I fear I might actually lose my doughnut.”

In this piece about the SEC’s internal controls enforcement theories, Michael Shepard (Hogan Lovells) states:

“Beneath the surface of these developments [the increased use of the internal controls provisions] is a disconnect about what the internal controls provisions actually require. The government — and especially the SEC — has settled on an interpretation of the internal controls provision that is at odds with the understanding of many in-house finance professionals about what internal controls are intended to address. Ask corporate finance professionals about internal controls at their companies and you will likely get an answer about processes designed to protect the company’s assets at a level that would materially impact the company’s financial statements. Ask your friendly neighborhood SEC investigator about internal controls and you will instead get inquiries about the exponentially smaller level of amounts of money that would be enough to influence a low-paid public official in a poor third-world country. Not only is the SEC looking at controls on a more microscopic level, but its predilection to pursue internal controls charges sometimes seems based on an interpretation of the FCPA that borders on strict liability. Circumstantial evidence of a bribery violation — such as evidence that some money may have left the company without proper authorization or accounting records — translates for the SEC into proof that the company’s controls were inadequate. Statutory elements of reasonableness and scienter get short shrift in a world in which the SEC aggressively pushes internal controls charges, and the vast majority of companies remain predisposed to settle.”

Reading Stack

Paul Barrett at Bloomberg BusinessWeek goes in-depth about the FCPA charges pending against Joseph Sigelman in an article titled “Does This Man Look Like a Felon to You?”

From the New Yorker, “Can Corruption Be Erradicated?”

“[C]orruption has always permeated so many fields of human endeavor that it may be not a corruption of anything—but, rather, a regrettable feature of our natural condition. Accountable government is an ideal, to be sure. It may also be an aberration.”

[O]ur conceptual vocabulary for understanding [corruption], let alone combatting it, remains conspicuously meagre. The very term “corruption” is so inclusive as to be almost meaningless, encompassing bribery, nepotism, bid-rigging, embezzlement, extortion, vote-buying, price-fixing, protection rackets, and a hundred other varieties of fraud.”

From Bloomberg BNA “As FCPA Complexity Increase, Corporate Interest in Self-Disclosure Wanes.”

*****

A good weekend to all.





January 15th, 2015

“Doing Compliance” – An FCPA Compliance Toolbox

toolbox2The Foreign Corrupt Practices Act community is blessed with an active group of writers. Many of the writers approach the FCPA and related issues from different perspectives and with different goals in mind.

One of the most active writers on FCPA topics is Thomas Fox (FCPA Compliance and Ethics Blog).  Fox approaches the FCPA and related topics with a singular goal in mind:  analyzing and articulating the vast body of literature on FCPA best practices in a digestable, practical, and workable way to be of value to compliance professionals in the field.

In short, Fox is the “nuts and bolts” guy of FCPA compliance who not only offers his own insight and perspective on best practices, but also effectively aggregates the insights and perspectives of others.

Fox’s latest book is “Doing Compliance: Design, Create, and Implement and Effective Anti-Corruption Compliance Program” and in it he provides, in his words, “the basics of how to create and maintain an anti-corruption and anti-bribery compliance program to suit any business climate across the globe.”

The nine chapters of the book are grouped around topics such as senior management commitment to compliance; written policies and procedures; conducting a risk assessment; training; hiring and other human resources issues; reporting and investigation; and merger and acquisition due diligence.

“Doing Compliance” is peppered with many helpful checklists and factors that compliance professionals can use on a daily basis to implement, assess and improve FCPA compliance policies and procedures.

As Fox says in conclusion:

“Anti-corruption compliance enforcement is here to stay.  That means, in today’s business world, you will need to ensure effective anti-corruption compliance in almost any location where you do business, and at any entity you might choose to do business with going forward.  An effective program should not be 100 paces past your company’s internal financial controls. It may be five paces beyond where you are now.  It is not difficult to institute and follow such a standard, but it does take commitment from senior management to lead and support the effort going forward.”

If developing an FCPA compliance tool-kit is on your to-do list this year, you may want to add “Doing Compliance” to your bookshelf.  The book can be ordered here and here.

Posted by Mike Koehler at 12:03 am. Post Categories: Compliance