It is September and the pennant races are taking hold.
The Yankees and Red Sox just completed a 3 game series with great baseball;
dramatic home runs, retaliatory beanings and the inevitable scuffles. So the
National Pastime is rounding into its most enjoyable time of the year. However,
for sheer entertainment this year nothing can beat the Herculean struggle that
is the battle between Major League Baseball (MLB) and the Los Angeles Dodgers.
Let's briefly recap, in April MLB took control of the
Dodgers and assumed day-to-day operations of the club, from owner Frank
McCourt. In June McCourt countered by placing the Dodgers in bankruptcy. There
have been various legal maneuverings and machinations typical to bankruptcy
courts which are better suited to the E Entertainment network than ESPN. But
something occurred yesterday which would even interest the Foreign Corrupt
Practices Act (FCPA) practitioner.
In a September 1, article in the Los
Angeles Times, Bill Shaikin reported that a group headed by Bill Burke
offered to purchase the Dodgers for a MLB record of $1.2bn, all in cash. The
interesting part of this, from the FCPA perspective, is that some
unstated portion of the funding was by Chinese investors, who were only said to
be "certain state-owned investment institutions of the People's Republic
of China". Does that sound like a government owned Sovereign Wealth
Fund (SWF) to you? Shaikin's article did not report on how much of the $1.2bn
bid was funded by this governmental entity as he reported that in addition to
the SWF money, there were other 'unidentified American investors." So what are
the consequences if over 50% of the "all in cash" bid comes from "certain
state-owned investment institutions of the People's Republic of China"?
As reported by the FCPA Professor in a blog entitled, "House Hearing-Overview and
Observations", former Attorney General Mike Mukasey's testimony focused on
this issue of ownership. According to Mukasey, "majority ownership is the most
plausible threshold" for whether a state-owned or state-controlled enterprise
constitutes a foreign government "instrumentality." So if SWF puts up more than
50% of the money to purchase the Dodgers, are the Dodgers now an
instrumentality of the Chinese government? If so are Dodger employees now
"foreign officials" under the FCPA?
With that question in mind I wish a happy Labor Day
Weekend to all. Watch some great baseball and ponder the following: Is that
extra $5 you slip a Dodger employee for a better parking slot at Dodger Stadium
next year a facilitation payment or is it a bribe paid to a foreign
Visit the FCPA Compliance and Ethics Blog,
hosted by Thomas Fox, for more commentary on FCPA compliance, indemnities and
other forms of risk management for a worldwide energy practice, tax issues
faced by multi-national US companies, insurance coverage issues and protection
of trade secrets.
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© Thomas R. Fox, 2011
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