September 24th, 2015

2 Enforcement Theories, 17 DOJ Corporate Enforcement Actions, 0 Individual Prosecutions

zeroThe subject matter of this post is certainly nothing new.

For over five years, I have been highlighting the low percentage of DOJ corporate Foreign Corrupt Practices Act enforcement actions that result in related individual prosecutions.

In 2010, I was asked to testify at the Senate FCPA hearing – specifically about the above issue – and offered the following explanation in my testimony.

“[A] reason no individuals have been charged in [many FCPA] enforcement actions may have more to do with the quality of the corporate enforcement action than any other factor. As previously described, given the prevalence of NPAs and DPAs in the FCPA context and the ease in which DOJ offers these alternative resolution vehicles to companies subject to an FCPA inquiry, companies agree to enter into such resolution vehicles regardless of the DOJ’s legal theories or the existence of valid and legitimate defenses.”

Yesterday’s post awarded an FCPA Professor apple award to Matthew Fishbein (Debevoise & Plimpton - who previously served in the U.S. Attorney’s Office for the Southern District of New York as Chief Assistant U.S. Attorney and Chief of the Criminal Division, among other DOJ positions) for his recent excellent article which touches upon the same subject. In pertinent part, Fishbein observed:

“[T]he lack of individual prosecutions [in most DOJ corporate enforcement actions] is the inevitable consequence of making a potential criminal case out of every news story where something bad occurs. While the needs and interests of companies often lead them to enter into settlements even where there is little evidence that a crime actually was committed, individuals are more likely to test the government’s case – especially if that case rests on questionable footing.”

In light of yesterday’s post, and more broadly the general discussion of individual accountability in the aftermath of the recent “Yates Memo,” it is useful to analyze some specific examples in the hopes of making the abstract more concrete.

The remainder of this post highlights 2 DOJ FCPA enforcement theories that have resulted in 17 DOJ corporate FCPA enforcement actions yielding approximately $350 million in settlements but have resulted in 0 individual prosecutions.

The first enforcement theory that has resulted in 7 DOJ FCPA enforcement actions (Panalpina, Noble, Shell, Pride International, Tidewater Marine, Transocean, and Parker Drilling) was based on the core theory that payments allegedly made to notoriously corrupt Nigerian Customs Services (“NCS”) employees in connection with securing or renewing temporary importation permits (“TIPS”) so that oil rigs could remain in Nigerian waters, as well as other allegations that payments were made to NCS officials to expedite the delivery of goods and equipment into Nigeria, consisted FCPA violations.

The enforcement theory was aggressive because the FCPA’s anti-bribery provisions specifically exempt so-called facilitation payments.  Perhaps in a sign of how obvious the facilitating payments exception was to the conduct at issue, the DOJ twice stated in resolution documents that “the payments [at issue] … would not constitute facilitation payments for routine governmental actions within the meaning of the FCPA.”

All of the so-called CustomsGate enforcement actions involved either an NPA or a DPA in which the DOJ extracted approximately $175 million in corporate settlements. However, none of the CustomsGate enforcement actions involved any related criminal prosecution of individuals associated with the companies resolving the enforcement actions.

With is perhaps most notable about the CustomsGate enforcement actions is that the SEC (which also brought 8 FCPA enforcement actions against business organizations based on the same core theory and extracted approximately $85 million in corporate settlements) brought only one related prosecution of individuals associated with the companies resolving the enforcement action.  However, Mark Jackson and James Ruehlen (both associated with Noble Corp.) put the SEC to its burden of proof as to whether the payments violated the FCPA. In an ironic twist, two years after the enforcement agencies collected approximately $260 million in the corporate CustomsGate enforcement actions, a federal trial court judge ruled that the SEC has the burden of proof to negate the facilitating payments exception. Despite the SEC merely have a civil burden of proof of preponderance of the evidence (as opposed to the DOJ’s higher burden of proof in criminal actions of beyond a reasonable doubt), the SEC was unable to carry its burden and on the eve of trial the SEC offered to settle the Jackson & Ruehlen matter on terms very favorable to the defendants.

The second enforcement theory that has yielded 10 DOJ FCPA enforcement actions (Syncor Taiwan, DPC (Tianjin Co), Micrus, AGA Medical, Johnson & Johnson, Pfizer, Orthofix International, Biomet, Smith & Nephew, and Bio-Rad ) was based on the core theory that various employees of alleged foreign health care systems such as physicians, nurses, mid-wives and lab personnel are “foreign officials” under the FCPA. This enforcement theory was first used by the DOJ in 2002 (before NPAs and DPAs became the dominate way for the DOJ to resolve FCPA enforcement actions against business organizations) and since 2005 has yielded 8 DOJ enforcement actions.

The enforcement theory was aggressive because the FCPA’s legislative history is clear that the main reason motivating Congress to enact the FCPA was the foreign policy implications of discovered corporate payments to foreign government officials such as the Prime Minister of Japan, the President of Korea, the President of Gabon, and Italian political parties. In other words, in passing the FCPA Congress was concerned with corporate payments to bona fide foreign government officials.

All of the “healthcare workers as foreign officials” enforcement actions since 2005 were resolved through an NPA or DPA in which the DOJ extracted approximately $90 million in corporate settlements. However, none of the enforcement actions against business organizations involved any related criminal prosecution of individuals associated with the companies resolving the enforcement actions.

In short, 2 DOJ FCPA enforcement theories that have yielded 17 corporate DOJ enforcement actions in which the DOJ extracted approximately $350 million in corporate settlements have not resulted in any related criminal prosecution of individuals.

Zero. Zilch. Nada.

Posted by Mike Koehler at 12:03 am. Post Categories: FCPA StatisticsIndividual Enforcement Action

September 23rd, 2015

And The Apple Goes To …

applepicFall.  The colors are changing and the apples are crisp.

Fitting of the season, the FCPA Professor apple award goes to Matthew Fishbein (Debevoise & Plimpton).

Since the release of the Yates Memo, I’ve commented more than once that those who think the Yates Memo represented something new are misinformed.

Fishbein (who previously served in the U.S. Attorney’s Office for the Southern District of New York as Chief Assistant U.S. Attorney and Chief of the Criminal Division, among other DOJ positions) surely is not among this category.

Indeed, three weeks prior to release of the Yates Memo, Fishbein wrote this article and picks an orchard.

“[T]he lack of individual prosecutions [in most DOJ corporate enforcement actions] is the inevitable consequence of making a potential criminal case out of every news story where something bad occurs. While the needs and interests of companies often lead them to enter into settlements even where there is little evidence that a crime actually was committed, individuals are more likely to test the government’s case – especially if that case rests on questionable footing. This article discusses the context in which corporations cooperate with the government and suggests that the DOJ’s increased emphasis on cooperation against individuals may undermine corporate defense counsel’s ability to obtain or recommend their client’s cooperation in the many marginal cases where evidence of criminal conduct is lacking.

A number of recent statements by top DOJ officials suggest that their explanation for the lack of individual prosecutions is that companies are largely to blame. The DOJ has suggested that by dragging their feet instead of actively cooperating – for example, by hiding behind over-expansive interpretations of foreign data privacy laws or allowing culpable employees to leave the country – companies effectively have put up roadblocks to the prosecution of individuals.

While there may be some examples of companies holding back in their cooperation, a corporation’s conduct during the course of a government investigation is rarely the reason that individuals are not prosecuted. Rather, individuals are not prosecuted for the conduct companies admit because, in many marginal cases, there is insufficient evidence that a crime actually occurred. Why would a company enter into a criminal settlement where the underlying conduct does not give rise to a crime? The answer is simple: companies frequently determine that a “bad” settlement may be a better resolution than a drawn out, litigated victory. And as prosecutors have grown to appreciate the great leverage they hold over corporate entities, they have exercised this leverage in the pursuit of increasingly marginal cases. They do so, in part, because the risk is minimal (the prosecutor’s case is unlikely to be challenged in court) and the reward is great (the corporations pay enormous penalties).

Prosecutors have considerably less leverage over individuals, who, facing the possibility of incarceration and financial devastation in the event of a criminal conviction, are more likely to test the government’s case and put the government at risk of a high-profile loss. Given the extreme public pressure to bring charges against individuals in connection with the financial crisis, it stands to reason that if prosecutors could prove cases against corporate executives, they would bring those cases in a heartbeat. Indeed, Attorney General Holder recently acknowledged that the lack of individual prosecutions in the wake of the financial crisis was “not for lack of trying.”

Faced with a largely unsuccessful record in the pursuit of individual prosecutions after the financial crisis, it appears that, going forward, the DOJ is going to try even harder. According to a senior DOJ official, “[t]he prosecution of individuals – including corporate executives – for white-collar crimes is at the very top of the Criminal Division’s priority list.” Consistent with this goal, a number of DOJ officials have explained that “true cooperation” with a government investigation requires that the corporation identify culpable individuals and provide the government with evidence that implicates them. Without such evidence of individual culpability, corporations will not receive full cooperation credit, even if they do all of the things that traditionally have been viewed as the hallmarks of robust cooperation such as volunteering information not otherwise known to the government, providing documents and witnesses outside the government’s subpoena power, and making productions and disclosures in a timely manner.


The DOJ’s corporate cooperation policy is in some ways a double-edged sword. In cases where there is clear-cut evidence of wrongdoing, the DOJ’s policy on cooperation makes good sense and should be relatively straightforward in its application: in order to obtain full cooperation credit, it makes sense that companies should have to identify and disclose the information relevant to individual misconduct. This requirement is consistent with the government’s policy on providing cooperation credit for individuals who substantially assist in the prosecution of others. However, the policy presents a real dilemma for companies responding to the marginal, gray-area cases described above, where the company may for business reasons want to reach a settlement even where it has strong defenses, but the absence of evidence of individual culpability may preclude it from receiving the benefits of “full cooperation.”

In these kinds of cases, defense counsel is left facing a host of difficult questions. If a company should make “securing evidence of individual culpability the focus of [its] investigative efforts,” what is it to do when that evidence does not exist? If a company targets its internal investigation toward developing cases against individuals, should individuals be provided with counsel at the outset? If true cooperation “requires identifying the individuals actually responsible for the misconduct,” can a company “truly cooperate” when there are no such responsible individuals? If, in order to receive “full cooperation credit,” a company should emphasize its efforts to obtain evidence of individual culpability, can it still receive “full credit” when those efforts are fruitless? And if securing evidence of individual culpability is a “primary focus” when the government weighs the Filip Factors, will a company be subject to harsher charging decisions or settlement terms simply because no such evidence exists?

Taken together, these questions suggest that a policy designed to incentivize cooperation may have the perverse effect of deterring it: if a company knows that it cannot receive full cooperation credit, it may decide that it is not worth the effort to try; and if individuals know that companies are incentivized to obtain evidence against them, they may be far less willing to cooperate during internal investigations.

Moreover, under the DOJ’s cooperation policy, companies seeking to resolve criminal investigations in marginal cases may actually be penalized when their individual employees did not engage in criminal conduct. In such cases, defense counsel may consider challenging prosecutors to identify what aspect of their investigation was lacking or what evidence of individual culpability should have been uncovered. DOJ officials have said that the government will conduct its own investigations to “pressure test” a company’s internal investigation. If the government’s test reveals no flaws in the company’s investigation, will the government still not provide full cooperation credit?

The DOJ’s policy on cooperation is unlikely to solve the problem that it was likely designed to address, i.e., the lack of individual prosecutions. Although there may be an increase in individual prosecutions in cases of clear wrongdoing, the DOJ’s policy is unlikely to have an impact on the marginal cases, where companies often settle in spite of the evidence – not because of it.

While the needs and interests of companies in reaching settlements have allowed the government to obtain larger and larger settlements in cases where the facts and law likely would not permit them to succeed with a jury, the government must live with the fact that no amount of company cooperation will turn facts that do not provide a basis for individual prosecutions into facts that do. The government either has to accept this – and continue along the path of corporate settlements without individual prosecutions – or stop pursuing investigations and accepting settlements where there are no individuals who have actually committed crimes.”

[The FCPA Apple Award recognizes informed, candid, and fresh thought-leadership on the Foreign Corrupt Practices Act or related topics. There is no prize, medal or plaque awarded to the FCPA Professor Apple Award recipient. Just recognition by a leading FCPA website visited by a diverse group of readers around the world. There is no nomination procedure for the Apple Award. If you are writing something informed, candid and fresh about the FCPA or related topics, chances are high that I will find your work during my daily searches for FCPA content.]

Posted by Mike Koehler at 12:03 am. Post Categories: Apple AwardDOJEnforcement Agency PolicyIndividual Enforcement Action

September 22nd, 2015

Avoid Trial At All Costs!

CallFearToday’s post is from Paul Calli and Chas Short of Calli Law based in Miami.

Calli and Short, along with their former partner Steve Bronis, successfully represented Stephen Giordanella, the first person acquitted at trial in the Africa Sting case, briefly represented Patrick Joseph in the Haiti Teleco FCPA prosecution, before Joseph elected to cooperate with DOJ to avoid trial and hired different attorneys, and have counselled publicly traded companies doing business abroad, on the FCPA .


At least, that’s the apparent directive if you’re a DOJ prosecutor tasked with trying to win the ever-elusive conviction against an individual DOJ claims violated the FCPA.

Earlier this month, Deputy Attorney General Sally Yates issued a memorandum titled “Individual Accountability for Corporate Wrongdoing.”

Taking into consideration the Department of Justice’s dismal rate of failure when put to its burden of proof in FCPA enforcement actions (see here for the article titled “What Percentage of DOJ FCPA Losses is Acceptable” and here for the most recent example) Ms. Yates’ memo could easily be titled “Government Strategy for Extracting Cooperation and Guilty Pleas from Individuals Against Whom DOJ Lacks Sufficient Evidence of Criminality When a Neutral Federal Judge Will Likely Reject the Deficient Investigation and Prosecution, by Deputizing Corporate Employers Who Stand to Lose Everything To Entice and Incentivize Those Publicly Traded Companies to Partner With DOJ and Manufacture Prosecutions That Result In Guilty Pleas So DOJ Can Falsely Claim a Successful Conviction Rate Against Individuals By Diluting its Many Trial Losses With Pleas of Convenience.”

The proposed title is a little wordy, but it seems more transparent and accurate.  The title could be shortened to “DOJ’s FCPA Cooperation Playbook.”

Not surprisingly, after suffering so many embarrassing losses in failed prosecutions against individuals over the past 10 years, DOJ is looking for a quick fix.  The Yates Memo discusses the government’s view of how prosecutors, DOJ civil attorneys, and lawyers who represent companies that cooperate with government investigations should be looking at a number of issues regarding individual and corporate culpability.

We focus our discussion here on the Yates Memo’s statements about companies identifying “all individuals involved in or responsible for” misconduct in order to get “any” cooperation credit.

It’s important to recognize that the “guidelines” or “best practices” discussed in the Yates Memo do not supply anything in the way of hard guidance. The principles discussed are much the same as in prior memoranda and the Yates memo is in many ways a self-serving puff piece (those inclined to be more charitable to our often-overreaching government might call it “rhetoric”).

That’s not to say the Yates Memo is meaningless – it reiterates government interest in pursuing individuals as well as corporations for alleged misconduct.  More importantly, the Memo provides a clear indication that the DOJ has learned its lessons from a decade of overwhelmingly failed prosecutions against individuals and has shifted its strategy.   The Memo makes plain DOJ’s focus regarding prosecuting individuals will shift from trying to prove its case in an open trial, before a neutral judge, pursuant to our adversary system of Justice, where the accused can fight back with counsel, before a jury, to the closed door plea meetings held in the bowels of DOJ that lack transparency, precedent or any deterrent effect to individuals who may find themselves implicated in an FCPA investigation in the future.

The Yates Memo memorializes the government’s ardor for pinning a tin badge to corporations and requiring increasing levels of cooperation in order for the government to unilaterally deem that cooperation valuable. The memo is full of statements like:

“To be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.” (Emphasis in original).

“[T]o be eligible for any credit for cooperation, the company must identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status, or seniority, and provide to the Department all facts relating to that misconduct.”

“If a company seeking cooperation credit declines to learn of such facts or to provide the Department with complete factual information about individual wrongdoers, its cooperation will not be considered a mitigating factor . . . .”

Once a company meets the threshold requirement of providing all relevant facts with respect to individuals, it will be eligible for consideration for cooperation credit.”

The current FCPA enforcement environment focuses in large part on investigations of large corporations that end in non-prosecution and deferred prosecution agreements. The process is non-public, and the government press releases that follow agreements tell only the government view of the facts. Accordingly, there is a lack of transparency and predictability of outcomes for corporations that consider cooperating with government investigations.

The Yates Memo introduces more uncertainty regarding what concrete investigative steps a corporation must make to satisfy the government and highlights the potential risks if the government thinks the corporation should have done more. There’s a clear risk, for example, that the government might view a choice not to engage in certain investigative steps as “declining[ing] to learn” of relevant facts. The language of the Yates Memo provides prosecutors with more excuses or talking points for saying that the corporation has not done enough. This of course is always the risk of cooperation and calls to mind the saying that one can’t be “a little pregnant.”

In setting these fuzzy but tough-sounding standards, the Yates memo underscores why individuals and corporations should consider holding the government to its burden of proof and going to trial. In FCPA cases, a plea and cooperation should not be the default position.

In FCPA trials, individuals often win and the government has been frequently embarrassed (see for example the recent Sigelman trial and the failed “Africa Sting” enforcement action). We are hard pressed to identify an area of white collar enforcement where there is a bigger gap between the theories that support pleas or deferred/non-prosecution agreements versus the kind of facts for which the government can obtain convictions at trial. The price of cooperation continues to be high for companies and, if you accept the Yates memo on in its face, those costs are likely to be higher now.

The Yates Memo’s discussion of cooperation is a reminder to individual businesspeople that in many investigations, the lawyers representing the company are not your friends. As with all cooperation, there is a tremendous pressure to point fingers – regardless of the truth – a pressure that the Yates Memo adds to.   Individuals confronted with the pressure outlined in the government’s new cooperation playbook should consider the downside to the government’s diminution of our Constitutional adversary system of justice effectuated by the government’s “shock and awe” pretrial tactics designed to avoid trial.

Trial is the great equalizer.  Everyone knows that people plead guilty when they are not guilty to avoid the risk of possibly serving a more lengthy jail sentence should DOJ get lucky a second time in an FCPA trial and win. But agreeing to plead guilty, become a federal convicted felon, and serve time in prison where you should not do so, without putting the government to its burden of proof, might well be a decision a person may regret for the rest of their lives.

A person facing the trial decision must work hard to confront the fear of the unknown that is trial – and not allow DOJ to succeed in exploiting that fear to extract a guilty plea that absolves the government of the responsibility of proving its case.

Coercion and cooperation are dangerous.  In the instance where an individual accused of FCPA violations pleads guilty because, like Richard Bistrong, he is actually guilty, wrist-slap probationary sentences reward criminality and deter law-abiding behavior.  As the Honorable Richard Leon stated when rejecting DOJ’s plea for probation and no jail for its criminal partner Bistrong in the DOJ’s failed Africa Sting case, “We certainly don’t want the moral of the story to be: Steal big. Violate the law big. Cooperate big. Probation.” (See here).

Individuals accused of FCPA crimes should consider trial, at all costs.  After all, just ask these persons who the DOJ formerly dubbed “Corporate Wrong-doers,” and who sent the DOJ packing and walked away vindicated.

  • Stephen Giordanella
  • Patrick Caldwell
  • John Godsey
  • Andrew Bigelow
  • Pankesh Patel
  • John Weir
  • Lee Tolleson
  • John Mushriqui
  • Jeana Mushriqui
  • Mark Morales
  • Helmie Ashiblie
  • Yochanan Cohen
  • Amaro Goncalves
  • Saul Mishkin
  • David Painter
  • Lee Wares
  • Ofer Paz
  • Israel Weisler
  • Michael Sacks
  • Jonathan Spiller
  • Haim Geri
  • Daniel Alvirez
  • John O’Shea
  • Si Chan Wooh
  • Keith Lindsey
  • Steve Lee
  • John Iacobucci
  • Ronald Schultz
  • Alfredo Duran
  • John Blondek
  • Vernon Tull
  • Arthur Klein
  • Thomas Spangenberg
  • George McLean
Posted by Mike Koehler at 12:03 am. Post Categories: DOJEnforcement Agency PolicyGuest Posts

September 21st, 2015

Where Does The Truth Lie?

TruthIf the DOJ and/or SEC make allegations in a Foreign Corrupt Practices Act enforcement action, and a risk averse corporation agrees to resolve the enforcement action in the absence of judicial scrutiny, does that mean the allegations are true?

Not necessarily.

For instance, a component of the 2014 HP enforcement action (see here and here for prior posts) involved DOJ and SEC allegations concerning business conduct in Mexico.

In this NPA, the DOJ alleged that HP Mexico indirectly made cash payments to a Pemex Chief Information Officer. In this administrative order, the SEC alleged the same thing.

Pemex raises money from private investors, including those in the U.S., and thus every year files an annual report with the SEC. The company’s most recent annual report states as follows concerning the allegations in the DOJ and SEC FCPA enforcement action.

“On April 9, 2014, the SEC issued an order imposing sanctions against Hewlett-Packard Company (or HP) based on its findings that HP’s subsidiaries in Mexico, Russia and Poland made improper payments to certain public officials in order to obtain public contracts in violation of the U.S. Foreign Corrupt Practices Act. In the case related to Mexico, the sanctions related in part to allegations that [HP Mexico] paid a Mexican information-technology and consulting company more than U.S. $1 million to win a software and licensing contract with [Pemex] worth approximately U.S. $6 million. The SEC’s order alleged that a former officer of [Pemex] received a portion of the HP subsidiary’s unlawful payment to the consulting company. The Internal Control Body of [Pemex] concluded its investigation after finding no improper payment.”

Where does the truth lie?

The public will likely never know, but this much is true.

The DOJ and SEC allegations, while accepted by a risk averse company, were not subjected to any judicial scrutiny. Moreover, there are no consequences to the DOJ and SEC should the allegations not be accurate and there is no accountability for untrue statements.

On the other hand, Pemex’s statement are contained in an SEC filing and are thus statements to the market. The consequences to Pemex should its statements not be true can be securities fraud actionable under Section 10(b) and Rule 10b-5 for making untrue statements of material facts.  Such actions could be brought by, among other plaintiffs, the SEC and shareholders.

To the extent the DOJ and SEC allegations in the HP Mexico are not accurate, it would be the first time agreed to allegations in a corporate FCPA enforcement action fall apart when subjected to scrutiny.

As highlighted in this prior post, in 2010, Innospec agreed to pay approximately $26 million to resolve DOJ and SEC enforcement actions. 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 typical 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.

However, in a U.K. civil proceeding, 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.”

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.

Posted by Mike Koehler at 12:03 am. Post Categories: H-P

September 18th, 2015

Friday Roundup

Roundup2DOJ compliance counsel identified, additional lenient PetroTiger exec sentences, scrutiny alerts and updates, and for the reading stack. It’s all here in the Friday roundup.

DOJ Compliance Counsel

As highlighted in this previous post, last month word spread that “the [DOJ] is hiring a compliance counsel who will help prosecutors determine whether companies facing corruption allegations are victims of rogue employees or willfully blind.”

According to this Global Investigations Review article:

“According to two people familiar with the matter, the US Department of Justice (DoJ) has hired Hui Chen, Standard Chartered’s former head of anti-bribery and corruption compliance, as its new compliance counsel. [...] Before joining Standard Chartered, Chen served as an assistant general counsel at US pharmaceutical company Pfizer between June 2010 and September 2013. In this position, she oversaw the drug-maker’s internal investigations in the Asia-Pacific region, and also led compliance reviews in Latin America, Europe and the Middle East. Chen previously worked for Microsoft for 13 years, serving first in the intellectual property litigation team and later as a compliance officer in China. During the 1990s, Chen worked as a DoJ trial lawyer in Washington, DC, and as an assistant US attorney in Brooklyn.”

PetroTiger Exec Sentences

The DOJ’s FCPA enforcement action against former PetroTiger executives has concluded with additional thuds.

By way of background, the DOJ’s prosecution of Joseph Sigelman fell apart after a key cooperating witness acknowledged giving false testimony. The DOJ effectively pulled its case although Sigelman did plead guilty to substantially reduced charges.  In sentencing Sigelman to probation, Judge Joseph Irenas (D.N.J.) blasted the DOJ.  (See here for the prior post).

Recently, Judge Irenas sentenced the two remaining defendants in the case: Gregory Weisman and Knut Hammarskjold.

Weisman was sentenced to two years probation and ordered to pay a $30,000 fine.  Hammarskjold was likewise sentenced to two years probation and ordered to pay a $15,000 fine as well as approximately $106,000 in restitution for the benefit of PetroTiger.

According to a media source: “before pronouncing the sentence[s], Judge Irenas said he had to reflect the reality that the ultimate sentence here is influenced by the Sigelman case.”

Scrutiny Alerts and Updates

NextEra Energy

In the “you don’t see this everyday” category, as indicated in this press release, it appears someone hired a public relations company to issue a release stating:

“[C]omplaints were [recently] filed with the United States Department of Justice regarding the conduct of NextEra Energy Inc. and RES Americas subsidiaries under the Foreign Corrupt Practices Act related to each company’s attempts to win renewable energy contracts in Addington Highlands, Ontario and North Frontenac, Ontario, from the Government of Ontario through the Independent Electricity System Operator.”


The company which has been under FCPA scrutiny since 2011 recently disclosed:

“As initially disclosed in our Annual Report on Form 10-K for the fiscal year ended July 31, 2011, we identified certain transactions involving our Danish subsidiary BK Medical ApS, or BK Medical, and certain of its foreign distributors, with respect to which we have raised questions concerning compliance with law, including Danish law and the U.S. Foreign Corrupt Practices Act, and our business policies. We have commenced discussions with the Securities and Exchange Commission concerning the resolution of the SEC inquiry into the matter and have proposed a payment of $1.6 million in settlement of such inquiry. During the three months ended July 31, 2015, we accrued a $1.6 million charge in connection with our settlement proposal. We are uncertain whether the U.S. Department of Justice or the Danish Government will seek to impose any sanctions or penalties against us and have not engaged in settlement discussions with either of these entities. There can be no assurance that we will enter into any settlement with the SEC, the DOJ or the Danish Government, and the cost of any settlements or other resolutions of these matters could materially exceed our accruals.”

Listening In

A fruitful source of unscripted, “real-person” talk about FCPA issues is earnings conference calls and other investor calls.  A recent Expeditors (a global logistics company headquartered in Seattle, Washington) investor day conference call caught me eye.

During the call, an analyst asked:  ”Do you see any limits to, whether it’s Europe or Africa or any other geographies, where maybe that’s a difficult – that’s a barrier that kind of prevents as much growth or marketplace capture as you would like, that there’s maybe less receptivity to that?”

Jeff Musser, Senior V.P. and CFO stated:

“When we look at other markets [besides Europe], some of the challenges that we have seen in other markets really have nothing to do with our model and how we roll out our model. The bigger concerns are compliance in some of those markets.So you look at places like Africa, you look at places like Russia. There’s tremendous pressure on us and on our customers to deal with things like the Foreign Corrupt Practices Act. We may — as we decide to go into those markets, we may have to do it in a little bit different way that incentivizes the right behavior and drives the right thing, so those are things that are in the back of our mind as we start thinking about these markets. We don’t think that we are limited in these markets. It just may take a little bit different approach.”

For the Reading Stack

Consistent with my own observations in “The Facade of FCPA Enforcement” (2010) and numerous articles and posts thereafter, Brian Whisler (Baker & McKenzie) writes in “Why DOJ Struggles to Convict Individuals in FCPA Cases” as follows.

“Given the enormous litigation and reputational risk, companies are generally averse to contesting criminal charges at trial. As a result, the FCPA practice has primarily evolved through a series of corporate settlement agreements, over which courts have little to no supervision and in which the burden of proof for evidentiary purposes has less impact. The relative absence of case law in the field has meant that the Justice Department has been able to advance expansive views regarding the scope and applicability of the FCPA, largely unhindered by skeptical juries and contrary case law. However, these settlements carry little to no precedential value, and if individual prosecutions multiply as the Justice Department has promised, then prosecutors will increasingly be held to the high burden of proof and forced to defend their theories before judges. It is already clear that the Justice Department will face difficulties in advancing some of its more aggressive theories in court. Last month, a federal judge rejected the Justice Department’s contention that a nonresident foreign national who worked for a U.S. company’s foreign affiliate could be convicted of conspiracy to violate the FCPA based on traditional accomplice liability theories. See United States v. Lawrence Hoskins, 3:12cr238 (D. Conn. Aug. 13, 2015). Instead, the Justice Department must show that the defendant acted as an agent for the U.S. company itself, a harder task given the defendant’s lack of a direct relationship to the U.S. company. Over the last few years, the Justice Department has used increasingly expansive views of conspiracy and accomplice liability to assert jurisdiction over potentially improper payments paid by employees and agents of foreign subsidiaries and affiliates of U.S.-listed companies. As a result, companies have routinely entered into massive FCPA settlements regarding conduct that has only minimal connections to the United States, U.S. citizens or even U.S. companies. The court’s ruling may ultimately encourage other nonresident foreign nationals, and corporations that only face exposure due to the conduct of their foreign affiliates’ employees, to resist settling future charges with the government. Hoskins is likely to be one of a number of adverse legal rulings regarding the scope of the FCPA if the Justice Department maintains its commitment to increase individual FCPA prosecutions. Adverse case law seems to beget more adverse case law for the DOJ; Hoskins heavily relied on the reasoning of one of the other rare FCPA cases to go to trial, United States v. Castle, 925 F.2d 831 (5th Cir. 1991), which rejected prosecutors’ efforts to charge officials who accept bribes under the FCPA.”


A good weekend to all.

Posted by Mike Koehler at 12:03 am. Post Categories: Analogic Corp.DOJFCPA SentencesGregory WeismanIndividual Enforcement ActionKnut HammarskjoldListening InNextEra Energy