First Africa Sting Trial Results In Mistrial

On January 19, 2010, the DOJ announced (here) a new type of FCPA enforcement action.

While not the first use of undercover techniques in an FCPA enforcement action (see here), the new type of case was certainly the largest and most dramatic use of pro-active, undercover investigative techniques in the FCPA's history.

Twenty-two executives and employees of companies in the military and law enforcement products industry were criminally indicted "for engaging in schemes to bribe foreign government officials to obtain and retain business." However, there was no real foreign official - just FBI agents posing as representatives of a Gabon foreign official - and the case was manufactured by the government with the assistance of Richard Bistrong (an individual who previously pleaded guilty to separate FCPA violations - see here).

In announcing the indictments, Assistant Attorney General Lanny Breuer called the action a "turning point."

The cases were assigned to Judge Richard Leon (U.S. District Court for the District of Columbia). Given the number of defendants indicted, the cases were segregated into smaller units for trial.

The first trial, which started in mid-May, involved Andrew Bigelow, Pankesh Patel, John Benson Weir, and Lee Allen Tolleson. As highlighted in this prior post, at the close of the DOJ's case, Judge Leon dismissed a substantive FCPA count as to Patel, a substantive FCPA count as to Tolleson, and dismissed a money laundering count as to all defendants.

Yesterday, Judge Leon declared a mistrial as to all remaining counts of the DOJ's "turning point" prosecution. For additional coverage see here from the FCPA Blog, here from Main Justice, here from Reuters, here from Law360, and here from the Wall Street Journal Corruption Currents.

Scott Fredericksen, a former DOJ prosecutor and current FCPA practitioner at Foley & Lardner (see here) offered the following analysis.

"A mistrial in the Africa Sting FCPA case represents a major disappointment for the DOJ. But for those who have followed the trial, it is no surprise. Many thought outright acquittal was a real possibility. A mistrial of course is most often declared by the court where the jury has steadfastly indicated that it is unable to reach a unanimous verdict, even after the court usually gives very strong instructions urging the jury to work harder to reach a verdict. There are other situations in which a mistrial may be declared, most often involving error in the way the case is tried or the improper admission of evidence or prejudicial information. In this case, it appears there was a failure to reach unanimity by the jury on a verdict. Often times in such situations the court may allow the counsel to interview jurors about the basis for being hung, including what the final vote was. Obviously, if the vote was heavily in favor of one side, or if, as often happens, there was a lone holdout, then counsel will be able to make informed decisions about a retrial and how the case should be tried in a retrial. It is in the discretion of the court whether to allow jurors to be interviewed. Jurors must also consent. Most judges will allow some limited amount of interviewing, including only allowing the interview to take place in court. Again, it is a discretionary decision. The mistrial puts the government between the proverbial rock and hard place. The DOJ has made this prosecution a marker in their ratcheting up of their enforcement of the FCPA. It is hard to imagine that they would not seek a retrial. Yet the case likely will only get more difficult for the prosecution. The trial exposed the weaknesses of the government's case, including their critical witnesses, the most important of which did not testify. Will DOJ change their strategy? But now defense counsel know the evidence and testimony and can cross examine with a transcript of the DOJ witnesses in hand. Waiting in the wings are another group of experienced defense counsel whose clients' trial has been severed but already scheduled. Finally, some observers of the trial think Judge Leon was surprised and disappointed by what he saw in the government's prosecution sting and the evidence. This looks to be only one chapter in a now much longer story."

Indeed, it would seem that yesterday's mistrial is merely one chapter in a much longer story. The DOJ has indicated that it intends to refile its case against all four defendants, but will a different jury make a difference? What impact will this mistrial have on the other Africa Sting cases scheduled for trial?

Mission Creep At The SEC?

Today's post is from Bruce W. Bean (Professor and Director, LLM Program at Michigan State University College of Law - here).

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Last week FCPA Professor had a post (see here) describing the SEC’s internal search for the new Head of the Division of Enforcement’s FCPA Unit.

As previously reported (see here), Cheryl Scarboro, Head of the Commission’s FCPA Unit, will shortly join the Washington, D.C. office of Simpson Thacher.

The internal SEC marketing materials for this position state that this “Unit seeks to expand the Commission's global reach in this area by executing targeted sweeps and sector-wide investigations, identifying systemic practices that give rise to potential FCPA violations and aggressively enforcing anti-bribery statutes.”

“[E]xpand the Commission’s global reach?” We do not find this concept in the FCPA. Nor is it in the original Securities Exchange Act that established the SEC. Has the Commission really run out of legitimate domestic prosecution targets? Does the Commission actually believe that, having long ignored stock manipulation by Wall Street traders (who can afford to mount a vigorous defense), it should declare victory in the domestic equities markets, shout “Mission Accomplished” and move on to police the rest of the world?

The most revealing aspect of this internal job posting for the new Head of the FCPA Enforcement Unit is this sentence, which encapsulates the SEC’s jurisdictional philosophy. "The Unit selects cases that present unique legal, evidentiary and policy challenges and attempts to develop case law and legal precedent that will have the greatest deterrent impact on conduct that violates the FCPA."

Certainly “unique legal, evidentiary and policy challenges” are presented each time we have the Commission stretch and distort the language of the FCPA as it “attempts to develop case law.” For example, there is no FCPA language supporting the determination that millions of Chinese employees at State-Owned Enterprises are “foreign officials.” Similarly, we search in vain for the statutory basis for FCPA liability for a foreign company whose foreign subsidiary committed an act which the prosecutor claims violates the FCPA.

This newly developed FCPA “case law,” of course, is largely created by the enforcement attorneys. (See here for a prior post on "prosecutorial common law"). It is seldom fully litigated before the Judicial Branch. After all, few defendants can afford to litigate against the Government, and those that could most often do not wish to risk “debarment” from doing further business with the Government until proven innocent.

FCPA enforcement has come to mean, “Let’s see just how far we can push the inherent ambiguities in the statute.” When that rare defendant does stand up and fight as in U.S. v. Giffen, we see a multi-year, multi-million dollar legal defense during which a Federal Court ultimately did not endorse the prosecutor’s attempt to “develop new case law."

Unquestionably, there is marvelous deterrent value when the SEC makes clear that it aggressively pursues FCPA violators. Prosecutors also find good value in high profile prosecutions, since this accelerates their passage through the SEC’s revolving door to much more lucrative private practice.

A closing note of warning. As outrageous as it may seem, the SEC’s jurisdictional and enforcement philosophy is comparatively good news. On Friday, July 1, the former Head of the Unit, Cheryl Scarboro, is likely to start at Simpson Thacher. That is also the date the U.K. Bribery Act comes into force. The Bribery Act actually does purport to give British prosecutors statutory authority to pursue bribery anywhere on the planet Earth. Stay tuned!

Global Financial Integrity Responds

The goal of FCPA Professor (see here) is to foster a forum for critical analysis and discussion of the FCPA (and related topics) among FCPA practitioners, business and compliance professionals, scholars and students, and other interested persons.

With that goal in mind, I asked Heather A. Lowe, Esq. (Legal Counsel & Director of Government Affairs, Global Financial Integrity ("GFI")) to consider a guest post to respond to my criticism last week of certain of GFI's statements in connection with the House FCPA hearing (see here for the prior post).

I am glad she accepted and below is Ms. Lowe's guest post.

If other readers want to make their voice heard on the topic of FCPA reform as well, please consider FCPA Professor as a suitable forum.

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I appreciate the invitation from Prof. Koehler to provide some comments on this forum as a guest blogger.

On June 14, 2011, Prof. Koehler commented (here) on documents provided by Global Financial Integrity and other civil society organizations and GFI’s press release (here) circulated on Monday, prior to the House of Representatives’ hearing on the FCPA. Additional arguments are included in GFI’s formal submission (here) for the record at the hearing. Karen Lissakers, Director of the Revenue Watch Institute, and Corinna Gilfillan, Head of U.S. Office at Global Witness, each provided statements (see here and here) for the hearing record as well. I am sure readers will find our full submissions to be of interest.

One of the primary reasons that GFI wanted to provide a submission for the hearing was to ensure that Members of Congress were aware that (a) businesses and the Department of Justice were not the only stakeholders with views to be considered in this discussion, (b) proposed changes to the FCPA must be considered within an international context, and any changes will have international implications, and (c) there are strong economic arguments for carefully considering changes to the FCPA that might lead to a reduction in enforcement.

Anti-bribery laws are not enacted in this world without years of blood, sweat and tears from anti-corruption campaigners around the world, and I don’t expect that they will be willing to lose ground on this flagship anti-bribery legislation without making their voices heard. When I say “blood, sweat and tears” I literally mean blood, sweat and tears. There are activists around the world who have been threatened with violence, jailed and even killed over the years to achieve the progress that has been made. It would be inaccurate, therefore, to believe that corporations are the only ones with “skin” in this game.

GFI would not presume to speak on behalf of these organizations without their permission, but we did not want to miss the opportunity to provide at least one civil society submission as a place-holder for a critical group of stakeholders.

We appreciated Prof. Koehler’s comments on the documents he posted. We are trying to begin a meaningful dialogue on these issues that more civil society organizations with direct experience in the field, around the world, can join. His comments demonstrate that we have been successful in starting that conversation.

Prof. Koehler did not invite me to blog for my motivational comments, however. He would like me to respond to his post of June 14, 2011.

Apart from quoting the opinion of a former SEC Commissioner in a statement made 20 years ago

• during a hearing on bills proposing changes that the Professor considers to be similar to changes being proposed today,
• which were ultimately never adopted by Congress, and
• during a time preceding the international proliferation of anti-bribery conventions and national laws that we have to support our FCPA enforcement efforts today,

Prof. Koehler seems to be focusing on two main subjects: the proposed amendment to further define “foreign official” and the proposal to include a compliance defense in the FCPA.

The Professor refers to the UK Bribery Act Guidance to shore up his position in support of creating a compliance defense for companies. The U.S. Chamber refers to the UK Bribery Act (the “UK Act”) itself to support its position that a compliance defense is a reasonable amendment to request. The compliance defense in the UK Act should not be taken out of context, however. It must be viewed in light of the other provisions of the UK Act. The UK Bribery Act criminalizes ALL forms of commercial bribery. The FCPA criminalizes only payments made to foreign officials. The UK Act does not permit facilitation payments. The FCPA permits facilitation payments and has an express provision creating an affirmative defense for reasonable travel and lodging and other types of expenses one might incur as a “host” of a trading partner. The UK Act’s extraterritoriality provisions have been described as more far-reaching than the FCPA’s.

The U.S. Chamber’s proposals to amend the FCPA are entitled “Restoring Balance.” The UK Act’s compliance defense could conceivably be seen as an attempt to balance provisions that go well beyond those of the FCPA. A compliance defense in the FCPA would, in fact, be out of balance when viewed in full context. However, if there is a genuine move to bring the FCPA in line with the UK Bribery Act then let’s talk!

I also found it interesting that the Professor referenced the UK Bribery Act Guidance in his support of the compliance defense. The Guidance he refers to is the Guidance from the UK Ministry of Justice. At the very beginning of that document, in paragraph 4, the Ministry states, “The question of whether an organisation had adequate procedures in place to prevent bribery in the context of a particular prosecution is a matter that can only be resolved by the courts taking into account the particular facts and circumstances of the case. The onus will remain on the organisation, in any case where it seeks to rely on the defence, to prove that it had adequate procedures in place to prevent bribery. However, departures from the suggested procedures contained within the guidance will not of itself give rise to a presumption that an organisation does not have adequate procedures.”

So, what does a compliance defense actually accomplish in the UK? A company still has to prove that it had adequate procedures in place to prevent the criminal activity (which means all of the investigation into what actually took place must still be undertaken) and the matter still has to be adjudicated by the courts. Compliance in the UK is not an absolute defense that can be relied upon to avoid the cost of investigation and litigation at all, as seems to be the idea behind the U.S. Chambers’ proposal! The burden on a UK company is, in practical terms, the same as that of a company defending an FCPA violation under the current form of the statute.

Prof. Koehler characterized some of my statements as “unsophisticated” and “naïve,” so I was surprised by his argument that the real reason that companies want a clearer definition of “foreign official” is so that they can more easily determine who they can take out for a round of golf and a few drinks at the 19th without thinking too hard about it. While I do not doubt that this is something companies do have to think about, I stand by my statement that a clearer definition of foreign official can just as easily be used to determine who a company can bribe and who it can’t bribe and I am not naïve enough to think that this isn’t a frequent question. Let’s get on board with the UK on this one and just not bribe anyone.

I will say, however, that I think I have a fairly accurate view of what motivates corporations. Corporations are motivated by their bottom line and their cost/benefit analysis. There are externalities that also factor into decisions, like reputational risk, but in the end the externalities are quantified and factored in. This is not a bad thing – corporations exist to make money and are vital to support a strong economy.

For the reasons set forth in GFI’s submission, I don’t think that most companies set out to engage in bribery, unless they do not have the attributes to be truly competitive in the market they are entering in the first place (which should not be overlooked as a possible motivating factor). When faced with a bribe, however, the choice on the spot may be perceived to be one of paying a bribe or losing business worth many times the value of the bribe. A strongly enforced FCPA makes that bribe much more expensive in any cost/benefit analysis.

The perception that the choice a company is making is whether to pay a bribe or lose the business is where we should be focusing our energy, however. Many companies have created strategies, policies and outreach to governments in the countries in which they operate in order to ensure that it is understood by those with whom they do business that they are subject to the FCPA and cannot pay bribes. We are pretty sure that the whole notion of the FCPA isn’t a surprise to their business counterparts when the subject is raised.

As I stated in GFI’s submission for the hearing, “Some companies, like Newmont Mining, view the FCPA in a positive light. Newmont Mining, based in Colorado, is the second largest gold mining company in the world. Newmont’s Director Corporate & External Affairs for Africa, Chris Andersen, stated during a panel discussion at the Extractive Industries Transparency Initiative Global Conference in March of this year that,

“…Newmont’s experience, particularly in Africa, has been that FCPA has been an enormously valuable protective device for us…when you have a government person saying…‘we’ll give you that license if you buy us a car or something’…it’s not about look ‘I’m a mean guy and I don’t value our relationship, and therefore I’m not going to give it to you,’ you say ‘look, there’s a law out there that means I’m going to go to jail if I do that, I’m not going to go to jail for you or anybody else.’”

There are many more arguments to be made on all sides of this debate, I have no doubt. Let’s make sure that all relevant voices are being heard moving forward.

Russian FCPA: The Law Has Been Signed, Will The Culture Change Result?

Last month, Russian President Dimitri Medvedev signed legislation that criminalizes foreign bribery, with monetary sanctions for companies and individuals who bribe foreign public officials. Soon thereafter, the OECD formally invited Russia to join the OECD's Working Group on Bribery and to accede to the OECD's Anti-Bribery Convention (see here for the OECD release).

Max Chester (Senior Counsel at Foley & Lardner - see here) takes the stage today with this guest post. Chester, a native speaker of Russian with significant experience representing U.S. clients in commercial transactions in Russia, provides an overview and analysis of the new Russian "FCPA-like" law.

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Russian FCPA: The Law Has Been Signed, Will The Culture Change As A Result?

On May 4, 2011, Russian President Dmitriy Medvedev signed into law a measure that significantly increases fines for bribery in Russia and now specifically applies to bribery of foreign government officials. The new federal law (here) is entitled “Federal Law dated May 4, 2011 No. 97-FZ On inclusion of changes to the Criminal Code of Russian Federation and to the Code of Administrative Offences in Connection with the Improvement of Government Administration in the Area of Fighting Corruption.” While the Russian title of the new law is not easy to understand even for a native Russian speaker, its objective is clear: it is intended to fight corruption in Russia, one of President Medvedev’s highest stated priorities, and to support Russia’s bid to accede to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Because the new law specifically prohibits offering or acceptance of a bribe by a foreign government official, we’ll refer to the new law as the “Russian FCPA.” Because the Russian FCPA prohibits commercial bribery and both receiving and offering corrupt payments to foreign government officials, the new law appears to resemble the UK Bribery Act and can be said to have even further reach than the US FCPA.

With respect to commercial bribery, the new law changes art. 46 of the Criminal Code and imposes the maximum fine for bribery in the amount of 100 times the amount of the bribe not to exceed 500 million rubles) (approximately $17.8 million). Prior to the amendment, the maximum monetary fine for acceptance of a bribe was 1 million rubles or an amount equaling salary/other income for the previous 5 year period and the maximum monetary fine for offering a bribe was 500,000 rubles or an amount equaling salary/other income for the previous 3 year period. The monetary fines for commercial grease payments (подкуп “podkup” in Russian) were even lower: the offeror could face a maximum fine of only 300,000 rubles or an amount equaling salary/other income for the previous 2 year period, and the acceptor could face a maximum fine of only 1 million rubles or an amount equaling salary/other income for a 5 year period.

While incarceration up to 12 years for bribery/grease payments was possible prior to the amendment, according Larisa Brycheva, the chair of the Office of Legal Affairs to the President of Russian Federation, only 26% of those convicted for bribery-related offenses were incarcerated. Furthermore, most of those convicted were offering/accepting small bribes (from 500 rubles to 10,000 rubles), making it difficult for Russian judges to impose sentences of up to 12 years in prison resulting from bribes equaling the cost of an average dinner for two at a Moscow restaurant.

Given this unimpressive to-date enforcement regime, the Russian lawmakers have decided that a significantly higher monetary fine would be more effective than a possibility of a lengthy prison sentence. While the anti-corruption professionals should welcome this change in the Russian law, a big question still remains exactly how aggressively Russian authorities will enforce the new law. It may not be palatable to impose a 500 million ruble fine on a Russian bureaucrat whose official government salary is 40,000 rubles and whose only official assets are his apartment (where his family lives and thus is not subject to forfeiture) and his dacha, the title to which is likely held by his relatives. The same can not be said of foreign businesses, however, on whom it would be much easier for Russian authorities to impose and collect fines equaling 100 times the bribe. There is no indication in the Russian FCPA that it would not apply to US companies doing business in Russia. In other words, if a US company or its constituents engage in commercial or foreign government official bribery in Russia, the offenders would be subject to fines and potential incarceration in Russia.

The Specific Provisions of the New Law

Acceptance of a Bribe

The Russian FCPA now specifically prohibits bribery involving foreign government officials. Thus, art. 290 of the Criminal Code (which prohibits acceptance of bribes directly or through intermediaries) as amended applies to government officials, foreign government officials or officials of public international organizations. The new law breaks down the fines into several categories depending on the conduct at issue and the amount of the bribe. In every case, however, in addition to the monetary penalty or a prison sentence with a monetary penalty, the offender may be restricted from occupying certain positions in government or commercial entities. For example, part 1 of art. 290 of the Criminal Code now imposes a penalty between 25-50 times the bribe amount or incarceration up to 3 years with a fine equaling 20 times the bribe amount if the bribe is under 25,000 rubles and was used to have an official perform an act (or refrain from performing an act) which falls within the official’s duties and responsibilities. Part 2 of article 290 states further that if the bribe amount is between 25,000 and 150,000 rubles, then the maximum penalty for a violation is a fine between 30-60 times the bribe amount or incarceration up to 6 years with a fine equaling 30 times the bribe.

If the actions (inactions) of government officials, foreign government officials or officials of public international organizations for which they accept a bribe are considered illegal, Part 3 of art. 290 of the Criminal Code now imposes a penalty equaling 40-70 times the bribe amount or incarceration for a period of 3-7 years with a fine equaling 40 times the bribe amount.

Even stiffer penalties (60-80 times the bribe amount or incarceration for a period of 5-10 years with a fine equaling 50 times the bribe amount) apply if the bribe is accepted by a federal Russian government official or an official of an equivalent body of local government administration. Art. 290, Part 4.

If the actions prohibited by parts 1-3 above involve a conspiracy, or a threat or the amount at issue is over 150,000 rubles, the penalty is 70-90 times the bribe or incarceration for a period of 7-12 years. Art. 290, Part 5

If the actions prohibited by parts 1-4 involve an amount greater than 1 million rubles, then the penalty is 80-100 times the bribe amount or incarceration for a period of 8-15 years with a penalty equaling 70 times the bribe amount.

Giving of a Bribe

The Russian FCPA similarly amends art. 291 of the Criminal Code, which now prohibits giving of a bribe (directly or through an intermediary) to a government official, foreign government official or an official of a public international organization. The giving of a bribe in the amount less than 25,000 rubles is punishable by a fine equaling 15-30 times the bribe amount or incarceration of up to 2 years with a fine equaling 10 times the bribe amount. Art. 291, Part 1.

The giving of a bribe in the amount between 25,000 rubles and 150,000 rubles is punishable by a fine equaling 20-40 times the bribe amount or incarceration of up to 3 years with a fine equaling 15 times the bribe amount. Art. 291, Part. 2.

If the actions prohibited by parts 1-3 above involve a conspiracy or the amount at issue is over 150,000 rubles, the penalty is 60-80 times the bribe or incarceration for a period of 5-8 years with a fine equaling 30 times the bribe amount. Art. 291, Part 4.

The giving of a bribe in the amount exceeding 1 million rubles is punishable by a fine equaling 70-90 times the bribe amount or incarceration for a period between 7 and 12 years with a fine equaling 70 times the bribe amount. Art. 291, Part. 2.

Giving of a bribe to a government official, foreign government official or an official of a public international organization to secure an action/inaction which is itself deemed illegal is punishable by a fine equaling 30-60 times the bribe amount or incarceration of up to 8 years with a fine equaling 30 times the bribe amount. Art. 291, Part 3.

Aiding and Abetting Bribery

The Russian FCPA also introduces new article 2911 to the Criminal Code, which prohibits aiding and abetting bribery if the amount of the bribe exceeds 25,000 rubles. In such circumstances, the Russian FCPA imposes a fine equaling 20-40 times the bribe or incarceration for a period of up to 5 years with a fine equaling 20 times the bribe amount.

If an aider assists with a bribery for an official’s act that itself is considered illegal or if an aider uses his official position in aiding the bribery, the penalty is 30-60 times the bribe or incarceration for a period of time between 3-7 years with a fine equaling 30 times the bribe amount.

If the aiding is committed by an organized group or pursuant to a conspiracy, or the amount of the bribe exceeds 150,000 rubles, the penalty is 60-80 times the bribe amount or incarceration for a period of time between 7-12 years with a fine equaling 60 times the bribe amount.

The penalty for aiding bribery in the amount exceeding 1 million rubles is 70-90 times the bribe amount or incarceration for a period of time between 7-12 years with a fine equaling 70 times the bribe amount.

A promise or an offer to aid in the bribery is also punishable by a penalty equaling 15-70 times the bribe or incarceration for a period of up to 7 years with a fine equaling 10-60 times the bribe amount.

Definition of Foreign Government Official

The Russian FCPA defines a “foreign government official” as any appointed or elected official who has a position in any legislative, executive, administrative, or judicial branch of a foreign country or an individual who serves any public function for a foreign country or a public agency or a public enterprise. This definition seems to suggest that Russian lawmakers embrace the position taken by the DOJ that employees of government owned enterprises are “foreign government officials” for purposes of the FCPA. It would be interesting to see if Russian authorities deem employees of General Motors, AIG or other large US companies where the US government has a substantial equity position, “foreign government officials” for purposes of the Russian FCPA.

Amendments to the Code of Administrative Offences of Russian Federation

The Russian FCPA also amends several provisions of the Code of Administrative Offences of Russian Federation. Among those is amendment to article 19.28, which imposes penalties on legal entities for commercial bribery or bribery of foreign government officials if a payment of a bribe or an offer of a bribe was made on a legal entity’s behalf. In such circumstances, the penalty is 3 times the amount of the bribe but not less than 1 million rubles. If the amount of the bribe at issue is greater than 1 million rubles, then the penalty is up to 30 times the bribe amount but not less than 20 million rubles. If the amount of the bribe at issue is over 20 million rubles, then the penalty is up to 100 times the bribe amount but not less than 100 million rubles.

In addition, the Russian FCPA introduces several new protocols for Russian authorities to seek information from their foreign counterparts in connection with the investigation by Russian authorities of violations set forth above as well as protocols for Russian authorities to respond to inquiries from foreign law enforcement agencies in connection with foreign law enforcement agencies’ investigation of crimes. These provisions will undoubtedly strengthen the level of cooperation between Russian and foreign law enforcement agencies in implementing anti-corruption measures. Such efforts are already underway, as evidenced by the recent meetings between Alexander Yakovenko, the Russian Ambassador to the United Kingdom in London, with Richard Alderman, Director of the Serious Fraud Office.

Conclusion

No law by itself can change overnight or even within a short period of time the “threatening” level of corruption that exists in Russia, as acknowledged by the Russian President himself. The current state of affairs in Russia is a product of 70+ years of socialist dictatorship and the resulting mindset of many government officials. This state of affairs will change, undoubtedly, and the passing of the Russian FCPA is the step in the right direction for Russia. It is up to the Russian authorities to follow through on the provisions of the new law.

Assessing the Power of the SEC to Impose Monetary Penalties In Administrative Proceedings Charging Violations of the FCPA

Foley & Lardner attorneys Kenneth Winer (here) and Manda Sertich (here) contribute this guest post regarding a little-noticed provision in Dodd-Frank and its impact on SEC FCPA enforcement.

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Assessing the Power of the SEC to Impose Monetary Penalties In Administrative Proceedings Charging Violations of the FCPA

The SEC recently imposed a civil penalty in an administrative proceeding involving payments to foreign government officials. In In the Matter of Ball Corporation, Exchange Act Rel. No. 64123, AAER No. 3255 (Mar. 24, 2011)(here), the SEC charged that Ball Corporation’s Argentinean subsidiary offered and paid at least ten bribes, totaling at least $106,749, to Argentinean government employees for favorable import/export treatment and mischaracterized the nature of the payments in the subsidiary’s books and records. In settling its administrative enforcement action against Ball Corporation on March 24 of this year, the SEC imposed a civil penalty of $300,000.00. [In a number of administrative proceedings, the Commission has ordered disgorgement and pre-judgment interest in addition to cease-and-desist orders in FCPA administrative proceedings, without additional civil penalties. See In the Matter of Avery Dennison Corporation, Exchange Act Rel. No. 60393, AAER No. 3021 at 6 (July 28, 2009); In the Matter of Westinghouse Air Brake Technologies Corp., Exchange Act Rel. No. 57333, AAER No. 2785 at 7 (Feb. 14, 2008), In the Matter of Electronic Data Systems Corp., Exchange Act Rel. No. 56519, AAER No. 2725 at 9 (Sept. 25, 2007)].

Until 2004, the SEC’s authority to impose monetary penalties in administrative proceedings was limited to regulated entities (brokerage firms, investment advisers and investment companies) and to persons who were associated with regulated entities. In 2010, as part of the Dodd-Frank Wall Street Reform Act, Congress granted the SEC broad authority to impose civil monetary penalties in administrative proceedings. Section 929P of Dodd-Frank amended the Securities Exchange Act to permit the imposition of civil monetary penalties in administrative proceedings in which the SEC staff seeks the issuance of a cease-and-desist order. Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010).

Law360 recently published an article analyzing the implications of Congress’s recent grant to the SEC of a broad power to impose civil monetary penalties in administrative proceedings stemming from the Dodd- Frank Act. Kenneth Winer & Laura Kwaterski, Assessing SEC Power in Administrative Proceedings (SecuritiesLaw360 Mar. 24, 2011). In this post, we discuss the implications this power poses for FCPA cases.

While the SEC’s interest in imposing monetary penalties in administrative proceedings is obvious given the rapid and inexpensive nature of such proceedings compared to federal district court trials, administrative proceedings risk incorrect factual and legal decisions against respondents because respondents do not have the same safeguards present in SEC administrative proceedings as in federal court. The three bases for this concern outlined in the Law360 article also apply in the FCPA context: (1) the limited discovery available to a respondent in an administrative proceeding; (2) the expedited pace of the administrative proceeding; and (3) the fact that the initial decision of the administrative law judge who presided at the hearing is subject to de novo review by the Commission.

With respect to the first basis for concern, in SEC administrative proceedings, the parties – except in rare circumstances – cannot depose witnesses. The inability to depose witnesses has only a limited adverse impact on the ability of the SEC to obtain incriminating evidence. The Staff can obtain incriminating evidence by using its investigative powers and the information- sharing arrangements that the SEC and DOJ have with law enforcement agencies across the globe. Although a respondent, like the SEC, can ask a witness to submit voluntarily to an interview, the typical respondent has far less leverage than the SEC to persuade a witness to agree voluntarily to an interview, especially given the SEC’s subpoena power and its ability to intimidate witnesses with its enforcement powers.

This concern may be particularly troublesome in FCPA cases, where potential key witnesses are often located in other countries, with little or no incentive to appear in an SEC administrative proceeding. Because the rules of evidence do not govern administrative proceedings, the SEC will be able to introduce statements of witnesses whom the respondent has had no opportunity to cross examine.

Next, as discussed in the Law360 article, in 2003 the Commission adopted a rule mandating that administrative proceedings must be completed at the ALJ level within 120 days, 210 days or 300 days. Additionally, SEC rules provide that the ALJs and the Commission shall “strongly disfavor” requests for extensions unless the moving party makes a strong showing that denial of the request would substantially prejudice his or her case. See 17 C.F.R. § 201.161(b)(1). At least as to individuals, the requirement of expedited administrative proceedings is also particularly worrisome when considered in the framework of the normal course of FCPA cases. The record developed in FCPA investigations often is extensive. It often will be unreasonable to expect an individual to prepare an appropriate defense in less than four months, especially when witnesses are likely to be scattered across the globe.

A third basis for concern identified in the Law360 article, de novo review by a commission, applies fully to the FCPA context. Both respondents and the public often have trouble understanding how it is fair and appropriate for the very commission that authorizes the institution of an enforcement proceeding to be able to overrule the factual findings of the ALJ who presided at the hearing, and this is no different with respect to FCPA enforcement proceedings.

The broad grant of the power to impose monetary penalties in administrative proceedings is especially significant in the context of the FCPA for at least two reasons. First, the SEC’s enforcement of the FCPA has been characterized by aggressive interpretations of the statute that have not been tested in the courts. In a civil action, a defendant could test such interpretations through motion practice. In administrative proceedings, however, a respondent’s ability to file motions testing aggressive legal theories is very limited. See, e.g., In the Matter of John P. Flannery and James D. Hopkins, Order on Motions for Leave to File Motions for Summary Disposition, Administrative Proceeding File No. 3-14081 (Jan. 10, 2001). In addition, a respondent will only be able to obtain judicial review of the SEC’s aggressive interpretation by appealing to the Court of Appeals the final decision that the Commission issues upon review of the initial decision of the administrative law judge who presided over the administrative proceeding.

Second, the SEC has sought substantial monetary penalties in settling enforcement actions involving the FCPA. For example, in 2007 the SEC filed a settled enforcement action charging Baker Hughes Incorporated with violations of the FCPA. Baker Hughes agreed to pay a civil penalty of $10 million for violating a 2001 Commission cease-and-desist Order prohibiting violations of the books and records and internal controls provisions of the FCPA, in addition to a payment of $23 million in disgorgement and prejudgment interest. SEC v. Baker Hughes Incorporated and Roy Fearnley, Civil Action No. H-07-1408, United States District Court for the Southern District of Texas (Houston Division) (EW) (Filed April 26, 2007). In 2010, the SEC filed a settled civil action against ABB, Ltd., in which it charged the company with bribing Mexican government officials to secure business with state-owned utilities companies and Iraqi government officials to obtain contracts under the U.N. Oil-for-Food Program. Pursuant to this settlement, ABB Ltd. was ordered to pay $16.51 million in civil penalties, in addition to nearly $23 million in disgorgement and prejudgment interest.

Individuals have also paid substantial civil penalties in settling such enforcement actions. Most recently, in January of this year, the SEC settled an enforcement action with Innospec’s former CEO, Paul Jennings, based on allegations that Jennings played a “key role” in Innospec’s bribery activities in Iraq and Indonesia. The executive was ordered to pay a $100,000 civil penalty, in addition to disgorging $116,092 and paying prejudgment interest in the amount of $12,945. SEC v. Paul W. Jennings, 1:11-CV-00144 (D.D.C. filed Jan. 24, 2011). In 2006, the Senior Vice President of Sales and marketing for Invision was ordered to pay a $65,000 civil penalty based on allegations that he aided and abetted InVision’s failure to establish adequate internal controls to prevent the company from violating the FCPA and that he indirectly caused the falsification of the company’s books and records. SEC v. David M. Pillor, Case No. C-06-4906-WHA (N.D. Cal. filed Aug. 15, 2006). Also in 2006, three senior employees of ABB Ltd. were ordered to pay civil monetary penalties ranging from $40,000 to $50,000 for violating the anti-bribery provisions of the FCPA and the books and records and internal accounting control provisions of Exchange Act Section. (One employee was also ordered to pay $64, 675 in disgorgement and prejudgment interest.) SEC v. John Samson, John G. A. Munro, Ian N. Campbell, and John H. Whelan, Civil Action No. 06 CV 01217(D.D.C. filed July 5, 2006).

In addition to increasing the risk that innocent parties will mistakenly be found to have violated the FCPA, the broad power Congress granted the SEC to impose civil monetary penalties in administrative proceeding adds additional pressure on individuals and entities to settle with the SEC even though they have not violated the law. Before seeking larger civil penalties in the FCPA context, the Commission therefore should consider whether the efficiency it gains by bringing enforcement actions administratively warrants the risk that the innocent will wrongly be found liable and the credibility that the Commission risks losing by aggressively exercising this broad grant of power.

A Q&A With Homer Moyer

In running a site called "FCPA Professor" it is only appropriate to touch base with a "Dean" on occasion.

I do so in this post with Homer Moyer, a "dean" of the FCPA bar. Moyer, a partner with Miller & Chevalier (see here) addresses a variety of topics in this Q&A - from evolution of the FCPA and FCPA enforcement to voluntary disclosure and investigative fees. Moyer closes out the Q&A with a few FCPA reform proposals of his own.

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Your government experience prior to law practice was with the Commerce Department, not the DOJ or SEC as is typical of many FCPA enforcement lawyers. How has your Commerce Department experience informed your FCPA practice?

I was at the Commerce Department when the FCPA was enacted, and I chaired an inter-agency group on FCPA issues. Of greater value to my later FCPA practice, however, was having served as general counsel of the Department that deals most directly with corporate issues and that both promotes and regulates American businesses. Also of great value were the experiences of having litigated cases as both a prosecutor and defense counsel. Perhaps most important, however, is having now seen hundreds of different FCPA issues for dozens of different clients.

Working on FCPA cases at the SEC or DOJ provides prosecutors with unique experience, but not the opportunity to counsel and represent corporate clients, manage complex legal issues for them, or help them devise and implement innovative compliance programs.

Describe your first FCPA matter or case? What were the issues? What were your client's concerns?

One of my early cases, some 20 years ago, presented a host of issues that had not yet become commonplace. The case I have in mind involved potential vicarious liability for the acts of a third party, a third party who claimed that the work it did for a U.S. company created a “constructive partnership” that entitled it to share the company’s profits, questions of whether to consult voluntarily with DOJ, an industry with which DOJ was not yet well-acquainted, innovative compliance enhancements, related civil litigation, and forged evidence presented to a court.

That matter ended well, but it presented issues of first impression and foreshadowed how complicated FCPA cases could be.

The FCPA has evolved much since your first case. From your perspective, has this evolution been positive? Any negative aspects of this evolution? How has this evolution affected your practice and your clients?

The evolution of FCPA enforcement has unquestionably brought more and more attention to the issue of official corruption and has had an indisputable impact on corporate behavior, or the “supply side” of the bribery equation. In addition, it has done something that unilateral U.S. laws rarely do, namely, led to a far-reaching change and consensus in the international legal landscape, as now reflected in international anti-corruption conventions to which more than 150 countries have become signatories.

Despite two sets of amendments, the FCPA itself has changed relatively little since it was adopted in 1977. Its “evolution” has primarily been through a steady escalation in enforcement -- the number and variety of enforcement actions, expansive interpretations of key provisions, the size and variety of penalties, the frequency of voluntary disclosures, and a steady rise in the levels of sophistication the government looks for in independent investigations, due diligence processes, and compliance programs.

Has this evolution been positive or negative? Few people would now dispute that corruption and bribery of foreign officials imposes staggering economic and social costs, frequently on countries that can afford it least. The question then becomes whether FCPA enforcement has made a positive difference in reducing or eliminating corruption. It probably has, but more relevant today is the continuing pervasiveness of official corruption and the daunting challenges to controlling it on a global basis.

With respect to the FCPA itself, complaints that it has created an “uneven playing field” have been somewhat undercut by aggressive FCPA enforcement against non-U.S. companies, by new international anti-corruption conventions, and by the beginnings of genuine enforcement in some other countries. And the lament that few FCPA cases are adjudicated in court does not distinguish FCPA enforcement from the enforcement patterns of many other regulatory laws. The infrequency of judicial review may occasionally embolden the government to overreach, but it has rarely resulted in abusive prosecutions.

In terms of our own practice, the increase in enforcement has plainly caused clients to be far more focused on anti-corruption issues than was once the case. This has certainly caused Miller & Chevalier’s long-standing FCPA practice to grow dramatically. It also appears to have created something of a traffic jam of newly minted “FCPA lawyers.”

Your point “that few FCPA cases are adjudicated in court does not distinguish FCPA enforcement from the enforcement patterns of many other regulatory laws” is a very valid point. However, isn’t a key difference though that other laws have benefited from several dozen circuit court opinions and perhaps a few Supreme Court decisions, such that the parameters of the law are at least set by someone other than the enforcement agencies? [Granted, 2011 will likely see several trial court decisions as to certain FCPA elements, but the FCPA is still a law that is lacking much meaningful precedential case law.]

One has to take the view -- and I certainly do -- that independent judicial review is a good thing -- a critical part of our legal system and important to preserving the rule of law. Judicial review, or the prospect of judicial review, can help prevent regulatory or enforcement excesses. In some regulatory programs -- environmental statutes come to mind -- the level of judicial review is robust. And we are beginning to see more judicial review in FCPA cases involving individual defendants.

At the same time, some regulatory areas have been subject to as little, or even less, judicial scrutiny than the FCPA. Statutory restrictions on judicial review and judicial deference to agency interpretations of regulations having “national security” ramifications effectively reduce judicial oversight. One can look long and hard for good case law on the regulations enforced by the Office of Foreign Assets Controls (“OFAC”) or on export controls rules under the ITAR (International Traffic in Arms Regulations), each of which has seen regulatory overreaching and little accountability. One recent Federal Circuit Court opinion referred to the discretion reserved by the Executive Branch combined with the lack of clarity in the ITAR as something that would be expected of a totalitarian regime, not the United States Government.

In the end, however, the amount of judicial review is determined by the private sector. Clients are, of course, free to challenge FCPA enforcement actions, although historically corporate clients have tended to favor settlement as a preferable route. Moreover, recent FCPA court decisions reflect that courts will not necessarily interpret laws differently from enforcement agencies. Nonetheless, both corporate and individual defendants are free to challenge agency interpretations of the laws they enforce, and I and many other counsel would undoubtedly be available to help.

When President Obama, high-ranking DOJ officials and others in government talk about corruption and bribery, they talk about the bridge that crumbles because the contractor was selected based on a bribe payment or other similar scenarios. However, very few FCPA enforcement actions fit this scenario, rather the alleged violator is generally viewed as an industry leader that sells the best products for the best prices. Do you agree that a divide exists between such government or civil society statements and typical FCPA enforcement action scenarios? If so, how do we bridge this divide?

Bribery of foreign officials is, in the first instance, typically designed to overcome market forces and to distort competition, not to ensure the purchase of the best products at the best price. Whether or not a bridge is the best metaphor, FCPA violations reflect illicit payments that are made to enrich corrupt officials and that shift that cost to consumers and taxpayers. The consistent scenario in FCPA enforcement actions is that an alleged violator, or someone acting on its behalf, did, in fact, pay bribes, often egregious ones.

The most significant “divide” today is the uneven enforcement among signatories to anti-corruption conventions. Whereas the 1980s saw an industry push to repeal or relax the FCPA on the grounds that it was creating a competitive disadvantage for American companies, the more common complaint today is that other countries must consistently and meaningfully enforce their own anti-corruption laws to assure that the proverbial playing field is level.

Many calls to roll back the FCPA are now anomalous, as they would put the United States out of compliance with international conventions that the FCPA inspired and that the United States fought hard to achieve. They also run counter to the anti-corruption momentum of the last 20 years and would effectively legalize some practices that are coming to be universally condemned, if not yet universally punished.

I find that most U.S. multinational corporations would be delighted to compete on the merits. Indeed, some companies are affirmatively using integrity in the marketplace to gain a competitive advantage. Many have voluntarily prohibited “facilitating payments,” even though they are permissible under the FCPA. It is also interesting to note that Siemens, after paying record-shattering FCPA fines and taking aggressive steps to transform its entire corporate culture, has been posting record profits.

What is your reaction to this statement from a recent high-ranking DOJ official - "“the government sees a profitable program, and it’s going to ride that horse until it can’t ride it anymore.” Do you believe that FCPA enforcement has become a government cash cow? FCPA enforcement fines and penalties simply go into the U.S. Treasury. Are there better places for this money accepting the notion that bribery results in victims?

FCPA fines probably don’t rise to the level of a governmental “cash cow.” In fiscal terms, they are of no real moment. The government unfortunately needs some much bigger revenue cows.

I do believe, however, that law enforcement penalties should be a consequence of, not a reason for, enforcing criminal laws. And although penalties have risen, I do not have the sense that revenue production has been a driver of FCPA enforcement.

Your interesting question about whether penalties might be used to compensate the “victims” of corruption is a favorite in developing countries. It highlights the difficulties of tracing, seizing, and repatriating funds that corrupt officials have stolen from their countries. Even where recovery of funds is possible, assuring that they are then used to benefit the citizens who were cheated by official corruption is a challenge. That is, however, the right use of repatriated funds.

Because countries that have been cheated by their own rulers have rarely been able to recover the stolen funds, some have asked whether they should be compensated with funds collected as penalties in anti-corruption enforcement actions. This would be a break from past law enforcement patterns, and the idea appears not to have gained significant traction. The strongest case for making that break probably relates to funds collected as disgorgement of profits rather than pure fines. Indeed, one could argue that it would be more just for the bounties that whistleblowers can now earn under the Dodd-Frank law to go not to whistleblowers, but rather to the countries affected for the benefit of the victims of corruption.

Your response speaks of corrupt “officials,” “official corruption” and “rulers.” Yet, the vast majority of FCPA enforcement actions involve no such individual – rather the alleged recipient of the bribe is an employee of an alleged state-owned or state-controlled enterprise. In these cases, would not the most direct victim be the competitor who lost the contract or did not have the opportunity to bid. Are you in favor of an FCPA private right of action?

In most FCPA violations, there is more than one victim. Competitors can certainly be victims. So can government agencies or instrumentalities that are procuring goods or services. Even where there is an admitted bribe, however, determining which competitors may have been “victims” would undoubtedly be a messy and imperfect process. And allegations of improper payments are far more common than proof of improper payments, as any practitioner knows, and the complications of trying to identify victims and allocate compensation among everyone claiming status as a victim might make us long for the days when the principal issues were simply the ones you have asked about here.

What percentage of internal investigations you have worked on in the past 3-5 years that ended with a conclusion that the company violated the FCPA resulted in a voluntary disclosure? Same question for investigations you worked on during the time period 1995-2005? Why the difference?

Although we have clients who, after weighing all the relevant factors, have elected not to disclose, the percentage of matters that result in voluntary disclosures has plainly been rising. The reasons include changes in the sentencing guidelines, the enactment of Sarbanes-Oxley, greater Audit Committee oversight of investigations, the campaign by enforcement agencies to assure companies that voluntary disclosure and cooperation will result in “tangible benefits,” and the gradually spreading view that this is true, if not numerically predictable.

With Avon's recent disclosure that it has spent over $100 million in professional fees and expenses in connection with an FCPA inquiry and other similar disclosures (albeit perhaps not as dramatic) have professional fees and expenses (law firm, accounting firm, etc.) associated with FCPA internal investigations gotten out of control?

I have to confess to being stunned at some of the reported costs of investigations. To be sure, the costs of investigations have risen with increased emphasis on electronic documents and the insistence that investigations must be independent, thorough, and knowledgeable.

Accepting those requirements, the cost-effectiveness of an investigation can be significantly improved by developing a careful work plan, utilizing a firm with experienced FCPA lawyers at all levels of seniority, tailoring the type of investigation to the type of issue, and making informed and reasonable judgments about when to stop an investigation and focus on remediation. In my experience, it is often possible to have a reasoned and productive dialogue with enforcement agencies about the scope and extent of investigations.

FCPA reform proposals are floating around and are reportedly being considered by certain members of Congress. In your view what reform proposals have merit and what issues are at the top of Homer Moyer's FCPA reform list?

I find some of the calls for statutory reform less than compelling. Proposals to change the statute in ways that would be inconsistent with international conventions to which the U.S. is committed are unlikely to be successful, in my view, and could well open the door to other “reforms” that advocates for change might dislike, such as eliminating the exception for facilitating payments.

To be sure, in enforcing the FCPA, the government tries to overreach from time to time -- exercising anti-bribery jurisdiction over foreign subsidiaries and aggressive applications of dd-3 jurisdictional on the grounds that some step in the process took place “in the territory of the United States” come to mind as occasional examples. When enforcement agencies overreach, they should be challenged.

My dream list of “reforms” might read something like the following:

• Internal DOJ guidance that voluntarily disclosed matters must normally be resolved by the Department within 90 days after completion of an internal investigation; that agencies should make public their calculations of credit for voluntary disclosure and coordination; and that the Department will publish sanitized summaries of its declinations.

• An amendment to tweak the whistle-blower provision of Dodd-Frank to relieve the SEC of the conundrum of implementing the statute consistent with its terms but in a manner that does not undercut effective corporate compliance programs;

• An agreement among prosecutors that in the case of parallel investigations by more than one country, private parties may request state-to-state consultations (as called for by the OECD convention), and the consulting states should assure that investigations are coordinated and penalties made complementary so that companies do not face redundant penalties or unnecessarily overlapping investigations.

• Insistence by the OECD that OECD membership for China, Russia, and India must include accession to the Anti-Corruption Convention, accelerated peer review, and possible reconsideration of OECD membership if implementation and enforcement of anti-corruption laws prove to be insufficient.

• Multilateral reform measures designed to minimize current legal impediments to identifying and seizing funds stolen by corrupt officials and to facilitate repatriation of such funds.

Uneven Justice: A Critical Look at FCPA Enforcement

The week starts with a guest post from Michael Volkov.

Volkov (here) is a partner at Mayer Brown LLP. His practice focuses on white collar defenses, FCPA enforcement and compliance, and litigation. The views expressed in this article are his own and do not represent those of his law firm, Mayer Brown LLP. He can be reached at mvolkov@mayerbrown.com.

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UNEVEN JUSTICE: A CRITICAL LOOK AT FCPA ENFORCEMENT

By Michael Volkov

The United States is a nation of laws: badly written and randomly enforced. ~Frank Zappa

Much has been written about the overall fairness of the Justice Department’s and the Securities and Exchange Commission’s aggressive FCPA enforcement program. Some have argued that DOJ and SEC have engaged in uneven justice: corporations plead to non-FCPA offenses, pay big fines, and continue business as usual. Others argue that DOJ has failed to prosecute individual executives and officers, or to ensure that corporations are debarred or suspended from continuing to sell to the federal government.

As a former federal prosecutor with nearly 20 years experience in the criminal justice system, I can assure you that some of the criticisms are accurate but some completely miss the mark. Last year, the Senate Judiciary Committee examined the controversy surrounding FCPA enforcement, and this year the House Judiciary Committee is planning to look at the issue.

DOJ is proud of its enforcement program. And rightly so – they have resuscitated a program which was dormant for years which now collects over one half of all criminal fines imposed each year in the United States. That is an impressive record.

Aside from the fundamental deficiencies inherent in DOJ’s voluntary disclosure process, DOJ claims that it gives adequate credit for corporate compliance programs, early cooperation and full disclosure. In response some suggest that plea agreements which are designed to protect companies from debarment and include pleas to non-FCPA charges are unfair. Part of that point is correct; the other part is flat out wrong.

Our criminal justice system operates day-to-day based on plea agreements. In the federal system, over 90 percent of federal cases are resolved through plea agreements. As part of that process, charge-bargaining is a critical component. DOJ’s decision to permit corporations, or typically country-specific subsidiaries to plead guilty to a non-FCPA offense, is in keeping with this long tradition. The underlying conduct as described in the plea agreement is known to all – the company engaged in systematic and widespread bribery. Nothing more, nothing less. To extrapolate from such a plea that DOJ is not enforcing the law is misguided and ignores the realities of the plea bargaining process.

On the other hand, DOJ’s willingness to forego debarment and/or suspension is certainly an issue that needs to be examined. As Professor Koehler testified at the Senate Judiciary Committee, BAE was awarded a government contract on the same day it plead guilty to a non-FCPA offense but paid a criminal fine over $400 million. That is certainly uneven justice, and Senators and policymakers should have taken note of this ironic enforcement twist.

Senator Specter and others have criticized the Justice Department for failing to include individual corporate executives and officers in its enforcement actions. The Justice Department’s Antitrust Division has a much better record on this score – corporations and individuals are prosecuted in criminal antitrust cases with equal vigor and results. Why has DOJ shied away from linking corporate cooperation to requiring cooperation against individual executives and officers at the offending company?

If the goal of DOJ’s enforcement program is corporate compliance, then the enforcement program needs to be recalibrated. Deterrence is an admirable objective and will certainly increase compliance, but DOJ has more tools available to it to encourage and promote cooperation. DOJ’s antitrust amnesty/leniency is an example of a program which has been incredibly successful on the enforcement and the compliance ends. While there are certainly problems with the application of a cartel-focused (multi-actor) model to FCPA cases, there are lessons which can be learned from the amnesty/leniency program.

We all aspire to equal justice and we all admire the image of justice that is blind as the hallmark of our judicial system. But right now what is needed is for justice to listen so that it operates with fairness and equal justice for all.

Guilty Verdicts in Lindsey Case

This past October, I asked (here) what will happen to Lindsey Manufacturing Company?

The company (a privately held manufacturer of electrical transmission towers and related products that employs approximately 100 individuals) was indicted along with its President, Keith Lindsey, and its Chief Financial Officer, Steven Lee. [Others outside the company were charged as well in connection with the case].

The case represented a rare instance of a criminal indictment of a company in the FCPA context.

Yesterday, after a five week trial in federal court in the C.D. of California, a jury returned guilty verdicts.

As noted in this DOJ release, Lindsey Manufacturing, Lindsey and Lee were convicted of one count of conspiracy to violate the FCPA and five counts of FCPA violations. The conduct at issue focused on commission payments made by Lindsey Manufacturing to Enrique and Angela Aguilar (directors of Grupo Internacional de Asesores S.A.) that "would be used to pay bribes to Mexican officials in exchange for [Comisión Federal de Electricidad (CFE), a state-owned utility company] awarding contracts to Lindsey Manufacturing." As noted in the DOJ release, Angela Aguilar was convicted of one count of money laundering conspiracy and the court entered a judgment of acquittal prior to the jury’s verdict on one substantive count of money laundering against her. Enrique Aguilar is currently a fugitive.

Sentencing for Lindsey Manufacturing, Lindsey and Lee is scheduled for Sept. 16, 2011. Angela Aguilar’s sentencing is scheduled for Aug. 12, 2011.

Reacting to the guilty verdicts, Assistant Attorney General Lanny Breuer stated as follows. "“Today’s guilty verdicts are an important milestone in our Foreign Corrupt Practices Act (FCPA) enforcement efforts. Lindsey Manufacturing is the first company to be tried and convicted on FCPA violations, but it will not be the last. Foreign corruption undermines the rule of law, stifling competition and the health of international markets and American businesses. As this prosecution shows, we are fiercely committed to bringing to justice all the players in these bribery schemes – the executives who conceive of the criminal plans, the people they use to pay the bribes, and the companies that knowingly allow these schemes to flourish. Bribery has real consequences.”

The Lindsey case attracted much interest as it was one of the "foreign official" challenges. See here for the full briefing and here for the written decision.

Prior to the jury verdicts, on Monday, Jan Handzlik (here - attorney for defendants Lindsey Manufacturing and Keith Lindsey) and Janet Levin (here - attorney for defendant Steve Lee) filed a motion to "Dismiss the Indictment with Prejudice due to Repeated and Intentional Government Misconduct." Handzlik is quoted in this story by Samuel Rubenfeld at the Wall Street Journal as saying "we continue to believe in our clients' innocence and will pursue our motion to dismiss the indictment on grounds of prosecutorial misconduct." A hearing on that motion is set for June 6. Aguilar's attorney, Stephen Larson (here) reportedly intends to seek a motion of acquittal as to the one charge his client was found guilty of.

Another case concerning alleged payments to CFE is pending in the Southern District of Texas against John Joseph O'Shea. See here for more.

So the question remains - what will happen to Lindsey Manufacturing?

As a small privately held company, Lindsey Manufacturing was able to aggressively mount a legal defense that publicly traded companies are unwilling, or some would say are logistically unable, to mount. Whether one agrees with certain of the judge's pre-trial rulings or not, or whether one finds arguments about prosecutorial misconduct persuasive or not, the fact is, the Lindsey case, unlike the majority of FCPA enforcement actions, was subject to an adversary proceeding in which someone other than the enforcement agencies weighed in on the issues - and that is a good thing!

Oral Argument in Carson "Foreign Official" Challenge

Jaime Guerrero (Foley & Lardner - here) provides a first-hand account of yesterday's oral arguments in the Carson "foreign official" challenge.

See here for a prior post, including links to the briefs.

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On Monday afternoon, May 9, 2011, United States District Judge James V. Selna heard oral arguments on defendants’ motion to dismiss the indictment on the “foreign official” issue in the Carson case in the Central District of California. In their moving papers, the defendants made three separate arguments in support of their motion to dismiss Counts One through Ten of the Indictment. Specifically, the defendants argued that: first, as a matter of statutory interpretation, employees of the state-owned companies identified in the indictment fall beyond the scope of the FCPA’s definition of “foreign official;” second, to the extent there is an ambiguity in the statute, the rule of lenity mandates that the motion be resolved in defendants’ favor; and third, to the extent the FCPA could be construed to proscribe payments made or promised to employees of state-owned companies, the statute is unconstitutionally vague as applied to defendants.

During the hearing, counsel for the defendants focused the majority of their arguments on the FCPA’s purported lack of definition for “instrumentality” within the term “foreign official.” Defendants noted that Congress did not define “instrumentality” within the statute and that the government’s position created a definition that was unworkable and overbroad. Moreover, the defendants argued that it was impractical to wait for the trial to decide the factors that the jury would consider to determine whether the employees of state-owned companies were “foreign officials.” The defendants also argued that the Supreme Court’s recent decision in Skilling v. United States, 561 U.S. ___, 130 S. Ct. 2896, 2933 (2010), was the proper framework for deciding the FCPA “foreign official” challenge. Thereafter, the defendants argued that the FCPA statute was “vague as applied,” as there was no way for the individual defendants to have done anything more to determine if a state-owned entity was an “instrumentality.” The defendants argued that there was no rhyme or reason to the government’s determination of whether a state-owned entity was an “instrumentality,” and, as such, the statute was vague. Finally, the defendants argued that the rule of lenity mandated that the Court dismiss the indictment, as the statute was unconstitutionally ambiguous and that, if it was a tie between the government’s position and the defendants’ position, that the tie should go to the defendants.

The government responded first by noting that the defendants’ ignored the standards the Court had to apply when deciding a motion to dismiss the indictment, as the issues presented in the motion raised factual issues that had to be resolved by a jury. Citing Hagner v. United States, 285 U.S. 427 (1932), the government argued that because there were factual issues outstanding related to whether the state-owned entities were “instrumentalities,” the Court could not grant the motion to dismiss. The government also argued that the statute was not void for vagueness, as the statute’s mens rea or scienter requirement served to defeat the defendants’ claim that they did not know what they were doing was wrong. In particular, however, the government noted that the statute did not require a specific intent, but instead the government need only prove that the defendants knew that what they were doing was wrong.

District Judge Selna permitted the parties to argue their respective positions, interjecting on few occasions. During the defendants’ arguments that the definition of “instrumentality” in the Foreign Sovereign Immunities Act (FSIA) could not be used as a reference point, or definition, for “instrumentality” in the FCPA statute, District Judge Selna asked whether the Court could infer whether Congress intended for the term “instrumentality” to have the same definition in the FCPA as the FSIA. District Judge Selna also inquired whether a finding that a state-owned entity was an “instrumentality” was self-evident, as the nature of the entity would be before the jury.

Ultimately, after hearing all arguments on defendants’ motion to dismiss, District Judge Selna took the motion under submission and reserved a final ruling on the motion for a later date.

A Focus on Russia

In this guest post, I am pleased to turn it over to Robert Wieck (a high school classmate - Elkhart Lake (WI) Class of '93 - Go Resorters!).

Robert is currently the Forensic Audit Senior Manager (Europe, Middle East and Africa) for Oracle Corporation and is based in Bucharest, Romania. He has thirteen years of experience in both “Big 4” and US listed multi-national companies. Twelve of these years have been focused on emerging markets including countries in the former Soviet Union, former Yugoslavia, and the Balkan region.

Robert participated as a panelist at the “3rd Annual Anti-Corruption Summit for Russia & CIS” held on March 16-17th in Moscow. See here for the prior post regarding Assistant Attorney General Lanny Breuer's comments at the event.

Below is Robert's guest post and the opinions expressed below are his own and do not necessarily reflect the opinion of his employer, Oracle Corporation.

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"I think it is clear to most people that the current business climate in Russia is troublesome for multi-national companies trying to do business legitimately. Presentations and discussions held at the conference seemed to confirm that companies are becoming increasingly concerned about being able to do business successfully in Russia and at the same time maintaining compliance with the FCPA.

One interesting point which I believe set the tone for the conference was that while the DoJ accepted the invitation for two senior officials (Mr. Breuer and Mr. Andres) to travel to Moscow to address the conference attendees, there were no Russian counterparts from the Russian Ministry of Justice present to advise on what they are doing to address the corruption problems on the ground in Russia.

While the transcript for Mr. Breuer’s speech is linked above, Mr. Andres’s comments are summarized below:

• Russia is clearly not the only place in the world where corruption is a problem. There have been a considerable number of prosecutions of US Citizens under the FCPA.

• There have been a record number of prosecutions under the FCPA in 2010, and more than 1 Billion USD in fines collected as a result. According to Mr. Andres, none of these cases involved a single, low level act of corruption or bribery, but systematic corruption involving hundreds of thousands of dollars, and involving dozens of people.

• While there were a record number of prosecutions in 2010, there were also a record number of cases that the DoJ declined to prosecute. Decisions to decline to prosecute a case were made based on a company’s ability to demonstrate that they have sound internal procedures and compliance programs. Andres believed this also highlights the benefits of companies self-reporting potential FCPA violations, and further mentioned that self-disclosure was an important factor in how many of those cases were resolved.

• There has been an uptick in the number of individuals being prosecuted under the FCPA, which totaled 50 for 2009 and 2010. This is up from 2 individuals prosecuted in 2004.

• In terms of FCPA trends for the future, Andres noted that it appears more companies are cooperating with the DoJ. More industry-wide prosecutions are being undertaken where they find that activities that violate the FCPA are not confined to one company within an industry, but represent an industry practice that multiple companies within the industry are all engaging in. The DoJ has noted increased cooperation with national law enforcement agencies and international organizations (including the OECD).

• Companies continue to criticize the DoJ for not providing enough guidance regarding their approach to FCPA prosecutions. However, Mr. Andres stated that the DoJ does a good job in maintaining the FCPA compliance website where a wealth of case information is published and available for review.

• Currently there is much debate ongoing about the definition of a public sector official, and the DOJ continues to see an increasing number of litigations surrounding the interpretation of who is a "foreign official" under the provisions of the FCPA.

• Andres believes the trend of increasing prosecutions under the FCPA will continue, and that the DoJ has added resources to address this trend.

Among the most interesting comments made by Mr. Andres, from my point of view, were his final comments in which he stated that the DoJ is demanding the same level of compliance with the FCPA from Russia as it does from other countries. He further stated that there would not be any “Russia-specific exception” when pursuing prosecutions under the FCPA.

One other interesting presentation was delivered by the General Director for Transparency International, Ms. Elena Panfilova. In what I consider a brutally honest way, she confirmed that based on research conducted by her team on the ground in Moscow, the fraud and corruptions problems in Russia are indeed getting worse, despite information that might suggest otherwise. The schemes used by these perpetrators are becoming more and more complex and they no longer appear to be shy about engaging in corruption. This has resulted in a diminished sense of public trust and led to a very cynical environment in Russia in regards to corruption. Ms. Panfilova believes that one of the barriers to reversing this trend is the lack of whistleblower protection for people reporting alleged cases of corruption. Whistleblowers currently have no guarantees of support from anyone when they raise concerns. And usually when people do report instances, whistleblowers become targets of unfounded prosecution. To demonstrate her point, she made reference to statistics which suggest that while corruption is on the rise, the number of whistleblowers making claims is decreasing. It is understood that the role of the whistleblower is critical in the fight against corruption. Thus, legal protection from prosecution (both civil and criminal), protection of property and labor rights (anti-retaliation legislation) is required in order to allow whistleblowers to come forward and voice their concerns regarding corrupt activities they might have witnessed or been a victim of.

My participation in the panel discussion covered best practices in conducting investigations in Russia. Over my twelve years of experience working in emerging markets in Europe (including Russia and CIS), I have noted common themes that should be considered while trying to conduct an audit or investigate potential misconduct in Russia (and any emerging market, for that matter). One aspect would be the high risk of document falsification in the Russian environment. In Russia, a “form over substance” approach is taking to maintain supporting documentation for transactions. Thus, in the context of an audit or investigation, the audit objectives should be managed carefully in order to ensure documentation is not “custom” prepared. Another aspect is the sometimes difficult task of getting complete/honest answers to questions or queries. It is common to receive conflicting stories and different versions of answers to the same question, sometimes for no apparent reason. A Russian celebrity summed it up in a Russian newspaper article I read recently by saying “For some reason, it's not the custom to tell the truth in our country, even when it is clear to everyone”. Lastly, I would say that securing full cooperation from auditees can be a tedious and exhausting process. It can only be recommended that companies use legal resources (both internal and external) when necessary, in order to ensure that they receive cooperation which might be required in the form of an employment agreement, internal code of conduct or other type of contract (in the case of third parties)."

"FCPA Sanctions: Too Big To Debar?"

Debarment (or lack thereof) is a periodic topic on this site.

Previously, I covered "Siemens ... The Year After" (here), a post that highlighted in the year after resolution of the Siemens record-setting December 2008 FCPA matter, the U.S. government continued to do substantial business with the company it charged with engaging in a pattern of bribery “unprecedented in scale and geographic scope.”

In September 2010, I highlighted (here) the FBI's $40 million contract with BAE - months after the FBI participated in resolution of the $400 million FCPA related enforcement action against the company.

In my November 2010 testimony (here) before the U.S. Senate, I stated as follows. "In order for the DOJ’s deterrence message to be completely heard and understood egregious instances of corporate bribery that legitimately satisfy the elements of an FCPA anti-bribery violation involving high-level executives and/or board participation should be followed with debarment proceedings against the offender."

This testimony prompted then Senator Arlen Specter (who chaired the hearing) to ask me several follow-up questions for the record relating to debarment. (See here for the Q&A's). Senator Christopher Coons (who also participated in the November 2010 hearing) also asked debarment follow-up questions of the DOJ.

As highlighted last week (here), the DOJ is opposed to a "mandatory, conduct-based, debarment remedy for companies that engage in egregious bribery." As noted in the prior post, the DOJ's responses seemed anchored in self-interest in that such a remedy would lessen its FCPA caseload, would make its job more difficult, and would take away it flexibility and leverage and resolving FCPA enforcement actions.

Enter Dru Stevenson (Professor of Law, South Texas College of Law - here and a past contributor to the site) and Nick Wagoner (a law student at South Texas College of Law).

Stevenson and Wagoner recently released a yet to be published article titled "FCPA Sanctions: Too Big to Debar?" (See here).

The authors (who can be reached at dstevenson@stcl.edu and nicholas.wagoner@gmail.com) provide this article summary.

"Despite the dramatic escalation in corporate fines and imprisonment imposed under the FCPA in recent years, a particularly lethal sanction for combating foreign corruption remains unused—suspension or debarment of prosecuted entities from future contracts with the U.S. Many of the firms caught bribing foreign officials have extensive contracts with a number of domestic federal agencies; meaning debarment may be a particularly devastating penalty both for the government contractor and the agency it transacts business with.

This begs the question: are certain private contractors too big to debar? As this Article demonstrates, it appears so. Certain federal agencies have become highly dependent on a handful of private firms responsible for satisfying the vast majority of government contracts. Because of the potential “collateral consequences” that may result from the collapse of a debarred contractor, these firms have enjoyed bailouts from agency officials who refuse to sanction corrupt practices through suspension or debarment. If ridding foreign markets of corruption truly is a top priority of the U.S., it seems both unfair and imprudent for federal agencies to continue awarding lucrative, multibillion-dollar contracts to firms recently prosecuted for fraudulently obtaining such contracts overseas.

This situation leads to the jaded viewpoint that paying fines when caught bribing foreign officials has “simply become a cost of doing business.” To help illuminate these concerns and lend support to the thesis, this Article examines the third largest FCPA-related enforcement actions to date: the BAE Systems case. On March 1, 2010, BAE Systems paid approximately $400 million in fines for its corrupt practices abroad. In the 365 days that followed however, BAE was awarded U.S. contracts in excess of $58 billion dollars. The U.S.’s refusal to debar BAE because of the risk of “collateral consequences” provides a case study of the benefits and drawbacks to deterring foreign corruption through suspension and debarment. This Article concludes that the U.S. must begin to diversify its portfolio of federal contractors so that prosecutors may leverage the legitimate threat of suspension and debarment to more effectively deter foreign corruption."

Robert Amaee on U.K. Bribery Act Guidance

Yesterday, in a much anticipated development, the United Kingdom Ministry of Justice released (here) its long awaited guidance (here) as to the U.K. Bribery Act - a delayed law now set to go live on July 1, 2011.

The U.K. Serious Fraud Office, the U.K. law enforcement agency tasked with enforcing the Bribery Act, also issued a release (here) and prosecuting guidance (here).

In this guest post, Robert Amaee (the former Head of Anti-Corruption and Proceeds of Crime Unit at the U.K. Serious Fraud Office and current counsel with Covington & Burling LLP in London - see here) provides insight and analysis of the U.K. developments.

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The Bribery Act: Countdown to Implementation

The UK Ministry of Justice yesterday published its long awaited Bribery Act 2010 (the “Bribery Act”) guidance entitled “Guidance about procedures which relevant commercial organisations can put in place to prevent persons associated with them from bribing (section 9 of the Bribery Act 2010).” This publication marks the official start of a ninety day countdown to the implementation of the Bribery Act which will now be brought into force on 1 July 2011.

Companies that already have reviewed and updated their anti-bribery and corruption procedures will be ahead of the game but will still need to study the new guidance to see what, if any, further amendments may be required. Those who have yet to complete the process of updating their procedures to ensure compliance no doubt will draw a modicum of comfort from the fact that they have a further ninety days in which to digest and absorb the guidance and implement the necessary policies and procedures.

The comments made by the Minister of Justice, Ken Clarke QC MP, and the guidance itself aim to reassure companies that the Bribery Act will be enforced with common sense and pragmatism.

The Minister of Justice ushered in the guidance by saying that "[t]he ultimate aim of [the Bribery Act] is to make life difficult for the minority of organizations responsible for corruption, not to burden the vast majority of decent and law-abiding businesses."

That is a message that prosecutors at the UK Serious Fraud Office (“SFO”) -- the organisation tasked with leading enforcement efforts under the Bribery Act -- have espoused for some time. What is less clear is whether the guidance provides any tangible assistance on some of the Bribery Act's thorniest issues such as the UK’s jurisdiction over non-UK registered companies, the extent of liability for the actions of third parties and the boundary between acceptable corporate hospitality and a prosecutable bribe, particularly when foreign officials are concerned.

Government Policy and the Section 7 Corporate Offence

The guidance, as expected, focuses on six high level principles which companies will need to familiarise themselves with and which are supported by 11 case studies. It also sets out the Government policy in relation to the section 7 corporate offence stating that “[t]he objective of the [Bribery] Act is not to bring the full force of the criminal law to bear upon well run commercial organisations that experience an isolated incident of bribery on their behalf” and recognises that “no bribery prevention regime will be capable of preventing bribery at all times.” This part of the guidance already has attracted criticism from some respected quarters. (See here).

The guidance deals with the section 1 offences of bribing another person but the most noteworthy commentary relates to the section 6 offence (Bribery of foreign public officials). This section highlights the fact that bribery of a foreign public official could be prosecuted under the section 1 offence but that evidential difficulties in proving that a bribe was paid to a foreign public official with the intention to induce him or her to perform his or her role “improperly”, something the guidance calls “a mischief”, means that prosecutors would seek to rely on the section 6 offence which needs no such proof. The guidance goes on to make a number of assertions in relation to the interpretation of section 6 which bear closer scrutiny. The guidance says “…it is not the Government’s intention to criminalise behaviour where no such mischief occurs…” In other words it appears that the guidance may be advocating that the concept of “improper performance” be read into section 6. What is clear is that Parliament did not include any such wording in section 6 in clear contrast to section 1.

Corporate Hospitality and other Business Expenditure

In addressing the topic of corporate hospitality and other business expenditures, the guidance adopts what can only be described as a permissive tone. It codifies the comments that the Minister of Justice has made over the last few weeks and states that “[b]ona fide hospitality and promotional, or other business expenditure which seeks to improve the image of a commercial organisation, better to present products and services, or establish cordial relations, is recognised as an established and important part of doing business and it is not the intention of the Act to criminalise such behaviour” and goes on to endorse “reasonable” and “proportionate” hospitality and business expenditure.

In determining what is reasonable and proportionate, the guidance proposes taking into account “all of the surrounding circumstances” which include matters such as “the type and level of advantage offered, the manner and form in which the advantage is provide, and the level of influence the particular foreign public official has over awarding business”. It states that “the more lavish the hospitality or the higher the expenditure in relation to travel, accommodation or other similar business expenditure provided to a foreign public official, then, generally, the greater the inference that it is intended to influence the official to grant business or a business advantage in return.”

Much of this is elementary and already part of the mantra of compliance departments but the guidance goes further and appears to give the green light to certain interactions with foreign public officials which would, today, be closely and critically scrutinised by those responsible for compliance. As an example, the guidance envisages that the provision of flights, airport to hotel transfers, hotel accommodation, “fine dining” and tickets to an event for a foreign public official and his or her spouse are “unlikely to raise the necessary inference” to engage section 6 and therefore unlikely to violate the Act so long as there is a business rational for the trip.

A Question of Jurisdiction

The guidance makes it clear that “the courts will be the final arbiter as to whether an organisation ‘carries on a business’ in the UK taking into account of the particular facts in individual cases” and sets out the “Government’s intention” in relation to the phrase “carries on a business, or part of a business in the United Kingdom.” The thrust of the approach appears to be a reliance on a “common sense approach.”

In cases where there may be dispute, the guidance again defers to the courts as the final arbiter but says that “… the Government anticipates that applying a common sense approach would mean that organisations that do not have a demonstrable business presence in the United Kingdom would not be caught.” That much is uncontroversial but what follows has elicited a great deal of comment. The guidance states that “[t]he Government would not expect, for example, the mere fact that a company’s securities have been admitted to the UK Listing Authority’s Official list and therefore admitted to trading on the London Stock Exchange, in itself, to qualify that company as carrying on a business or part of a business in the UK and therefore falling within the definition of a ‘relevant commercial organisation’ for the purposes of section 7.” This commentary has been welcomed in some quarters but has been criticised by some as undermining the concept of a level playing field. (See here).

In the vast majority of cases, it will be clear whether a company is or is not carrying on a business or part of a business in the UK. There will, however, be cases where there is room for debate. If, for example, a non-UK registered company sets up a joint venture with a UK company and the joint venture is not registered in the UK, is the non-UK registered company carrying on a business or part of a business in the UK? What if the non-UK registered company then seconds an employee to work at the UK partner’s offices in London looking after the joint venture - is the non-UK registered company carrying on a business or part of a business in the UK? What if it sends 5 employees? Those are the type of intricacies that need to be worked through by company advisors and in the worst case prosecutors and the courts.

Associated Persons

When considering the potential liability imposed on a company by virtue of its supply chains or its involvement in a joint venture, the guidance introduces the concept of “the level of control”-- a concept that does not appear in the Bribery Act -- as one of the “relevant circumstances” that would be taken into account when seeking to determine if the person creating liability can be deemed to be an “associated person” i.e. someone who is performing services for or on behalf of a company that falls within the UK’s jurisdiction. The guidance states that “[t]he question of adequacy of bribery prevention procedures will depend in the final analysis on the facts of each case, including matters such as the level of control over the activities of the associated person and the degree of risk that requires mitigation.”

Facilitation Payments

In the run up to the publication of the guidance, there had been some suggestion that there may an attempt to ‘soften’ the approach to facilitation payments. This is not at all the case. While the Government has recognised the problems faced by commercial organisations in some parts of the world and in certain sectors, the guidance reiterates that there are no exemptions in the Act and sets out the OECD position that facilitation payments are corrosive and that exemptions create artificial distinctions that are “difficult to enforce, undermine corporate anti-bribery procedures, confuse anti-bribery communication with employees and other associated person, perpetuate an existing ‘culture’ of bribery and have the potential to be abused.” In circumstances where an individual has no alternative but to make a facilitation payment in order to “protect against loss of life, limb or liberty”, the guidance states that “the common law defence of duress is very likely to be available”. It stresses that it is a matter for prosecutorial discretion whether to prosecute an offence and defers to the Joint Prosecution Guidance when it comes to the “prosecution of facilitation payments.”

Conclusion

Companies will of course be pleased to have more guidance and will look to draw as much comfort as they can from the more 'permissive' tone of the MoJ guidance but global companies will not be looking at their UK exposure in isolation and will certainly not be rushing to relax their anti-bribery and corruption policies and procedures. It is not much comfort for a company to avoid prosecution in the UK for interactions with foreign government officials for example but to be in violation of their industry codes of conduct or be called to account in a US court for that same conduct. Global companies will continue to be mindful of their global exposure.