InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
SEC’S FCPA Chief to Leave Agency Later in April
On April 4, the SEC announced that FCPA Unit Chief Kara Brockmeyer will leave the agency later this month. Ms. Brockmeyer joined the SEC in 2000 and has led the FCPA Unit since September 2011. Under her supervision of the unit, the SEC brought 72 FCPA enforcement actions resulting in judgments and orders totaling more than $2 billion in disgorgement, prejudgment interest, and penalties.
Former Thailand Tourism Chief Sentenced to 50 Years for Accepting Bribes
On March 29, the former governor of the Tourism Authority of Thailand was reportedly sentenced in Thailand to 50 years in prison for accepting $1.8 million in bribes from 2002 to 2007 from two U.S. filmmakers in exchange for rights to organize the Bangkok International Film Festival. The former tourism chief was also ordered to forfeit the bribe money. Her daughter received a 44-year prison sentence for her own involvement. In 2009, the U.S. filmmakers, who paid the bribes, were convicted in the U.S. on charges of FCPA violations. A U.S. federal court sentenced the filmmakers to six months incarceration, three years of supervised release, and $250,000 in restitution.
The former tourism chief and her daughter were also indicted in the U.S. in January 2009 for the same underlying conduct. The indictment raised interesting questions about the United States pursuing corruption on the “demand side,” in light of the fact that the FCPA does not criminalize the receipt of bribes. The indictment instead alleged money laundering violations and related charges. The former tourism chief moved to dismiss the U.S. indictment based on the double jeopardy provision of the Thai-US extradition treaty. The decision on her motion was stayed, pending the outcome of the Thai prosecution.
New Survey Reports on Corruption in the Asia Pacific Region
A German nonprofit that tracks global corruption and perceptions of corruption, has published People and Corruption: Asia Pacific – Global Corruption Barometer. In what the organization calls “the most extensive survey of its kind,” the group spent a year and a half interviewing over 21,000 people living in the Asia Pacific region as a litmus test for corruption in the area. The 38-page report found considerable differences in bribery rates between surveyed countries; for example, while Japan weighed in at 0.2%, a staggering 69% of people surveyed in India indicated they had paid a bribe in the past year in exchange for public services. People across the surveyed region agreed that police were the most corrupt part of public services. While Australians expressed the “most positive” outlook on corruption, people in Malaysia and Vietnam felt the least positive overall, and people in China “were most likely to think the level of corruption had increased recently.” The report outlines three key recommendations, encouraging governments to “make good on promises,” “stop[] bribery in public services,” and “encourag[e] more people to report corruption.”
New DOJ Appointee Expresses Commitment to Enforcing the FCPA
In late January of 2017, President Donald Trump appointed Trevor N. McFadden as Deputy Assistant Attorney General in the U.S. Department of Justice Criminal Division, a position that includes oversight over the Fraud and Criminal Appellate Sections. The Fraud Section is in charge of enforcing the FCPA, placing the former law firm Litigation and Government Enforcement partner, who also served as an Assistant U.S. Attorney and Counsel to the Deputy Attorney General, in a key role to determine the future of FCPA enforcement under the new administration. On February 16, 2017, McFadden gave a speech at the Global Investigations Review Conference in which he proclaimed his dedication to the continued enforcement of the statute. While McFadden’s comments reflect Attorney General Jeff Sessions’ recent promise to enforce the FCPA, they contrast with President Trump’s 2012 comments that the FCPA is a “horrible law” that “should be changed.”
Above all, McFadden’s message was one of enforcement, enforcement, enforcement. He commented that the law “has been vigorously enforced” over its 40-year history, efforts which have “steadily increased over time.” McFadden specifically highlighted two important trends of this history of enforcement: transparency to businesses, and cooperation with foreign nations in the fight against corruption. McFadden’s emphasis on the “utmost importance” of working with other countries also signaled a continued commitment to what he called “important anti-corruption conventions,” including “the OECD Anti-Bribery Convention, the United Nations Convention Against Corruption (NCAC), the Convention on Transnational Organized Crime (UNTOC), and several others.”
In looking to the future of FCPA enforcement, McFadden called the law’s continued “fight against official corruption [] a solemn duty of the Justice Department…regardless of party affiliation.” He also emphasized that the Justice Department will continue to prioritize “individual accountability,” although he did comment that some people “may be unwittingly involved in facilitating an illegal payment under circumstances that do not merit criminal prosecution of the individual.” Finally, McFadden expressed that a company’s “voluntary self-disclosures, cooperation, and remedial efforts” will “continue to guide our prosecutorial discretion determinations,” along with the “penalty reductions for companies that self-disclose, cooperate, and accept responsibility for their misconduct” provided for in the U.S. Sentencing Guidelines. Interestingly, the only whiff of questioning past Justice Department approaches was McFadden’s mention of an upcoming review of the FCPA pilot program encouraging such company cooperation. However, plans to re-evaluate the pilot program were already in place under the Obama administration, according to an article McFadden co-wrote with colleagues at his proir law firm in April of 2016. Notably, McFadden’s article called the pilot program “a step forward in providing companies and their counsel with more transparent and predictable benefits for self-reporting, cooperating, and remediating FCPA misconduct.”
Second Circuit Hears Oral Arguments on Accomplice Theory of Liability Under FCPA
On March 2, 2017, a three judge panel for the United States Court of Appeals for the Second Circuit heard oral arguments in U.S. v. Hoskins. The government charged U.K. citizen with FCPA violations as part of a larger scheme involving a U.S. subsidiary of a French company. The citizen, a non-resident foreign national who did not act on U.S. soil and who was an executive of a non-U.S. company, argued in federal district court that Congress did not intend for people like him to be subject to direct FCPA liability, and that the government cannot circumvent Congressional intent by charging him with accomplice liability. In August of 2015, the federal district court in Connecticut ruled in the citizen’s favor, holding that the government would first have to show that the citizen was subject to direct liability as an agent of a U.S. concern in order to reach accomplice liability. The legal issues at hand are detailed in previous FCPA Scorecard posts here and here.
In addition to the important question of the scope of liability of foreign nationals under the FCPA, this argument has a secondary importance related to the right of the government to appeal criminal matters under Title 18 U.S.C. § 3731. Section 3731 allows the government to appeal “from a decision, judgment, or order of a district court dismissing an indictment or information or granting a new trial after verdict or judgment, as to any one or more counts, or any part thereof….” Here, the citizen argues that the court did not dismiss any counts, so the government had no right to make the interlocutory appeal. For its part, the government argues that the court’s ruling was effectively a dismissal of a portion of a count, making the matter appealable.
In ruling on the case, the Second Circuit will have the potential to expand or limit both the reach of the FCPA, and the power of the federal government to bring interlocutory appeals when a trial court rules against it in a criminal matter.
An mp3 of the oral arguments may be downloaded here.
Financial Services Institution Discloses SEC FCPA Investigation into Hiring Practices
On February 24, a major financial services institution disclosed in its 10-K that government and regulatory agencies, including the SEC, are conducting investigations concerning potential violations of the FCPA related to hiring of candidates referred by or related to foreign government officials. The institution stated that it was cooperating with the investigations.
This is not the first FCPA-related investigation of a company’s hiring practices. As previously reported here in November 2016, a global financial company and a Hong Kong subsidiary agreed to pay approximately $264 million to the DOJ, SEC, and the Federal Reserve, ending a nearly three year, multi-agency investigation of the subsidiary’s referral program through which the children of influential Chinese officials were allegedly given prestigious and lucrative jobs as a quid pro quo to retain and obtain business in Asia. Similarly, as reported here, in August 2015, the SEC announced a settlement with a multinational financial services company over allegations that the company violated the FCPA by giving internships to family members of government officials working at a Middle Eastern sovereign wealth fund in hopes of retaining or gaining more business from that fund. The company paid $14.8 million to settle the charges.
Nor are the inquiries confined to financial services companies. For example, the SEC announced in March 2016 that it settled charges with the San Diego-based mobile chip maker. The company agreed to pay a $7.5 million civil penalty to resolve charges that it violated the FCPA by hiring relatives of Chinese government officials and providing things of value to foreign officials and their family members, in an attempt to influence these officials to take actions that would assist the company in obtaining or retaining business in China.
Claims Management Company Reports Conclusion of SEC FCPA Investigation
As previously covered here, an Atlanta-based claims management firm, disclosed in November 2015 that it self-reported possible FCPA violations to the DOJ and SEC. These potential violations were identified during an internal audit. On February 27, 2017, the firm announced that it had received notice that the SEC “concluded its investigation and did not intend to recommend an enforcement action” related to this matter. The company did not reference the DOJ in its announcement.
Law Firm Raided, Founders Arrested, Tied to Bribery Investigation
On February 8, authorities in Panama raided the offices of a law firm at the center of the sprawling Panama Papers scandal, and arrested the firm’s founders. Reuters reports that Panama’s Attorney General announced on Twitter that the raid and arrests were tied to the investigation of the Brazilian construction company that in December reached a $3.5 billion combined global settlement with U.S., Brazilian, and Swiss authorities to resolve FCPA allegations. Until now, the investigations spawned by the 2016 release of millions of documents stolen from the law firm were focused on money laundering and tax evasion. The tie to the company’s investigation brings anti-bribery investigations into the mix.
CEO Questioned by UK SFO in Bribery Investigation
Less than a month ago, as previously reported on FCPA Scorecard, a UK-based manufacturer and global distributor for the civil aerospace, defense aerospace, marine, and energy sectors, entered into deferred prosecution agreements with the DOJ and UK SFO to resolve allegations that the company conspired to violate anti-bribery laws around the world. Now, Reuters reports that the company’s CEO has been questioned by the SFO regarding bribery allegations. According to the article, the SFO refused to comment on the report, citing concerns about an ongoing investigation.
Both the DOJ and SFO have repeatedly stated that they intend to pursue bribery cases against individuals. But there is so far no indication that the DOJ is also investigating the company’s CEO. Although DOJ could pursue such an investigation in the future, the agency may also defer to the SFO to handle the matter.
Former Hungarian Telecommunications Executive Settles with SEC
On February 8th, a former executive of a Hungarian telecommunications company settled a 2011 civil complaint filed by the SEC. The trial of the remaining co-defendants is scheduled for May 8. As part of the settlement, the former executive agreed to pay a $60,000 civil penalty and did not admit or deny the SEC’s allegations. The former executive also admitted that U.S. courts had jurisdiction over the case. The issue of jurisdiction had been contested; in 2013, the court denied the defendants’ motion to dismiss for lack of personal jurisdiction.
The SEC’s complaint alleged that the former executive, along with two other co-defendants, authorized bribes to Macedonian government officials and others. In 2014, the SEC dropped allegations regarding payments to government officials in Montenegro, substantially narrowing the allegations in the case. The company and its parent settled allegations regarding payments to government officials in Macedonia and Montenegro with the SEC and DOJ in 2011. Prior Scorecard coverage of the company’s investigation can be found here.
This outcome of this lengthy case illustrates that individual defendants can still achieve relatively favorable outcomes when they choose to litigate FCPA cases, even after the corporate defendants have reached a resolution.