You may want to listen to this while reading this post.
To my knowledge, the previous "limbo low" for an otherwise commercial enterprise to be deemed an "instrumentality" of a foreign government, and thus employees of the enterprise to be deemed "foreign officials" by the DOJ and SEC was 49%.
In the Bonny Island bribery cases (see here) the enforcement agencies asserted that officers and employees of Nigeria LNG Limited ("NLNG") were "foreign officials" despite the fact that NLNG was owned 51% by a consortium of private multinational oil companies. For instance, paragraph 14 of the KBR information (here) alleges as follows. "NLNG was created by the Nigerian government to develop the Bonny Island Project and was the entity that awarded the related EPC contracts. The largest shareholder of NLNG was NNPC [the Nigerian National Petroleum Corporation - an alleged Nigerian government-owned company charged with development of Nigeria's oil and gas wealth and regulation of the country's oil and gas industry]. The other owners of NLNG were multinational oil companies. Through the NLNG board members appointed by NNPC, among other means, the Nigerian government exercised control over NLNG, including but not limited to the ability to block the award of EPC contracts. NLNG was an entity and instrumentality of the Government of Nigeria within the meaning of the FCPA. Officers and employees of NLNG were 'foreign officials' within the meaning of the FCPA."
The SEC's complaint (here) at paragraph 10 contains similar allegations.
Move over 49%, there is a new "foreign official" "limbo low" - 43%.
In the recent Alcatel-Lucent enforcement action (see here for a complete analysis) paragraph 21 of the DOJ's information (here) states as follows.
"Telekom Malaysia Berhad ('Telekom Malaysia') was a state-owned and controlled telecommunications provider in Malaysia. Telekom Malaysia was responsible for awarding telecommunications contracts during the relevant time period. The Malaysian Ministry of Finance owned approximately 43% of Telekom Malaysia's shares, had veto power over all major expenditures, and made important operational decisions. The government owned its interest in Telekom Malaysia through the Minister of Finance, who had the status of a 'special shareholder.' Most senior Telekom Malaysia officers were political appointees, including the Chairman and Director, the Chairman of the Board of the Tender Committee, and the Executive Director. Accordingly, officers, directors and employees of Telekom Malaysia were 'foreign officials' within the meaning of the FCPA."
The SEC's complaint (here) at paragraph 56 contains similar allegations.
What type of company is Telekom Malaysia ("TM" as it calls itself)?
Perhaps TM itself should tell you.
According to its most recent annual report (here) "TM is the largest integrated communications solutions provider in Malaysia, and one of Asia’s leading communications companies, with market capitalisation of RM11 billion and an employee force of 24,744. Established as the Telecommunications Department of Malaya in 1946, it was privatised in 1987, and listed on Bursa Securities in 1990." (see pg. 10 - emphasis added). Page 32 of the report describes the "shareholder base" as follows. "TM has a large shareholder base comprising 34,891 institutional and private/retail shareholders."
TM's capital structure and shareholder information can be found here. TM's most recent quarterly results are here.
The new "limbo low" is 43%.
How long can it go?
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Is it ownership? Or is it control? Or some calculus of both? In this current period of significant government intervention in corporate ownership, we need to be cautious of who is behind a company.
ReplyDeleteIn the case of TM, it is unusual that the government owned less than 50% and still had such significant control of the company. It is rare, but I expect there are many more companies like this.
It would have been interesting to see if these cases would have helped develop the definition of "foreign official." Once again, the company in the hot seat found it better to settle, than to argue the nuances of the law.