This article was reprinted with permission from FCPA Professor
Further trimmed, scrutiny alerts and updates, facts and figures, quotable, and for the reading stack. It’s all here in the Friday roundup.
When the SEC announced its enforcement action against James Ruehlen and Mark Jackson (a current and former executive of Noble Corp.) in February 2012, I said that this would be an interesting case to follow because the SEC is rarely put to its burden of proof in FCPA enforcement actions – and when it has been put to its ultimate burden of proof – the SEC has never prevailed in an FCPA enforcement action.
Over the past two years, the SEC’s case has been repeatedly trimmed. (See this recent post containing a summary). In the latest cut, the SEC filed an unopposed motion for partial voluntary dismissal with prejudice on March 25th. In pertinent part, the motion states as follows.
“To narrow this case and streamline the presentation of evidence to the jury, the SEC hereby moves for leave to voluntarily dismiss with prejudice all portions of its claims … predicated upon Noble Corporation’s violation of [the FCPA's internal controls provisions".
For additional specifics, see the filing.
As highlighted in this previous post, in 2010 the SEC charged Noble Corporation with violating the FCPA's anti-bribery, books and records and internal controls provisions based on the same core conduct alleged in the Jackson/Ruehlen action. Without admitting or denying the SEC’s allegations, Noble agreed to agreed to an injunction and payment of disgorgement and prejudgment interest of $5,576,998.
In short, the SEC's enforcement action against Ruehlen and Jackson is a shell of its former self. Interesting, isn't it, what happens when the government is put to its burden of proof in FCPA enforcement actions.
Scrutiny Alerts and Updates
Bloomberg reports speculation that a future FCPA enforcement action against Alstom could top the charts in terms of overall fine and penalty amounts. (See here for the current Top 10).
The article states:
"The Justice Department is building a bribery case against Alstom SA , the French maker of trains and power equipment, that is likely to result in one of the largest U.S. anticorruption enforcement actions, according to two people with knowledge of the probe. Alstom, which has a history checkered with corruption allegations, has hindered the U.S. investigation of possible bribery in Indonesia and now faces an expanded probe including power projects in China and India, according to court documents in a related case. Settlement talks haven’t begun, the company said."
Netherlands-based and NASDAQ traded telecommunications company VimpelCom recently disclosed:
"[T]hat in addition to the previously disclosed investigations by the U.S. Securities and Exchange Commission and Dutch public prosecutor office, the Company has been notified that it is also the focus of an investigation by the United States Department of Justice. This investigation also appears to be concerned with the Company’s operations in Uzbekistan. The Company intends to continue to fully cooperate with these investigations.”
On March 12, 2014, VimpelCom disclosed:
“The Company received from the staff of the United States Securities and Exchange Commission a letter stating that they are conducting an investigation related to VimpelCom and requesting documents. Also, on March 11, 2014, the Company’s headquarter in Amsterdam was visited by representatives of the Dutch authorities, including the Dutch public prosecutor office, who obtained documents and informed the Company that it was the focus of a criminal investigation in the Netherlands. The investigations appear to be concerned with the Company’s operations in Uzbekistan. The Company intends to fully cooperate with these investigations.”
As noted in this Wall Street Journal Risk & Compliance post, Orthofix International recently disclosed:
“We are investigating allegations involving potential improper payments with respect to our subsidiary in Brazil.
In August 2013, the Company’s internal legal department was notified of certain allegations involving potential improper payments with respect to our Brazilian subsidiary, Orthofix do Brasil. The Company engaged outside counsel to assist in the review of these matters, focusing on compliance with applicable anti-bribery laws, including the Foreign Corrupt Practices Act (the “FCPA”). This review remains ongoing.”
As noted in this previous post, in July 2012 Orthofix International resolved a DOJ/SEC FCPA enforcement action concerning alleged conduct by a Mexican subsidiary. In resolving that action, the company agreed to a three year deferred prosecution agreement. As is typical in FCPA DPAs, in the Orthofix DPA the DOJ agreed not continue the criminal prosecution of Orthofix for the Mexican conduct so long as the company complied with all of its obligations under the DPA, including not committing any felony under U.S. federal law subsequent to the signing of the agreement.
See this prior post for a similar situation involving Willbros Group (i.e. while the company while under a DPA it was investigating potential additional improper conduct). As noted here, Willbros was released from its DPA in April 2012, the original criminal charges were dismissed and no additional action was taken.
Across the pond, the U.K. Financial Conduct Authority (“FCA”) recently issued this final notice to Besso Limited imposing a financial penalty of £315,000 for failing “to take reasonable care to establish and maintain effective systems and controls for countering the risks of bribery and corruption associated with making payments to parties who entered into commission sharing agreements with Besso or assisted Besso in winning and retaining business (“Third Parties”).”
Specifically, the FCA stated:
“The failings at Besso continued throughout the Relevant Period [2005-2011] and contributed to a weak control environment surrounding the making of payments to Third Parties. This gave rise to an unacceptable risk that payments made by Besso to Third Parties could be used for corrupt purposes, including paying bribes to persons connected with the insured or public officials. In particular Besso: (1) had limited bribery and corruption policies and procedures in place between January 2005 and October 2009. It introduced written bribery and corruption policies and procedures in November 2009, but these were not adequate in their content or implementation; (2) failed to conduct an adequate risk assessment of Third Parties before entering into business relationships; (3) did not carry out adequate due diligence on Third Parties to evaluate the risks involved in doing business with them; (4) failed to establish and record an adequate commercial rationale to support payments to Third Parties; (5) failed to review its relationships with Third Parties, in sufficient detail and on a regular basis, to confirm that it was still appropriate to continue with the business relationship; (6) did not adequately monitor its staff to ensure that each time it engaged a Third Party an adequate commercial rationale had been recorded and that sufficient due diligence had been carried out; and (7) failed to maintain adequate records of the anti-bribery and corruption measures taken on its Third Party account files.”
The FCA has previously brought similar enforcement actions against Aon Limited (see here), Willis Limited (see here), and JLT Speciality Limited (see here). For more on the U.K. FCA and its focus on adequate procedures to prevent bribery , see this guest post.
Facts and Figures
Trace International recently released its Global Enforcement Report (GER) 2013 – see here to download. Given my own focus on FCPA enforcement statistics and the various counting methods used by others (see here for a recent post), I particularly like the Introduction of the GER in which Trace articulates a similar “core” approach that I use in keeping my enforcement statistics. The GER states:
“[W]hen a company and its employees or representatives face multiple investigations or cases in one country involving substantially the same conduct, only one enforcement action is counted in the GER 2013. An enforcement action in a country with multiple investigating authorities, such as the U.S., is also counted as one enforcement action in the GER 2013.”
The Conference Board recently released summary statistics regarding anti-bribery policies. It found as follows.
39% of companies in the S&P Global 1200; 23% of companies in the S&P 500; and 14% of companies in the Russell 1000 reported having a policy specifically against bribery.
Given the results of other prior surveys which reported materially higher numbers, these results are very surprising.
This recent Wall Street Journal article “Global Bribery Crackdown Gains Steam” notes as follows.
“Cash-strapped countries are seeing the financial appeal of passing antibribery laws because of the large settlements collected by the U.S., according to Nathaniel Edmonds, a former assistant chief at the U.S. Department of Justice’s FCPA division. ”Countries as a whole are recognizing that being on the anticorruption train is a very good train to be on,” said Mr. Edmonds, a partner at Paul Hastings law firm.”
The train analogy is similar to the horse comment former DOJ FCPA enforcement attorney William Jacobson made in 2010 in an American Lawyer article that “[t]he government sees a profitable program, and it’s going to ride that horse until it can’t ride it anymore.” For additional comments related to the general topic, see this prior post.
This recent Wall Street Journal Risk & Compliance Journal post contains a Q&A with former DOJ FCPA Unit Chief Chuck Duross. Contrary to the inference / suggestion in the post, Duross did not bring “tougher tactics” such as wires and sting operations to the FCPA Unit. As detailed in prior posts here and here, undercover tactics and even sting operations had been used in FCPA enforcement actions prior to the Africa Sting case.
Speaking of the Africa Sting case, the Q&A mentions reasons for why the Africa Sting case was dropped. Not mentioned, and perhaps relevant, is that the jury foreman of the second Africa Sting trial published this guest post on FCPA Professor after the DOJ failed in the second trial. Two weeks later, the DOJ dismissed all charges against all Africa Sting defendants.
Further relevant to the Africa Sting case, the Wall Street Journal recently ran this article highlighting the role of Richard Bistrong, the “undercover cooperator” in the case. Bistrong has recently launched an FCPA Blog – see here.
A good weekend to all.
Read more articles on the FCPA by Mike Koehler at FCPA Professor.
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