January 13th, 2015

Corporate FCPA Enforcement In 2014 Compared To Prior Years

Survey ResultsI am no different from the other Foreign Corrupt Practices Act aficionados.

I maintain and publish yearly FCPA statistics even though I fully acknowledge that year-to-year enforcement statistics, and the arbitrary cutoffs associated with such statistics, may be of marginal value given that many non-substantive factors can influence the timing of an actual FCPA enforcement action.

For instance, if the Alcoa enforcement action happened 10 days earlier (instead of January 9, 2014) or if the Alstom enforcement action happened 10 days later (instead of December 22, 2014), 2014 FCPA enforcement settlement amounts would be materially different.

Nevertheless and accepting year-to-year FCPA statistics for what they are, the issue remains:  how does one best analyze and interpret these statistics over time?

Here is how I see it through reference to another example.  In year 1, a city issues 100 speeding tickets and collects $20,000 in fines associated with those tickets.  In year 2, a city issues 90 speeding tickets, but because certain drivers were going really fast, the city collects $25,000 in fines associated with those tickets.  Was there less enforcement in year 2 compared to year 1?  Depends on what you are measuring – the number of infractions or amount of fines.

The some logic applies to year-to-year FCPA statistical data and I believe that the best way to track yearly enforcement is through the number of “core” enforcement actions.

By this measure, although 2014 witnessed two very large settlement amounts, FCPA enforcement in 2014 was below historical averages.

Previous posts (here and here) provided various facts and figures from 2014 DOJ FCPA enforcement and SEC FCPA enforcement.   Viewing FCPA enforcement statistics this way is useful and informative given that the DOJ and SEC are separate law enforcement agencies and different issues may arise in DOJ and SEC FCPA enforcement actions.

As indicated by the below charts and by using the “core” approach to FCPA enforcement statistics (an approach the DOJ endorses), both DOJ and SEC corporate enforcement in 2014 was down from recent historical averages

Corporate DOJ FCPA Enforcement Actions

Year

Core Actions

2014 7

2013

7

2012

9

2011

11

2010

17

Corporate SEC FCPA Enforcement Actions

Year

Core Actions

2014 7

2013

8

2012

8

2011

13

2010

19

However, if one analyzes corporate FCPA enforcement statistics based on settlement amounts, corporate FCPA enforcement was up in 2014 compared to recent historical averages.

Corporate DOJ FCPA Enforcement Action Settlement Amounts

Year

Settlement Amounts

2014 $1.25 billion

2013

$420 million

2012

$142 million

2011

$355 million

2010

$870 million

Corporate SEC FCPA Enforcement Action Settlement Amounts

Year

Settlement Amounts

2014 $327 million

2013

$300 million

2012

$118 million

2011

$148 million

2010

$530 million

Viewing FCPA enforcement in the aggregate (DOJ and SEC combined) is of course also useful and informative and in 2014 the DOJ and SEC combined collected approximately $1.6 billion in 10 corporate FCPA enforcement actions.  The below chart provides a summary of corporate FCPA enforcement data (DOJ and SEC combined) for the years 2007-2014, as well as notable circumstances that significantly skewed enforcement data statistics for a particular year (an occurrence that happens in most years including 2014).

Corporate FCPA Enforcement Actions (2007-2014)

Year

Core Actions

Settlement Amounts

Of Note

2007

15

$149 million

Six enforcement actions involved Iraq   Oil for Food conduct and these enforcement actions comprised 40% of all   enforcement actions and approximately 50% of the $149 million amount.

2008

10

$885 million

The $800 million Siemens enforcement   action comprised approximately 90% of the $885 million amount.

2009

11

$645 million

The $579 million KBR / Halliburton   Bonny Island, Nigeria enforcement action comprised approximately 90% of the   $645 million amount.

2010

21

$1.4 billion

Six enforcement actions, all resolved   on the same day, centered on various oil and gas companies use Panalpina in   Nigeria. Panalpina also resolved an enforcement action on the same day.Two   enforcement actions (Technip and Eni / Snamprogetti) involved Bonny Island   conduct. In other words, there were 14 unique corporate enforcement actions   in 2010. Of further note, the two Bonny Island enforcement actions,   Technip($338 million) and Eni/Snamprogetti ($365 million) comprised   approximately 50% of the $1.4 billion amount.

2011

16

$503 million

The $219 million JGC Corp. Bonny   Island, Nigeria enforcement action comprised approximately 44% of the $503   million amount

2012

12

$260 million

None that significantly skewed the   statistics

2013

9

$720 million

The $398 million Total enforcement   action comprised approximately 55% of the $720 million amount

2014 10  $1.6 billion Two enforcement actions (Alstom – $772 million and Alcoa – $384 million) comprised approximately 72% of the $1.6 billion amount.
  TOTALS

104

$6.23 billion

In short, the number of core corporate FCPA enforcement actions in 2014 was tied for the second lowest in seven years.

In closing, have it your way.

However, the way I believe is the more accurate and reliable way to keep and analyze FCPA enforcement statistics is by focusing on unique instances of FCPA scrutiny (not settlement amounts) and tracking enforcement actions using the “core” approach.

Posted by Mike Koehler at 12:03 am. Post Categories: FCPA StatisticsYear in Review 2014




January 12th, 2015

FCPA Enforcement Critic And Reform Advocate Selected As New DOJ Fraud Section Chief

WeissmannLast week, the DOJ announced Andrew Weissmann has been selected as the Chief of the Criminal Division’s Fraud Section.

In recent years, Weissmann has been a vocal advocate of Foreign Corrupt Practices Act reform and more broadly, reforming corporate criminal liability principles.

In October 2010, Weissmann was the lead author of “Restoring Balance:  Proposed Amendments to the FCPA.”  Written on behalf of the U.S. Chamber Institute for Legal Reform, “Restoring Balance,” lead to a Senate FCPA reform hearing in November 2010, and thereafter, a House FCPA reform hearing in June 2011.

Here is what Weissmann wrote in “Restoring Balance”.

“In spite of this rise in enforcement and investigatory action, judicial oversight and rulings on the meaning of the provisions of the FCPA is still minimal. Commercial organizations are rarely positioned to litigate an FCPA enforcement action to its conclusion, and the risk of serious jail time for individual defendants has led most to seek favorable terms from the government rather than face the expense and uncertainty of a trial. Thus, the primary statutory interpretive function is still being performed almost exclusively by the DOJ Fraud Section and the SEC. Notably, these enforcement agencies have been increasingly aggressive in their reading of the law. The DOJ has expressed its approach primarily through its opinion releases, but also in its decisions as to what FCPA enforcement actions to pursue. Many commentators have expressed concern that the DOJ effectively serves as both prosecutor and judge in the FCPA context, because it both brings FCPA charges and effectively controls the disposition of the FCPA cases it initiates.”

Using phrases such as “how far the DOJ has pressed the limits of enforcement,” “DOJ’s aggressive pursuit” of companies as “indication of how far the DOJ is willing to expand the scope of FCPA enforcement,” and “the highly aggressive stance the DOJ is taking to expand the FCPA net beyond its borders,” Weissmann stated:

“The current FCPA enforcement environment has been costly to business. Businesses enmeshed in a fullblown FCPA investigation conducted by the U.S. government have and will continue to spend enormous sums on legal fees, forensic accounting, and other investigative costs before they are even confronted with a fine or penalty, which, as noted, can range into the tens or hundreds of millions. In fact, one noteworthy innovation in FCPA enforcement policy has been the effective outsourcing of investigations by the government to the private sector, by having companies suspected of FCPA violations shoulder the cost of uncovering such violations themselves through extensive internal investigations.

From the government’s standpoint, it is the best of both worlds. The costs of investigating FCPA violations are borne by the company and any resulting fines or penalties accrue entirely to the government. For businesses, this arrangement means having to expend significant sums on an investigation based solely on allegations of wrongdoing and, if violations are found, without any guarantee that the business will receive cooperation credit for conducting an investigation.”

Elsewhere in “Restoring Balance,” Weissmann wrote:

“[T]he FCPA should be modified to make clear what is and what is not a violation. The statute should take into account the realities that confront businesses that operate in countries with endemic corruption (e.g., Russia, which is consistently ranked by Transparency International as among the most corrupt in the world) or in countries where many companies are state-owned (e.g., China) and it therefore may not be immediately apparent whether an individual is considered a “foreign official” within the meaning of the act. As the U.S. government has not prohibited U.S. companies from engaging in business in such countries, a company that chooses to engage in such business faces unique hurdles. The FCPA should incentivize the company to establish compliance systems that will actively discourage and detect bribery, but should also permit companies that maintain such effective systems to avail themselves of an affirmative defense to charges of FCPA violations. This is so because in such countries even if companies have strong compliance systems in place, a third-party vendor or errant employee may be tempted to engage in acts that violate the business’s explicit anti-bribery policies. It is unfair to hold a business criminally liable for behavior that was neither sanctioned by or known to the business.

The imposition of criminal liability in such a situation does nothing to further the goals of the FCPA; it merely creates the illusion that the problem of bribery is being addressed, while the parties that actually engaged in bribery often continue on, undeterred and unpunished. The FCPA should instead encourage businesses to be vigilant and compliant. For this reason, and given the current state of enforcement, the FCPA is ripe for much needed clarification and reform through improvements to the existing statute. Such improvements, which are best suited for Congressional action, are aimed at providing more certainty to the business community when trying to comply with the FCPA, while promoting efficiency and enhancing public confidence in the integrity of the free market system as well as the underlying principles of our criminal justice system.”

Weissmann also testified, on behalf of the U.S. Chamber, at the November 2010 Senate hearing.  In his written testimony, Weissmann stated:

“The FCPA had been tailored to balance various competing interests, but that balance has been altered, at times, by aggressive application and interpretations of the statute by the government. Instead of serving the original intent of the statute, which was to punish companies that participate in foreign bribery, actions taken under more expansive interpretations of the statute may ultimately punish corporations whose connection to improper acts is attenuated at best and nonexistent at worst.

The result is that the FCPA, as it currently written and implemented, leaves corporations vulnerable to civil and criminal penalties for a wide variety of conduct that is in many cases beyond their control and sometimes even their knowledge. It also exposes businesses to predatory follow-on civil suits that often get filed in the wake of a FCPA enforcement action. In fact, there is reason to believe that the FCPA has made U.S. businesses less competitive than their foreign counterparts who do not have significant FCPA exposure.”

In concluding his written testimony, Weissmann stated:

“The recent dramatic increase in FCPA enforcement, coupled with the lack of judicial oversight, has created significant uncertainty among the American business community about the scope of the statute. In addition, some of the enforcement actions brought by the SEC and DOJ are not commensurate with the original goals of the FCPA, in that they fail to reach the true bad actors and instead assign criminal liability to corporate entities with attenuated or non-existent connections to potential FCPA violations.”

As reflected in this transcript, during the hearing Weissmann stated:

“One of the reasons it is important to have a clearer statute, particularly in the FCPA arena, is that corporations cannot typically take the risk of going to trial and, thus, there is a dearth of legal rulings on the provisions of the FCPA as it applies to organizations. Thus, the government’s interpretation can be the first and the last word on the scope of the statute as it applies to a company. The lack of judicial oversight, expansive government interpretation of the FCPA, and the increased enforcement that you heard about from [the DOJ witness] have led to considerable concern and uncertainty about how and when the FCPA applies to overseas business activities.”

During the hearing, Senator Arlen Specter asked: “overall, do you think that the act is fairly well balanced and fairly well enforced or too tough?”

Weissmann responded:

“I think there is no question that many of the cases that were brought up today, such as Siemens, fall far, far, far into the—that it is amply warranted for the application of the statute. The problem is that every company in America and many companies overseas worry about the statute daily. And so regardless of what the Department of Justice is doing, people think about the statute and could their conduct fall on one side of it versus the other and will they be subject to an investigation. So it is a difficult question to answer, because I have seen many prosecutions where you say, of course, that seems like a just result and should have been warranted, but there are many companies that are hurt by the ambiguities in the statute and what I think is the over-breadth of some of its provisions on a daily basis.”

Beyond the FCPA, Weissmann has also been a vocal advocate of reforming corporate criminal liability principles.

In “Rethinking Corporate Criminal Liability,” 82 IND. L.J. 411, 414 (2007), Weissmann challenged traditional notions of corporate criminal liability and argued that when the DOJ “seeks to charge a corporation as a defendant, the government should bear the burden of establishing as an additional element that the corporation failed to have reasonably effective policies and procedures to prevent the conduct.”

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




January 9th, 2015

Friday Roundup

Roundup2From the dockets, cleared, when the dust settles, outreach, and quotable.  It’s all here in the Friday roundup.

From the Dockets

Sigelman

This recent post highlighted the motion to dismiss filed by Joseph Sigelman.  Among other things, Sigelman challenged the DOJ’s interpretation and application of the “foreign official” element in regards to Ecopetrol, the alleged “the state-owned and state-controlled petroleum company in Colombia.”

On December 30th, U.S. District Judge Joseph Irenas denied the motion (as well as addressed other motions) in a 1 page order.

Hoskins

This recent post highlighted the motion to dismiss filed by Lawrence Hoskins. Among other things, the motion argued that the 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.”

In this December 29th ruling, U.S. District Court Judge Janet Arterton (D. Conn.) denied the motion to dismiss concluding that factual issues remain as to the disputed issues.

Cleared

Remember Kazuo Okada and Universal Entertainment Corp.  They were at the center of a boardroom battle royal with Wynn Resorts in which a Wynn sanctioned report stated:

“Mr. Okada, his associates and companies appear to have engaged in a longstanding practice of making payments and gifts to his two (2) chief gaming regulators at the Philippines Amusement and Gaming Corporation (“PAGCOR”), who directly oversee and regulate Mr. Okada’s Provisional Licensing Agreement to operate in that country.  Since 2008, Mr. Okada and his associates have made multiple payments to and on behalf of these chief regulators, former PAGCOR Chairman Efraim Genuino and Chairman Cristino Naguiat (his current chief regulator), their families and PAGCOR associates, in an amount exceeding $110,000.”  The report categorizes this conduct as “prima facie violations” of the FCPA.

Universal recently issued this release which states:

“The Prosecutor General of the Philippines has proposed to the Secretary of Justice to terminate the investigation into the groundless suspicion that our group may have offered bribes to officials of Philippine Amusement and Gaming Corporation …”.

When The Dust Settles

It is always interesting to see what happens when the dust settles from an FCPA enforcement action (see here for the prior post).

A portion of the recent Alstom enforcement action alleged improper payments in connection with power projects with the Bahamas Electricity Corporation (“BEC”), the state-owned and state-controlled power company.

According to the Nassau Guardian ”Attorney General Allyson Maynard-Gibson said The Bahamas has requested information from the US regarding the allegations, including the identity of the alleged bribe taker.”

This follow-up report states:

“Former Bahamas Electricity Corporation (BEC) board member Philip Beneby said on Tuesday he would find it hard to believe that any member of the board accepted bribes from a French power company to swing BEC contracts its way. [...] “The allegation is stating that a member of the board received some kickback, but it’s kind of strange to me that a member of the board would receive a kickback if the board unanimously agreed that the contract be awarded to Hanjung out of Korea, then only to find out later that the Cabinet overturned the board’s decision. So that decision to not award Hanjung from Korea the contract came from the Cabinet, not from the board.” According to Beneby and former minister with responsibility for BEC, Bradley Roberts, in 2000 the board of BEC unanimously voted to award a generator contract to Hanjung Co. out of South Korea, but that decision was overturned by the then Ingraham Cabinet, which decided to award the contract to Alstom (then ABB). [...] Former deputy prime minister Frank Watson was the minister at the time responsible for BEC. He said the decision to award the contract to Alstom was a Cabinet decision that involved no bribery. Watson insisted he was unaware of any claims that a bribe had been paid with respect to the award of that particular contract. Beneby, who is the proprietor of Courtesy Supermarket, said he remembers the event quite well as it was the first time a board decision was overturned.”

As explored in this prior post, many FCPA enforcement actions assume an actual casual link between alleged payments and obtaining or retaining business.  However, the reality is that such a casual link is not always present.

Outeach

This event notice from the New England Chapter of the National Defense Industrial Association caught my eye.

“FBI Seminar on FCPA and International Corruption: Outreach to Industry Education Session

Join us for an engaging morning seminar to learn how to be compliant with the Foreign Corrupt Practices Act (FCPA). The FBI’s International Corruption Unit (ICU) is conducting private sector outreach and education to support a new initiative.  The FBI recognizes the importance of forging new partnerships and strengthening existing relationships to help level the playing field for US businesses competing internationally.  By fostering better understanding of FCPA requirements, the FBI and private sector can join forces more efficiently to fight international corruption and ensure fair global markets and a strong US economy.

The FBI is excited to showcase five pillars of FCPA compliance in their program: Private Sector Outreach, Training and Education, Dedicated Personnel, Domestic and International Partnerships and Proactive Enterprise Theory Investigations.  Utilizing the five pillars approach, the FBI is gaining new momentum and expertise.

Additionally, the FBI will discuss new analysis outlining bribery hotspots and trends.  Using charts and graphs the FBI will examine the latest bribe payment techniques, who is paying bribes and who is accepting bribes.  Specific regions of the world will be discussed along with the various risks associated with doing business in these areas.

Lastly, the FBI will present a guest speaker who violated the FCPA, cooperated with the FBI and eventually was incarcerated for his crimes.  This segment will provide a unique and impactful insight into the rationalization of an employee who paid bribes, despite knowledge and training on FCPA.The FBI is looking forward to the opportunity to discuss best practices and enhance FCPA compliance with industry partners”

Quotable

This recent Forbes article ask “isn’t it strange that the U.S. gets to fine Alstom, a French company, for bribery not in the U.S.?” The article concludes:

“It’s most certainly not good economics that one court jurisdiction gets to fine companies from all over the world on fairly tenuous grounds. Who would really like it if Russia’s legal system extended all the way around the world? Or North Korea’s? And I’m pretty sure that the non-reciprocity isn’t good public policy either. Eventually it’s going to start getting up peoples’ noses and they’ll be looking for ways to punish American companies in their own jurisdictions under their own laws. And there won’t be all that much that the U.S. can honestly do to complain about it, given their previous actions.”

That is pretty much what Senator Christopher Coons said during the November 2010 Senate FCPA hearing. “”Today we the only nation that is extending extraterritorial reach and going after the citizens of other countries, we may someday find ourselves on the receiving end of such transnational actions.”

In a recent speech, Stuart Alford QC (Joint Head of Fraud at the Serious Fraud Office) addressed the following question:  ”why have there been no Bribery Act prosecutions; is this Act really being taken seriously?”  In response to his own question, Alford stated, in pertinent part:

“The Bribery Act is not retrospective. Therefore, for conduct to be criminal under the Act it has to have been undertaken after 1 July 2011. Often conduct of this type takes some time to surface; and, once it does, it takes time to investigate. SFO cases must, by definition, be serious or complex and they very often include international parties and conduct. While the SFO is always striving to investigate criminal conduct in as timely a way as possible, these types of cases will take some time to move through the process of investigation and on to prosecution.

The Bribery Act represented a very significant shift in setting the standards for the more ethical corporate culture I referred to a moment ago. When one looks at legislation of this kind, both here and abroad, one can see that a flow of prosecutions can take time to develop. We only have to look at the 1977 Foreign Corrupt Practices Act in the USA, to see that it took many years for that work to build up a head of steam, and not really until the turn of the century did we start to see the level of prosecutions that we do now.”

Spot-on and consistent with my own observations on July 1, 2011 when the Bribery Act went live.

Top Book Review

International Policy Digest recently compiled its top book reviews of 2014.  On the list is the following.

Review of Mike Koehler’s ‘The Foreign Corrupt Practices Act in the New Era’

By John Giraudo

If you care about the rule of law, ‘The Foreign Corrupt Practices Act in the New Era’ by Mike Koehler, is one of the most important books you can read—to learn how it is being eroded. Professor Koehler’s book may not make it to the top of any summer reading list, but it is a must read for people who care about law reform.

For more information on the book, see here.

*****

A good weekend to all.

Posted by Mike Koehler at 12:02 am. Post Categories: ALSTOMBahamasComplianceFCPA JurisprudenceJoseph SigelmanKazuo OkadaLawrence HoskinsPolicy ConsiderationsU.K. Bribery ActUnited KingdomUniversal Corporation




January 8th, 2015

DOJ Enforcement Of The FCPA – Year In Review

DOJ2This previous post highlighted facts and figures from SEC enforcement of the FCPA in 2014.

This post highlights facts and figures from DOJ FCPA enforcement in 2014.

(See here for a similar post from 2013, here for a similar post from 2012, here for a similar post from 2011, and here from 2010).

 

Settlement Amounts and Specifics

In 2014, the DOJ brought 7 corporate FCPA enforcement actions.  By comparision, in 2013 the DOJ brought 7 corporate enforcement action; in 2012 the DOJ brought 9 corporate FCPA enforcement actions; in 2011 the DOJ brought 11 corporate enforcement actions; and in 2010 the DOJ brought 17 corporate enforcement actions.  (Note:  these figures  use the “core” approach to FCPA statistics – see here for the prior post – an approach also endorsed by the DOJ – see here).

In the 7 corporate FCPA enforcement actions from 2014, the DOJ collected approximately $1.25 billion in criminal fines, an all-time record in terms of yearly FCPA settlement amounts. By way of comparison, in the 7 corporate FCPA enforcement actions from 2013, the DOJ collected approximately $420 million in criminal fines; in 2012, the DOJ collected approximately $142 million in criminal fines; in 2011, the DOJ collected approximately $355 million in criminal fines ($504 million including the $149 million forfeiture in the Jeffrey Tesler individual enforcement action); and in 2010, the DOJ collected approximately $870 million in criminal fines.

DOJ FCPA enforcement in 2014 ranged from $772 million in criminal fines (Alstom) to $14 million in criminal fines (Dallas Airmotive).  3 FCPA enforcement actions in 2014 were DOJ only (Alstom, Dallas Airmotive and Marubeni).

Of the approximate $1.25 billion the DOJ collected in 2014 corporate FCPA enforcement actions, $772 million (62%) was in one enforcement action (Alstom) and $981 million (78%) was in two enforcement actions (Alstom and Alcoa).

In 4 of 6 corporate FCPA enforcement actions where an analysis was possible, the DOJ agreed to a criminal fine below the minimum range suggested by the sentencing guidelines.  In these 4 actions, the average was approximately 29% below the minimum guidelines range and the distribution range was 9% below the minimum guidelines range (Avon) to 53% below the minimum guidelines range (Alcoa).  In 2 corporate FCPA enforcement actions in 2014 (Alstom and Marubeni), the company paid a criminal fine within the guidelines range.

[Note - why are only 6 of the 7 corporate enforcement actions included in the above analysis? 1 corporate enforcement action (Bio-Rad) was resolved via an NPA and the DOJ does not set forth a guidelines range in NPAs]

Corporate vs. Individual Prosecutions

How many corporate FCPA enforcement actions in 2014 involved related individual prosecutions of company employees by the DOJ (recognizing that such prosecutions may be forthcoming in the future)?  Of the 7 corporate DOJ enforcement actions in 2014, 1 (14%) has thus far resulted in related DOJ prosecutions of company employees. This action was the Alstom action (in which the DOJ alleged conduct concerning Indonesia, Saudi Arabia, Egypt, the Bahamas, and Taiwan) and the related individual prosecutions related only to the Indonesia conduct alleged by the DOJ.

The DOJ brought or announced 10 individual FCPA enforcement actions in 2014 in 3 core actions (5 individuals associated with DF Group in connection with Indian mining licenses, 2 individuals associated with Direct Access Partners and 3 individuals associated with PetroTiger).

Stay tuned for future posts specifically about DOJ and SEC individual FCPA enforcement actions.

NPAs / DPAs

What about non-prosecution and deferred prosecution agreements vs. old fashioned law enforcement (i.e. if a company committed a crime the DOJ charged it and if the company did not commit a crime the DOJ did not charge it)?  In 2014, 5 of the 7 (71%) corporate enforcement actions included an NPA or DPA.  Marubeni and Alcoa were plea agreements only. [Note, the Alstom enforcement action involved two plea agreements and two DPAs; the Avon enforcement action involved  a plea agreement and DPA; and the HP enforcement action involved a plea agreement, DPA and NPA].

By way of comparison, in 2013, 100% of corporate DOJ enforcement actions involved either an NPA or DPA; in 2012 100% of corporate DOJ enforcement actions involved either an NPA or a DPA;  in 2011 82% of corporate DOJ enforcement actions involved either an NPA or DPA; and in 2010 94% of corporate DOJ enforcement actions involved either an NPA or DPA.

Since 2010, 86% of corporate DOJ enforcement actions have involved either an NPA or DPA.

Voluntary Disclosures

Of the 7 corporate DOJ FCPA enforcement actions in 2014, 2 enforcement actions (29%) were the result of corporate voluntary disclosures (Avon and Bio-Rad),  3 enforcement actions (43%) were the result of previous foreign law enforcement investigations or related thereto (Alstom, Marubeni, and HP), 1 enforcement action was related to a previous FCPA enforcement action (Dallas Airmotive) and 1 enforcement action was the result of civil litigation (Alcoa).

By way of comparison, in 2013 57% of corporate FCPA enforcement actions were the result of corporate voluntary disclosures or the direct result of a related voluntary disclosure; in 2012, 78% of corporate FCPA enforcement actions were the result of corporate voluntary disclosures or casually related to previous corporate voluntary disclosures; in 2011, 73% of corporate FCPA enforcement actions were the result of corporate voluntary disclosures.

Monitors

Of the 7 corporate DOJ FCPA enforcement actions in 2014, 1 (14%) enforcement action (Avon) resulted in a corporate monitor. By way of comparison, of the 7 corporate DOJ FCPA enforcement actions in 2013, 4 enforcement actions (57%) involved a monitor; of the 9 corporate DOJ FCPA enforcement actions in 2012, 3 enforcement actions (33%) involved a monitor; of the 11 corporate DOJ FCPA enforcement actions in 2011, 1 enforcement action (9%) involved a corporate monitor; of the 17 corporate DOJ enforcement actions in 2010, 7 enforcement actions (41%) involved a corporate monitor.

This remainder of this post provides an overview of corporate DOJ FCPA enforcement in 2014.

Alstom and Related Entities (December 22nd).

See here and here for prior posts

Charges:  As to Alstom S.A., violation of the FCPA’s books and records and internal controls provisions.  As to Alstom Network Schweiz AG, conspiracy to violate the FCPA’s anti-bribery provisions.  As to Alstom Power Inc., conspiracy to violate the FCPA’s anti-bribery provisions.  As to Alstom Grid Inc., conspiracy to violate the FCPA’s anti-bribery provisions.

Resolution Vehicle:  As to Alstom and Alstom Network Schweiz, plea agreements.  As to Alstom Power and Alstom Grid, DPAs.

Guidelines Range:  As to Alstom $532.8 million to $1.065 billion

Penalty:  As to Alstom, $772 million (the other entities were not required to pay separate penalties).

Disclosure:  The enforcement action presumably originated from a prior 2011 Swiss enforcement action (see here and here).

Monitor:  No

Individuals Charged:  Yes (as to the Indonesia conduct – see here).

Avon Entities (December 17th)

See here and here for prior posts

Charges:  As to Avon China, conspiracy to violate the FCPA’s books and records provisions.  As to Avon Products, conspiracy to violate the FCPA’s books and records provisions and violation of the FCPA’s internal controls provisions.

Resolution Vehicle:  As to Avon China, a plea agreement; as to Avon Products a DPA.

Guidelines Range:  As to Avon China, $73.9 million to $147.9 million; as to Avon Products, $84.6 million to $169.1 million.

Penalty:  As to Avon China, $67.6 million; as to Avon Products $67.6 million but the Avon China penalty was deducted from this amount.

Disclosure:  Voluntary Disclosure.

Monitor:  Yes

Individuals Charged:  No

Dallas Airmotive (December 10th)

See here for the prior post

Charges:  Conspiracy to violate the FCPA’s anti-bribery provisions and violation of the FCPA’s anti-bribery provisions.

Resolution Vehicle:  DPA

Guidelines Range:  $17.5 million to $35 million

Penalty:  $14 million

Disclosure:  The enforcement action appears to be casually related to a prior enforcement action against BizJet International and certain of its executives

Monitor:  No

Individuals Charged:  No

Bio-Rad (November 3rd)

See here and here for prior posts

Charges:  Not applicable

Resolution Vehicle:  NPA

Guidelines Range:  Not set forth in the NPA

Penalty:  $14.4 million

Disclosure:  Voluntary Disclosure

Monitor:  No

Individuals Charged:  No

HP Related Entities (April 9th)

See here for the prior post

Charges:  As to HP Russia - (i) conspiracy to violate the FCPA’s anti-bribery provisions and books and records and internal controls provisions; (ii) one count of violating the FCPA’s anti-bribery provisions; (iii) one count of violating the FCPA’s internal controls provisions; and (iv) one count of violating the FCPA’s books and records provisions; As to HP Poland – violation of the FCPA’s books and records and internal controls provisions; As to HP Mexico – not applicable.

Resolution Vehicle:  As to HP Russia, a plea agreement; as to HP Poland a DPA; as to HP Mexico an NPA.

Guidelines Range:  As to HP Russia $87 million to $174 million; as to HP Poland $19.3 million to $38.6 million; as to HP Mexico not specified in the NPA.

Penalty:  As to HP Russia $58.8 million; as to HP Poland $15.5 million; as to HP Mexico $2.5 million.

Disclosure:  The enforcement action appears to have been the result of a previous German and Russian law enforcement investigation (see here for the prior post).

Monitor:  No

Individuals Charged:  No

Marubeni (March 19th)

See here for the prior post

Charges:  Conspiracy to violate the FCPA’s anti-bribery provisions and 7 substantive FCPA anti-bribery violations

Resolution Vehicle:  Criminal information resolved via a plea agreement

Guidelines Range:  $63.7 million to $127.4 million

Penalty:  $88 million

Disclosure:  Related to the April 2013 FCPA enforcement action against various current and former employees of Alstom

Monitor:  No

Individuals Charged:  No

Alcoa (January 9th)

See here for the prior post

Charges:  One count of violating the FCPA’s anti-bribery provisions.

Resolution Vehicle:  Criminal information against Alcoa World Alumina LLC resolved via a plea agreement.

Guidelines Range:  $446 million – $892 million.

Penalty:  $209 million (plus administrative forfeiture of $14 million)

Disclosure:  A 2008 civil lawsuit between Alba and Alcoa.

Monitor:  No

Individuals Charged:  No

Posted by Mike Koehler at 12:02 am. Post Categories: DOJDOJ Enforcement ActionFCPA StatisticsYear in Review 2014




January 7th, 2015

DOJ Brings First FCPA Enforcement Action Of 2015

European BankThis February 2014 post foreshadowed a future FCPA enforcement action against Dmitrij Harder in connection with a notable Third Circuit grand jury proceeding.

Yesterday, the DOJ announced the enforcement action against Harder, the former owner and President of Chestnut Consulting Group Inc. and Chestnut Consulting Group Co. (together “Chestnut Group”), for allegedly bribing an official with the European Bank for Reconstruction and Development.

The enforcement action is notable in that it invokes the rarely used “public international organization” prong of the FCPA’s “foreign official” element.

In the indictment, Harder is described as “Russian national, naturalized German citizen and permanent resident alien of the United States” who purportedly used the Chestnut Group entities to “provide, among other things, consulting services to companies seeking financing from multilateral development banks.”

According to the indictment:

“Between in or around 2007 through in or around 2009, Harder engaged in a scheme to pay approximately $3.5 million in bribe payments for the benefit of a foreign official to corruptly influence the foreign official’s actions on applications for financing submitted to the European Bank for Reconstruction and Development (“EBRD”) by the clients of Harder and the Chestnut Group, and to corruptly influence the foreign official to direct business to Harder and the Chestnut Group, and others.”

The EBRD is described as follows.

“The EBRD was a multilateral development bank headquartered in London, England, and was owned by over 60 sovereign nations. Among other things, the EBRD provided debt and equity financing for development projects in emerging economies, primarily in Eastern  Europe. On or about June 18, 1991, the President of the United States signed Executive Order 12766 designating the EBRD as a “public international organization.” The EBRD was thus a “public international organization,” as that term is defined in the FCPA.”

The EBRD Official is described as follows.

“EBRD Official” was a Russian and United Kingdom national residing in or around London, England, and was a senior banker working in the Natural Resources Group at the EBRD. As a senior banker, EBRD Official served as an Operations Leader in the Natural Resources Group and was responsible for leading the review of applications submitted to the EBRD for project financing, including loans and equity investments. EBRD Official thus had the authority to influence the process for approving project financing, and setting the terms and conditions for that financing. EBRD Official was a “foreign official,” as that term is used in the FCPA.  [...] Harder  knew EBRD Official from business associations dating back to at least 1999.”

The indictment also described the EBRD Official’s Sister as follows.

“EBRD Official’s Sister” was a Russian and United Kingdom national residing in or around London, England, and was the sister of EBRD Official. EBRD Official’s Sister purportedly provided consulting and other business services for the Chestnut Group. In reality, however, EBRD Official’s Sister provided no such services to the Chestnut Group or Harder.”

According to the indictment:

“Between in or about 2007 and in or about 2009, Harder, through the Chestnut Group, worked as a financial consultant to companies seeking project financing from the EBRD. For at least four of these applications, including those of Company A [a Russian independent oil and gas company] and Company B [an oil and gas company incorporated in the United Kingdom with operations in Russia] EBRD Official was the Operations Leader responsible for leading the management of the application process and negotiating the terms and conditions of any financing provided by the EBRD. Chestnut Inc. was retained by Company A and Company B despite its relatively small size, distant location from the EBRD, and unproven track record as a financial advisor. [...] [T]he EBRD ultimately approved the applications for project financing for Company A and Company B.”

[...]

In all, Chestnut Inc. received payments from Company A totaling approximately $2.9 million, and Harder caused payments to be made to EBRD Official’s Sister totaling approximately $1.06 million. While EBRD Official’s Sister purportedly received these payments as a result of providing consulting and other business services to the Chestnut Group, in reality, EBRD Official’s Sister provided no such services. Instead, EBRD Official’s Sister received these payments for the benefit of EBRD Official, to corruptly influence the foreign official’s actions on applications for financing by the clients of Harder and the Chestnut Group, and to corruptly influence the foreign official to direct business to Harder and the Chestnut Group.”

[...]

“[A]fter Chestnut Inc. received the success fees from Company B, Harder caused a payment of approximately $2,478,580.89 to be made to EBRD Official’s Sister. Although EBRD Official’s Sister purportedly received these payments as a result of providing consulting and other business services to the Chestnut Group, in reality, EBRD Official’s Sister provided no such services. Instead, EBRD Official’s Sister received these payments for the benefit of EBRD Official, to corruptly influence the foreign official’s actions on applications for financing by the clients of Harder and the Chestnut Group, and to corruptly influence the foreign official to
direct business to Harder and the Chestnut Group.”

Under the heading “concealment of the bribe payments,” the indictment alleges:

“Through the Chestnut Group, Harder paid EBRD Official’s Sister approximately $3.5 million in bribe payments for the benefit of EBRD Official. To conceal and cover up these bribe payments, Harder and EBRD Official’s Sister created false paperwork to make it appear that EBRD Official’s Sister had provided services to the Chestnut Group for these payments, when in fact no such services were provided.”

Based on the above allegations, the indictment charges Harder with one count of conspiracy to violate the FCPA and Travel Act, five counts of violating the FCPA, five counts of violating the Travel Act, one count of conspiracy to commit international money laundering, and two counts of money laundering.

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

“We are committed to combating foreign corruption, across the globe and across all industries, through enforcement actions and prosecutions of companies and the individuals who run those companies. As alleged, in this case, the owner and chief executive of a Pennsylvania financial consulting firm secured hundreds of millions of dollars in business by bribing a European banking official. He now faces an indictment for corruption in federal court.  Bribery of foreign officials undermines the public trust in government and fair competition in business.  The charges returned today reflect the clear message that we will root out corruption and prosecute individuals who violate the Foreign Corrupt Practices Act.”

U.S. Attorney Zane Memeger of the Eastern District of Pennsylvania stated:

“We will aggressively investigate and prosecute individuals in our district who use corrupt means like bribery to influence foreign officials.  Our criminal statutes in this arena must be enforced to ensure fair dealing in a competitive global marketplace where foreign officials often hold significant decision-making authority.  The alleged conduct here was particularly reprehensible because it undermined the legitimacy of a process designed to support businesses for the citizens of developing nations.”

Special Agent in Charge Edward Hanko of the FBI’s Philadelphia Division stated:

“This is a great example of the FBI’s ability to successfully coordinate with our international law enforcement partners to tackle corruption. Bribery – foreign or domestic – cripples the notion of fair competition in the marketplace.”

For more information on the conduct alleged in the enforcement action, see this 2012 Bloomberg article.