This article was reprinted with permission from FCPA Professor
The FCPA in the hallways, Super Bowl bribery, no FCPA charges, quotable, survey says, FCPA reform advocate nominated to the federal bench, interesting homework assignment, scrutiny alert, and for the reading stack. It’s all here in the Friday roundup.
FCPA in the Hallways
Avon’s FCPA scrutiny brought the FCPA to main street. News Corp.’s and Wal-Mart’s FCPA scrutiny generated world-wide media coverage. Will the FCPA next become the topic of discussion in middle school and high school hallways across America?
According to this TMZ report:
“A Canadian border official has been fired for allegedly accepting a $10,000 bribe in return for allowing members of Justin Bieber’s entourage with criminal records to enter Canada. Bieber’s camp reportedly gave a female officer at the Niagara Falls border thousands of dollars in backstage passes to get members of his posse into the country while he performed. Canada has a strict policy on not allowing people with certain types of criminal records to enter. It’s unclear when the alleged bribes went down … but Justin performed 2 shows in Toronto last year. The accusations surfaced after more of Bieber’s friends allegedly showed up at the border looking for the same special treatment — and the officers on duty blew the whistle. The Canada Border Services agency reportedly circulated an internal memo reminding officers not to take bribes … and to rat out anyone who does.”
In case you are wondering, there have been several FCPA enforcement actions in recent years concerning alleged payments to customs, immigration and other regulatory officials in connection with a business purpose broadly speaking.
Super Bowl Bribery?
Providing money or other things of value to a person or entity to influence the discretionary acts of that person or entity in connection with a business purpose is bribery … is it not?
Yet, according to this Wall Street Journal article, the above may determine which artist receives the coveted Super Bowl half-time performance slot. According to the article, the NFL “has asked artists under consideration for the high-profile gig to pay to play” including whether the artists “would be willing to contribute a portion of their post-Super Bowl tour income to the league, or if they would make some other type of financial contribution, in exchange for the halftime gig.”
According to the article, the NFL’s only goal is to “put on the best possible show.”
No FCPA Charges
It is sometimes perplexing why certain alleged conduct results in Foreign Corrupt Practices Act charges, whereas other alleged conduct – clearly implicating the FCPA – does not result in FCPA charges.
Case in point, the recent DOJ prosecution of Alisa Bivens, a U.S. citizen and former foreign program director of International Adoption Guides Inc. (IAG – a South Carolina company). (See here for the DOJ release). Bivens recently pleaded guilty to defrauding the U.S. in violation of 18 U.S.C. 317. As noted in the DOJ release:
“Bivens admitted as part of her plea that she and her co-conspirators submitted fraudulent documents to the State Department to facilitate adoptions of Ethiopian children by U.S. parents from 2006 until 2009. In support of U.S. visa applications for the Ethiopian children, Bivens and others submitted false documentation, including contracts of adoption signed by orphanages that could not properly give the children up for adoption because, for example, the child in question was never cared for or never resided at the orphanage.”
The DOJ release further states:
“In entering her guilty plea, Bivens also admitted that she and others paid bribes to two Ethiopian officials so that those officials would help with the fraudulent adoptions. The first of these two foreign officials, an audiologist and teacher at a government school, accepted money and other valuables in exchange for providing non-public medical information and social history information for potential adoptees to the conspirators. The second foreign official, the head of a regional ministry for women’s and children’s affairs, received money and all-expenses-paid travel in exchange for approving IAG’s applications for intercountry adoptions and for ignoring IAG’s failure to maintain a properly licensed adoption facility.”
U.S. Ambassador to China Max Baucus recently delivered this speech to the APEC Network of Anti-Corruption Authorities and Law Enforcement Agencies. Ambassador Baucus stated:
“The Obama Administration takes a firm stand against American and foreign companies that engage in bribing foreign officials to obtain or retain business. Other economies here do this as well. In the United States, one of the most effective tools we use to combat corruption is enforcement of the Foreign Corrupt Practices Act. We pursue corruption at many levels:
• corporations, both big and small;
• everyone from sales agents to CEOs;
• U.S. and foreign companies;
• citizens and foreign nationals; and
• direct payers and intermediaries.
Since 2009, the U.S. Department of Justice has taken in $3.4 billion from criminal fines, penalties and forfeitures. And the U.S. Securities and Exchange Commission has seized another $1 billion of profits obtained by illegal or unethical acts over the last ten years. As a result, more American companies have changed the way they do business. Companies are now more willing to voluntarily disclose corrupt behavior and report on solicitations for bribes.”
The last sentence of course is debatable.
Even so, what is not debatable is the following from Ambassador Baucus – “we need to adopt international best practices of transparency and rule of law” in the fight against corruption.
U.S. officials preach this virtue abroad, yet the reality is we need to work on these virtues here at home as well.
As to the rule of law, and as noted in this speech by former Federal Reserve Chairman Paul Volcker who was the keynote speaker at the International Bar Association’s annual conference:
“There is frank recognition that the combination of a weak rule of law and corruption is not only economically debilitating, but threatening the political health of both new and old democracies. I do not exclude the United States. We think of ourselves as exemplars of the rule of law. We are certainly world champions in the extent of legislation and regulation governing bribery, conflicts of interest, procurement procedures, campaign financing, protection of human rights and most of all, transparency. All of these are ingredients of what some think of as the rule of law. But we still face the sad fact that in the United States itself, only a quarter of Americans believe that corruption is not widespread in our country. My feeling is that the impression of serious corruption has increased further, a reflection largely of the concern that campaign financing has come to gravely distort the political process. Should we be satisfied that we live with a really effective rule of law, when the perceived need for heavy campaign spending has come to dominate our political process? We let those financing practices infringe in a very basic way upon the rule of law, with its sense of even-handedness and openness. Does it not breed behaviour that is accomplished by any reasonable definition of corruption?”
PwC’s 2014 State of Compliance Survey asked: ”Please select your top 3 areas in terms of current perceived level of risk to your business.” The most popular responses from survey participants were:
FCPA Reform Advocate Nominated to the Federal Bench
Earlier this week, President Obama announced his intent to nominate Haywood Stirling Gilliam, Jr. (Vice-Chair of Covington & Burling’s White Collar Defense and Investigations practice group) to serve on the United States District Court for the Northern District of California.
As noted in this previous post, in a 2013 Law360 Q&A Gilliam was asked “what aspects of your practice area are in need of reform and why?” and he stated:
“Foreign Corrupt Practices Act enforcement stands out as an area in need of further reform. Over the past several years, FCPA enforcement has been characterized by the U.S. Department of Justice and U.S. Securities and Exchange Commission advancing aggressive enforcement theories, but there have been limited opportunities for courts to scrutinize those theories. Most FCPA enforcement cases end in negotiated resolutions such as deferred prosecution or nonprosecution agreements. In that context, regulators often insist that the settling company or individual accept the government’s expansive theories as a condition of resolving the case. For example, the DOJ has extracted penalties from non-U.S. based, non-U.S. traded companies not covered under the four corners of the statute by asserting broad theories such as aiding and abetting or conspiracy — even when the foreign entity has not taken any action in the U.S. As a practical matter, that could be a hard case to prove at trial — but the government almost never has to. The result of this trend has been to enshrine the government’s aggressive enforcement positions as quasi-precedent: The law means what the DOJ and SEC say it means, and defendants (especially publicly traded companies) seldom have a realistic opportunity to push back in court, given the financial and practical costs of fighting a contested enforcement action. Relatively recently, district courts have begun to weigh in on these theories, which is a positive development, but there still is a dearth of FCPA case law as compared to other areas of criminal law. This absence of settled law makes it challenging for companies to decide how to handle thorny FCPA compliance issues. For example, companies routinely face a difficult choice in deciding whether to self-report potential violations to the government, as opposed to thoroughly investigating and remediating the issues internally. While regulators insist that they will give “meaningful credit” to companies that self-report, the tangible benefits of doing so are far from clear. The recent FCPA resource guide issued by the DOJ and SEC says that the agencies place a “high premium” on self-reporting, but does not give concrete guidance as to how the government weighs self-reporting in deciding whether to charge a case, as opposed to offering a deferred prosecution or nonprosecution agreement, or declining the case outright. While the resource guide is a start, companies and their counsel would benefit from more specific guidance when they are weighing the potential, but uncertain, benefits of disclosure against the cost and distraction that can result from voluntarily handing the government a case that otherwise might not have come to its attention.”
Interesting Homework Assignment
Professors are supposed to give homework, not receive homework.
Yet, as highlighted in this Corporate Crime Reporter article, Professor Brandon Garrett (UVA) recently received a homework assignment from a federal court judge.
The assignment: “to appear in [a] case as an amicus curiae for the limited purpose of providing the Court with advocacy on questions regarding the scope of the Court’s authority, if any, to consider the fairness and reasonableness of a deferred prosecution in deciding whether to accept or reject such an agreement.”
As noted in the Corporate Crime Reporter article, the DPA is between the DOJ and Saena Tech, a defense contractor and grew out of a domestic bribery investigation.
To say the least, I look forward to reviewing Professor Garrett’s homework and so should you.
Bloomberg goes in-depth in this article “The Hedge Fund and the Despot” concerning Och-Ziff’s relationships in Zimbabwe and the company’s overall scrutiny.
Previous posts (here) have detailed Barclay’s scrutiny on both sides of the Atlantic regarding its business relationships with various Middle Eastern investors.
“Britain’s fraud prosecutor could decide as soon as next month whether to charge former Barclays executives over undisclosed payments the bank made to Qatari investors in 2008.”
According to the article, “U.S. authorities are also investigating the same Barclays’ Qatari commercial agreements and whether third-party relationships breached anti-bribery rules.”
From Bloomberg, an in-depth look at the Libyan Investment Authority (LIA) and its relationships with various companies in the financial services industry which has resulted in FCPA scrutiny.
Informative article here titled “Land of Confusion: Insurance Coverage for Pre-Suit FCPA Investigation Costs Under D&O Liability Policies.”
An interesting front-page read here from the Wall Street Journal regarding China’s anti-corruption crackdown.
A good weekend to all.
Read more articles on the FCPA by Mike Koehler at FCPA Professor.
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