Friday FCPA Roundup for Week Ending June 6

 This article was reprinted with permission from FCPA Professor

Up north, David Cameron gets it, scrutiny update, octogenarian, and quotable.  It’s all here in the Friday roundup.

Up North

Earlier this week, the Royal Canadian Mounted Police announced:

“The RCMP’s National Division has charged US nationals Robert Barra (former Cryptometrics CEO) and Dario Berini (former Cryptometrics COO) under Section 3.1 of the Corruption of Foreign Public Officials Act (CFPOA). UK national Shailesh Govindia, an agent for Cryptometrics, has also been charged under Section 3.1 of the CFPOA and with one count of fraud contrary to Section 380 Criminal Code. The charges were laid at the Ottawa Courthouse on Elgin Street.  These charges were laid as a result of an international investigation into allegations of bribery involving executives of Cryptometrics Canada Inc.  In 2006, Cryptometrics Canada tendered a contract with Air India for a Biometric Passenger Security System valued at approximately $100 million USD. Evidence gathered and later presented at trial revealed an agreement by Mr. Nazir Karigar, an agent working for Cryptometrics, to pay millions of dollars in bribes to Indian public officials for the purpose of securing a contract with Air India.  ”We have a mandate to investigate domestic and international allegations of corruption of foreign public officials.  This investigation demonstrates the RCMP’s commitment to combating international corruption.  Leaving these crimes unchallenged can jeopardize Canada’s reputation as a fair and transparent society”, said Assistant Commissioner, Gilles Michaud, Commanding Officer of National Division.  The initial investigation led to a conviction for Mr. Nazir Karigar who received a three year sentence. The second phase of the investigation focused on the activities of the former CEO and COO of the company.  Canada-wide warrants have been issued for all three accused.”

See here for previous posts regarding the Karigar enforcement action.  For additional coverage of the recent charges, see here and here.

The charges against the foreign national defendants will be most interesting to follow, particularly in light of this April 2014 decision by a judge in Toronto who stayed a bribery charge under the CFPOA against foreign national defendant Abul Hasan Chowdhury.  The judge ruled that the CFPOA provided no jurisdiction over the foreign national defendant based on the alleged conduct.

David Cameron Gets It

In this opinion piece in the Wall Street Journal, the U.K. Prime Minister writes “the best way to fight corruption and drive growth is through what I call the three Ts: greater transparency, fair tax systems and freer trade.”

As to the later, Cameron writes:

“On trade, the World Trade Organization in December delivered a massive breakthrough, with the first global trade deal in a generation. Every country in the WTO committed to sweep away red tape and bureaucracy at ports and borders. This alone could add £70 billion to the world economy each year, including £7 billion for sub-Saharan Africa and £1 billion for the U.K. We must build on this momentum and press ahead with global negotiations on services and green goods, and we must take a bold and ambitious approach to bilateral trade deals. That means signing the EU-Canada deal and continuing the progress toward an EU-Japan agreement. Above all it means seizing the historic opportunity to conclude a deal like no other: the Trans-Atlantic Trade and Investment Partnership between the U.S. and EU begun at Lough Erne. This deal has the potential to deliver a turbo-boost to growth and jobs, helping to secure our economic future for the long-term. And by making global supply chains more efficient, it will also have benefits for the global economy. We must have the political courage to be radical in seeing this through. I certainly intend to be. And we must be just as ambitious in offering strong support for market access for the least developed countries.”

As previously highlighted (see here) trade barriers and distortions create bureaucracy. Bureaucracy creates points of contact with foreign officials. Points of contact with foreign officials create discretion. Discretion creates the opportunity for a foreign official to misuse their position by making demand bribes.  A reduction in bribery will not be achieved without a reduction in trade barriers and distortions.

Scrutiny Update

Key Energy Services

The company which previously disclosed FCPA scrutiny in Russia (see heredisclosed earlier this week as follows.

“In April 2014, the Company became aware of an allegation involving Key’s Mexico operations that, if true, could potentially constitute a violation of certain Company policies, including our Code of Business Conduct, the U.S. Foreign Corrupt Practices Act (FCPA) and other applicable laws. The Company conducted an initial investigation of this matter and the Board of Directors of the Company has formed a special committee of independent directors to oversee the investigation of this matter as well as the investigation of previously disclosed possible violations of the FCPA involving business activities of our operations in Russia, and any other resulting matters. The special committee has retained external independent legal counsel to continue these investigations. On May 30, 2014, the Company voluntarily disclosed the allegation and information from this initial investigation to the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ). The Company and its management are fully cooperating with the SEC and DOJ; however, at this time the Company is unable to predict the ultimate resolution of these matters with these agencies.”

Octogenarian

The SEC turns 80 today.  See here for an informative overview.  With the SEC currently having an FCPA Unit, it is interesting to note that the SEC originally never wanted any part in enforcing the FCPA’s anti-bribery provisions.  See here for “The Story of the Foreign Corrupt Practices Act.”

Quotable

I’ve never before visited the blog “The Campaign for Boring Development” but am glad my daily FCPA search landed me on this post because it contains perhaps the best comment under 25 words ever written about the word “corruption.”

“[C]orruption isn’t an analytical category, it’s a moral judgment. It’s a word that tends to close minds and end debates, rather than open them.”

I agree (see here for the prior post “Lots of Talk .. But What Is It?” and  here for my article “Corruption Is Bad … But What Is It, and What Should Be Done?”).

This post earlier this week focused on the DOJ’s and SEC’s apparent obsession with enforcement statistics.  In this retirement speech, long-time SEC enforcement attorney James Kidney calls this mindset a “cancer.”  He states:

“The only other item I want to be serious about, besides some personal observations in a minute, is the metric of the division of enforcement: number of cases brought. It is a cancer. It should be changed. I have suggested to our higher ups on several occasions starting a discussion about factors we – after Monday, you — should weigh in evaluating investigations to be sure our resources are being well-spent and properly distributed. It has gone nowhere. One argument against change is that the press and congress are welded to our own anvil. But I submit that there are not more than a dozen reporters who matter covering the Commission, and about the same number of Hill staffers. I imagine they would welcome coming to an educational event about the Division’s new metric, one which focuses on quality, not quantity. Who could be against it? Goodness knows we spend millions promoting even our emptiest achievements. Why not promote a new metric that will be sensible and helpful. Current management of the Division would either adjust or leave.

Please don’t tell me we account for other factors in our management of cases. We think about them, of course, but we all see cases frequently to which we offer a head scratching response. Really? The SEC spent time and money on that? These cases have no significant impact and the conduct is of minimal or no harm to the investing public. But the investigation has been intense and expensive. Could no one in management exercise judgment and call the investigation to a halt? Of course not! Bringing the case is a stat!

The metric we have now is built into the soul of the Division. It has to be removed root and branch.”

*****

A good weekend to all.

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

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