Mum's The Word As To Perez Sentence

On January 21st, the DOJ announced (here) that Antonio Perez was sentenced to 2 years in prison in connection with the Haiti Teleco case.

I did not cover the sentence as it happened because, as I hope readers recognize and appreciate, I like to analyze things a bit before posting.

Thus, when it comes to FCPA sentences, the actual sentence only tells part of the story; the complete story requires knowledge of the sentence the DOJ was actually requesting.

For instance, the DOJ sought a 37 month sentence as to Leo Winston Smith, but the judge sentenced him to six months (see here). The DOJ sought a 38 month sentence as to Bobby Elkins, but the judge sentenced him to probation (see here). The DOJ sought a 14-17 year sentence as to Nam Nguyen, but the judge sentenced to him to 16 months (see here).

Numerous other examples abound and I've previously noted that the DOJ may be charging more individuals with FCPA violations (although in 2010, 70% of corporate enforcement actions did not involve any related enforcement action against company employees), and those individuals may be pleading guilty (perhaps because of the "carrots" and "sticks" the DOJ possesses), but when it comes time to sentencing, judges are viewing FCPA cases much differently than the DOJ.

Back to Perez.

There is nothing in the publicly filed documents that indicate the sentence the DOJ was seeking in this case.

I contacted Perez's attorney, Michael Chavies (see here) and asked him - what sentence was the DOJ seeking - the answer - no comment.

I've exchanged e-mails with the Public Affairs Office at Justice Department and, after nearly three months, I've still yet to learn the answer to the rather simple question of what sentence the DOJ was seeking as to Perez.

Perhaps someday the answer will be known and a more thoughtful analysis of the Perez sentence will be possible.

For now, mum's the word.

So ... in case you had not heard, Antonio Perez was sentenced to two years in prison and ordered to serve two years of supervised release following his prison term, and to forfeit $36,375.

For numerous prior posts on the Haiti Teleco, please visit the Haiti tab on the right.

*****

A good weekend to all.

Picking and Choosing?

The sentencing memos in the Ousama Naaman matter are interesting reads. Naaman's memo (here), submitted by Abbe Lowell of McDermott Will & Emery (here), provides a glimpse into cooperation by an individual FCPA defendant.

The DOJ's memo (here), while requesting a downward departure, details how Naaman's cooperation was not great at all and how Naaman is seemingly contesting various facts and issues he agreed to in pleading guilty.

The DOJ seeks a recommended sentence of 90 months (7.5 years) which would result in 79 months of additional incarceration given that Naaman has already 11 months of time served.

As previously reported (here), Naaman's sentencing has been delayed until April 18th.

One aspect of the DOJ's sentencing memo I found interesting is where the DOJ warns the judge that a "minimal sentence could not only possible be construed as a violation of U.S. treaty obligations [...] but could do much to undermine the efforts by the United States Departments of Commerce and State to educate U.S. businesses about the harm caused by and risk of engaging in transnational bribery." (See pgs. 34-36).

The treaty reference is to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (see here) and the DOJ specifically cites Art. 3 Sec. 1 - "The bribery of a foreign public official shall be punishable by effective, proportionate and dissuasive criminal penalties. The range of penalties shall be comparable to that applicable to the bribery of the Party's own public officials."

Is the DOJ picking and choosing which articles of the OECD Convention it wants to abide by?

Article 5 of the same OECD Convention, under the heading "Enforcement," states that investigation and prosecution of bribery offenses "shall not be 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."

Are we to believe that the Giffen prosecution (see here for prior posts) was not influenced by considerations on the "potential effect upon relations with another state."?

Are we to believe that the BAE prosecution and the lack of FCPA charges (see here for the prior post) was not influenced by "considerations of national economic interest" or the "identity of the natural or legal persons involved."

It would seem that every time the DOJ specifically states in a sentencing memo (i.e. Siemens, BAE, Daimler, etc.) that, in deciding how to resolve a case, it considered the collateral consequences - including the risk of debarment and exclusion from government contracts - that prosecution of the offense is being "influenced by considerations of national economic interest" or the "identity of the natural or legal persons involved."

In an effort to avoid yet another rejection of its FCPA sentencing recommendation, the DOJ is now warning a judge that a "minimal sentence" could be "construed as a violation of U.S. treaty obligations."

In doing so, is the DOJ picking and choosing which articles of the OECD Convention it will abide by?

Friday Roundup

FCPA enforcement down 100% and some items for the weekend watch/read list.

Enforcement Down 100%

Last year at this time there were already 23 FCPA enforcement actions (22 defendants in the Africa Sting case and the Natco Group enforcement action).

So far this year there have been 0.

Thus, FCPA enforcement is down 100%.

I don't expect you to take this statistic seriously and I don't intend it to be. Rather, it is meant as a commentary on the often times odd obsession some have with FCPA enforcement statistics (misleading as they may be in many cases).

On to more meaningful commentary by others.

For Your Viewing Pleasure

Two titans of the FCPA bar, Homer Moyer (here) and Martin Weinstein (here) were recently the focus of separate interviews on the BulletProofBlog as to various FCPA topics.

Informative views here and here.

For Your Reading Pleasure

Gary Stein (here - Schulte Roth & Zable) has an informative overview (here) of "Sentencing of Individuals in FCPA Cases."

I've been documenting the growing trend of judges significantly rejecting DOJ sentencing recommendations in FCPA cases (see here) and Stein "hits the nail on the head" with this paragraph:

"The DOJ exercises virtually unlimited discretion in deciding who gets charged in FCPA cases and, for all practical purposes, in deciding the amount of the financial penalty imposed against corporate violators. But sentencing of individual defendants, particularly after U.S. v. Booker, is ultimately a matter of judicial, not prosecutorial discretion. And it has become apparent that there is a wide and growing rift between the views of the DOJ and the courts as to the appropriate sentences for individual violators in FCPA cases."

Tired of all the "are you ready" hysteria surrounding the U.K. Bribery Act?

If so, you will want to read "Keep Calm and Carry On" (here) by Alexandra Wrage (President of Trace) recently published by In Compliance Magazine. Among other things, Wrage states that "the argument that companies that have navigated FCPA waters for a decade or more are unprepared for the new UK Act is unfounded."

See here for my "bold" prediction that implementation of the U.K. Bribery Act (whenever that occurs) is not that big of deal for most companies and that U.K. enforcement of the Bribery Act is likely to be measured and disciplined.

*****

A good weekend to all.

Judge (Again) Significantly Rejects DOJ's Recommendation In Sentencing Leo Winston Smith

It has become a broken-record statement by now - a judge has significantly rejected the DOJ's sentencing recommendation in an FCPA enforcement action. (See here and here for prior posts).

In September 2009, as described in the DOJ release (here), Leo Winston Smith (the former Director of Sales and Marketing for Pacific Consolidated Industries) pleaded guilty to charges related to the bribery of a U.K. Ministry of Defense official in order to obtain lucrative equipment contracts with the U.K. Royal Air Force, in violation of the Foreign Corrupt Practices Act. (Smith also pleaded guilty to corruptly obstructing and impeding the due administration of the internal revenue laws.).

The DOJ sought a 37 month sentence.

In his sentencing memorandum, Smith respectfully requested a term of probation with appropriate conditions. His attorney, Edward Patrick Swan Jr. of Luce Forward (here), noted as follows. "The prison term of 37 months recommended by the government is disproportionate to most of the other FCPA cases prosecuted by the Department of Justice" and that the "great majority of the sentences imposed in similar cases, and even in cases involving much larger bribe amounts, have been generally much less than what the government is recommending in this case."

In early December 2010, U.S. District Judge Andrew Guilford (C.D. Calif) sentenced Smith to six months imprisonment, followed by six months of home confinement, and three years of supervised release. (See here).

Just as it did not issue a release in connection with the Elkin and Green sentences, the DOJ did not issue a release in connection with Smith's sentence.

Smith's co-conspirator, Martin Self (here), was sentenced to two years probation in November 2008 (see here).

The Giffen Gaffe - The Final Chapter

The original 2003 indictment (here) charged James Giffen with "making more than $78 million in unlawful payments to two senior officials of the Republic of Kazakhstan in connection with six separate oil transactions, in which the American oil companies Mobil Oil, Amoco, Texaco and Phillips Petroleum acquired valuable oil and gas rights in Kazakhstan."

Giffen's defense?

Partly that his actions were taken with the knowledge and support of the Central Intelligence Agency, the National Security Council, the Department of State and the White House. The DOJ did not dispute the fact that Giffen had frequent contacts with senior U.S. intelligence officials or that he used his ties within the Kazakh government to assist the United States. With the court's approval, Giffen sought discovery from the government to support such a public authority defense and much of the delay in the case was due to the government's resistance to such discovery and who was entitled to see such discovery.

In August, the case took a mysterious turn when Giffen agreed to plead guilty (here) to a one-paragraph superseding indictment charging a misdemeanor tax violation.

The case ended Friday in a Manhattan court room.

U.S. District Court Judge William Pauley called Giffen a Cold War hero, imposed no jail time, and stated that the case should never had been brought in the first place.

It's the Giffen Gaffe, the biggest blunder in the history of the FCPA.

Today's post is from Steve LeVine who was present in Judge Pauley's courtroom on Friday. LeVine writes "The Oil and The Glory" For Foreign Policy (here) and the below is reprinted with his permission.

*****

James Giffen, the oil dealmaker at the center of what was once the largest foreign bribery case in U.S. history, is officially a free man.

The 69-year-old former oil adviser to Kazakhstan's president, accused of diverting $78 million from oil companies to the Kazakh government, waited out more than a dozen federal prosecutors and sat through some two dozen court appearances and five trial dates over the course of seven years. Today, the effort paid off. Three months after prosecutors announced a stunning capitulation, dropping all foreign bribery, money laundering, and fraud charges against Giffen in exchange for a guilty plea on a misdemeanor tax charge, U.S. District Judge William Pauley ordered no prison time and no fines in sentencing proceedings at a Manhattan courthouse.

In handing down the non-sentence, Pauley seemingly validated the argument to which Giffen's lawyers had clung since 2003: that whatever crimes Giffen had allegedly committed occurred while he was a highly valued foreign asset of the American intelligence. "Suffice it to say, Mr. Giffen was a significant source of information to the U.S. government and a conduit of secret information from the Soviet Union during the Cold War," Pauley said today.

Giffen may have been lesser-known than the other businessmen-cum-criminal-defendants of recent decades, but he was equally colorful, a swaggering, coarse-talking, heavy-drinking womanizer and a charismatic fixture on the Caspian Sea. He arrived in Kazakhstan in 1992, but the trajectory that ultimately landed him there began in 1969, when he started traveling to Moscow as an aide to a Connecticut metals trader. Giffen worked his way up to become a major player in a U.S-Soviet business association with top-level political ties in both Washington and Moscow. When the Soviet Union collapsed in 1991, business in Russia dried up, and Giffen moved on to Kazakhstan, which was quickly becoming one of the hottest oil plays on the planet.

Giffen managed to ingratiate himself with a man he called The Boss: Kazakh President Nursultan Nazarbayev. He became Nazarbayev's chief oil negotiator and, prosecutors alleged, his personal banker. While honchoing some of the era's biggest oil deals, he also diverted some $78 million in payments made to Kazakhstan by now-dead companies like Mobil, Amoco, and Texaco into Swiss and other bank accounts that he set up in the name of Nazarbayev, other senior Kazakh officials, and their relatives, prosecutors alleged. (U.S. diplomats said that Nazarbayev, an unindicted co-conspirator in the case, so dreaded being tarnished by a Giffen conviction that both he and his envoys pleaded repeatedly for the George W. Bush Administration to order the case dropped.)

The case seemed open and shut, since the prosecutors presented a detailed paper trail -- provided by a Swiss magistrate -- of Giffen slicing payments into tiny discrete pieces for transfer into secret Swiss bank accounts, rather than shifting them as a whole, a classic method of money laundering. Even at their most voluble and expansive in court, Giffen's lawyers made no attempt openly to dispute the prosecution's facts. They simply kept repeating that, whatever Giffen may have done, he was taking orders from the Kazakh government -- a sovereign state entitled to its own ideas of legality -- and otherwise serving the patriotic interests of the Central Intelligence Agency.

It was an audacious defense that many thought verged on the preposterous. For one thing, CIA officers of the era deny that Giffen was anything of the sort -- he walked into CIA headquarters on his own volition and talked to agency officers about Kazakhstan, they said, but that was very different from being a trusted asset on an informal assignment. In short, they asserted, Giffen was simply another dude talking.

The CIA, however, appears to have refused to hand over many -- if any -- documents sought by the defense. Judge Pauley had ruled that such documents were obligatory if Giffen were to have access to his rights to adequately defend himself. So the prosecution was left with having to drop the charges.

In his sentencing remarks, Pauley said that he had had access to classified documents that no one else in the courtroom had seen, and that they largely validated Giffen's claims. "He was one of the only Americans with sustained access to" high levels of government in the region, Pauley said. "These relationships, built up over a lifetime, were lost the day of his arrest. This ordeal must end. How does Mr. Giffen reclaim his reputation? This court begins by acknowledging his service."

*****

For additional coverage see here (David Glovin - Bloomberg) and here (Larry Neumeister - AP).

For Giffen's contribution to FCPA case law (see here).

Judge (Again) Significantly Rejects DOJ's Recommendation In Sentencing Bobby Elkins

If the above title sounds familiar, it is.

Last month, the title read "Judge (Again) Significantly Rejects DOJ's Recommendations in Sentencing Nexus Defendants" (see here). As noted in the prior post, the DOJ sought a 14-17 year sentence for lead defendant Nam Nguyen, but the judge sentenced him to 16 months (plus 2 years of supervised release). Further, the DOJ sought multi-year sentences for two defendants, but the judge sentenced them to probation.

Last week, the DOJ sought another multi-year sentence and again the sentencing judge rejected the recommendation and sentenced the defendant to probation.

There is a clear trend developing.

The DOJ may be charging more individuals with FCPA violations, and those individuals may be pleading guilty (perhaps because of the "carrots" and "sticks" the DOJ possesses), but when it comes time to sentencing, judges are viewing these cases much differently than the DOJ.

In August, Bobby Jay Elkin Jr. pleaded guilty to a one count criminal information charging him with conspiracy to violate the FCPA. (See here for the prior post). Elkin was Country Manager for Dimon International Kyrgyzstan (DIK), a wholly-owned subsidiary of Dimon Inc. (Dimon and Standard Commercial Corporation merged to form Alliance One International in 2005). According to the information, Elkin conspired and agreed with Dimon, DIK, and others to pay and authorize payment of bribes to "officials of state-owned enterprises and other public officials in Kyrgyzstan in order to secure business for" Dimon and DIK.

Although the sentencing memoranda were filed under seal, this report from the Roanoke Times indicates that the DOJ was seeking a 38 month sentence for Elkin.

Time out said Judge Jackson Kiser.

According to the Roanoke Times, Judge Kiser noted, that in making the improper payments, "Elkin faced a choice of either you do this or lose your job."

Plus, Judge Kiser said, the CIA routinly bribes Afghan warlords, but the CIA's conduct is not illegal. According to the Roanoke Time, Judge Kiser said that this parallel "sort of goes to the morality of the situation."

It appears that these two factors, plus Elkin's cooperation, motivated Judge Kiser to sentence Elkins to three year's probation (plus a $5,000 fine).

Moreover, Judge Kiser "said he would waive the usual travel restrictions of probation to allow Elkin to return to Kyrgyzstan and resume his job" for a Turkish tobacco company.

*****

In April, Elkin was also charged by the SEC (see here).

For more on the related Alliance One enforcement action (see here).

Judge (Again) Significantly Rejects DOJ's Recommendations In Sentencing Nexus Defendants

As noted in this DOJ release, last week several defendants in the Nexus Technologies enforcement action (see here for prior posts) were sentenced. Because many media sources merely regurgitate DOJ releases in such instances, this post may be the first you'll learn that the sentencing judge in the Nexus matter significantly rejected the DOJ's sentencing recommendations.

For instance, and as described more fully below, the DOJ sought a 14-17 year sentence for lead defendant Nam Nguyen, but the judge sentenced him to 16 months (plus 2 years of supervised release).

Further, the DOJ sought multi-year sentences for two defendants, but the judge sentenced them to probation.

The DOJ's sentencing memoranda (see here for the 79 pages of collective material) provide an interesting read and clearly demonstrate the growing divide between how the DOJ views FCPA defendants and how judges view such defendants at sentencing. For instance, Judge Shira Scheindin stated at Frederic Bourke's sentencing (see here) “after years of supervising this case, it’s still not entirely clear to me whether Mr. Bourke is a victim or a crook or a little bit of both.”

The DOJ stated in Nam Nguyen's sentencing memo that its recommendation (168-210 months) should be accepted "to promote general deterrence" and that conduct such as Nguyen's "will hardly be deterred by sending the message that the consequences of such conduct is at worst several months of imprisonment."

Yet, the judge still sentenced Nam Nguyen to 16 months (plus 2 years of supervised release).

Also of note is that the DOJ criticized Nam Nguyen for "subjectively" looking at the "history of FCPA sentencing, focusing on the statistical outlier of the case U.S. v. Green ... but ignoring the more common cases of significant prison time" such as "Charles Jumet, who paid less than 1/3 of what Nguyen paid in bribes, but received 87 months' imprisonment."

Let me assert that it is the DOJ who is "subjectively" looking at the "history of FCPA sentencing" and that Jumet is the "statistical outlier" - not sentences such as of the Greens.

Indeed, it is very common for FCPA defendants to be sentenced to prison terms measured in days and months, not years.

Consider the following recent sentences:

Greens - 6 months (August 2010)

Frederic Bourke - 366 days (November 2009)

Jim Bob Brown - 366 days (January 2010)

Jason Edward Steph - 15 months (January 2010)

The below post provides an overview of the Nexus sentences as well as the DOJ's sentencing memos.

Nam Nguyen

Sentence: 16 months, 2 years of supervised release

DOJ Recommendation: 168-210 months

In its sentencing memorandum, the DOJ stated that Nguyen "paid bribes to multiple Vietnamese government officials in exchange for contracts for his business" and that "Nguyen literally offered a bribe on every single contract bid over a period of more than nine years ...".

DOJ sought a four-level sentencing enhancement "because the offense involved a public official in a high-level decision-making or sensitive position." Specifically, the DOJ asserted that Nguyen paid bribes to "Nguyen Van Tan, who was the Managing Director of T&T Co. Ltd. ... the procurement arm of Vietnam's Ministry of Public Safety."

Other items of interest from the DOJ's sentencing memorandum.

In a footnote, the DOJ asserts that "the court has ruled in favor of the government" on the "foreign official" issue briefed in the case. However, as noted in this prior post, the DOJ specifically argued throughout its brief that a court decision as to this issue was premature. What actually happened is that the judge denied the defendants' motion to dismiss without comment or analysis. The DOJ stated in the same footnote that because Nguyen's counsel discussed the "foreign official" issue in his sentencing memorandum, that this "raises serious questions as to whether or not he has actually accepted responsibility for his crimes."

The DOJ memo contains "Exhibit A" - a chart detailing the "Sentences of Natural Persons Who Pleaded Guilty to FCPA Violations Since 2001."

The chart is misleading.

Nowhere in the chart does it indicate, nor in the brief referencing the chart is it noted, that the sentences are not just for FCPA violations, but, in many cases, sentences based on other violations of law as well.

For instance, in the longest sentence on the DOJ's chart - Charles Jumet (87 months) nowhere is it noted that the "FCPA" portion of the sentence was actually lower. Jumet pleaded guilty to two counts - conspiracy to violate the FCPA and making false statements to federal agents. The false statements portion of his sentence was 20 months. Thus, Jumet's "FCPA" sentence was 60 months - not 87 months as suggested by the DOJ's chart.

An Nguyen

Sentence: 9 months, 3 years of supervised release (notwithstanding that, per the DOJ's sentencing memorandum, Nguyen was on probation at the time of his offense)

DOJ Recommendation: 87-108 months

In its sentencing memorandum the DOJ stated that Nguyen "paid bribes to multiple Vietnamese government officials in exchange for contracts for his family's business." Elsewhere in the memo, the DOJ states that "Nguyen's bribery was particularly egregious." In connection with its decision not to seek a sentencing enhancement for an offense involving a public official in a high-level decision-making or sensitive position, the DOJ noted that "Nguyen was unaware of the nature, position, or role of the specific officials who received the bribe payments."

Kim Nguyen

Sentence: 2 years probation

DOJ Recommendation: 70-87 months (even after the DOJ's downward departure recommendation)

The DOJ requested a Section 5K1.1 downward departure. The DOJ noted that "even though Kim Nguyen did not begin providing information to the government until shortly before trial" this information nevertheless "appeared to play a role in her siblings' decisions to plead guilty." The DOJ noted that "Nguyen met with the government on approximately two occasions to explain the business practices and financial records of Nexus Technologies" and "explained various entries in the Nexus books which allowed the government accurately to calculate the total amount of bribes paid by the defendants ..."

In its sentencing memo, the DOJ stated that "Nguyen played a critical role in this conspiracy, as she was the person responsible for handling the finances and maintaining the books and records of Nexus." The DOJ stated that Nguyen "funneled the bribe payments to an off-shore company controlled by Nexus, which then forwarded the bribe payments to the Vietnamese officers, and it was Kim Nguyen who falsified the associated wire-transfer documents to cover their tracks." The DOJ further asserted that e-mail correspondence "makes it very clear that Kim Nguyen knew exactly what she was doing, and why." As with An Nguyen, the DOJ did not seek a sentencing enhancement for Kim Nguyen and noted that "Kim Nguyen was unaware of the nature, position, or role of the specific officials who received the bribe payments."

Joseph Lukas

Sentence: 2 years probation

DOJ Recommendation: 37-46 months (even after the DOJ's downward departure recommendation)

The DOJ requested a Section 5K1.1 downward departure. The DOJ noted that Lukas "met with the government on approximately seven separate occasions over the course of approximately 1.5 years and explained everything he knew about his co-defendants, their criminal conduct, their personal histories, and their business records." According to the DOJ, "Lukas also created spreadsheets of information for the government, voluntarily turned over his computer for government analysis, and spent hours upon hours poring through documents in order to explain the business practices of Nexus Technologies and the Nguyen siblings."

In its sentencing memorandum, the DOJ stated that "Lukas helped Nexus Technologies pay bribes to multiple Vietnamese government officials in exchange for contracts." According to the DOJ, "Lukas was responsible for vendor relations and negotiations in the United States (which included identifying vendors who could supply the requested goods at low enough prices to allow the bribe payments.)".

*****

As to the Greens' sentence, the DOJ noted in footnote 8 of Nam Nguyen's sentencing memo that the "DOJ is considering appealing the sentence in that case."

DOJ Seeks Sentencing Enhancement

The starting point in calculating a criminal fine for an FCPA anti-bribery violation is Section 2C1.1 of the U.S. Sentencing Guidelines (see here).

By way of example, see here (pg. 8) for how this section was used to determine the "total offense level" in the Alliance One plea agreement, here (pg. 6) for how this section was used to determine the base fine in the Technip deferred prosecution agreement.

Over the summer, the DOJ submitted its required report "commenting on the operation of the sentencing guidelines, suggesting changes in the guidelines that appear to be warranted, and otherwise assessing the [U.S. Sentencing] Commission's work."

In the June 28th letter (see here) from Jonathan Wroblewski (Director, Office of Policy and Legislation) to The Honorable William Sessions III of the Commission, Wroblewski states (see p. 5, footnote 4) the DOJ's belief that changes are needed to 2C1.1 to address crimes that occur overseas.

Specifically, Wroblewski stated that the Commission ought to add an enhancement in 2C1.1 - similar to the one found in 2B1.1 - that increases penalties for defendants who "increase the prosecutorial expenses associated with detection and investigation by committing a substantial part of their offense outside of the United States."

The enhancement found in 2B1.1(b)(9)(B) (see here) that the DOJ wants added to 2C1.1 offenses states: "If ... (B) a substantial part of a fraudulent scheme was committed from outside the United States; ... increase by 2 levels. If the resulting offense level is less than level 12, increase to level 12."

Although Wroblewski's letter does not specifically mention the FCPA, the starting point for calculating FCPA fines is 2C1.1, thus the enhancement DOJ seeks would increase base fine amounts in DOJ FCPA enforcement actions.

As applied to FCPA enforcement, such an enhancement would be ironic given that the DOJ routinely assesses fines significantly below even the floor suggested by the Sentencing Guidelines.

For instance, in the recent Universal Corp. enforcement actions (see here) the fine was 30% below the bottom of the sentencing guidelines range; in the recent Technip enforcement action (see here) the fine was 25% below the bottom of the sentencing guidelines range; and in the recent Snamprogetti enforcement action (see here) the fine was 20% below the bottom of the sentencing guidelines range.

Friday Roundup

Writer's cramp at the DOJ, the well fed U.K. Ministry of Defence officials, and a potential cost-savings due diligence tool ... it's all here in the Friday roundup.

Writer's Cramp at the DOJ?

When Charles Paul Edward Jumet was sentenced in April to 87 months in prison for FCPA and related offenses, the DOJ issued a press release the same day (see here).

When John Warwick was sentenced in June to 37 months in prison for conspiracy to violate the FCPA, the DOJ issued a press release the same day (see here).

When Juan Diaz was sentenced in July to 57 months in prison for conspiracy to violate the FCPA, the DOJ issued ... you got it ... a press release the same day (see here).

All three instances represented, in FCPA terms at least, a harsh sentence.

So what happens when a sentencing judge rejects the DOJ's ten year sentencing recommendation and instead sentences the defendants to six months in prison?

Well, let's just say that the DOJ appears to have experienced a sudden case of writer's cramp.

As indicated in this prior post, on August 12th, U.S. District Court Judge George Wu of the Central District of California rejected the DOJ's requested ten year prison sentence for Gerald and Patricia Green and sentenced the couple to six months in prison.

It's not like the DOJ hasn't been issuing press releases throughout this case (see here and here), but apparently when a judge materially disagrees with the DOJ, it is time to stop the presses.

Or perhaps it was a mere oversight in which case the DOJ will soon issue a release.

Well Fed U.K. Ministry of Defence Officials

The Guardian recently ran a story that caught my eye.

Written by Rob Evans, the article (see here) details how BAE Systems "regularly wined and dined mandarins and senior military officers."

The article also claims that BAE Systems "frequently gives jobs to politicians and civil servants in a 'revolving door' after they have left public service, including officials who negotiated multi-million pound deals with the company" and that "MoD secretly lobbied to end the Serious Fraud Office's investigation into allegations that BAE bribed foreign politicians and officials to secure large contracts."

An MoD spokesman is quoted in the article as saying "It is vital for the MoD to maintain a close relationship with the defence industry to ensure that we have the best equipment for our armed forces. All the meetings are subject to strict guidelines."

Due Diligence Co-Op Programme

I don't often highlight the latest in FCPA compliance services, but Red Flag Group's new offering seemed to make sense to me - plus it is a service that would seem to lead to cost savings for companies.

The ad (here) asks a simple question: "tired of paying full price for the same due diligence report that another company ordered just a few months ago?"

If you answered yes to this question, you may be interested in Red Flag Group's Due Diligence Co-Op Programme, also explained in the ad.

*****

A good weekend to all.

This & That

A bit of catch up with today's post which discusses the recent sentence of Juan Diaz in the continuing Haiti Teleco saga (including an interesting post-enforcement action twist) and a DOJ release that flew under the radar.

Juan Diaz

Juan Diaz was recently sentenced to 57 months in prison after previously pleading guilty to a one-count information charging him with conspiracy to violate the Foreign Corrupt Practices Act and money laundering. (See here for the DOJ release). As noted in the release, Diaz was also ordered to: (i) serve three years of supervised release following his prison term; (ii) pay $73,824 in restitution; and (iii) forfeit $1,028,851.

In May 2009, (see here) Diaz pleaded guilty for his role in an improper payment scheme involving employees of Haiti Teleco, an alleged state-owned national telecommunications company. In the DOJ's view, that would make the Director of International Relations and the General Director of Haiti Teleco, persons Diaz and others allegedly bribed, Haitian "foreign officials" under the FCPA.

The interesting twist is this.

If Diaz bribed these same employees today, he would be bribing (presumably in the DOJ's view) not Haitian "foreign officials" but Vietnamese "foreign officials."

Why?

Because in May, Viettel, a telecommunications company run by Vietnam's military, purchased a 60% stake in Haiti Teleco. (See here).

The 57 month sentence Diaz received is similar to the 60 month FCPA sentence Charles Jumet received in April (see here). Jumet was sentenced to 87 months after pleading guilty to a two-count criminal information charging conspiracy to violate the FCPA and making false statements to federal agents. The false statements portion of the sentence was 20 months.

Civil Forfeiture Action Against Properties Owned by Former President of Taiwan

In July, the DOJ issued a release (see here) about a civil forfeiture complaint it filed against certain U.S. properties "that represent a portion of illegal bribes paid to the former president of Taiwan and his wife."

With Attorney General Eric Holder's recent announcement of the Kleptocracy Asset Recovery Initiative (see here), the release should be of interest to those who follow this initiative and the general issue of asset recovery.

Bribe recipients can not be prosecuted under the Foreign Corrupt Practices Act, but U.S. based assets (or other assets that flow through U.S. financial institutions) of bribe recipients can be subject to U.S. legal proceedings under other laws.

As noted in this post from November 2009, Attorney General Holder has called asset recovery a "global imperative" and announced a "redoubled commitment on behalf of the United States Department of Justice to recover" funds obtained by foreign officials through bribery.

The prior post discussed the January 2009 civil forfeiture action the DOJ filed in the aftermath of the Siemens enforcement action against bank accounts located in Singapore in the names of Zulfikar Ali, Fazel Selim, and ZASZ Trading and Consulting Pte Ltd. ("ZASZ") (see here). According to the DOJ's complaint (see here), these accounts were used by Siemens and another company to bribe foreign officials in violation of the FCPA, specifically Arafat Rahman ("Koko"), the son of former Bangladeshi Prime Minister Khaleda Zia. The DOJ alleges that the illicit funds in these accounts flowed through U.S. financial institutions thereby subjecting them to U.S. jurisdiction.

Similarly, in January 2010, the DOJ unsealed a criminal indictment against Juthamas Siriwan and Jittisopa Siriwan, the foreign official bribe recipient of the Green's improper payments and her daughter. See here. Among other things, the indictment seeks forfeiture of approximately $1.7 million.

Thus, the DOJ's July announcement that it is pursuing U.S. based assets of the former president of Taiwan and his wife very much continues a trend.

According to the DOJ release:

"The former president and his wife were convicted in Taiwan on Sept. 11, 2009, for bribery, embezzlement and money laundering. They are currently sentenced to 20 years in prison. Their convictions were upheld on appeal and are now pending before the Supreme Court in Taiwan. [...] The former president and his wife are also currently under indictment in Taiwan for additional alleged acts of graft and money laundering."

Director John Morton of U.S. Immigration and Customs Enforcement (ICE) stated that the enforcement action "serves as a warning to those corrupt foreign officials who abuse their power for personal financial gain and then attempt to place those funds in the U.S. financial system" and that "ICE’s Homeland Security Investigations agents will continue to work with our law enforcement partners both here and abroad to investigate and prosecute those involved in such illicit activities and hold corrupt foreign officials accountable by denying them the enjoyment of their ill ?gotten gains.”

What appears to make this recent civil forfeiture action different than the previously filed Siemens-related forfeiture action and the previously filed Siriwan enforcement action is that the bribe payor may be beyond the reach of the FCPA.

According to the DOJ release, the entity paying the bribes to the president of Taiwan and his wife was Yuanta Securities Co. Ltd. (YSC). The release notes that YSC "was attempting to increase its ownership share of Fuhwa Financial Holding Company Limited" and that "YSC paid a bribe of 200 million New Taiwan dollars, or approximately $6 million U.S. dollars, [...] to ensure that the authorities on Taiwan would not interfere with its acquisition of additional shares and to attempt to establish a relationship with the head of the authorities on Taiwan."

Neither YSC (here), nor its parent company, Yuanta Financial Holdings, appear to be U.S. issuers. Under 78dd-3 of the FCPA, foreign companies can be subject to the FCPA's jurisdiction. However, this prong of the FCPA requires a U.S. nexus. A quick scan of the forfeiture complaint does not suggest a U.S. nexus in terms of making the bribe payments - although the complaint clearly does allege a U.S. nexus once the payments were received and used by the former president of Taiwan and his wife.

*****

Curious as to what happened in the above referenced Siemens-related enforcement action? In April 2010, U.S. District Court Judge John Bates granted the DOJ's motion for default judgment and judgment of forfeiture against the subject properties.

What's happening in the Siriwan enforcement action? According to the docket, nothing since the indictment was unsealed in January 2010.

Six Months For The Greens ... Plus The Friday Roundup

In September 2009, Gerald and Patricia Green were found guilty by a federal jury of substantive FCPA violations, conspiracy to violate the FCPA, and other charges. According to the DOJ release (see here) the Los Angeles-area film executives were found guilty of engaging in "sophisticated bribery scheme that enabled the defendants to obtain a series of Thai government contracts, including valuable contracts to manage and operate Thailand’s yearly film festival."

As noted in the DOJ release:

"The conspiracy and FCPA charges each carry a maximum penalty of five years in prison, and each of the money laundering counts carries a maximum penalty of up to 20years in prison. The false subscription of a U.S. income tax return carries a maximum penalty of three years in prison and a fine of not more than $100,000."

Sentencing was originally set for December 17, 2009, was delayed several times, and, at one point, was removed from the calendar altogether (see here).

U.S. District Court Judge George Wu of the Central District of California reportedly wanted to learn more about other FCPA sentences as well as Mr. Green's health issues.

The DOJ requested a 10 year sentence for both Gerald and Patricia Green.

The DOJ stated that the "court must decline defendants' remarkable invitation to join the wholesale speculation of FCPA 'pundits' as to whether corporate settlements are 'shielding' to corporate executives from punishment."

In closing, the DOJ urged the court to "disregard defendants' efforts to obscure the landscape of FCPA sentencing, which generally reflects significant prison terms for convicted individuals."

According to this report, Judge Wu yesterday sentenced the Greens, before a packed courtroom, to six months in prison, followed by three years probation (six months of which must be served as home confinement).

According to the report, Judge Wu "also set a restitution figure of $250,000" but "if the Greens, who have had their accounts frozen and assets seized since being arrested in 2007, can prove that none of the $1.8 million they paid in bribes to Thai officials can be recovered, then they will only have to pay $3,000 in restitution."

Does the "landscape of FCPA sentencing" truly reflect "significant prison terms" as stated by the DOJ?

True, any prison term is significant for a defendant and his/her family and friends.

But with a top sentence of 60 months (Charles Jumet - see here), the 366 day sentence for Frederic Bourke in November 2009 (see here), the 15 month sentence for Jason Edward Steph and the 366 day sentence for Jim Bob Brown both in January 2010 (see here) and now the 6 month sentence for the Greens - is this yet another instance in which DOJ's FCPA rhetoric does not match reality?

*****

H-P news that does not involve its former CEO, what others are saying about the Giffen Gaffe, SciClone's stock drop, and Siemens $1 billion customer ... it's all here in the Friday roundup.

H-P Inquiry Escalates

According to a story in today's Wall Street Journal by David Crawford, the DOJ "has asked Hewlett-Packard Co. to provide a trove of internal records as part of an international investigation into allegations that H-P executives paid bribes in Russia, according to people familiar with the investigations."

According to the story, the DOJ request "came after German prosecutors complained H-P had refused to provide them with all of the records they requested" and after "H-P initially argued that the German request for bookkeeping records, some of which are five years old, imposed an 'undue hardship' on the company."

The article indicates that the DOJ "asked H-P to comply voluntarily with the request and hasn't subpoenaed the records" and that "H-P has yet to provide some records" but is "cooperating with the investigations." According to H-P, the investigation
"involves people that have largely left the company and matters that happened as much as seven years ago."

What Others Are Saying About Giffen

It's been one week since the Giffen Gaffe (see here).

Here is what others are saying about the enforcement action that began with charges that James Giffen made "more than $78 million in unlawful payments to two senior officials of the Republic of Kazakhstan in connection with six separate oil transactions", yet ended with a misdemeanor tax violation against Giffen and an FCPA anti-bribery charge against a functionally defunct entity (The Mercator Corporation -in which Giffen was the principal shareholder, board chairman, and chief executive officer) focused merely on two snowmobiles.

Scott Horton, writing at Harper's Magazine (see here) noted that "[t]he outcome is a huge embarrassment to federal prosecutors, who had invested a decade in resources in the effort to convict Giffen of FCPA and related violations."

Horton, who has been following the case for years, highlighted how the "case has been the focus of political manipulation concerns for years" and closed with this paragraph:

"Kazakhs have long claimed that their government’s strategy of resolving the Giffen case by using the right levers with the American administration–a process that led them to hire former attorneys general and high-profile retired prosecutors, private investigators, and public-relations experts–would be successful. The outcome in the Giffen case appears to ratify that view. The notion of an independent, politically insulated criminal-justice administration in America has just taken another severe hit."

Steve LeVine, author of The Oil and The Glory page at Foreign Policy, noted (here) that the Giffen resolution is "a considerable comedown for the federal government" and that Giffen's lawyer "understood correctly that he could set up a collision between the Justice Department and the CIA in which the latter would probably prevail."

The FCPA and Stock Price

What affect, if any, does an FCPA disclosure or resolution have on a company's stock price?

It's an issue I've explored before (see here) and best I can tell the evidence is inconclusive and the answer is - it depends.

In the case of a company that does business almost exclusively in China disclosing an FCPA inquiry focused on China, the answer is that disclosure of the FCPA inquiry matters - and quite a bit.

On Monday, SciClone Pharmaceuticals Inc., a Delaware company based in California, disclosed in a 10-Q filing (here) as follows:

"On August 5, 2010 SciClone was contacted by the SEC and advised that the SEC has initiated a formal, non-public investigation of SciClone. In connection with this investigation, the SEC issued a subpoena to SciClone requesting a variety of documents and other information. The subpoena requests documents relating to a range of matters including interactions with regulators and government-owned entities in China, activities relating to sales in China and documents relating to certain company financial and other disclosures. On August 6, 2010, the Company received a letter from the DOJ indicating that the DOJ was investigating Foreign Corrupt Practices Act issues in the pharmaceutical industry generally, and had received information about the Company’s practices suggesting possible violations."

SciClone's business is focused primarily on China with 90+% of its revenue derived from China sales. Thus, it is not surprising that an FCPA inquiry focused on China had a material impact on the company's stock price.

As noted in this Reuters story, news of the FCPA inquiry sent SciClone's shares, at one point, down 41% to a 52 week low.

Siemens $1 Billion Customer

In December 2008, Siemens agreed to pay $800 million in combined U.S. fines and penalties to settle FCPA charges for a pattern of bribery the DOJ termed “unprecedented in scale and geographic scope.” According to the DOJ, for much of Siemens’ operations around the world, “bribery was nothing less than standard operating procedure.”

The Siemens enforcement action remains the largest FCPA settlement ever (even though Siemens itself was not charged with FCPA anti-bribery violations).

On the one year anniversary of the Siemens enforcement action, I ran a post - Siemens - The Year After (see here) which highlighted how the U.S. government continues to do substantial business with the company it charged with engaging in a pattern of bribery “unprecedented in scale and geographic scope.”

This U.S. government business has helped Siemens outperform its competitors in a difficult recessionary environment and much of the company’s recent success is the direct result of government stimulus programs around the world.

Using Recovery.gov (a U.S. government website designed “to allow taxpayers to see precisely what entities receive Recovery money ..”), I highlighted how several Siemens’ business units have been awarded several dozen contracts funded by U.S. taxpayer stimulus dollars.

It is against this backdrop that Paul Glader's recent piece in the Wall Street Journal "Siemens Seeks More U.S Orders" caught my eye.

According to the article, Siemens Corp. (the U.S. division of Siemens) currently brings in about $1 billion a year from the U.S. government, a figure the division hopes to double by 2015.

Eric Spiegel, chief executive of Siemens Corp., is quoted in the article as saying: "[o]ne of the beauties of the federal-government spending is it didn't drop off during the recession."

To that, I'll add that one of the unfortunate beauties of engaging in bribery the U.S. government terms “unprecedented in scale and geographic scope" is no slow down in U.S. government contracts in the immediate aftermath of the enforcement action.

It's one of the FCPA greatest headscratchers - FCPA violaters are and remain some of the U.S. government's biggest suppliers and contracting partners.

As I've noted in numerous prior posts, efforts are underway to try to change this. See here, here and here.

*****

A good weekend to all.

Additional Lighthouses and Buoys Sentence

Last Friday, the DOJ announced (see here) that John Warwick was sentenced to approximately three years in federal prison "for his role in a conspiracy to pay bribes to former Panamanian government officials to secure maritime contracts." U.S. District Court Judge Henry Hudson also sentenced Warwick to two years of supervised release following his prison term and ordered Warwick to forfeit approximately $330,000 in proceeds from his crime.

In February, Warwick pleaded guilty to a one-count indictment charging him with conspiring to make corrupt payments to Panamanian officials for the purpose of securing business for Ports Engineering Consultants Corporation in violation of the Foreign Corrupt Practices Act. The business involved contracts to maintain lighthouses and buoys along Panama's waterways.

This is the same conduct at issue in the prior plea and sentencing of Charles Edward Jumet. (See here for additional posts on this matter). In April, Jumet was sentenced to approximately 7.25 years in federal prison after pleading guilty to two charges - conspiracy to violate the FCPA and making false statements to federal agents. (See here). Even though Jumet's charges were equal part FCPA and equal part making false statements to federal agents, his sentence was described as the "longest prison term imposed against an individual for violating the FCPA."

Given that Warwick was charged and pleaded guilty to the same conspiracy as Jumet, it suggests that the FCPA component of Jumet's sentence was between 3-4 years.

Two-Tiered Justice?

Certain corporations (acting through employees and agents) in certain industries, most often selling certain things, to certain customers can seemingly violate the FCPA's anti-bribery provisions with very little consequence. In fact, with increasingly frequency, such companies are not even charged with FCPA antibribery violations and/or may not even have to plead guilty to anything. See here for the recent Daimler, here for the recent BAE, and here for the (somewhat) recent Siemens "bribery, yet no bribery" enforcement actions. Sure these companies coughed up hundreds of millions of dollars, in some cases offered up a few subsidiaries to take the fall, but yet were allowed to escape the full legal consequences of their action despite DOJ and SEC allegations that these companies paid hundreds of millions of dollars in bribes to obtain or retain hundreds of millions, and in some cases billions, of dollars of business. The deterrent message in these cases is so strong that the U.S. government continues to do business with these companies - see here for the recent $28 million dollar contract between the U.S. government and a BAE business unit - see here for a general overview of Siemens post-bribery scandal U.S. government contracts.

Charles Paul Edward Jumet of Fluvanna County, Virginia will probably not be getting U.S. government contracts in the near future.

In fact, he probably will not be doing much of anything (other than sitting around) in the near future.

Why?

Because yesterday he was sentenced to approximately 7.25 years in federal prison (see here for the DOJ release).

His crime?

Conspiring to violate the same law that Daimler, BAE, Siemens, its employees, and several other corporations, apparently are immune from violating ... the FCPA's anti-bribery provisions.

Surely, Jumet's conduct was more egregious than that of Daimler, BAE, Siemens, and others?

Well, not exactly.

Not to make light of his crime, but according to the DOJ, the total amount that Jumet and others paid to Panamanian government officials to receive a lighthouse and buoy contract was approximately $200,000 - an amount that pales in comparison to the hundreds of millions of bribe payments in the above referenced enforcement actions.

Even though Jumet's sentence is equal part FCPA and equal part making false statements to federal agents, it is not surprisingly being termed the "longest prison term imposed against an individual for violating the FCPA."

The DOJ release contains the usual get tough language (i.e. "foreign corruption carries with it very serious penalties," "bribery isn't just a cost of doing business overseas [... but] a serious crime that the U.S. government is intent on enforcing."

Serious penalties and intent on enforcing against whom is the question.

The issue is not whether the DOJ was too lenient in the Daimler, BAE, and Siemens case or whether the DOJ was too harsh in the Jumet case.

Rather, the issue is that there appears to be a two-tiered justice system when it comes to FCPA enforcement.

As noted in the DOJ's release, Jumet's co-defendant John Warwick, who also pleaded guilty, is scheduled to be sentenced by the same judge on May 14th. (See here for prior posts on this entire enforcement action).