Thursday, April 7, 2011

What You Need To Know From Q1

This post provides a summary of enforcement actions, other events, and U.K. developments from the first quarter of 2011.

As to enforcement, this post covers DOJ and SEC enforcement separately. With the exception of the Jeffrey Tesler plea that is noted, this post only covers enforcement actions initiated and resolved during the first quarter of 2011. For a summary of other indictments, guilty pleas and sentences during the first quarter see here - the FCPA Blog's Q1 Enforcement Report.

DOJ Enforcement

The DOJ resolved two FCPA enforcement actions in the first quarter: Maxwell Technologies and Tyson Foods. Total DOJ recovery in these enforcement actions was $12 million. Both cases resulted from voluntary disclosures and both cases were resolved via deferred prosecution agreements (DPAs). Neither enforcement action has, at present, resulted in any individual prosecutions.

Including the Jeffrey Tesler plea agreement (an enforcement action that began in 2009) in which Tesler agreed to forfeit approximately $149 million (see here), the DOJ's FCPA enforcement program in the first quarter of 2011 brought in approximately $161 million to the U.S. treasury.

Maxwell Technologies (Jan. 31st)

See here for the prior post.

Charges: FCPA anti-bribery violations and knowingly violating the FCPA's books and records provisions.

Resolution Vehicle: Criminal information resolved through a DPA (three year term).

Guidelines Range: $10.5 million to $21 million.

Penalty: $8 million (25% below the minimum amount suggested by the guidelines).

Disclosure: Yes, voluntary disclosure.

Monitor: No.

Individuals Charged: No.

Tyson Foods (Feb. 10th)

See here for the prior post.

Charges: Conspiracy to violate the FCPA's anti-bribery and books and records provisions; FCPA anti-bribery and books and records violations.

Resolution Vehicle: Criminal information resolved through a DPA (two year term).

Guidelines Range: $5.04 to $10.08 million.

Penalty: $4 million (approximately 20% below the minimum amount suggested by the guidelines)

Disclosure: Yes, voluntary disclosure.

Monitor: No.

Individuals Charged: No.

For a similar analysis of 2010 DOJ FCPA enforcement actions, see here.

SEC Enforcement

The SEC resolved five FCPA enforcement actions in the first quarter: Paul Jennings, Maxwell Technologies, Tyson Foods, IBM Corp. and Ball Corp. Total recovery in these enforcement actions was approximately $18 million.

As with DOJ FCPA enforcement in the first quarter, all of the SEC's enforcement actions resulted from disclosures (i.e. voluntary disclosures in the traditional sense, such as the company disclosing the conduct at issue to the enforcement agencies, as well as other forms of public disclosure, such as identification in the U.N. Oil for Food Report, or the result of prior foreign law enforcement agency investigations).

Of the $18 million the SEC recovered thus far in FCPA enforcement actions, approximately $15.9 million (88% has been disgorgement and prejudgment interest).

Paul Jennings (Jan. 24th)

See here for the prior post.

Charges: Settled civil complaint charging FCPA anti-bribery violations; FCPA books and records and internal controls violations; knowingly falsifying books and records; knowingly circumventing internal controls; and signing false certifications required by SOX.

Settlement: Approximately $230,000 (approximately $116,000 in disgorgement, $13,000 in prejudgment interest, and a $100,000 civil penalty).

Disclosure: Yes, the enforcement action was related to the Innospec matter - an enforcement action prompted by the U.N. Oil for Food Report.

Related DOJ Enforcement Action. Yes as to Innospec in 2010.

Maxwell Technologies (Jan. 31st)

See here for the prior post.

Charges: Settled civil complaint charging: FCPA anti-bribery, books and records and internal controls violations; and Section 13 disclosure violations.

Settlement: Approximately $6.3 million (approximately $5.6 million in disgorgement and $700,000 in prejudgment interest)

Disclosure: Yes, voluntary disclosure.

Individuals Charged: No.

Related DOJ Enforcement Action: Yes.

Tyson Foods (Feb. 10th)

See here for the prior post.

Charges: Settled civil complaint charging FCPA anti-bribery violations and books and records and internal control violations.

Settlement: $1.2 million in disgorgement and prejudgment interest.

Disclosure: Yes, voluntary disclosure.

Individuals Charged: No.

Related DOJ Enforcement Action: Yes.

IBM Corporation (March 18th)

See here for the prior post.

Charges: Settled civil complaint charging FCPA books and records and internal controls violations.

Settlement: $10 million ($5.3 million in disgorgement, $2.7 million in prejudgment interest, and a $2 million civil penalty).

Disclosure: Yes, the action is reportedly the result of a prior South Korean government investigation.

Individuals Charged: No.

Related DOJ Enforcement Action: No.

Ball Corporation (March 24th)

See here for the prior post.

Charges: Administrative cease and desist proceeding finding FCPA books and records and internal controls violations.

Settlement: $300,000 penalty.

Disclosure: Yes, voluntary disclosure.

Individuals Charged: No.

Related DOJ Enforcement Action: No.

For a similar analysis of 2010 SEC FCPA enforcement actions, see here.

Other Events

"Foreign Official" Challenges

A significant event from the past quarter was the historic "foreign official" challenge in U.S. v. Carson (see here). This challenge in the C.D. of California, utilizing a detailed and complete overview of the FCPA’s extensive legislative history on the “foreign official” element, asks the court to rule on the DOJ’s interpretation that employees of alleged state-owned or state-controlled enterprises are “foreign officials” under the FCPA. DOJ will soon be filing its response brief in the case and further developments are likely to occur in the second quarter.

The Carson challenge sparked two other challenges to the DOJ's "foreign official" interpretation in the Lindsey and O'Shea matters - two prosecutions both focused on alleged improper payments to employees of a Mexican entity - ComisiĆ³n Federal de Electricidad (CFE), an alleged state-owned utility company. Although filed after the Carson challenge, both challenges are further along than the Carson challenge.

The Lindsey matter was fully briefed (see here for the prior post including links to the briefing) and on April 1st U.S. District Court Judge Howard Matz issued an oral ruling denying the defendants' challenge. (See here for the prior post). It is expected that Judge Matz will author a written decision in the near future.

In the O'Shea matter, the DOJ has filed its opposition brief. (See here for the prior post).

Prosecutorial Common Law

This past quarter had one of the best guest posts contributed to this site (see here) by Michael Levy, co-chair of the White Collar Investigations and Enforcement Group at Bingham McCutchen. Levy, a former Assistant United States Attorney in the District of Columbia and law clerk to U.S. Supreme Court Justice Lewis F. Powell Jr., described what he called "prosecutorial common law."

With the DOJ arguing in its "foreign official" opposition briefs that its position is strengthened by "more than 35 guilty pleas by individuals who have admitted to violating the FCPA by bribing officials of state-owned entities," Levy's guest post was indeed timely.

China Law Development

As noted in this prior post, in February, the legislature of the People’s Republic of China (PRC) passed certain amendments to the Criminal Law, one of which is a provision that criminalizes paying bribes to non-PRC government officials and to officials of international public organizations. The prior post contains a analysis of the significant development - the first instance in which PRC law has prohibited PRC nationals and PRC companies from paying bribes to non-PRC government officials.

Global Changes

The first quarter of 2011 witnessed several regime changes or similar events around the world. Will these events lead to FCPA scrutiny, future enforcement actions, or changes in corporate compliance? These issues are explored in prior posts here, here and here.

U.K. Developments

The first quarter of 2011 also witnessed several developments in the United Kingdom.

Certain high-ranking U.K. Serious Fraud Office officials left the agency to join private law firms in what is becoming a vibrant Bribery Act Inc. industry. (See here).

The SFO continued to enforce existing U.K. laws as it prepares to enforce the Bribery Act. (See here for the prior post on the M.K. Kellogg Ltd. enforcement action and Mabey & Johnson sentences).

Finally, and most significantly, in a much anticipated development, the U.K. Ministry of Justice released its long awaited guidance as to the U.K. Bribery Act - a delayed law now set to go live on July 1, 2011. (See here for the prior post which includes links to the relevant guidance material and an analysis by Robert Amaee, a former SFO official).

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