This article was reprinted with permission
from FCPA Professor
From the SEC Chairman, Congress is
capable, adding to the list, scrutiny alerts, and for the reading
stack. It's all here in the Friday Roundup.
From the SEC Chairman
SEC Chairman Elisse Walter stated as follows earlier
this week (see here)
in opening a Foreign Bribery and Corruption Training Conference for law
enforcement officials from around the world.
"[W]e have found that corrupt practices by a registered
company are generally indicators of larger problems within the business -
problems with the potential to harm that business's shareholder-owners.
Bribery and other corrupt practices may result in accounting fraud and
falsified disclosures where shareholders are not getting an accurate picture of
a company's finances in their regulatory filings. Bribery means losing
control of - or deliberately falsifying - books and records. Often, key
executives or board members are kept in the dark, limiting their ability to
make informed decisions about the company's business. Obviously, engaging in
corrupt practices means weakening or circumventing internal control mechanisms,
leaving a company less able to detect and end not just corruption but other
questionable practices. A company that has lost its moral compass is in grave
danger of losing its competitive roadmap, as well - while shareholders are kept
in the dark."
Congress Is Capable
Well, at least as to certain issues.
Such as introducing and passing laws that expressly
describe state-owned entities ("SOEs"). In reading my historical
account of the FCPA's legislative history, "The Story of
the Foreign Corrupt Practices Act" or my "foreign official" declaration here,
you will learn that despite being aware of SOEs, despite exhibiting a
capability for drafting a definition that expressly included SOEs in other
bills, and despite being provided a more precise way to describe SOEs, Congress
chose not to include such definitions or concepts in S. 305, the bill that
ultimately became the FCPA in December 1977.
post highlighted Congress's capability in capturing SOEs in
Dodd-Frank Section 1504 and along comes another example which demonstrates that
Congress is capable of legislating as to SOEs. Recently, H.R.491
- the Global Online Freedom Act of 2013 was introduced in the House.
The purpose of the bill is "To prevent United States businesses from
cooperating with repressive governments in transforming the Internet into a
tool of censorship and surveillance, to fulfill the responsibility of the
United States Government to promote freedom of expression on the Internet, to
restore public confidence in the integrity of United States businesses, and
for other purposes."
The bill defines "foreign official" as follows.
The term 'foreign official' means- (A) any officer
or employee of a foreign government or of any department; and (B) any
person acting in an official capacity for or on behalf of, or acting under
color of law with the knowledge of, any such government or such department, agency,
state-owned enterprise, or instrumentality." (emphasis added).
It is a basic premise of statutory construction that
Congress is presumed not to use redundant or superfluous language.
Granted, H.R.491 is not yet law, but let's assume it becomes law as
introduced. If instrumentality includes SOEs (as the enforcement
agencies maintain), then Congress will violate this legislative maxim
by using redundant or superfluous language in H.R. 491.
Adding To The List
The Heritage Foundation recently published (here) a speech
by Peter Hansen titled "Unleashing the U.S. Investor in Africa: A Critique of
U.S. Policy Toward the Continent." Hansen critiqued U.S. government
thinking about African development, including Ambassador statements that it is
important to raise incentives for overly "cautious" U.S. companies to invest in
Africa. Hansen stated that this "mistaken assumption" assumed
that "mainstream U.S. companies will be motivated more by the prospect of
higher rewards than by the diminishment of risks." He noted
that this view is not just wrong, but counterproductive and
stated as follows.
"The problem with Africa is not a lack of attractive
prospects, but rather Africa's risk profile. With few exceptions, sensible U.S.
direct investors (that is, those who run projects, not just take
portfolio positions) have steered clear of Africa for the simple reason that
Africa's risks often exceed their risk tolerance. The African market has been
left largely to non-Americans, to the unsophisticated seekers of El Dorado, and
to a legion of "chancers" who seek sweetheart deals with no money down. The
resulting tales of woe coming out of Africa, due largely to poor investment
planning or thwarted get-rich-quick schemes, serve wrongly to tarnish Africa's
reputation. By exclusively raising incentives and failing to reduce
risks, Ambassador Carson's approach simply encourages those already prone to
failure, without inspiring broad-spectrum investment by serious U.S. companies.
Such bedrock U.S. firms do not need higher incentives. Africa already presents
high-return opportunities. What serious U.S. firms need instead is for Africa's
risks to be reduced. Rewards that cannot be obtained are, after all, just
mirages. The easiest way for the U.S. government to reduce risks for U.S.
investors in Africa is to provide them with legal protection. The basic
legal tools for protecting U.S. investors are double tax treaties (DTTs), often
called double tax agreements (DTAs) and bilateral investment treaties (BITs)."
Query whether an FCPA compliance defense should be added
to this list? See here to
download my article "Revisiting a Foreign Corrupt Practices Act Compliance
Scrutiny Alerts and Updates
previous post highlighted the scrutiny Brookfield Asset Management (a Toronto
based global asset management company with shares traded on the NYSE)
was facing in Brazil concerning allegations that its subsidiary paid bribes to
win construction permits. As the Wall Street Journal recently reported (here),
Sao Paulo, Brazil prosecutors filed civil charges against the company's
Brazilian subsidiary, two of its top executives and a former employee.
The prosecutor is quoted in the WSJ as saying that "Brookfield has created a
high system of bribery in order to obtain approval for its projects quickly and
with irregularities." A spokesman for the company stated as
follows. "These are unproven allegations made by a former employee.
We don't believe Brookfield did anything wrong and we are cooperating with
post highlighted scrutiny of EADS subsidiary, GPT Special Management
Systems in the U.K. The Financial Times recently reported here that
the FBI is also probing corruption allegations against GPT "relating to a
contract in Saudi Arabia." The article states as follows. "The FBI
has interviewed a witness and taken possession of documents in connection with
allegations that GPT bribed Saudi military officials with luxury cars and made
£11.5m of unexplained payments - some via the US - to bank accounts in the
Reuters article reports that Italian police arrested the head of
defense group Finmeccanica SpA (Giuseppe Orsi) on a warrant alleging that
he paid bribes to win an Indian contract. According to the report,
Prosecutors accuse Orsi of paying bribes to intermediaries to secure
the sale of 12 helicopters in a 560 million euro ($749 million) deal when he
was head of the group's AgustaWestland unit. Finmeccanica, which is
approximately 30% owned by the Italian government, has ADRs registered
with the SEC and AgustaWestland does extensive business in the U.S. (see here), including with
the U.S. government. According to this Wall
Street Journal article, Italian prosecutors are also "investigating
[Finmeccanica] on suspicion that it engaged in corrupt activities to win
various types of contracts in Latin America, Asia, and at home."
Bloomberg article reports that "Eni SpA Chief Executive Officer Paolo
Scaroni is being investigated for alleged corruption in an Italian probe
of contracts obtained by its oil services company, Saipem SpA, in
Algeria." Eni has ADRs registered with the SEC. In 2010, Eni
resolved (see here)
an SEC FCPA enforcement action concerning Bonny Island, Nigeria
conduct. In resolving the action, Eni consented to the entry of a
court order permanently enjoining it from violating the FCPA's books and record
and internal controls provisions.
NCR Corporation stated in a recent release here,
in pertinent part, as follows concerning its FCPA scrutiny.
"Update regarding OFAC and FCPA
The Company and the Special Committee of the
Company's Board of Directors have each completed their respective
internal investigations regarding the anonymous allegations received from
a purported whistleblower regarding certain aspects of the Company's
business practices in China, the Middle East and Africa. The principal
allegations relate to the Company's compliance with the Foreign Corrupt Practices
Act ("FCPA") and federal regulations that prohibit U.S. persons from
engaging in certain activities in Syria.
The Company has made a presentation to the staff of the
Securities and Exchange Commission("SEC") and the U.S. Department of
Justice ("DOJ") providing the facts known to the Company related to the
whistleblower's FCPA allegations, and advising the government that
many of these allegations were unsubstantiated. The Company's
investigations of the whistleblower's FCPA allegations identified a
few opportunities to strengthen the Company's comprehensive
FCPA compliance program, and remediation
measures were proposed and are being implemented. As previously
disclosed, the Company is responding to a subpoena of the SEC and requests
of the DOJ for documents and information related to the FCPA, including
matters related to the whistleblower's FCPA allegations."
Investigating the purported whistleblower's allegations
has been a costly exercise for NCR. In a recent earnings conference call,
company CFO Bob Fishman stated that the "overall cost" has been approximately
See here for
the New York Times DealBook writeup of oral arguments in SEC v. Citigroup -
an appeal which focuses of Judge Jed Rakoff's concerns about common SEC
settlements terms, including neither admith nor deny.
FCPA enforcement statistics are over-hyped for
compliance assessments says Ryan McConnell (Morgan Lewis) in this
Corporate Counsel article. In this
Corporate Counsel article, McConnell and his co-author compare 2012 to 2011
numbers in terms of facilitation payments data found in corporate
The three types of employees one encounters when
conducting FCPA training - here from
Alexandra Wrage (President, Trace International).
If for no other reason, because of the picture associated
recent post on thebriberyact.com.
A good weekend to all.
Read more articles on the FCPA by Mike
Koehler at FCPA
For more information about LexisNexis
products and solutions connect with us through our corporate site.