Wednesday, March 31, 2010

Point - Counterpoint With Billy Jacobson

A few weeks ago, I took issue with Mark Mendelsohn's (DOJ Deputy Chief, Fraud Section and the DOJ's FCPA "top cop") recent defense of the 2008 Siemens enforcement action. (see here).

In response, I heard from William Jacobson.

I am always grateful for reader feedback, especially when its comes from someone the caliber of Jacobson - the former Assistant Chief for FCPA Enforcement at the Fraud Section, Criminal Division, U.S. Department of Justice. While at DOJ, Jacobson worked closely with Mendelsohn, including on the Siemens matter. For more on Jacobson's role at DOJ see this recent profile in Main Justice. Jacobson is currently the Vice President, Co-General Counsel, and Chief Compliance Officer at Weatherford International, Ltd. (see here).

With Jacobson's permission, I set forth our e-mail exchange below.

*****

WJ - I have to take issue with your recent post regarding the Siemens settlement. As a recent √©migr√© to the world of in-house counsel, I can assure you that the staggering monetary settlement made a tremendous impact in boardrooms across the U.S. and the world. One can certainly argue that the government should have kept investigating Siemens until it uncovered every scrap of evidence against the company. One can also argue that the fine and disgorgement amounts could have been greater. However, the government’s goal was not to destroy the company and thereby cause untold damage to its shareholders. In fact, I think it is fair to say that the government’s goal was to sufficiently punish the company without destroying the company. An investigation lasting several more years and a fine of several billion dollars could well have done that – not to mention debarment, the lack of which you have also criticized.

Since at least 2001, the Fraud Section has been trying to bring “real-time” prosecutions as often as possible. This often means focusing on the one or two most egregious transactions at issue in a case, bringing a case based upon those transactions and moving on. An important component of this strategy in FCPA cases has been ensuring that companies improve their compliance departments to mitigate the chances of bad conduct recurring. This is precisely what the Fraud Section (as well as the SEC and the Munich Prosecutor) did with Siemens and, in my opinion, it was the correct approach.

MK – Nice to hear from you and thanks for reading the blog. I am not suggesting that in a case that apparently involved hundreds, if not thousands, of separate bribe payments, that the DOJ/SEC need to fully investigate each and every instance, perhaps focusing on six, ten (I don’t know what the magical number is or should be) is desirable. Even so, is it too much to ask that, as to those six or ten instances, that the criminal charges actually fit the facts? In other words, is it too much to ask of the DOJ to actually charge a company that clearly committed FCPA antibribery violations with FCPA antibribery charges?

Point taken that the “government’s goal was not to destroy the company and thereby cause untold damage to its shareholders.” Indeed, that is a legitimate policy issue present in any corporate criminal matter, FCPA or not. However, is agreeing to an overall penalty LESS than the amount of the alleged payments and LESS than the amount of the business allegedly obtain or retained – is that “sufficiently punishing” the company. Siemens net income between 2004-2008 (a time period that does not even cover the full range of the relevant time period) was approximately $28.3 billion. Thus, the worldwide fines and penalties accounted for approximately 5% of its net income, how does this “sufficiently punish” the company? Is not one justified, when viewing the amounts at issue, to conclude that this whole episode was a net positive for Siemens?

You raise the debarment issue, which I have discussed on my blog as well. My opinion is that the message DOJ says it wants to send in these cases, will not be sent until a company is debarred for a specific time period. If the DOJ is looking for deterrence it has the tools at its disposal.

If “real-time” prosecutions are indeed the goal of the DOJ (a dubious assertion given that many, many disclosed FCPA cases have languished for years and years) that is a good goal. However, the rush to get things settled and put a nice shiny bow around a case so that the enforcement agencies can conserve resources and focus elsewhere, and so that the company can move on, should not result in a situation, which I think is reflected in the Siemens and BAE enforcement actions, that certain companies in certain industries which sell to certain customers are essentially immune from FCPA antibribery violations.

WJ: While I agree that debarment would send an even stronger deterrent message than non-debarment, it is hard to see how a $1.6B penalty equates with immunity as you suggest. There is always more punishment that is possible, but the maximum does not have to be applied for DOJ to be effective.

Another factor that should be considered is jurisdiction. If I remember correctly, the Siemens charging papers state that its Venezuelan and Bangladeshi subsidiaries used U.S bank accounts to further their bribe schemes. The papers do not make similar US-nexus allegations for either the parent company or the Argentine subsidiary. Thus, it may be that DOJ felt it didn’t have jurisdiction over the parent company for a bribery charge. As for BAE, I can only say what press reports make clear – the case was enormously challenging for many different reasons. I think the folks at DOJ would agree that their settlement was not perfect, but I think they did an admirable job of not having perfect be the enemy of good.

MK – I am clearly not suggesting that Siemens escaped liability for its “egregious,” “staggering,” and “brazen” corrupt conduct (those are the enforcement agencies’ words – not mine). However, it sure seems that certain companies have come to be immune from FCPA antibribery charges. Any time a particular company is immune from particular aspects of a law, respect for that law and indeed the rule of law suffers.

As to Siemens and whether there was a U.S. nexus sufficient to charge an antibribery violation, the DOJ’s information clearly states that Siemens Power Generation (with offices in Florida), Siemens Power Transmission and Distribution (with offices in North Carolina) and Siemens Transportation Systems (with offices in California) were key players in the overall bribery scheme – presumably DOJ included the “with offices” in the U.S. part for a reason.

In any event, where does this leave the future of FCPA enforcement. I teach the FCPA to my students, should I now conclude my FCPA section with “FCPA enforcement – an area of law where perfect should not be the enemy of good.” If you are an individual sitting in prison today because you violated the FCPA’s antibribery provisions, how do you explain to such an individual that certain companies are immune from the same conduct for which they are sitting in prison?

WJ: Those of your students that aspire to prosecution, especially white collar prosecution, would be well served to learn that concept, yes. Prosecutorial discretion is a wonderful feature of our judicial system which often leads to imperfect solutions, but, on balance, usually – though certainly not all the time -- works out just about right.

Tuesday, March 30, 2010

Random Musings

A recent Main Justice article by Christopher Matthews (see here) talked about Mark Mendelsohn (DOJ FCPA Top Cop) and Cheryl Scarboro (Head of the SEC's New FCPA Team) "spreading the FCPA gospel" at the recent National Forum on the Foreign Corrupt Practices Act.

Two items in the article caught my eye.

First, Mendelsohn is reported to have said, in response to a question, that the DOJ "does consider collateral consequences when structuring settlement agreements" and that "there is a growing recognition that the European Union debarment requirement presents particular challenges for companies trying to settle cases."

That European debarment is the engineer driving the FCPA locomotive in certain cases is clear upon reviewing the DOJ's sentencing memoranda in the Siemens, BAE, and Daimler bribery, yet no bribery enforcement actions.

The Siemens memo (here) states:

"The Department's analysis of collateral consequences included the consideration of the risk of debarment and exclusion from government contracts."

The BAE memo (here) has a separate section on debarment and states:

- "European Union Directive 2004/18/EC, which has recently been enacted in all EU countries through implementing legislation, provides that companies convicted of corruption offenses shall (emphasis in original) be mandatorily excluded from government contracts."

- "BAES's business is primarily from government contracts, including with several EU customers."

- "Mandatory exclusion under EU debarment regulations is unlikely in light of the nature of the charge to which BAES is pleading. Discretionary debarment will presumably be considered and determined by various suspension and debarment officials."

- "The Department will communicate with U.S. debarment and regulatory authorities, and relevant foreign authorities, if requested to do so, regarding the nature of the offense of which BAES has been convicted, the conduct engaged in by BAES, its remediation efforts, and the facts relevant to an assessment of whether BAES is presently a responsible government contractor."

The Daimler memo (here) states:

The DOJ's "analysis of collateral consequences included the consideration of the risk of debarment and exclusion from government contracts, and in particular European Union Directive 2004/18/EC, which provides that companies convicted of corruption offenses shall be mandatorily excluded from government contracts in all EU countries."

The way around these debarment provisions appears to be simple, yet troubling.

Despite clear evidence of FCPA antibribery violations, don't charge FCPA antibribery violations!

Second, Scarboro indicated that the SEC's "FCPA Team" will be up and running "in the next two weeks" and that "the dedicated staff involved in these cases will have a chance to learn the nuts and bolts."

Perhaps in learning the FCPA's "nut and bolts," the SEC enforcement attorneys will learn that many features of its FCPA enforcement program have no legal support such as: (i) employees of state-owned or state-controlled enterprises being deemed "foreign officials"; (ii) parent companies being strictly liable for subsidiary or affiliate books and records and internal control violations; (iii) seeking disgorgement remedies in the absence of antibribery charges.

Sunday, March 28, 2010

Dissecting Daimler

April Fool's Day is a day traditionally full of practical jokes and pranks.

Thus, it is only fitting that on April 1st U.S. District Court Richard Leon will hold a hearing on the Daimler FCPA enforcement action during which he is expected to approve a DOJ - Daimler brokered deferred prosecution agreement and other various aspects of the settlement discussed below.

If so, one pillar which contributes to the "facade of FCPA enforcement" (more on that in a future post) - bribery, yet no bribery - will have a new poster-child in addition to the Siemens and BAE bribery, yet no bribery FCPA enforcement actions (see here for prior Siemens posts and here for prior BAE posts).

At least, Siemens and BAE pleaded guilty to something - even if that something was not an FCPA antibribery charge.

The Daimler enforcement action appears to take the "facade" one step further in that Daimler will not have to plead guilty to anything ... zero ... zilch.

Rather, Daimler will agree to a deferred prosecution agreement despite clear evidence (per the DOJ's own allegations as set forth below) of FCPA antibribery violations.

One can legitimately ask, what did Innospec Inc. and Control Components, Inc. (two companies that recently pleaded guilty to FCPA antibribery violations) do that Daimler also didn't do?

Sure, two insignificant entities in Daimler's massive corporate hierarchy, Daimler Export and Trade Finance GmbH ("ETF") and DaimlerChrysler Automotive Russia SAO ("DCAR"), are expected to plead guilty to FCPA antibribery charges. EFT is a finance arm far down on Daimler's corporate hierarchy and DCAR sells spare parts for Daimler in Russia.

In other words, it sure looks and feels like two junior, indirect subsidiaries are being offered up as "sacrificial corporate lambs" to take the fall for the more significant, powerful parent.

The end result is that the DOJ can boast it secured two FCPA antibribery pleas while allowing Daimler to say that it never violated the FCPA's antibribery provisions, thus allowing Daimler to escape debarment in Europe - a factor clearly at issue in this enforcement action as highlighted below.

Yet another instance of bribery, yet no bribery is not the only reason why the Daimler enforcement action contributes to the facade of FCPA enforcement.

In addition, wrapped into allegations which clearly establish all the elements of an FCPA antibribery violation, are numerous dubious and untested theories of FCPA liability.

Most notably, the entire criminal information against DaimlerChrysler China Ltd. ("DCCL") is premised, as so many recent FCPA enforcement actions are, on employees of alleged Chinese state-owned entities (companies doing business all over the world and companies with publicly traded stock) being "foreign officials" under the FCPA. As in other FCPA enforcement actions, the allegations as to these entities are bare-bones, uninformative, and replete with legal conclusions as to why these entities are "instrumentalities" of a foreign government.

Because these dubious and untested theories of FCPA liability are embedded into the much larger bribery, yet no bribery charges against Daimler which are being resolved through a deferred prosecution agreement, these dubious and untested theories will once again escape judicial scrutiny.

Because of the general lack of substantive FCPA case law, the entire Daimler enforcement action (including theories of liability premised on the dubious and untested legal theories) will once again be viewed as de facto FCPA case law.

The Daimler bribery, yet no bribery enforcement action is wide in scope and allegations of improper conduct go all the way up to senior levels of the company. The "things of value" are numerous, the "foreign officials" include bona fide government officials (as well as the dubious "foreign officials" referenced above) and the amount of business allegedly obtained or retained through bribery and corruption is in the hundreds of millions.

The countries in which the payments were allegedly made are numerous (in fact, the label function at the bottom of this post only allows so many characters and I was unable to separately label each country in which the alleged improper payments occurred).

The alleged improper payments involved dozens and dozens of third parties, including several located in the U.S., which were allegedly utilized by Daimler and its affiliates to bribe foreign officials. Given Daimler's use of numerous U.S. based entities, it will be interesting to see if any of these U.S. entities and/or entity employees will be prosecuted for their role in the respective bribery schemes.

The Daimler bribery, yet no bribery case involves involves ineffective internal controls, lack of effective third-party due diligence, and intentional misrecording of bribe payments on Daimler's books and records (and those of its affiliates).

Yet in another interesting twist, Daimler also escapes criminal charges for knowingly failing to implement effective internal controls, even though the DOJ's own allegations would seem to support such a charge. (Even Siemens plead guilty to both criminal books and records and internal controls charges).

This a long post.

However, the more that is known about the Daimler FCPA enforcement action and the more that is understood about the facade of FCPA enforcement, the greater the chance the facade of FCPA enforcement will be exposed and addressed.

It all starts with the person standing between the DOJ and Daimler and that is Judge Richard Leon and he would be doing a great public service by rejecting the proposed settlement and injecting the "rule of law" into the current facade of FCPA enforcement.

This post details the Daimler criminal information, the Daimler deferred prosecution agreement, the three separate criminal informations against Daimler subsidiaries, and the DOJ omnibus sentencing memorandum.

The Daimler AG Bribery, Yet No Bribery Allegations

According to the criminal information (see here) filed against Daimler AG (and the Statement of Facts in the below described deferred prosecution agreement), the company "engaged in a long-standing practice of paying bribes to 'foreign officials' as that term is defined in the FCPA ... through a variety of mechanisms, including the use of corporate accounts [such as cash desks], offshore bank accounts, deceptive pricing arrangements, and third-party intermediaries."

In summary fashion, the information charges that "between 1998 and January 2008, Daimler made hundreds of improper payments worth tens of millions of dollars to foreign officials in at least 22 countries - including China, Croatia, Egypt, Greece, Hungary, Indonesia, Iraq, Ivory Coast, Latvia, Nigeria, Russia, Serbia and Montenegro, Thailand, Turkey, Turkmenistan, Uzbekistan, Vietnam, and others - to assist in securing contracts with government customers for the purchase of Daimler vehicles valued at hundreds of millions of dollars."

According to the information, "in some cases, Daimler wired these improper payments to U.S. bank accounts or to the foreign bank accounts of U.S. shell companies in order to transmit the bribe." The information alleges that "in at least one instance, a U.S. shell company was incorporated for the specific purpose of entering into a sham consulting agreement with Daimler in order to conceal improper payments routed through the shell company to foreign government officials." According to the information "certain improper payments even continued as late as January 2008." The information charges that "in all cases, Daimler improperly recorded these payments in its corporate books and records."

Despite being a German company, the information charges that "as a result of Daimler's filing of periodic reports with the SEC, and Daimler's use of U.S. bank accounts and U.S. companies in transacting certain business with foreign governments and officials, the company is subject to the FCPA."

According to the information, "Daimler's longstanding violations of the FCPA resulted from a variety of factors, including: (1) an inadequate compliance structure; (2) a highly decentralized system of selling vehicles through a myriad of foreign sales forces, subsidiaries, and affiliates, with no central oversight; (3) a corporate culture that tolerated and/or encouraged bribery; and (4) the involvement of certain key executives, such as the then head of its overseas sales division ("DCOS"), the then head of internal audit, and the then CEO's of several subsidiaries and affiliates."

According to the information, "in total, the corrupt transactions with a territorial connection to the United States resulted in over $50,000,000 in pre-tax profits for Daimler."

The information alleges improper conduct at the highest levels of the country. For instance, in 1999 during a Daimler "Board of Management meeting, Daimler's then head of internal audit proposed that the company adopt an integrity code that included anti-bribery provisions ..." However, the information charges that "participants in the meeting discussed that adopting such policies (and stopping the practice of making 'useful payments') would result in Daimler losing business in certain countries." Even though the company did adopt "an integrity code with anti-bribery provisions" at the meeting, the information charges that Daimler, among other things, "failed to make sufficient efforts to enforce the code, train employees on compliance with the FCPA or other applicable anti-bribery statutes" or "otherwise attempt to ensure that the company was not continuing to make improper payments in order to obtain or retain government business overseas."

Elsewhere, the information charges that "in or about 2000 or 2001" "Daimler's internal audit department was aware that Daimler employees had made and could make bribe payments" and that the department drafted a document identifying 14 separate improper payment mechanisms. According to the information, the same document noted that "payment of 'useful expenditures' through these methods was subject to criminal prosecution in countries such as the United States." However, the document also noted the "level of difficulty" law enforcement authories would have in "proving corruption carried out through the various methods."

The Daimler information, as to conduct in Russia, China, and Croatia, contains the same substantive allegations as set forth in the separate criminal informations against DCAR, ETF, and DCCL (described more fully below).

Vietnam

As to Vietnam, the information charges that "Daimler employees working at Mercedes Benz Vietnam ("MBV") made improper payments and provided gifts and other things of value to Vietnamese government officials in exchange for business from Vietnamese government owned and controlled customers." According to the information, "these improper payments were routinely paid to government officials through broker commissions" and the payments were "improperly categorized as broker commissions, cost of goods sold, and/or gifts" in MBV's books and records.

The information states that between "2000 and 2005, MBV was majority owned (70%) and controlled by Daimler through its subsidiary Daimler Benz Vietnam Investments Singapore Pte. Ltd., which Daimler wholly owned from June 30, 2003 through 2006." The information further states that "although a Vietnamese government entity, Saigon Auto Corp., was a minority owner (30%) of MBV" and that "MBV was managed primarily by German Daimler employees."

According to the information, the "foreign official" recipients of the improper payments included employees of Saigon Passenger Transport Company ("Saigon Bus") (see here), an alleged "instrumentality" of the Vietnamese government and "Vietnamese government officials in the Ministry of Public Security."

The information alleges that "MBV agreed to make the improper payments to the Saigon Bus official through" an account of Trading & Investment Houston, a U.S. based entity. The information also alleges that during negotiations of the Saigon Bus deal, "a Vietnamese government official with the government-owned Saigon High Tech Park suggested that MBV make a contribution [approximately $22 million over a five yeard period] to the high tech park as a condition of Daimler and MBV winning the business contract."

The information also alleges that in connection with the 2004 Asia Europe Meeting ("ASEM 5"), "Vietnamese government officials sought to obtain 78 Mercedes Benz passenger cars in order to transport officials attending the conference." According to the information, MBV "agreed to lend the vehicles to the Vietnamese government free of charge" and that in exchange "the Vietnamese government allowed MBV to import these 78 completely assembled passenger cars into Vietnam at a tariff rate of only 25%, when the standard tariff rate for completely assembled vehicles was 100%." According to the information, following the conference, when MBV sold the vehicles, it was thus able to make a "much higher profit, approximately €1.65 million, because of the lower tariff costs."

According to the information, "the making of [these] improper payments was known about and encouraged at the highest levels of the former MBV management."

Turkmenistan

As to Turkmenistan, the information alleges that Daimler, and its Vienna based distributor (IPC) delivered to high-level Turkmen government officials various gifts, including "an armored Mercedes Benz S-class passenger car, valued at more than €300,000 for his birthday." According to the information, "neither the Turkmen Government Official nor the Turkmen government paid for the vehicle" but that Daimler affiliate employees "agreed to provide this birthday gift to the Turkmen Government Official with the expectation that [Daimler] would receive large contracts for the purchase of vehicles by the Turkmenistan government in the coming year."

Nigeria

As to Nigeria, the information focuses on the conduct of Anambra Motor Manufacturing Company ("Anammco"), "a joint venture between Daimler and the Nigerian government" that Daimler utilized to sell vehicles into Nigeria. According to the information, "Daimler owned 40% of Anammco and controlled Anammco, inter alia, through Anammco's then managing director, who was a German expatriate and dual employee of both Daimler and Anammco."

According to the information, "Daimler entered into a contract to sell vehicles to the Nigerian State House, which was also known as the Nigerian Presidential Complex, and was the office and residence of the Nigerian President (the 'State House Contract') and that pursuant to this contract, Daimler charged "the State House approximately 21% over the wholesale price for the vehicles, parts, and services." According to the information, "in connection with these sales to the State House, Daimler made €1,427,242 in improper commission payments ... with the understanding that these funds would be passed on, in whole or in part, to Nigerian officials to secure the State House Contract."

The information also charges that Daimler made improper payments to high-level executive branch officials in Nigeria in connection with the State House Contract; that Anammco entered into contracts worth $4.6 million with Savannah Sugar Company Ltd. (an alleged instrumentality of the Nigerian government) to supply Daimler vehicles, spare parts, and tools on which approximately €554,396 in "consultant" payments were made; and that "Daimler entered into a contract with the Nigerian Police Force" in which Anammco requested that Daimler make payment to a member of the Nigerian Police Force in his German bank account.

The information also alleges that Daimler made various payments to Nigerian government officials in connection with selling "54 buses to the Nigerian Ministry of Industry" to provide transport for the World Youth Championship games held in Nigeria. The informatin further alleges that Anammco agreed to provide $500,000 in support of the "All-Africa Games" and that Anammco supplied numerous vehicles for the games, but that the Nigeria organizing committee for the games did not pay for the vehicles.

Finally, the information charges that Daimler's wholly-owned subsidiary in Brazil utilized the services of an entity owned by a senior Nigerian diplomat in Brazil and his wife to help facilitate the sale of buses to a Nigerian state and that approximately $60,000 in commission payments were paid to the Nigerian diplomat.

Ivory Coast / West Africa

As to the Ivory Coast and West Africa, the information states that "from at least 1992 to 2007, Daimler sold passenger cars in the Ivory Coast and other West African countries through its majority owned (89%) and controlled subsidiary, Star Auto S.A. ("Star Auto")" and that Star Auto made direct sales of Daimler passenger cars to various government customers in West Africa, including government ministries, the military, and government agencies, including for use by diplomats and heads of state." In connection with these sales, Daimler employees "authorized and made improper payments to government officials at its customers in the Ivory Coast and elsewhere in West Afria..."

Among other conduct, the information alleges that commission payments were made to an entity that would pass on, in whole or in part, the payments to Ghanaian Army officials in connection with a contract to sell trucks to the Army of Ghana, and that Daimler, to assist in securing a contract to provide trucks to an Indonesian firm operating a logging project in Liberia, "gave a then senior executive branch official of Liberia a gift of an armored Mercedes passenger car worth approximately €267,000."

Latvia

As to Latvia, the information charges that EvoBus GmbH ("EvoBus"), a wholly-owned subsidiary of Daimler and part of a Daimler business unit called Daimler Buses, paid approximately €1,800,000 in 'commision' payments to third parties with the understanding that such improper payments would be passed on, in whole or in part, to Latvian government officials to influnce the award of contracts to EvoBus." According to the information, the contracts were awarded by the Riga City Council Traffic Department and EvoBus paid bribes to members of the Riga City Council. To make these "commission payments and to disguise their true nature and purpose" the information charges that "EvoBus entered into sham consulting contracts with, among others, two U.S. based entities: Oldenburgh Financial Corporation, incorporated in Delaware, and United Petrol Group LLP, incorporated in Oregon."

Austria / Hungary

As to Austria and Hungary, the information charges that, to help facilitate the sale of 32 used buses to a state-owned regional public transport company in Hungary, EvoBus Austria GmbH agreed to pay a "commission of €333,370 to a U.S. based corporation called USCON Ltd. with the understanding that the payment would be passed on, in whole or in part, to Hungarian government officials."

Turkey

As to Turkey, the information charges that Daimler's Corporate Audit Department "discovered three binders located in a safe at MB Turk's [a Daimler subsidiary in Turkey] offices in Istabul" that, along with other evidence, demonstrated that "MB Turk made approximately €6.05 million in payments to third parties in connection with vehicle export transactions that involved the sale of vehicles to non-Turkish government customers in North Korea, Latvia, Bulgaria, Libya, Romania, Russia, Saudi Arabia, Yemen, and other countries in deals with revenues of approximately €95 million." According to the information, at least €3.88 million of the €6.05 million comprised of "improper payments and gifts [...] paid to foreign government officials or to third parties with the understanding that the payments and gifts would be passed on, in whole or in part, to foreign government officials to assist in securing the sale of Daimler vehicles to government customers."

Indonesia

As to Indonesia, the information charges that "Daimler's local affiliates provides gifts, travel and entertainment to government officials associated with Perum Damri in order to secure business." According to the information, Perum Damri (see here) is a "state-owned bus company" and an "instrumenality of the Indonesian government" thus making its employees "foreign officials" under the FCPA. The information alleges that between 1998 and 2005, "Daimler's local affiliates spent approximately $41,000 on such gifts, including golf clubs, wedding gifts for the children of a senior offical at Perum Damri, golf outings for Perum Damri officials, and gifts that were raffled off to low-level employees on the occasion of Perum Damri's anniversary. According to the information, Perum Damri purchased approximately $8.36 million worth of buses from Daimler's Indonesian affiliates. The information also alleges that "Daimler's local affiliates also made several large cash payments to tax officials in Indonesia for the purpose of reducing their tax obligations."

Iraq

As to Iraq, the information charges, what has become, standard Iraqi Oil for Food Program allegations in that Daimler "agreed to pay a 10% commission to the government of Iraq in connection with sales of its vehicles under the [Oil for Food Program]." Yet in a twist, the information states certain sales between "Daimler and the Iraqi government were prepared, negotiated and finalized by employees at Daimler's headquarters in Germany" and that "Daimler negotiated its [Oil for Food Contracts] directly with the government of Iraq." (In many of the prior Oil for Food cases, the Iraqi government contracts were prepared, negotiated, and finalized primarily by third-party agents retained by the offending company). When third party agents were used by Daimler to make sales to the Iraqi government, the information charges that Daimler executives "understood that Daimler's contract partners would pay illegal kickbacks to Iraqi ministries."

After this laundry list of bribes in several differnt countries, the information then alleges that "prior to 2005, Daimler's anti-bribery compliance program was inadequate." Among other things, the information alleges that Daimler had "inadequate guidelines and controls concerning the disbursement of cash from cash desks;" inadequate controls over other corporate accounts; "inadequate controls over the opening and maintaining of bank accounts;" "inadequate controls over the selection, use, and making of payments to agents and intermediaries;" and "inadequate training of Daimler employees on FCPA or other anti-bribery compliance."

Against this backdrop, one might assume that Daimler was charged with FCPA antibribery violations - which generally prohibit the payment of money or anything of value, to a foreign official, in order to obtain or retain business.

However, in this current facade era of FCPA enforcement, nothing can be taken for granted and the Daimler enforcement action is yet another instance of bribery, yet no bribery, as Daimler was merely charged with two counts: (i) conspiracy to violate the FCPA's books and records provisions; and (ii) knowingly falsifying books, records, and accounts - a criminal charge under 78m(b)(5).

Even more troubling, Daimler will not even by pleading guilty to these charges, because the charges are being resolved through a deferred prosecution agreement ("DPA").

Daimler AG's Deferred Prosecution Agreement

The DPA (see here) is a fairly standard FCPA DPA in that in return for the DOJ deferring prosecution of the criminal charges against Daimler, Daimler "admits, accepts, and acknowledges that is is responsible for the acts of its employees, subsidiaries, and agents" as set forth above. As is common, Daimler also agrees to a host of compliance undertakings, including hiring an independent monitor for a three year period (an issue discussed in this prior post).

The term of the DPA is an unusual two years and seven months after the guilty pleas of ETF and DCAR (most FCPA NPAs or DPAs are for whole year terms). Also unusual is that the DPA states that if the DOJ finds "in its sole discretion, that there exists a change in circustances sufficient to eliminate the need for the corporate compliance monitor ... and that other provisions of [the DPA] have been satisfied, the Term of the Agreement may be terminated early."

Like other NPAs and DPAs, the Daimler DPA essentially muzzles Daimler, its directors, its employees, and agents, from making "any public statement ... contradicting the acceptance of responsibility by Daimler" for the facts set forth in the charging documents. In this way, DOJ is able to insulate itself from criticism from the only other party besides DOJ (i.e. Daimler) that actually knows the precise facts and issues relevant to the charged conduct. Specifically, if Daimler wants to issue a press release relevant to this case, it must first get DOJ's approval.

The DPA also states: "with respect to Daimler's present reliability and responsibility as a government contractor, the Department agrees to cooperate with Daimler, in a form and manner to be agreed, in bringing facts relating to the nature of the conduct underlying this Agreement and to Daimler's cooperation and remediation to the attention of governmental and other debarment authorities, including Multinational Development Banks, as requested."

Thus, as in the BAE and Siemens bribery, yet no bribery enforcement actions, debarment seems to have been a key factor in selecting the actual charges against Daimler - a fact confirmed by the DOJ's sentencing memorandum described below.

Daimler Export and Trade Finance GmbH and the Croatian Firetrucks

DOJ also filed a two count criminal information against Daimler Export and Trade Finance GmbH ("ETF") which is described as wholly-owned subsidiary of Daimler Financial Services AG ("DFS"), which in turn is described as a wholly-owned subsidiary of Daimler AG. According to the information, "ETF specialized in the structuring and arranging of customized financing solutions for exports by Daimler and external customers to countries without a local DFS company." "In addition," the information charges that "ETF participated in business ventures outside of Daimler's core businesses of the manufacture and sale of passenger cars and vehicles."

The charged conduct involves selling fire trucks to the Croatian Ministry of the Interior ("MOI") as well as the conduct of IM Metal ("IMM") an alleged "Croatian government controlled and partially owned former weapons manufacturer." The information charges that "IMM was an 'instrumentality' of the Croatian government, and executives employed by IMM, or their designess were 'foreign officials' as those terms are used in the FCPA ..." The charged conduct also involves Biotop Group, Inc. ("Biotop"), a Delaware corporation and Marketing Research and Consultants LLC ("MRC"), a Wyoming corporation.

Count one of the information charges conspiracy and alleges that "from in or about 2002, through in or about January 2008" ETF, and others were engaged in a conspiracy to "make improper payments to Croatian government officials to induce them to cause the Croatian government agencies and instrumentalities to purchase Daimler vehicles."

Among other things, the information charges that:

prior to be awarded a €85 million fire truck contract, "ETF understood that improper payments to Croatian government officials would be required in order to secure the Fire Truck Contract from the Croatian MOI;"

"ETF made improper payments directly to Croatian government officials and to third parties with the understanding that the payments would be passed on, in whole or in part, to Croatian government officials to assist in the Fire Truck Contract;"

"between 2002 and January 2008, ETF made approximately €3.02 million in payments to IMM and/or its principles in connection with the contract to sell fire trucks to the Croatian MOI with the understanding that all or a portion of the funds were paid to IMM's employees, themselves foreign government officials, and that another portion of the funds were paid to Croatian government officials outside IMM in exchange for assistance in securing for the ETF-led consortium the Fire Truck Contract;" and

"in total, between 2002 and January 2008, ETF made approximately €1,673,349 in improper payments to Biotop and MRC in connection with the Fire Truck Contract with the understanding that those payments would be passed on, in whole or in part, to Croatian government officials" and that "neither Biotop nor MRC performed legitimate services for ETF sufficient to warrant payments in those amounts."

The information alleges that "ETF entered into a sham consulting contract with Biotop in order to conceal the nature of improper payments ETF made to Biotop, and with the understanding that these funds would be passed on, in whole or in part, to Croatian government officials to assist in securing the Fire Trucks Contract with the Croatian MOI." As to MRC, the information alleges that "six days after MRC's incorporation, ETF executed a written consulting contract with MRC in order to conceal the nature of improper payments being made to MRC, with the understanding that the payments to MRC would be passed on, in whole or in part, to Croatian government officials."

Count two of the information charges an FCPA antibribery violation. Because ETF is a foreign entity, the applicable section of the statute is 78dd-3 which requries a U.S. nexus. The information charges "ETF entered into sham consulting contracts with shell companies incorporated in Delaware and Wyoming for the purpose of making improper payments to Croatian government officials, and made payments to those companies' accounts outside the United States with the understanding that such payments would be passed on, in whole or in part, to Croatian government officials."

Because the information charges that ETF's payments to Biotop and MRC were to the companies' accounts "outside the United States" it appears that the sole U.S. nexus DOJ is using to charge ETF with an FCPA antibribery is the act of entering into a contract with a U.S. company.

DaimlerChrysler China Ltd. and the Chinese "Foreign Officials"

DOJ also filed a two count criminal information against DaimlerChrysler China Ltd. ("DCCL"), a "Beijing-based, wholly-owned Daimler subsidiary and cost center that managed Daimler's business relationships in [China], assisted Daimler in selecting and managing joint ventures in China, and helped manage Daimler's expatriate employees in China." According to the information, "although DCCL did not itself sell any vehicles directly into China, certain DCCL employees assisted with the sale of vehicles by various Daimler divisions in Germany to government customers in China."

The charged conduct focuses solely on three Chinese state-owned entities the DOJ alleges are "instrumentalities" of the Chinese government.

First, the DOJ alleges that "The Bureau of Geophysical Prospecting ("BGP") was a division of the China National Petroleum Corporation ("CNPC"), a Chinese state-owned oil company" and that "among other things, BGP was involved in searching for oil in various regions of China" and that "BGP was an 'instrumentality' of the Chinese government, and individuals employed by BGP were 'foreign officials'" under the FCPA. According to its website (see here), BGP is a limited liability company and it has "forty overseas branches and offices have been established in Asia, America, Africa and the Middle East" (see here). According to its website (here), CNPC " is China's largest oil and gas producer and supplier, as well as one of the world's major oilfield service providers and a globally reputed contractor in engineering construction" and it has "a presence in almost 70 countries." CNPC's corporate hierachy (here) looks similar to other commercial enterprises and one of CNPC's largest holdings is PetroChina, an entity with shares traded on the New York Stock Exchange as well as other exchanges (see here).

Second, the DOJ alleges that "Sinopec Corp. ("Sinopec") was a Chinese state-owned energy company involved in, among other things, exploration and production of petroleum and natural gas, as well as the refining and sale of petroleum products" and that "Sinopec was an 'instrumenality' of the Chinese government, and individuals employed by Sinopec were 'foreign officials'" under the FCPA. According to its website (here) Sinopec is "a listed company on domestic and international stock exchanges" and it has shares traded in Shanghai, Hong Kong, New York and London.

Third, the DOJ alleges that "Changqing Petroleum Exploration Bureau ("Changqing") was a Chinese state-owned oil and natural gas extracting company" and that "Changqing was an 'instrumentality' of the Chinese government and individuals employed by Changqing were 'foreign official'" under the FCPA. Changqing is an entity within CNPC's extensive organization.

According to the information, "between 2000 and 2005, DCCL employees and/or Daimler employees through DCCL made at least €4,173,944 in improper payments in the form of 'commissions,' delegation travel, and gifts for the benefit of Chinese government officials and their designees, in connection with over €112,357,719 in sales" of vehicles to Chinese government customers. The information alleges that "these sales to Chinese government customers were made directly from Daimler's [divisions] in Germany through various intermediaries with the assistance of DCCL employees in the commercial vehicles division."

According to the information, "to make improper payments to Chinese government officials, Daimler and DCCL typically inflated the sales price of vehicles sold to Chinese government customers and then maintained the overpayments in debtor accounts on Daimler's books and records, including one debtor account called the 'special commissions' account." The information alleges that "DCCL employees, including its then head of sales and marketing disbursed payments" from the account and "at the time, no checks or policies were in place to ensure the legitimacy or appropriateness of such payments."

According to the information, "DCCL and Daimler also employed agents to assist in securing" vehicles from Chinese government customers, but that "neither DCCL nor Daimler performed due diligence on these agents, and there were inadequate controls in place to ensure that payments made to these agents were not passed on to Chinese government officials and their designees." The information states that "the agency agreements were often not in writing" and that "DCCL and Daimler lacked adequate oversight into the appropriateness or purpose of payments from debtor accounts that ultimately went to government officials in China and their designees." The information charges that "finance and controls oversight was so lacking with respect to Daimler's sale of commercial vehicles in China that DCCL's Sales and Marketing Head was able to remove at least approximately €230,000 from a company debtor account without detection, and then direct those funds to the offshore bank account of his wife."

Count one of the information charges conspiracy and alleges that DCCL, and others, were engaged in a conspiracy to "make improper payments to Chinese government officials to induce them to cause Chinese government agencies and instrumenalties to purchase Daimler vehicles."

Among other things, the information charges that:

"in total, Daimler and DCCL made approximately €2,599,694 in improper payments to Chinese government officials associated with these entities to assist in obtaining sales worth approximately €71,562,882;"

"between 2001 and 2004, DCCL and Daimler at the direction of Chinese government officials made improper payments totaling at least €188,840 into U.S. bank accounts belonging to third parties to obtain contracts valued at €5,533,381 for the sale of vehicles to Chinese government customers "even though no part of the transaction involved the U.S., nor were the entities that nominally controlled the bank accounts parties to any of these transactions;" that "DCCL and Daimler did not perform any due diligence to discern who the recipients were" and the "corporate entities that received the payments from Daimler for the benefit of the Chinese government officials performed no legitimate services for DCCL or Daimler and did nothing to earn those payments;"

"between 1998 and 2005, DCCL and Daimler also provided at least €268,568 worth of delegation trips to employees of its government customers in China for the purpose of assisting in securing business from those customers;" according to the information "agents working as intermediaries between DCCL and Daimler, on the one hand, and its Chinese government customers, on the other hand, typically requested the delegation trips up front during the contract negotiation process on behalf of the customer involved" that "DCCL and Daimler then estimated the cost of the trip and increased the purchase price of vehicles accordingly" and that "some contracts characterized these trips as 'factory inspection trips' even though the trips were primarily visits to tourist locations."

In furtherance of this conspiracy, the information identifies several agents used to make the improper payments including: M.F. Mechanical & Electrical; Shores International (a Texas corporation); Lily Energy Services, Inc. (a Texas corporation); King Jack, Inc. (a California corporation); and Chinese Agent A.

Additional payments charged in the information include: "€155,905 for the purpose of entertaining executives at" BGP and Sinopec; "payments totaling approximately €56,400 into accounts at multiple banks to an individual associated with an official at BGP in charge of operations in another country;" "a payment of approximately €14,800 to a relative of a Chinese government official associated with BGP in connection with the sale of commercial vehicles to BGP; "payments totaling approximately €30,000 in commissions for 'market research' to the Stuttgart bank account of the son of an official of BGP;" and "a payment of approximately €57,000 to the wife of a Chinese government official employed at Sinopec" disguised as a payment pursuant to a "phony consulting agreement with the wife of the Chinese government official."

The information further charges a laundry list of "things of value" provided "to the son of a Chinese government official who made purchasing decisions for BGP in order to assist in securing business from BGP" including: interships at Daimler for his girlfriend; "letters from a former Daimler employee to German immigration officials to assist him and his girlfriend with their efforts to obtain student visas;" "€2,224 in expenses to attend a truck race;" "use of a Mercedes passenger car for a period of time;" and "employment at Daimler" for a five month period "with a monthly salary of €600."

Count two of the information charges an FCPA antibribery violation. Because DCCL is a foreign entity, the applicable section of the statute is 78dd-3 which requires a U.S. nexus. As relevant to this issue, the information charges that "DCCL caused wire transfers to be sent from Daimler accounts in Germany to financial institutions in the United States."

DaimlerChrysler Automotive Russia SAO and Russian Sales

DOJ also filed a two count criminal information against DaimlerChrysler Automotive Russia SAO ("DCAR"), a "Moscow-based, wholly-owned subsidiary of Daimler" that "sold Daimler spare parts, assisted with the sale of vehicles from various Daimler divisions in Germany, including in particular its overseas sales division ("DCOS"), to government customers in [Russia], and also imported Daimler passenger and commercial vehicles into Russia for sale to customers and distributors."

The charged conduct focuses on Daimler's, DCAR's and DCOS's relationships with: "the Russian Ministry of Internal Affairs ("MVD") a department and agency of the Russian government principally responsible for police, militia, immigration and other functions" including supervising the "Russian traffic police; "the Special Purpose Garage ("SPG") an 'instrumenality' of the Russian government" whose employees were "foreign officials" under the FCPA; "Machinoimport a Russian government-owned and controlled purchasing agent for the City of Moscow," an "instrumentality of the Russian government" whose employees were "foreign officials" under the FCPA; and "Dorinvest a Russian government-owned and controlled purchasing agent for the City of Moscow," an "instrumentality of the Russian government" whose employees were "foreign officials" under the FCPA.

According to the information, "Daimler's business in Russia was substantial." The information states that "Daimler sold passenger cars and commercial vehicles directly from its headquarters in Stuttgart, Germany, to its Russian government clients with the assistance of DCAR and Daimler's representative office in Moscow" and that "Daimler carried out such sales from DCOS and DCAR acting as an agent to assist with such direct sales."

The information charges that "Daimler, through DCAR, made improper payments at the request of Russian government officials or their designess in order to secure business from Russian government customers." According to the information, payments were "made with the knowledge and involvement of the former senior management of DCAR and DCOS."

The information states that "DCAR and Daimler sometimes made improper payments to government officials in Russia to secure business by over-invoicing the customer and paying the excess amount back to the government officials, or to other designated third parties that provided no legitimate services to Daimler or DCAR, with the understanding that such payments would be passed on, in whole or in part, to Russian government officials." The information further states that "when requested, Daimler employees wired and authorized the wiring of payments from Daimler's bank accounts in Germany to, among other destinations, U.S. and Latvian bank accounts beneficially owned by shell companies with the understanding that the money, in whole or in part, was for the benefit of Russian government officials."

Count one of the information charges conspiracy and that DCAR, and others, were engaged in a conspiracy to "make improper payments to Russian government officials to induce them to cause Russian government agencies and instrumentalties to purchase Daimler vehicles."

Among other things, the information charges that:

"between 2000 and 2005" Daimler's sale of vehicles to Russian government customers was approximately "€64,660,000" and that "in connection with these vehicle sales, DCAR and Daimler made over €3 million in improper payments to Russian government officials employed at their Russian governmental customers, their designess, or to third-party shell companies that provided no legitimate services to Daimler or DCAR with the understanding that the funds would be passed on, in whole or in part, to Russian government officials."

According to the information, the payments were routed all over the world including: "to the Deutsche Bank acount in Stuttgart, Germany, of a Russian government official at the SPG;" to "Berwick Commercial LLC, a corporation registered in Delaware, with the understanding that the payment would be passed on, in whole or in part, to the SPG official;" "to Kongress Food Ltd., a corporation with an address in Dublin, Ireland, with the understanding that the payments would be passed on, in whole or in part, to the SPG official;" "to Delight Commercial Ltd., a corporation with an address in the Seychelles, with the understanding that the payments would be passed on, in whole or in part, to the SPG official;" "to Pyrmont Alliance Corp., a corporation with an address in the Bahamas, with the understanding that the payments would be passed on, in whole or in part, to the SPG official;" "to Loretti LLP, a corporation with an address in the United Kingdom, with the understanding that the payment would be passed on, in whole or in part, to the SPG official;" "to a Bank of America account in San Diego, California, for Sittard Investments, a California corporation, to secure passenger car sales to the Moscow tarffic police;" "to a bank account in Latvia for Novitta Ltd., a Delaware corporation, in connection with passenger car sales to the MVD;" "to a bank account in Latvia for Tower Block Ventures, a U.K. corporation, for the benefit of a consultant to the MVD in connection with passenger car sales to the MVD;" "to a bank account in Latvia for Silvarado Ltd., a corporation that provided no legitimate services for Daimler or DCAR, in connection with passenger car sales to the MVD;" "to a bank account in Latvia for Capital Alliance Corp., a Florida corporation, in connection with passenger car sales to the MVD and to the Russian military;" "to Technoforex, a Delaware corporation, to secure the sale of one commercial vehicle to the SPG;" "to Contrex, a Cyprus corporation established for the benefit of the wife" of an official;" "to the Latvian bank account of Fidelity Finance Corporation, a Delaware corporation, in connection with the sale [of vehicles] to Gormost, a department within the city of Moscow responsible for bridges and tunnels, with the understanding that such payments would be passed on, in whole or in part, to Russian government officials in order to secure this sale;" "to Fidelity Finance Corporation's Latvian bank account with the understanding that such payment would be passed on, in whole or in part, to Russian government officials;" "to the Latvian bank account of Forfun Co., a Delaware corporation, in connection with the sale [of vehicles] with the understanding that such payment would be passed on, in whole or in part, to Russian military officials;" "to the Swiss bank account of Northcote Holdings, a Costa Rican corporation, with the understanding that such payment would be passed on, in whole or in part, to Russian military officials;" and "to the bank account of Crofton Allianz, a Delaware corporation" "with the understanding that such payment would be passed on, in whole or in part, to a Russian government official."

Count two of the information charges an FCPA antibribery violation. Because DCAR is a foreign entity, the applicable section of the statute is 78dd-3 which requires a U.S. nexus. As relevant to this issue, the information charges that "DCAR caused wire transfers to be sent from Daimler accounts in Germany to financial institutions in the United States and elsewhere, via international and interstate wires, in furtherance of corrupt payments to Russian government officials" and that "DCAR made payments to third party agents, including shell companies established in the United States, knowing that such payments would be passed on, in whole or in part, to Russian government officials on behalf of DCAR and Daimler."

DOJ's Sentencing Memorandum

In the sentencing memo (here) DOJ "respectfully requests that the Court" approve the disposition of the matter against Daimler and all of the above referenced entities and "accept the guilty pleas of DaimlerChrysler Automotive Russia SAO and Daimler Export and Trade Finance GmbH." The memo notes, in a footnote, that "the court will not actually be sentencing Daimler AG and DaimlerChrysler China Ltd., as those entities have entered into deferred prosecution agreements."

The DOJ provides this summary of the overall disposition of the matter:

"The Department and Daimler agree that the appropriate resolution of this matter consists of (1) a DPA with Daimler AG, the parent company; (2) a DPA with DCCL, the Chinese subsidiary; (3) guilty pleas pursuant to plea agreements with DCAR, the Russian subsidiary, and ETF, the Daimler Finance subsidiary; (4) overall payment of a $93.6 million criminal penalty, which is apportioned, based on a Guidelines analysis, among the subsidiaries and the parent company; (5) continued obligations to provide full, complete, and truthful cooperation to the Department and any other law enforcement agency, domestic or foreign; (6) implementation of rigorous compliance enhancements, including periodic testing of same, with a recognition that the Company has already implemented substantial changes due to the investigation; and (7) the imposition of a corporate compliance monitor who will, over a three-year term, conduct a review of the compliance code, the Company's internal controls and related issues, and will prepare periodic reports on his reviews."

DOJ specifically notes that its "analysis of collateral consequences included the consideration of the risk of debarment and exclusion from government contracts, and in particular European Union Directive 2004/18/EC, which provides that companies convicted of corruption offenses shall be mandatorily excluded from government contracts in all EU countries."

As the Daimler, the BAE and Siemens enforcement actions all make clear, the simple way to avoid application of the European Union Directive is not to charge the company with a corruption offense, notwithstanding the existence of facts to support such a conviction.

This "let's not call a spade a spade" silliness occurs notwithstanding the fact that the U.S. is a member of the OECD. As relevant, OECD guidance specifically states that "Member countries should be vigilant in ensuring that investigations and prosecutions of the bribery of foreign public officials in international business transactions are not influenced by considerations of national economic interest, the potential effect upon relations with another State or the identity of the natural or legal persons involved, in compliance with Article 5 of the OECD Anti Bribery Convention."

The DOJ's sentencing guidelines calculations contains a bit of irony in that Daimler received a sentencing credit (a credit which reduces the overall fine amount) because the "organization fully cooperated in the investigation and clearly demonstated recognition and affirmative acceptance of responsiblity for its criminal conduct" despite the fact that elsewhere in the sentencing memo the DOJ notes that the entire investigation started in March 2004 when a "former Daimler employee filed a whistleblower complaint with the U.S. Department of Labor Occupational Safety & Health Administration ... allege[ing] that he was terminated for voicing concerns about Daimler's practice of maintaining secret accounts, including accounts in its own books and records, for the purpose of bribing foreign government officials."

In other words, even if an investigation is hatched by an internal whistleblower, a company may still be able to receive a sentencing credit for cooperating in the eventual investigation.

The sentencing range set forth in the DOJ memo is $116 - $232 million. Thus, the $93.6 million penalty is 20% below the bottom fine range of $116 million.

DOJ seeks to justify this reduction by stating that such a "reduction is appropriate given the nature and extent of Daimler's cooperation in this matter, including sharing information with the Department regarding evidence obtained as a result of Daimler's extensive investigation of corrupt payments around the world."

The DOJ further states, "indeed, because Daimler did not voluntarily disclose its conduct prior to the filing of the whistleblower lawsuit, it only receives a two-point reduction in its culpability." However, in a rather odd statement, DOJ then said that it "respectfully submits that such reduction is incongruent with the level of cooperation and assistance provided by the company in the Department's investigation." In other words, the DOJ seems to be saying something like "who cares what the guidelines say, we will do what we feel like."

In conclusion, the DOJ notes that the disposition "promotes respect for the law, provides just punishment, and affords adequate deterrence to criminal conduct for Daimler and the marketplace generally."

This would seem to be the biggest April Fools joke of all. How does another bribery, yet no bribery enforcement action "promote respect for the law?"

Finally, the DOJ states that Daimler's cooperation in the investigation has been "excellent." The DOJ notes that Daimler "conducted a worldwide internal investigation;" "regularly presented it findings" to the DOJ; "made certain witnesses available to the Department;" "voluntarily complied with requests for the production of documents from overseas;" and took disciplinary actions against over "60 company employees, with approximately 45 employees being terminated or separated under termination agreements." "Finally, and perhaps most significantly," in the words of the DOJ, "Daimler began to reform its anti-bribery compliance program while the investigation was still ongoing, without waiting until the finalization of a disposition with the Department." The sentencing memo then sets forth a list of changes Daimler made to its compliance program. Such measures, no doubt, will now come to be viewed as "best practices."

Friday, March 26, 2010

Chertoff Joins BAE Board

BAE announced yesterday (see here) that Michael Chertoff, President Bush's former Secretary of Homeland Security, has joined its board. Chertoff (see here) is also senior counsel at Covington & Burling, the law firm current DOJ Assistant Attorney General - Criminal Division, Lanny Breuer (see here) practiced at before his current position.

According to this story, BAE received $7.1 billion in U.S. government contracts in 2009, "making it the government's eighth-biggest contractor." According to the same story, BAE has received over $200 million in Department of Homeland Security contracts since 2005.

Thursday, March 25, 2010

These Are Interesting Times

The Daimler deferred prosecution agreement has trickled out (see here).

Attachment D of the DPA concerns the Independent Corporate Monitor and states "in consultation with the Department, Daimler has proposed and the Department has approved Louis J. Freeh to serve as the Monitor."

Louis J. Freeh (here) is the Former Director of the FBI (1993-2001). He currently is a principal of Freeh Group International (see here). Other principals in the Freeh Group include Stanley Sporkin, an individual who has held various positions during his distinguished career including Director of Enforcement at the SEC, and General Counsel to the CIA.

Freeh represented Saudi Prince Bandar, an individual at the center of the DOJ's bribery, yet no bribery enforcement action against BAE. (See here for an extended PBS Frontline interview of Freeh).

*****

Stay tuned for an extensive post "Dissecting Daimler." The amount of material in this case is now up 228 pages!

SFO Providing Real Time Disclosure in ALSTOM Investigation

For a government agency that has stated in the past that it prefers not to investigate bribery and corruption cases (see here), and for a government agency that has received mounds of criticism in connection with its bungled BAE enforcement action, the U.K. Serious Fraud Office ("SFO") would seem to be running a public relations campaign of late.

In this release from today, the SFO states, in connection with ALSTOM investigation (see here) that:

"The Serious Fraud Office search operation runs into its second day. Following yesterday's multi-location search operation and arrests relating to ALSTOM in the UK, the SFO made operational decisions to extend searches today at ALSTOM properties in Rugby and Ashby de la Zouch. Today's operation involved over 50 personnel including officers from the Warwickshire and Leicestershire Police forces."

Wednesday, March 24, 2010

SFO Given Green Light to Complete Plea Agreement With BAE

An additional development from the U.K. to report. A previous post (see here) discussed the efforts of Corner House Research and Campaign Against Arms Trade, two British non-profits, to derail the SFO's plea agreement with BAE.

Earlier this month, a U.K. High Court prohibited the SFO "from taking any steps in its prosecution of BAE" "until the determination of the application for permission to apply for judicial review or further order."

As is being reported today, the permission to apply for judicial review has been refused. In a two-page order, the judge wrote that: "it is only in the most exceptional case that the court will think it right to interfere with a prosecutorial decision such as this;" that the SFO "applied the guidelines ... properly" and that the SFO's decision to resolve the matter in the way it did was not "unlawful."

According to this release, Corner House and Campaign Against Arms Trade "are taking legal advice on whether or not to appeal the decision."

A spokesperson for one of the groups said that "we are obviously disappointed by the Judge's decision to refuse permission," and that the ruling "implies that the law allows a giant company to pay a small financial penalty for 'accounting irregularities' rather than be charged and tried in open court on more serious criminal charges." According to media report, a BAE spokesperson said that this recent decision is "a matter between the two campaign groups and the SFO."

In a related development (see here), Austrian prosecutors are reportedly continuing to investigate BAE's agent Alfons Mensdorff-Pouilly. (See here for a prior post).

ALSTOM - Corruption Investigation Enters the Boardroom

The U.K. Serious Fraud Office ("SFO") issued this release today which states that "[t]hree members of the Board of ALSTOM in the UK have been arrested on suspicion of bribery and corruption, conspiracy to pay bribes, money laundering and false accounting, and have been taken to police stations to be interviewed by the Serious Fraud Office."

According to the release, search warrants were executed at five ALSTOM businesses premises and four residential addresses. The operation, involving "109 SFO staff and 44 police officers" is code-named "Operation Ruthenium" and centers on "suspected payment of bribes by companies within the ALSTOM group in the U.K." According to the release, "[i]t is suspected that bribes have been paid in order to win contracts overseas."

SFO Director Richard Alderman, in a very DOJ-like statement, noted that "[t]he SFO is committed to tackling corruption" (presumably so long as it does not involve BAE) and that the SFO is "working closely with other criminal justice organizations across the world" and is "taking steps to encourage companies to report any suspicions of corruption, either within their own business or by other companies or individuals."

ALSTOM (see here) "is a global leader in power generation and rail infrastructure." One of the company's major competitors is Siemens. ALSTOM's shares are listed on the Paris Stock Exchange.

Tuesday, March 23, 2010

Daimler - Yet Another Bribery, Yet No Bribery Case

In a criminal information filed yesterday (see here) in U.S. District Court for the District of Columbia, the DOJ alleges that:

"[b]etween 1998 and January 2008, DAIMLER made hundreds of improper payments worth tens of milions of dollars to foreign officials in at least 22 countries - including China, Croatia, Egypt, Greece, Hungary, Indonesia, Iraq, Ivory Coast, Latvia, Nigeria, Russia, Serbia and Montenegro, Thailand, Turkey, Turkmenistan, Uzbekistan, Vietnam, and others - to assist in securing contracts with government customers for the purchase of DAIMLER vehicles valued at hundreds of milions of dollars. In some cases, DAIMLER wired these improper payments to US. bank accounts or to the foreign bank accounts ofU. S. shell companies in order to transmit the bribe. In at least one instance, a US. shell company was incorporated for the specific purpose of entering into a sham consulting agreement with DAIMLER in order to conceal improper payments routed through the shell company to foreign governent offcials. Certain improper payments even continued as late as January 2008. In all cases, DAIMLER improperly recorded these payments in its corporate books and records."

However, in what is becoming a distubring and troubling new norm (i.e. Siemens, BAE) Daimler was NOT charged with FCPA antibribery violations.

Stay tuned for additional analysis of the 78 page criminal information.

Potpourri

Back in active blogging "mode" here on the campus of the Sweet 16 bound Butler Bulldogs after an enjoyable few days in Washington D.C. where I participated in Georgetown Law's Combating Global Corruption Conference. It was nice to see some familiar faces, connect faces to some names I have met through this blog, and to meet new people. The title of my presentation and upcoming paper in the Georgetown Journal of International Law is "The Facade of FCPA Enforcement" and I will post in the coming days a short abstract of the paper as well as my presentation slides.

In the meantime, some items of note.

Africa Sting

Christopher Matthews at Main Justice continues to follow the Africa Sting case and has this report of yesterday's hearing.

Shearman & Sterling Update

Shearman & Sterling pioneered the concept of keeping track of FCPA enforcement actions in an "FCPA Digest" (see here) and it supplements the digest with occasional "Recent Trends and Patters" update. For the latest, see here from Philip Urofsky & Danforth Newcomb.

FCPA Compliance in Phnom Penh

Looking for additional evidence that the FCPA is indeed a hot topic. How about this article from Phnom Penh Post of Cambodia. As noted in the article, a recent FCPA seminar, hosted in part by the American Chamber of Commerce, attracted more than 100 local business leaders.

I wonder if anywhere in the discussion of Siemens and/or BAE the point was made that neither of these entities were charged with FCPA antibribery violations?

Further, I remain perplexed by the curious (and frequent) tendency of FCPA conferences including representatives from FCPA violators - a regional compliance officer for Siemens Singapore presented at the seminar.

Sunday, March 21, 2010

Polish Up The Resume

Do you know a thing or two about the FCPA?

Does foreign bribery enforcement policy interest you?

Do you like to design and conduct FCPA training sessions?

Do you like to publicly speak on FCPA issues?

If you answered yes to these questions, the DOJ has a job for you!

Title - Deputy Chief, Fraud Section - FCPA.

The current DOJ Deputy Chief, Fraud Section - FCPA is Mark Mendelsohn. His pending departure has been discussed and confirmed for some time now.

Last Friday, DOJ posted this job opening.

Looking for an extra perk? You will be covered by this, and other, blogs!

Friday, March 19, 2010

Innospec Gets Hit on Both Sides of the Atlantic

Last month (see here) Innospec, Inc. disclosed that it accured $40.2 million for potential settlement of corruption investigations on both sides of the Atlantic. Yesterday, on both sides of the Atlantic, it was announced that Innospec agreed to resolve these enforcement actions by, among other things, paying $40.2 million in combined fines and penalties. How's that for an accurate corporate disclosure!

See here for the DOJ release and criminal information, here for the SEC release and complaint, and here for the SFO release and supporting documents.

If you are looking for additional evidence / validation that the DOJ and SFO cooperate in enforcement actions, this would be it!

As explained more fully below, the Innospec enforcement action is part Iraqi Oil for Food, part payment of excessive travel and entertainmet expenses, part Cuba, part Indonesia and it involves U.S. companies, U.K. entities, Swiss entities, U.S. citizens, British citizens, German citizens, South African citizens, and Iraqi citizens.

Innospec manufacturers and sells speciality chemicals and is apparently the "world's only manufacturer of the anti-knock compound tetraethyl lead, used in leaded gasoline."

DOJ

According to the DOJ criminal information (here), Innospec, Innospec Limited (a wholly-owned U.K. subsidiary), Alcor Chemie Vertriebs GmbH (a wholly-owned Swiss subsidiary), Ousama Naaman (an agent for Innospec and Alcor in Iraq and elsewhere), and others, knowingly conspired: (i) to defraud the U.N. Oil for Food Program; (ii) to violate the FCPA's antibribery provisions; and (iii) to violate the FCPA's books and records provisions.

According to the information, the primary purpose of the conspiracy was to "obtain and retain lucrative business with the government of Iraq through payment and promise of payment of kickbacks and bribes to the Iraqi government and its officials.

In addition to the "standard" Oil for Food allegations found in previous enforcement actions (i.e. inflated commission payments to an agent which were then used to pay kickbacks to the government of Iraq), the information further alleges that "Naaman, on behalf of Innospec, paid approximately $150,000 in bribes to officials of the [Ministry of Oil ("MoO")] to ensure" that a competitor's product "failed a field trial test and therefore would not be used by the [MoO]..."

In addition, the information alleges that "Innospec and Naaman agreed to pay and promise to pay bribes, including but not limited to money, travel, gifts, and entertainment, to officials of the MoO to obtain and retain contracts."

Among other overt acts, the information details an e-mail Naaman sent to, among others, Executive B (a U.S. citizen and former senior Innospec executive) that indicates "with [Director's (a U.K. citizen and former Innospec Division Managing Director)] instructions, we proceeded, as we don't want to discuss this issue in writing any further because it is so delicate, and as per [Director's] instructions that we don't elaborate in writing, for which I agree."

According to the information, Innospec paid Naaman over $700,000 to reimburse him for payments to Iraqi officials.

The information also contains "travel" allegations including: that Innospec paid approximately $35,000 for eight Iraqi officials to travel to Switzerland for a morning meeting and "four days of sightseeing" complete with "9,000 in pocket money" for the officials;" that Naaman arranged for cash filled envelopes to be given to Iraqi officials visiting the U.K.; that Innospec paid for an Iraqi official's "vacation with his wife in Thailand" a trip with cost approximately $13,000 including "pocket money" for the official; and that Alcor reimbursed Naaman $35,000 "to cover the cost of the travel of the three Iraqi MoO officials to Lebanon for the half-day meeting to finalize the 2008 Long Term Purchase Agreement, including hotel accomodations for six days, $1,800 for 'entertainment, lunches, & dinners in Lebanon,' $1,650 for 'mobile phone cards for international calling + 3 cameras' and $15,000 in 'pocket money.'"

According to the information, all of these payments were improperly recorded on Alcor's books and records (which were consolidatd with Innospec's for purposes of financial reporting) as "commissions" or "sales promotion expenditures."

In addition to the above described conspiracy charge, the information also charges five counts of wire fraud, five counts of FCPA antibribery violations and an FCPA books and records violation.

The DOJ release notes that, pursuant to a yet to be released plea agreement, "Innospec also admitted to selling chemicals to Cuban power plants in violation of the U.S. embargo against Cuba." The DOJ release further notes that Innospec acknowledged paying "approximately $2.9 million in bribes to officials of the Indonesian government to secure sales."

According to the DOJ release, as part of the plea agreement, "Innospec agreed to pay a $14.1 million criminal fine and to retain an independent compliance monitor for a minimum of three years to oversee the implementation of a robust anti-corruption and export control compliance program and report periodically to the DOJ." According to the release, "Innospec also agreed to fully cooperate with the DOJ and other U.S. and foreign authorities in ongoing investigations of corrupt payments by Innospec employees and agents."

In other words, stayed tuned for more. Previously, Naaman (the agent) was indicted (see here).

In annoucing the charges, Assistant Attorney General Lanny Breuer noted that "[t]oday's case is a win for law-abiding companies trying to compete fairly in the marketplace" and that "fraud and corruption cannot be viewed simply as a cost of doing business."

For more on the Innospec plea hearing, including Judge Ellen Segal Huvelle's concern about the compliance monitor, see here for Christopher Matthew's piece from Main Justice. For more on compliance monitors, and the controversy often associated with them, see here.

SEC

In its complaint (here), the SEC alleges that "[f]rom 2000 to 2007, Innospec violated the anti-bribery, books and records and internal control provisions of the FCPA when it routinely paid bribes in order to sell Tetra Ethyl Lead ("TEL") ... to government owned refineries and oil companies in Iraq and Indonesia."

According to the SEC, "Innospec's former management did nothing to stop the bribery activity, and in fact authorized and encouraged it." The SEC alleges that "Innospec's internal controls failed to detect the illicit conduct, which continued for nearly a decade."

According to the SEC, "[i]n all, Innospec made illicit payments of approximately $6,347,588 and promised an additional $2,870,377 in illicit payments to Iraqi ministries, Iraqi government officials, and Indonesian government officials in exchange for contracts worth $176,717,341 in revenues and profits of $60,071,613."

The SEC's charges relating to Iraqi are substantively similar to the DOJ's allegations in the criminal information and include both Iraqi Oil for Food conduct as well as additional improper conduct after the Oil for Food Program was terminated in late 2003.

The SEC's complaint has more detail than the DOJ's criminal information concerning Indonesia and alleges: (i) that "[f]rom 2000 until approximately 2005, Innospec used [a] Indonesian Agent [an Indonesian citizen] and his company to pay bribes of approximately $1,323,507 to Official X [a senior official at BP Migas, an Indonesian state owned oil and gas company ... who previously was a senior official at the Ministry of Energy and Mineral Resources]"; (ii) that "in 2000 and 2001, Innospec also made payments [totaling $700,000] to government officials at Pertamina, another state owned oil compay related to BP Migas" through a "privately owned bank in Geneva, Switzerland;" and (iii) that Innospec "also bribed other officials at Pertamina in order to influence their decisions regarding TEL purchases."

The SEC charged that "at least one U.S. person and officer was complicit in the scheme" and that "[m]any of the bribes were mischaracterized as legitimate commissions, travel and legal fees in Innospec's books and records."

According to the SEC, "as evidenced by the extent and duration of the improper payments to foreign officials made by Innospec, the improper recording of these payments in Innospec's books and records, and the significant involvement of certain members of management at the highest levels of the company, Innospec failed to devise and maintain an effective system of internal controls to prevent or detect these anti-bribery and books and records violations.

The SEC release (here) notes that Innospec, without admitting or denying the SEC's allegations, was ordered to pay $60,071,613 in disgorgement, but because of Innospec's "sworn Statement of Financial Condition" all but $11,200,000 of that disgorgement will be waived. The release states that "[b]ased on its financial condition, Innospec offered to pay a reduced criminal fine of $14.1 million to the DOJ and a criminal fine of $12.7 million to the SFO. Innospec will pay $2.2 million to OFAC for unrelated conduct concerning allegations of violations of the Cuban Assets Control Regulations.

***

Stay tuned for additional analysis of the SFO - U.K. prong of this enforcement action.

Thursday, March 18, 2010

No, We Don't Need to Suspend the FCPA In Haiti or Any Other Country!

A topic in the blogosphere this week has been whether the FCPA needs to be suspended so that more U.S. companies will invest in Haiti.

The spark igniting this discussion was an opinion piece on Monday by Wall Street Journal editorial board member Mary Anastasia O'Grady titled "Democrats and Haiti Telecom" (see here).

[Although O'Grady's article is titled "Democrats and Haiti Telecom" and although she focuses mostly on Josepth P. Kennedy II and former President Clinton, it should be noted that John Sununu (President Bush's former Chief of Staff and Counselor) currently is the Chairman of Fusion's advisory board (see here).]

The article focused on a 1999 contract between Fusion Telecommunications and Haiti Teleco - an entity in the news recently given that certain former employees have been connected to a wide-ranging FCPA enforcement action (see here for prior posts). The article discusses Joseph P. Kennedy II's role at Fusion as a former member of the board "and the still-unanswered question about why Fusion had access to the Teleco network at a 75% discount to the official rate on file at the Federal Communications Commission." Incidentally, the FCPA enforcement action involving Haiti Teleco that has been in the news since May 2009 includes allegations that the individuals and companies involved received "preferred telecommunications rates" based on improper payments made to Haiti Teleco officials (see here at pages 7-8). Indeed, O'Grady's article notes that a civil action in a Florida federal court alleges that certain U.S. telecom carriers were granted "significantly reduced rates for services provided by Teleco in exchange for kickbacks" and that one of the companies that made payments "to certain off-shore companies" was Fusion.

O'Grady's article concludes with this statement from "an American entrepreneur who does business in the Caribbean" who "recently explained the Haitian landscape" to O'Grady this way - "We did not bother with Haiti as the Foreign Corrupt Practices Act precludes legitimate U.S. entities from entering the Haitian market. Haiti is pure pay to play. The benefit of competitive submarine cables would be transformative for the Haitians. Instead, they were stuck with Clinton cronies taxing the poor."

This unattributed statement by one person (a statement which exhibits misunderstanding of the FCPA) then prompted George Mason University Economics Professor Tyler Cowen to write at the Marginal Revolution Blog (see here) that "one of the best way to help Haiti" is to "pass a law stating that the Foreign Corrupt Practices Act does not apply to dealings in Haiti. As it stands right now, U.S. businesses are unwilling to take on this legal risk and the result is similar to an embargo. You can't do business in Haiti without paying bribes."

This then prompted Eric Lipman at the Legal Blog Watch (see here) to ask - "[i]t should not be necessary to suspend enforcement of an anti-corruption law to enable U.S. companies to participate, but, realistically speaking, is it justified in this case to look the other way for a time?"

This then prompted Ashby Jones at the Wall Street Journal's Law Blog (see here) to ask:

"It’s an interesting question posed by Lipman, we think. Let’s assume, for now, that suspension of the FCPA would, in fact, lead to more badly needed U.S. investment in Haiti — a country in desperate need of every last dollar. Would it make sense to pull back on the law for the time being — say 1-2 years? Or would this send a counterproductive message from the Justice Department — that foreign bribery is okay in some countries but not in others? And is that any way to get a country like Haiti back on its feet — by perpetuating a culture of corruption?"

Here is my two cents - NO, WE DON"T NEED TO SUSPEND THE FCPA IN HAITI OR ANY OTHER COUNTRY!

My initial reaction was something like this - gee if the FCPA can, in effect, be suspended for certain companies selling certain products to certain customers (i.e. BAE), why shouldn't it be suspended to help an impoverished country recover from a natural disaster.

However, the misguided suspension suggestion / argument would seem to rest on certain false assumptions about the FCPA.

First, (Travel Act considerations aside) not all business dealings in Haiti are subject to the FCPA - only those with the Haitian government are (as well as, potentially, those with state-owned or state-controlled entities giving credence, just this once for purposes of this post, to the enforcement agencies' dubious "foreign official" interpretation). In other words, even if suspension of the FCPA would "open up" a portion of the Haitian market, it remains the case that only a portion of the Haiti market is affected by the FCPA.

Second, the misguided suspenson suggestion / argument assumes empirical evidence suggesting that businesses shun markets with high FCPA risk. I remain suspect to such claims, notwithstanding the prevalence of such claims by others including my friend Andy Spalding (see here). For instance, Venezuela, Angola, Russia, Philippines, Nigeria, Vietnam, Indonesia, Jamaica, Brazil, China, India, Thailand, and Mexico all fare (although not as poorly as Haiti) poor in Transparency International's Corruption Perceptions Index (see here) (the index is far from perfect, but it is commonly viewed as a leading barometer). Yet foreign investment in these countries is generally vibrant and generally continues to grow notwithstanding the corruption perceptions. Why? Because these are lucrative markets for companies and when a market is lucrative companies will gravitate to those markets, notwithstanding the FCPA risks involved. Haiti has a rather small population and the purchasing power of its citizens is among the lowest in the world. FCPA risks aside, it is perfectly rational for companies to avoid a country like Haiti in favor of doing business in other more populated, lucrative markets. In other words, suspending the FCPA in Haiti is not likely to change this dynamic.

Further, despite my frequent criticism of HOW the FCPA is ENFORCED by the enforcement agencies, I firmly believe that the FCPA, if enforced consistent with its statutory terms and consistent with legislative intent, is a fundamentally sound statute. Suspending enforcement of a necessary and fundamentally sound statute based on false and misguided assumptions is irresponsible and not sound public policy.

What can be done about Haiti?

For starters, how about removing economically inefficient U.S. import quotas that negatively affect Haitian businesses (see here for the recent broadcast from National Public Radio)? An economist like Cowen, as well as others, should pursue this solution rather than advocating suspension of a fundamentally sound and important law.

Wednesday, March 17, 2010

Nexus Technologies Inc. et al. - Part I

Unfortunately, the FCPA enforcement action against Nexus Technologies Inc., a Philadelphia-based export company ("Nexus"), Nam Nguyen (Nexus's President and Owner), and his siblings and fellow Nexus employees, Kim Nguyen and An Nguyen came to an end yesterday.

As noted in this DOJ release, Nexus pleaded guilty to "a conspiracy to bribe officials of the Vietnamese government in exchange for lucrative contracts to supply equipment and technology to Vietnamese government agencies in violation of the FCPA." The release also notes that Nam and An Nguyen "pleaded guilty to conspiracy, a substantive FCPA violation, a violation of the Travel Act and money laundering" and that Kim Nguyen "pleaded guilty to conspiracy, a substantive FCPA violation and money laundering." In June 2009, Joseph Lukas (a former Nexus partner) pleaded guilty to conspiracy and to violating the FCPA (see here).

The DOJ release notes that "in connection with the guilty pleas, Nexus and the Nguyens admitted that from 1999 to 2008 they agreed to pay, and knowingly paid, bribes in excess of $250,000 to Vietnamese government officials in exchange for contracts with the agencies and companies for which the bribe recipients worked" and that the defendants "admitted that the bribes were falsely described as 'commissions' in the company's records."

The DOJ release further notes that in pleading guilty, "Nexus also acknowledged that, as a company, it operated primarily through criminal means and agreed to cease operations as a condition of the guilty plea."

Why did this post start with "unfortunately?"

Because, unlike most FCPA defendants (corporate or individual) Nexus and the Nguyens actually mounted a legal defense based on FCPA's elements, including the key "foreign official" element.

You wouldn't know it just by reading the above DOJ release, but this enforcement action centered on payments to employees of various commerical arms of Vietnam's Ministry of Transport, Ministry of Industry, and Ministry of Public Safety.

While the case may not have been the strongest "test case," Nexus and the Nguyens, in what is believed to be an FCPA first, challenged the DOJ's interpretation that employees of state-owned or state-controlled enterprises ("SOES") are "foreign official" under the FCPA. As readers likely know, this issue is a frequent topic of discussion on this blog (see here for prior "foreign official" posts).

The "foreign official" issue was fully briefed and I will explore in a future post (Nexus Technologies Inc. et al. - Part II) the issues raised by the briefs, including the DOJ's surprising argument that it does not even need to identify specific "foreign officials" to charge an FCPA antibribery violation as well as the DOJ's thin and misguided justification for its legal theory that employees of SOEs are "foreign officials" under the FCPA.

For the record, the judge in the case, without any comment or analysis, denied the motion to dismiss. Thus, DOJ may claim victory on its "foreign official" interpretation; however, in its brief DOJ specifically argued that a decision on the "foreign official" element was premature and ultimately a jury issue.

For all the talk, including on this blog, about the Africa Sting Case, BAE, Siemens, etc., this little noticed FCPA enforcement action in Philadelphia had the potential to shape the future of FCPA enforcement like no other - considering that over 50% of recent FCPA enforcement actions involve "foreign officials" only under DOJ's dubious legal interpretation - which still, notwithstanding this resolution, has no judicial support.

Stay tuned for more.