Friday FCPA Roundup for Week Ending May 30

 This article was reprinted with permission from FCPA Professor

Attend the FCPA Institute,  Wal-Mart fires back, up north, the race is on, deserving part 2, quotable, and a revised roundup. It’s all here in the Friday roundup.

FCPA Institute

Join lawyers and other in-house counsel and compliance professionals already registered for the inaugural FCPA Institute July 16-17th in Milwaukee, Wisconsin. The FCPA Institute is a unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills. FCPA Institute participants will have their knowledge assessed and upon successful completion of a written assessment tool can earn a certificate of completion. In this way, successful completion of the FCPA Institute represents a value-added credential for professional development.

To register see here.

Wal-Mart Fires Back

This recent post highlighted various Wal-Mart shareholder proposals that touched upon FCPA issues. As noted in the post, Institutional Shareholder Services (“ISS”) criticized Wal-Mart’s board for “fail[ing] to make progress in providing meaningful information to shareholders about any specific findings on the FCPA-related investigations and whether executives will be held accountable for related compliance failures.”

Wal-Mart has fired back in this proxy filing which states, in pertinent part:

The Audit Committee and the Company are following the appropriate protocol for an independent, thorough investigation

As the Company has previously reported, the Audit Committee of the Board is conducting an independent internal investigation into, among other things, alleged violations of the FCPA and alleged misconduct in connection with foreign subsidiaries. Also, as previously reported to shareholders, the Company voluntarily disclosed the Audit Committee’s investigative activity on these matters to the U.S. Department of Justice and the U.S. Securities and Exchange Commission, both of which are conducting their own external investigations of these matters.

We believe that ISS’s recommendation that shareholders vote against the election of Mr. Walton and Mr. Duke because the Board has not disclosed “specific findings” regarding the FCPA-related investigations is at odds with the appropriate conduct of such internal and external investigations. We further believe that ISS’s request for disclosure of “specific findings” with respect to these ongoing investigations is contrary to the best interests of the Company and our shareholders because such a disclosure: (1) could interfere with, or distract from, the ongoing investigations; (2) is impractical, given that no final conclusions or findings have been made; and (3) could adversely impact the Company’s position in any current or future legal proceedings that may relate to these matters.”

As hinted at in the previous post, I agree with Wal-Mart’s position.

Up North

This previous post highlighted Canada’s first individual conviction for a bribery offense under the Corruption of Foreign Public Officials Act (“CFPOA”) including the specific facts in the action against Nazir Karigar. Karigar was recently sentenced to three years in prison.

As noted here from Baker & McKenzie’s Canadian Fraud Law:

“Superior Court Justice Hackland ruled that Karigar “had a leading role in a conspiracy to bribe Air India officials in what was undoubtedly a sophisticated scheme to win a tender for a Canadian based company.” The Court issue[d] the following warning: “Any person who proposes to enter into a sophisticated scheme to bribe foreign public officials to promote the commercial or other interests of a Canadian business abroad must appreciate that they will face a significant sentence of incarceration in a federal penitentiary”.

In his reasons for sentence Justice Hackland stated that “The idea that bribery is simply a cost of doing business in many countries, and should be treated as such by Canadian firms competing for business in those countries, must be disavowed. The need for sentences reflecting principles of general deterrence is clear.”

As noted in this Osler alert:

“The [sentencing] decision noted a number of aggravating factors. First, the bribery conspiracy was sophisticated, carefully planned, and would have involved the payment of millions of dollars in bribes. Second, Mr. Karigar orchestrated a fake bid to create the illusion of competition and used confidential insider information to prepare the bid. Third, Mr. Karigar behaved with “a complete sense of entitlement.” Finally, Mr. Karigar personally conceived and orchestrated the scheme.

Several mitigating factors were also noted. The bribery scheme was unsuccessful. In addition, Mr. Karigar helped to shorten the trial by cooperating in the prosecution. Indeed, it was his exposure of the bribery scheme after a falling out with his co-conspirators, and his inability to secure an immunity agreement, that led to his prosecution. Mr. Karigar’s prior clean record, his 67 years of age and his failing health were also considered mitigating factors.”

For more, see here from Blakes.

The Race is On

This previous post regarding GSK’s scrutiny in China noted that one of the more interesting aspects of the scrutiny will be the enforcement competition between Chinese, U.K., and U.S. authorities. The U.K. has unique double jeopardy provisions and former U.K. Serious Fraud Office Director Richard Alderman has stated (see here):

“Our double jeopardy law looks at the facts in issue in the other jurisdiction and not the precise offence. Our law does not allow someone to be prosecuted here in relation to a set of facts if that person has been in jeopardy of a conviction in relation to those facts in another jurisdiction.”

The race is on as GSK recently disclosed:

“GSK has … been informed by the UK’s Serious Fraud Office (SFO) that it has opened a formal criminal investigation into the Group’s commercial practices. GSK is committed to operating its business to the highest ethical standards and will continue to cooperate fully with the SFO.”

In this release, the SFO states:

“The Director of the SFO has opened a criminal investigation into the commercial practices of GlaxoSmithKline plc and its subsidiaries. Whistleblowers are valuable sources of information to the SFO in its cases. We welcome approaches from anyone with inside information on all our cases including this one …”.

For additional reporting, see here

Deserving Part 2

Earlier this week, the African Development Bank (“AfDB”) announced:

“[T]he conclusion of a Negotiated Resolution Agreement with Snamprogetti Netherlands B.V. following the company’s acceptance of the charge of corrupt practices by affiliated companies in an AfDB-financed project. As part of the Negotiated Resolution Agreement, the Bank’s Integrity and Anti-Corruption Department levied a financial penalty of US $5.7 million against the company.”

The project at issue was once again the Bonny Island, Nigeria project and the recent AfDB action follows a March action (see here for the prior post) in which the AfDB assessed $17 million in financial penalties against other Bonny Island participants – Kellogg Brown & Root, Technip, and JGC Corp.

As highlighted in this previous post, in July 2010 Snamprogetti and related entities resolved a $365 million DOJ/SEC enforcement action involving Bonny Island conduct.

My comment is the same as it was in connection with the March AfDB action against other Bonny Island participants.

Pardon me for interrupting this feel good moment (i.e. a corporation paying money to a development bank), but why is the AfDB deserving of any money from the companies?  As noted here, AfDB’s role in the Bonny Island project was relatively minor as numerous banks provided financing in connection with the project. Moreover, as noted here, the AfDB “invested in the oil and gas sector through a USD 100 million loan to NLNG [Nigeria LNG Limited] to finance the expansion of a gas liquefaction plant located on Bonny Island.”

Why is the bank that loaned money to NLNG deserving of anything?  Is there any evidence to suggest that the $100 million given to NLNG was not used for its “intended purpose” of building the Bonny Island project?

Quotable

In this recent Wall Street Journal Risk & Compliance Journal Q&A, Kathleen Hamann (a recent departure from the DOJ’s FCPA Unit) states:

“Tell me what companies should take from your time at the Justice Department now that you’re advising them on how to fulfill the requirements of an FCPA compliance program.

The first thing I would say is that companies shouldn’t just be thinking about the FCPA. There’s been such a proliferation of transnational bribery laws and domestic bribery laws that you may not [just] have an FCPA issue. You also have to think about the U.K. Bribery Act, you may have to think about the Corruption of Foreign Public Officials Act in Canada, [among others.]

A lot of the laws in other countries have complete defenses to liability for having a good compliance program in place. Having a good compliance program ahead of time not only helps prevent misconduct, but it also puts the company in a better position if something does go wrong. There are points all the way where a good compliance program and strong remediation can either stop an investigation, or really mitigate the consequences of the investigation, both in terms of the penalty and in terms of the reputational risk the company will take.

[....]

What do you tell companies about self-reporting allegations to the authorities?

I think it’s a much more complicated question than even five years ago. It used to be that you disclose to the Justice Department and the SEC; you deal with them and it’s over. But now: How many different jurisdictions do you need to disclose to? What if it’s a country with no mechanism for voluntary disclosure, or no mechanism to reward voluntary disclosure?

I also think there’s a perception that your only two choices are to voluntarily disclose, lay down and cooperate, and give the department everything it asks for — or fight from day one. Those aren’t the only two options. There are stages of cooperation where you can get full credit, without accepting everything that is said by the government as gospel.

You want to minimize disruption to your business operations , which can be one of the best incentives for voluntary disclosure. The U.S. generally doesn’t do things like seize servers, but others do. It’s incredibly disruptive to business operations to have foreign law enforcement take your in-country server. There has to be a very clearheaded assessment of what jurisdictions are involved, how complicated voluntary disclosure will be and what the genuine benefits and risks are of the disclosure are.”

Revised Roundup

Last week’s roundup collected commentary regarding the 11th Circuit’s recent “foreign official” ruling. The post has been revised to include several additional law firm alerts, etc. and now includes over 25 links.

*****

A good weekend to all.

 Read more articles on the FCPA by Mike Koehler at FCPA Professor.

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