The Department of Justice ended one of its most
significant FCPA prosecutions against individuals in the history of the Act,
voluntarily dismissing with prejudice all of the remaining charges in the
Africa sting case. U.S. v Goncalves, No. 09-cr-335 (D.D.C.). The court
papers filed by the DOJ stated that the unprecedented step follows careful
consideration of three factors: "(1) the outcomes of the first two trials in
which . . . juries remained hung as to seven defendants and acquitted two . . .
and one defendant [was acquitted] . . .pursuant to Fed. R. Crim. P. 29; (2) the
impact of certain evidentiary and other legal rulings . . .; and (3) the
substantial governmental resources, as well as judicial, defense, and jury
resources, that would be necessary to proceed . . ."
The dismissal may mark a turning point in FCPA
enforcement. The DOJ and SEC have had a string of significant corporate
settlements over the years. Ever increasing sums were paid in settlement. What
was once a headline grabbing, and record setting amount, became an after
thought in the wake of the next huge case and even larger settlement.
Born of this trend, the African sting case was quickly
hailed as another FCPA milestone. It represented the largest FCPA sting
operation in history. Twenty two defendants were indicted in an action that was
so large it had to be broken into segments for trial. Early on defendants began
pleading guilty. What had been declared to be a "new era" of FCPA enforcement
seemed destine to continue.
Then things started to unravel. In the first corporate
case where a jury returned a verdict, the court tossed the case out on
post-trial motions as to Lindsey Manufacturing and the other defendants. U.S.
v. Aguillar, Case no. 2:10-cr-01031 (C.D.Cal.). While the ruling was
predicated on prosecutorial misconduct, the court made it clear that a key
factor was the weakness of the evidence. The first African Sting case ended
with a hung jury after the court dismissed substantive FCPA charges as to
certain defendants and each money laundering charge. In another case the court
dismissed all the FCPA charges as to former ABB official John O'Shae. U.S.
v. O'Shae, H-09-cr-429 (S.D. Tx). Subsequently the DOJ dismissed the remaining
charges. That was followed by the second African Sting trial which ended in two
acquittals and a hung jury as to three defendants. Post trial juror comments
made it clear that that jurors thought little of the government's case.
In the wake of DOJ's dismissal of all the remaining
African sting charges the critical question is where does the "new era" of
enforcement go? Nobody would seriously argue with the goals of the FCPA. At the
same time enforcement officials have steadfastly resisted efforts to amend
portions of the Act to give clarity to key terms such as who is a foreign
official or to add a compliance defense which should only serve to foster the
goals of the FCPA. Those officials also seem to have overlooked suggestions that
their interpretations of the Act are at times over-reaching such as in the
application of its jurisdictional provisions and the construction of the
facilitation payment provisions.
Perhaps now is a good time to stop and reflect on what
the courts and jurors have said about the "new era" of FCPA enforcement. Surely
that era should be more than a dazzling array of ever increasing monetary
payments by corporations or actions against individuals built on questionable
blue collar tactics. Surely it should be more than business organizations
spending ever increasing sums to conduct far reaching and perhaps at times
unnecessary investigations at huge expense in a effort to win cooperation
credit. Surely it should be more than brining increasing numbers of charges
against individuals and demanding longer and longer prison terms. Perhaps now
is the time to craft meaningful reform to the Act and enforcement policy to
ensure clearer guidance and a more balanced application of the statutes to
ensure that the laudable goals of the statute in a fair and balanced manner in
the future. That would truly be a "new era" of FCPA enforcement.
For more cutting edge commentary on
developing securities issues, visit SEC Actions, a
blog by Thomas Gorman.
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