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→State of the Union April 30, 2010
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State of the Union April 30, 2010
Visit manufacturing-holdings for Daily Updated Wedding Dresses Collection
BAE ... Inside the SFO
Labels:
BAE
,Serious Fraud Office
Several prior posts (here) have been devoted to the BAE case, both the U.K. - Serious Fraud Office component (and challenges to the plea agreement) and the DOJ's bribery, yet no bribery allegations and charges.
This post returns to the SFO component of the BAE matter.
Widespread allegations that BAE was involved in bribery and corruption on a grand and global scale are detailed in Black Money - a PBS Frontline documentary from April 2009 (here).
In 2004 the SFO began investigating whether BAE made bribe payments to secure Saudi fighter jet contracts. However, in late 2006, the SFO was forced to halt its investigation under pressure from the U.K. government, which cited national security concerns should the investigation go forward.
However, because BAE also allegedly made bribe payments in numerous other countries to secure business, the SFO, under a new Director, revived its investigation of BAE, at least as to non-Saudi issues, including whether the company paid bribes to secure contracts in various European and African countries. After settlement talks stalled – the conventional wisdom is that BAE was unwilling to plead guilty to bribery related offenses given the collateral effect of the mandatory European Union debarment provisions – the SFO pressed ahead with the case.
The SFO Director stated in late January 2010 that “BAE is clearly a very important case” and that “it is very important that we get it right.”
In late January 2010, the SFO issued a release (here) stating that Count Mensdorff, a former BAE agent, was criminally charged with “conspiracy to corrupt” and for “conspiring with others to give or agree to give corrupt payments […] to officials and other agents of certain Eastern and Central European governments, including the Czech Republic, Hungary and Austria as inducements to secure, or as rewards for having secured, contracts from those governments for the supply of goods to them, namely SAAB/Gripen fighter jets, by BAE Systems Plc."
Then, in early February 2010, the SFO announced (here) its long-awaited resolution of the BAE matter. Despite allegations of wide-spread bribery on a global scale, and despite BAE’s agent being criminally indicated a few days earlier in connection with bribe payments in “certain Eastern and Central European government” (presumably on evidence that such payments did indeed occur), the SFO resolution related solely to the company’s failure “to keep reasonable and accurate accounting records in relation to its activities in Tanzania.” The SFO release notes that BAE will pay a £30 million penalty "comprising a fine to be determined by the Court with the balance paid as a charitable payment for the benefit of Tanzania."
Most dramatic, and in a strange turn of events, the SFO announced that it had withdrawn the criminal charges filed days earlier against Count Mensdorff. The same release also notes that "[t]his decision brings to an end the SFO's investigations into BAE's defense contracts."
In the face of widespread criticism, the SFO defended its handling of the BAE matter and noted that "the public interest lay in drawing a line under the whole investigation."
Documents filed in connection with the SFO-BAE plea agreement challenge shed additional light on the SFO's abrupt end to the BAE investigation.
In the SFO's "Grounds for Contesting the Claim" (here) the SFO details the history of its investigation.
Highlights include:
"From the beginning of March 2009, the SFO had been involved in plea discussions with BAE. The position of the SFO was that it would be satisfied with pleas to charges in respect to some, but not necessarily all, the strands of its investigation."
By September 30, 2009 ("the SFO imposed deadline") no agreement had been reached and "discussions in England were discontinued." "By that time, it was known that plea discussions between the DOJ and BAE in the U.S. had also failed to produce any agreement."
"In late January - early February 2010 there was a material change in circumstances. First on January 29, the DOJ contacted the SFO and indicated that a plea agreement with BAE was imminent. The agreement involved BAE entering pleas of guilty with respect of offenses in connection to the investigations concerning Eastern Europe and Saudi Arabia and a payment of $400 million."
The SFO "received advice from counsel that the Eastern Europe aspect of the proposed U.S. agreement was highly likely to have the effect of preventing prosecution for the offenses under consideration in respect of the Eastern European investigation in England, on the basis of the application of the principle of double jeopardy. This represented an additional, potentially serious difficulty in respect of the evidential test. Additionally, the [SFO] re-assessed the effect of the agreement on public interest considerations. He concluded that it was not in the public interest to pursue BAE in England in respect of matters to which the company was to plead guilty in the U.S."
[Note - BAE pleaded guilty in the U.S. to "conspiring to defraud the United States by impairing and impeding its lawful functions, to make false statements about its Foreign Corrupt Practices Act compliance program, and to violate the Arms Export Control Act, and International Traffic in Arms Regulations." It is difficult to see how this plea would raise double jeopardy issues for a corruption / bribery offense.]
"On February 4, 2010 [...] BAE indicated that it was prepared to plead guilty [...] in respect of the Tanzanian transaction, and pay a sum of £30 million. The [SFO] concluded than an agreement on such a basis was in the public interest."
"...a serious evidential difficulty had been identified in respect of potential corruption charges, namely the difficulty of proving the involvement of a 'controlling mind' in the offending. In the absence of a plea agreement, this raised the prospect that the [SFO], having gained no admission of criminal liability or any financial payment, would (a) nevertheless be forced to conclude that there was no realistic prospect of conviction in respect of corruption offenses or (b) end up prosecuting a weak and vulnerable case."
[Note - the above assertion would seem to differ significantly from the assertions of former SFO prosecutors Robert Wardle and Helen Garlick made in the above referenced Black Money documentary]
"By virtue of Article 45 of the European Union Public Sector Procurement Directive 2004, a conviction for an offense of corruption would have had the effect of debarring BAE for tendering for public contracts in the EU. This could have been a disproportionate outcome, having regard to the fact that the relevant conduct took place many years ago and the company had taken substantial steps to transform itself as an organization since then."
"The plea agreements in England and the US were entered into on February 5, 2010 and brought to an end the investigation of BAE."
Thus, over the course of six days, the multi-year investigation of BAE was swiftly resolved and, as in the U.S., a driving force behind the ultimate charges was to avoid application of the European Union debarment provisions.
So why did the SFO abruptly drop the criminal charges against Count Mensdorff?
The short answer is that BAE would not agree to the SFO plea (as watered down as it was) without the SFO agreeing to drop the charges against Count Mensdorff.
The SFO notes that a "particular problem arose in Count Mensdorff's case which led to him being charged sooner than had initially evisaged."
"Count Mendsdorff is an Austrian citizen. As of January 2010, he was in the United Kingdom on police bail. In discussions with the SFO, the Austrian authorities made clear that, as a matter of Austrian law, if he returned to Austria there would be no jurisdiction to extradite Count Mensdorff in respect of the offense which the SFO was considering charging, namely conspiracy to corrupt."
The "SFO concluded that, in the absence of effective extradition arrangements, there was a strong likelihood that, if not charged on January 29th, Count Mensdorff would go to Austria and not re-enter the jurisdiction to face criminal proceedings."
The SFO "decided that the appropriate course of action was to charge Count Mensdorff on January 29th, ensuring that he then became subject to court bail conditions sufficient to ensure he remained within, or came back to, the jurisdiction. Count Mensdorff was duly charged."
"As it transpired, on February 4th, during plea discussions, BAE requested an undertaking from the SFO that in any future prosecutions (to which BAE was not a party) the prosecution could not allege that the company was guilty of corruption. The [SFO] concluded that without such an undertaking, a plea agreement could not be achieved. The [SFO] received advice from counsel to the effect that in a prosecution of Count Mensdorff, or any of the individuals under investigation in connection with the Eastern European transactions, it would not be possible to proceed without making an allegation of corruption against BAE. In short, the SFO concluded that Count Mensdorff could not be prosecuted consistent with the terms of the undertaking sought. In the circumstances, the [SFO] took the view that it was in the public interest to give the undertaking to BAE, thereby enabling the plea agreement to be achieved, and, consequently, to withdraw the charge against Count Mensdroff."
In a recent April 20th Financial Times article, the SFO said "we do not accept that we acted hastily - these were considered negotiations and were not rushed decisions."
The same article noted that because the SFO dropped the charges against Count Mensdroff, he is able to "claim his legal costs from taxpayer funds." According to the article, Mensdorff, who assets include a castle, has made such a claim.
This post returns to the SFO component of the BAE matter.
Widespread allegations that BAE was involved in bribery and corruption on a grand and global scale are detailed in Black Money - a PBS Frontline documentary from April 2009 (here).
In 2004 the SFO began investigating whether BAE made bribe payments to secure Saudi fighter jet contracts. However, in late 2006, the SFO was forced to halt its investigation under pressure from the U.K. government, which cited national security concerns should the investigation go forward.
However, because BAE also allegedly made bribe payments in numerous other countries to secure business, the SFO, under a new Director, revived its investigation of BAE, at least as to non-Saudi issues, including whether the company paid bribes to secure contracts in various European and African countries. After settlement talks stalled – the conventional wisdom is that BAE was unwilling to plead guilty to bribery related offenses given the collateral effect of the mandatory European Union debarment provisions – the SFO pressed ahead with the case.
The SFO Director stated in late January 2010 that “BAE is clearly a very important case” and that “it is very important that we get it right.”
In late January 2010, the SFO issued a release (here) stating that Count Mensdorff, a former BAE agent, was criminally charged with “conspiracy to corrupt” and for “conspiring with others to give or agree to give corrupt payments […] to officials and other agents of certain Eastern and Central European governments, including the Czech Republic, Hungary and Austria as inducements to secure, or as rewards for having secured, contracts from those governments for the supply of goods to them, namely SAAB/Gripen fighter jets, by BAE Systems Plc."
Then, in early February 2010, the SFO announced (here) its long-awaited resolution of the BAE matter. Despite allegations of wide-spread bribery on a global scale, and despite BAE’s agent being criminally indicated a few days earlier in connection with bribe payments in “certain Eastern and Central European government” (presumably on evidence that such payments did indeed occur), the SFO resolution related solely to the company’s failure “to keep reasonable and accurate accounting records in relation to its activities in Tanzania.” The SFO release notes that BAE will pay a £30 million penalty "comprising a fine to be determined by the Court with the balance paid as a charitable payment for the benefit of Tanzania."
Most dramatic, and in a strange turn of events, the SFO announced that it had withdrawn the criminal charges filed days earlier against Count Mensdorff. The same release also notes that "[t]his decision brings to an end the SFO's investigations into BAE's defense contracts."
In the face of widespread criticism, the SFO defended its handling of the BAE matter and noted that "the public interest lay in drawing a line under the whole investigation."
Documents filed in connection with the SFO-BAE plea agreement challenge shed additional light on the SFO's abrupt end to the BAE investigation.
In the SFO's "Grounds for Contesting the Claim" (here) the SFO details the history of its investigation.
Highlights include:
"From the beginning of March 2009, the SFO had been involved in plea discussions with BAE. The position of the SFO was that it would be satisfied with pleas to charges in respect to some, but not necessarily all, the strands of its investigation."
By September 30, 2009 ("the SFO imposed deadline") no agreement had been reached and "discussions in England were discontinued." "By that time, it was known that plea discussions between the DOJ and BAE in the U.S. had also failed to produce any agreement."
"In late January - early February 2010 there was a material change in circumstances. First on January 29, the DOJ contacted the SFO and indicated that a plea agreement with BAE was imminent. The agreement involved BAE entering pleas of guilty with respect of offenses in connection to the investigations concerning Eastern Europe and Saudi Arabia and a payment of $400 million."
The SFO "received advice from counsel that the Eastern Europe aspect of the proposed U.S. agreement was highly likely to have the effect of preventing prosecution for the offenses under consideration in respect of the Eastern European investigation in England, on the basis of the application of the principle of double jeopardy. This represented an additional, potentially serious difficulty in respect of the evidential test. Additionally, the [SFO] re-assessed the effect of the agreement on public interest considerations. He concluded that it was not in the public interest to pursue BAE in England in respect of matters to which the company was to plead guilty in the U.S."
[Note - BAE pleaded guilty in the U.S. to "conspiring to defraud the United States by impairing and impeding its lawful functions, to make false statements about its Foreign Corrupt Practices Act compliance program, and to violate the Arms Export Control Act, and International Traffic in Arms Regulations." It is difficult to see how this plea would raise double jeopardy issues for a corruption / bribery offense.]
"On February 4, 2010 [...] BAE indicated that it was prepared to plead guilty [...] in respect of the Tanzanian transaction, and pay a sum of £30 million. The [SFO] concluded than an agreement on such a basis was in the public interest."
"...a serious evidential difficulty had been identified in respect of potential corruption charges, namely the difficulty of proving the involvement of a 'controlling mind' in the offending. In the absence of a plea agreement, this raised the prospect that the [SFO], having gained no admission of criminal liability or any financial payment, would (a) nevertheless be forced to conclude that there was no realistic prospect of conviction in respect of corruption offenses or (b) end up prosecuting a weak and vulnerable case."
[Note - the above assertion would seem to differ significantly from the assertions of former SFO prosecutors Robert Wardle and Helen Garlick made in the above referenced Black Money documentary]
"By virtue of Article 45 of the European Union Public Sector Procurement Directive 2004, a conviction for an offense of corruption would have had the effect of debarring BAE for tendering for public contracts in the EU. This could have been a disproportionate outcome, having regard to the fact that the relevant conduct took place many years ago and the company had taken substantial steps to transform itself as an organization since then."
"The plea agreements in England and the US were entered into on February 5, 2010 and brought to an end the investigation of BAE."
Thus, over the course of six days, the multi-year investigation of BAE was swiftly resolved and, as in the U.S., a driving force behind the ultimate charges was to avoid application of the European Union debarment provisions.
So why did the SFO abruptly drop the criminal charges against Count Mensdorff?
The short answer is that BAE would not agree to the SFO plea (as watered down as it was) without the SFO agreeing to drop the charges against Count Mensdorff.
The SFO notes that a "particular problem arose in Count Mensdorff's case which led to him being charged sooner than had initially evisaged."
"Count Mendsdorff is an Austrian citizen. As of January 2010, he was in the United Kingdom on police bail. In discussions with the SFO, the Austrian authorities made clear that, as a matter of Austrian law, if he returned to Austria there would be no jurisdiction to extradite Count Mensdorff in respect of the offense which the SFO was considering charging, namely conspiracy to corrupt."
The "SFO concluded that, in the absence of effective extradition arrangements, there was a strong likelihood that, if not charged on January 29th, Count Mensdorff would go to Austria and not re-enter the jurisdiction to face criminal proceedings."
The SFO "decided that the appropriate course of action was to charge Count Mensdorff on January 29th, ensuring that he then became subject to court bail conditions sufficient to ensure he remained within, or came back to, the jurisdiction. Count Mensdorff was duly charged."
"As it transpired, on February 4th, during plea discussions, BAE requested an undertaking from the SFO that in any future prosecutions (to which BAE was not a party) the prosecution could not allege that the company was guilty of corruption. The [SFO] concluded that without such an undertaking, a plea agreement could not be achieved. The [SFO] received advice from counsel to the effect that in a prosecution of Count Mensdorff, or any of the individuals under investigation in connection with the Eastern European transactions, it would not be possible to proceed without making an allegation of corruption against BAE. In short, the SFO concluded that Count Mensdorff could not be prosecuted consistent with the terms of the undertaking sought. In the circumstances, the [SFO] took the view that it was in the public interest to give the undertaking to BAE, thereby enabling the plea agreement to be achieved, and, consequently, to withdraw the charge against Count Mensdroff."
In a recent April 20th Financial Times article, the SFO said "we do not accept that we acted hastily - these were considered negotiations and were not rushed decisions."
The same article noted that because the SFO dropped the charges against Count Mensdroff, he is able to "claim his legal costs from taxpayer funds." According to the article, Mensdorff, who assets include a castle, has made such a claim.
Post Title
→BAE ... Inside the SFO
Post URL
→https://manufacturing-holdings.blogspot.com/2010/04/bae-inside-sfo.html
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State of the Union April 29, 2010
• There will be six more members recalled Monday, May 3. The new seniority date to hold the plant is May 22, 1998.
• The runoff for Vice President will be Tuesday, May 4 from 4:30 am until 8:30 pm. Please make every effort to come out and vote again.
• From the Indianapolis Star: General Motors’ massive stamping plant in Indianapolis might stay open and add jobs, a union official said. JD Norman Industries of Addison, Ill., is negotiating to buy the plant and make components for the auto industry. GM had scheduled the plant for sale or closure in 2011. The factory is down to about 650 employees from more than 2,000 in the 1990s. If enough orders come in, employment could reach 2,500 and remain under the UAW contract, Region 3 Director Mo Davison said.
• From the Detroit Free Press: The Obama administration rebutted complaints today from Republicans over General Motors' use of a government-funded escrow to pay off $5.8 billion in federal loans last week, saying the move was a good deal for taxpayers. “The fact that GM made the determination and repaid the remaining $4.7 billion to the U.S. government now is good news for the company, our investment and the American people,” said Herbert Allison, assistant Treasury secretary for financial stability.
• Gas prices have risen to an all-time high in Great Britain. Tax hikes and a weaker pound have conspired to push prices up to $1.85 a liter (one liter = .26 gallons) or over $7 a gallon. Taxes make up around 47% of the cost of gas there.
• The runoff for Vice President will be Tuesday, May 4 from 4:30 am until 8:30 pm. Please make every effort to come out and vote again.
• From the Indianapolis Star: General Motors’ massive stamping plant in Indianapolis might stay open and add jobs, a union official said. JD Norman Industries of Addison, Ill., is negotiating to buy the plant and make components for the auto industry. GM had scheduled the plant for sale or closure in 2011. The factory is down to about 650 employees from more than 2,000 in the 1990s. If enough orders come in, employment could reach 2,500 and remain under the UAW contract, Region 3 Director Mo Davison said.
• From the Detroit Free Press: The Obama administration rebutted complaints today from Republicans over General Motors' use of a government-funded escrow to pay off $5.8 billion in federal loans last week, saying the move was a good deal for taxpayers. “The fact that GM made the determination and repaid the remaining $4.7 billion to the U.S. government now is good news for the company, our investment and the American people,” said Herbert Allison, assistant Treasury secretary for financial stability.
• Gas prices have risen to an all-time high in Great Britain. Tax hikes and a weaker pound have conspired to push prices up to $1.85 a liter (one liter = .26 gallons) or over $7 a gallon. Taxes make up around 47% of the cost of gas there.
Post Title
→State of the Union April 29, 2010
Post URL
→https://manufacturing-holdings.blogspot.com/2010/04/state-of-union-april-29-2010.html
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Kyrgyzstan, Thailand, Tobacco, and Piranha Fishing
Labels:
Kyrgyzstan
,Thailand
The SEC announced today (see here) an FCPA enforcement action involving "multiple payments of bribes to foreign officials in Kyrgyzstan and Thailand by senior executives and employees of Dimon, Inc. ("Dimon") and Standard Commercial Corporation ("Standard"), predecessor companies of Alliance One International, Inc. ("Alliance One"), during the period from 1996 through 2004 in violation of the Foreign Corrupt Practices Act..."
In 2005, Dimon and Standard merged to form Alliance One (see here) and its stock is listed on the New York Stock Exchange.
Kyrgyzstan
According to the SEC complaint (see here), "from 1996 through 2004, Dimon International Kyrgyzstan ("DIK"), a wholly-owned subsidiary of Dimon, paid more than $3 million in bribes to Kyrgyzstan government officials in order to purchase Kyrgyz tobacco for resale to Dimon's largest customers."
The complaint alleges that "these payments were made to various government officials, including officials of the JSC GAK Kyrgyztamekisi ("Tamekisi") [an entity established by the Kyrgyz government that had authority to issue and control licenses for the fermentation and export of tobacco] and local public official ("Akims")" and "DIK also made improper payments to Kyrgyzstan tax officials."
According to the compliant: (i) defendant Bobby Elkin Jr., Dimon's country manager, "authorized, directed, and made these bribes in Kyrgyzstan through a DIK bank account under his name (the "Special Account);" (ii) defendant Baxter Myers, Dimon's Regional Financial Director, "authorized all fund transfers from a Dimon subsidiary's bank account to the Special Account;" and (iii) defendant Thomas Reynolds, Dimon's International Controller, "formalized the accounting methodology used to record the payments made from the Special Account for purposes of internal reporting by Dimon."
The complaint alleges that in September 1996 "the Kyrgyzstan government imposed a requirement that all exporters of fermented tobacco have an export license," and that "Tamekisi acted as the issuing authorize and controlled the issuance of export licenses, thus effectively controlling all tobacco purchases in Kyrgyzstan."
According to the complaint, Elkin "periodically delivered bags filled with $100 bills to a high-ranking Tamekisi official" and that from 1996 to 2004, Elkin, on behalf of Dimon, "paid more than $2.6 million to a high-ranking Tamekisi official..." The complaint also alleges that Elkin "also paid bribes to local government officials in Kyrgyzstan known as the Akims, who controlled the tobacco regions." The complaint says that "DIK needed the support and consent from each local Akim in order to continue to purchase tobacco from local growers or agricultural collectives" and that "as governors, Akims had the power and influence to prevent the purchase of tobacco in the region, even if a company had an export license." The complaint also states that "Akims could also send the police to block the entrance to buying stations or install a lock box to prevent the transfer of tobacco." According to the complaint, "Elkin authorized and paid more than $260,000 to the Akims..."
Finally (at least as to Kyrgyzstan), the complaint details how DIK was "frequently subjected to audits by Kyrgyz tax officials" and that "during one audit, the tax officials determined that DIK failed to submit two reports to the tax office." Accordingly, the complaint states that the tax officials imposed an approximate $172,000 fine against DIK and the "tax authorities also threatened to seize DIK's bank accounts and tobacco inventory for tax violations." However, according to the complaint, "the tax authorities later offered to reduce the tax penalties levied against DIK in exchange for a cash payment." The complaint then alleges that Elkin "made a cash payment to the tax authorities" and that from 1996 through 2004 Elkin, on behalf of Dimon, "paid approximately $82,850 to Kyrgyz tax officials."
According to the complaint, although the Special Account used to make the above-described payments "was funded by a Dimon subsidiary in the United Kingdom, the financial reporting on the Special Account by that subsidiary, and all other consolidated subsidiaries, went directly to Dimon's corporate headquarters in the United States..."
Thailand
The complaint also alleges that "from 2000 to 2003, Dimon paid bribes of approximately $542,590 to government officials of the Thailand Tobacco Monopoly ("TPM") in exchange for obtaining approximately $9.4 million in sales contracts." According to the complaint, defendant Tommy Williams, Dimon's Senior Vice President of Sales, "directed the sales of tobacco from Brazil and Malawi to the TTM through Dimon's agent in Thailand" and that he "authorized the payment of bribes to TTM officials and characterized the payments as commissions paid to Dimon's agent in Thailand."
The complaint alleges that a "portion of Dimon's selling price to the TTM" included "kickbacks paid as commissions through Dimon's agent to certain members of the TTM in exchange for the sales contracts." The complaint alleges that these bribes to the TTM were authorized "by Dimon's U.S. and Brazilian personnel," in particular Williams.
The complaint also alleges that "Williams also knew about a purported business trip to Brazil that actually was a sightseeing trip arranged by Dimon and others for TTM officials." According to the complaint, the "sightseeing trip occurred in May 2000 and included, among other things, trekking in the Amazon jungle, piranha fishing, and visits to Argentina and various Brazilian waterfalls." The complaint also alleges that in 2002 Williams arranged a trip for a TTM delegation to travel from Bangkok to Brazil "purportedly to look at tobacco blends and samples." According to the complaint, "the return portion of the TTM delegation's trip included a one-week stay in Madrid and Rome that was unrelated to the inspection and purchase of tobacco by the TTM."
Based on the above conduct, the SEC charged Elkin, Myers, Reynolds, and Williams for violating the SEC's antibribery provisions and for aiding and abetting violations of the FCPA's internal controls and books and records provisions.
According to the SEC release, "without admitting or denying the allegations" in the complaint, Elkin, Myers, Reynolds, and Williams consented to the entry of final judgments permanently enjoining violations of the FCPA. Myers and Reynolds also agreed to pay a civil monetary penalty of $40,000 each.
The SEC release notes that the settlement with Elkin "takes into account his cooperation" with the SEC's investigation and "acknowledges of the assistance" of the DOJ and the FBI.
*****
This is the second SEC FCPA enforcement action of the year which seems, according to the facts, to be based, in whole or in part, on extortion or something close to it. For a previous post on the NATCO enforcement action (see here). In addition, earlier this week I had a post "Facilitating Payments or Bribes" (see here). The Kyrgyzstan facts would seem relevant to that issue.
The FCPA, as part of the securities laws, has a statute of limitations of five years. The conduct at issue occured between 1996 and 2004. Perhaps there was a tolling agreement in place or perhaps this is another example where it is difficult to square black-letter law concepts with an FCPA enforcement action.
In 2005, Dimon and Standard merged to form Alliance One (see here) and its stock is listed on the New York Stock Exchange.
Kyrgyzstan
According to the SEC complaint (see here), "from 1996 through 2004, Dimon International Kyrgyzstan ("DIK"), a wholly-owned subsidiary of Dimon, paid more than $3 million in bribes to Kyrgyzstan government officials in order to purchase Kyrgyz tobacco for resale to Dimon's largest customers."
The complaint alleges that "these payments were made to various government officials, including officials of the JSC GAK Kyrgyztamekisi ("Tamekisi") [an entity established by the Kyrgyz government that had authority to issue and control licenses for the fermentation and export of tobacco] and local public official ("Akims")" and "DIK also made improper payments to Kyrgyzstan tax officials."
According to the compliant: (i) defendant Bobby Elkin Jr., Dimon's country manager, "authorized, directed, and made these bribes in Kyrgyzstan through a DIK bank account under his name (the "Special Account);" (ii) defendant Baxter Myers, Dimon's Regional Financial Director, "authorized all fund transfers from a Dimon subsidiary's bank account to the Special Account;" and (iii) defendant Thomas Reynolds, Dimon's International Controller, "formalized the accounting methodology used to record the payments made from the Special Account for purposes of internal reporting by Dimon."
The complaint alleges that in September 1996 "the Kyrgyzstan government imposed a requirement that all exporters of fermented tobacco have an export license," and that "Tamekisi acted as the issuing authorize and controlled the issuance of export licenses, thus effectively controlling all tobacco purchases in Kyrgyzstan."
According to the complaint, Elkin "periodically delivered bags filled with $100 bills to a high-ranking Tamekisi official" and that from 1996 to 2004, Elkin, on behalf of Dimon, "paid more than $2.6 million to a high-ranking Tamekisi official..." The complaint also alleges that Elkin "also paid bribes to local government officials in Kyrgyzstan known as the Akims, who controlled the tobacco regions." The complaint says that "DIK needed the support and consent from each local Akim in order to continue to purchase tobacco from local growers or agricultural collectives" and that "as governors, Akims had the power and influence to prevent the purchase of tobacco in the region, even if a company had an export license." The complaint also states that "Akims could also send the police to block the entrance to buying stations or install a lock box to prevent the transfer of tobacco." According to the complaint, "Elkin authorized and paid more than $260,000 to the Akims..."
Finally (at least as to Kyrgyzstan), the complaint details how DIK was "frequently subjected to audits by Kyrgyz tax officials" and that "during one audit, the tax officials determined that DIK failed to submit two reports to the tax office." Accordingly, the complaint states that the tax officials imposed an approximate $172,000 fine against DIK and the "tax authorities also threatened to seize DIK's bank accounts and tobacco inventory for tax violations." However, according to the complaint, "the tax authorities later offered to reduce the tax penalties levied against DIK in exchange for a cash payment." The complaint then alleges that Elkin "made a cash payment to the tax authorities" and that from 1996 through 2004 Elkin, on behalf of Dimon, "paid approximately $82,850 to Kyrgyz tax officials."
According to the complaint, although the Special Account used to make the above-described payments "was funded by a Dimon subsidiary in the United Kingdom, the financial reporting on the Special Account by that subsidiary, and all other consolidated subsidiaries, went directly to Dimon's corporate headquarters in the United States..."
Thailand
The complaint also alleges that "from 2000 to 2003, Dimon paid bribes of approximately $542,590 to government officials of the Thailand Tobacco Monopoly ("TPM") in exchange for obtaining approximately $9.4 million in sales contracts." According to the complaint, defendant Tommy Williams, Dimon's Senior Vice President of Sales, "directed the sales of tobacco from Brazil and Malawi to the TTM through Dimon's agent in Thailand" and that he "authorized the payment of bribes to TTM officials and characterized the payments as commissions paid to Dimon's agent in Thailand."
The complaint alleges that a "portion of Dimon's selling price to the TTM" included "kickbacks paid as commissions through Dimon's agent to certain members of the TTM in exchange for the sales contracts." The complaint alleges that these bribes to the TTM were authorized "by Dimon's U.S. and Brazilian personnel," in particular Williams.
The complaint also alleges that "Williams also knew about a purported business trip to Brazil that actually was a sightseeing trip arranged by Dimon and others for TTM officials." According to the complaint, the "sightseeing trip occurred in May 2000 and included, among other things, trekking in the Amazon jungle, piranha fishing, and visits to Argentina and various Brazilian waterfalls." The complaint also alleges that in 2002 Williams arranged a trip for a TTM delegation to travel from Bangkok to Brazil "purportedly to look at tobacco blends and samples." According to the complaint, "the return portion of the TTM delegation's trip included a one-week stay in Madrid and Rome that was unrelated to the inspection and purchase of tobacco by the TTM."
Based on the above conduct, the SEC charged Elkin, Myers, Reynolds, and Williams for violating the SEC's antibribery provisions and for aiding and abetting violations of the FCPA's internal controls and books and records provisions.
According to the SEC release, "without admitting or denying the allegations" in the complaint, Elkin, Myers, Reynolds, and Williams consented to the entry of final judgments permanently enjoining violations of the FCPA. Myers and Reynolds also agreed to pay a civil monetary penalty of $40,000 each.
The SEC release notes that the settlement with Elkin "takes into account his cooperation" with the SEC's investigation and "acknowledges of the assistance" of the DOJ and the FBI.
*****
This is the second SEC FCPA enforcement action of the year which seems, according to the facts, to be based, in whole or in part, on extortion or something close to it. For a previous post on the NATCO enforcement action (see here). In addition, earlier this week I had a post "Facilitating Payments or Bribes" (see here). The Kyrgyzstan facts would seem relevant to that issue.
The FCPA, as part of the securities laws, has a statute of limitations of five years. The conduct at issue occured between 1996 and 2004. Perhaps there was a tolling agreement in place or perhaps this is another example where it is difficult to square black-letter law concepts with an FCPA enforcement action.
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Daimler Under Investigation in Russia
Earlier this month, Damiler AG and certain of its subsidiaries resolved DOJ and SEC FCPA enforcement actions (see here for prior posts).
While Daimler escaped FCPA antibribery charges and did not have to plead guilty to anything (it was offered a deferred prosecution agreement), DaimlerChrysler Automotive Russia SAO ("DCAR")(now known as Mercedes-Benz Russia SAO) pleaded guilty to a criminal information charging conspiracy and FCPA antibribery violations.
The charged conduct focused on Daimler's and DCAR's relationships with: "the Russian Ministry of Internal Affairs ("MVD") a department and agency of the Russian government principally responsible for police, militia, immigration and other functions" including supervising the "Russian traffic police; "the Special Purpose Garage ("SPG") an 'instrumenality' of the Russian government"; "Machinoimport a Russian government-owned and controlled purchasing agent for the City of Moscow," an "instrumentality of the Russian government"; and "Dorinvest a Russian government-owned and controlled purchasing agent for the City of Moscow," an "instrumentality of the Russian government."
It used to be that companies could largely put the issues to bed after resolving DOJ and/or SEC enforcement actions. However, "tag-a-long" FCPA-like enforcement actions or inquiries in other countries are becoming a new norm.
Case in point - Daimler.
And we're not talking Germany here.
We're talking Russia.
Earlier this month, The Moscow Times (here) noted that the Daimler case, because of the Russia conduct at issue, presented a test for President Dmitry Medvedev to see "just how determined he is to fight corruption."
Yesterday, The Moscow Times (here) reported that Russia's Interior Ministry opened an internal investigation "after a personal order" from President Medvedev. According to the article, Russia's Prosecutor General has "sent a request to the U.S. Justice Department for information on bribes given by carmaker Daimler." For additional information (see here).
Daimler is not the only company under scrutiny in Russia.
As previously posted (here) H-P's Moscow headquarters were recently raided by Russian authorities in connection with a bribery investigation.
While Daimler escaped FCPA antibribery charges and did not have to plead guilty to anything (it was offered a deferred prosecution agreement), DaimlerChrysler Automotive Russia SAO ("DCAR")(now known as Mercedes-Benz Russia SAO) pleaded guilty to a criminal information charging conspiracy and FCPA antibribery violations.
The charged conduct focused on Daimler's and DCAR's relationships with: "the Russian Ministry of Internal Affairs ("MVD") a department and agency of the Russian government principally responsible for police, militia, immigration and other functions" including supervising the "Russian traffic police; "the Special Purpose Garage ("SPG") an 'instrumenality' of the Russian government"; "Machinoimport a Russian government-owned and controlled purchasing agent for the City of Moscow," an "instrumentality of the Russian government"; and "Dorinvest a Russian government-owned and controlled purchasing agent for the City of Moscow," an "instrumentality of the Russian government."
It used to be that companies could largely put the issues to bed after resolving DOJ and/or SEC enforcement actions. However, "tag-a-long" FCPA-like enforcement actions or inquiries in other countries are becoming a new norm.
Case in point - Daimler.
And we're not talking Germany here.
We're talking Russia.
Earlier this month, The Moscow Times (here) noted that the Daimler case, because of the Russia conduct at issue, presented a test for President Dmitry Medvedev to see "just how determined he is to fight corruption."
Yesterday, The Moscow Times (here) reported that Russia's Interior Ministry opened an internal investigation "after a personal order" from President Medvedev. According to the article, Russia's Prosecutor General has "sent a request to the U.S. Justice Department for information on bribes given by carmaker Daimler." For additional information (see here).
Daimler is not the only company under scrutiny in Russia.
As previously posted (here) H-P's Moscow headquarters were recently raided by Russian authorities in connection with a bribery investigation.
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State of the Union April 28, 2010
• Everyone is invited to attend the Cinco DeMayo dance this Saturday, May 1. Doors open at 6 pm, dinner is served at 7 pm and the dance will go from 8 pm until midnight.
• Correction: The overnite drive drawing will be held in the cafeteria Thursday, April 29 at 8:30, not lunch time. A schedule matrix will be filled in as the names are drawn and will be on display. All winners will be notified.
• Thanks to everyone who took time yesterday to vote. A total of 896 active and retired members voted. Congratulations to delegates Van Simpson, Mike Bullock, Ernie Pace and Dan Howell and alternates Paco Martinez and Wanda Richard.
• From the Detroit News: Toyota Motor Corp. recalled about 50,000 2003 Sequoia SUVs today to upgrade its anti-rollover software -- the latest in a string of callbacks by the Japanese automaker. The recall of the full-sized SUV, disclosed in a letter obtained by The Detroit News, comes 16 months after the National Highway Traffic Safety Administration opened an investigation. It had received 50 complaints over sudden unexpected braking or slowing of the vehicles. Toyota said in an earlier response to NHTSA that it believed several issues are responsible. The automaker said it is "most likely related to the application of the traction control system" and not its vehicle stability control systems -- but Toyota didn't believe a recall was necessary at the time. NHTSA said Toyota has issued at least three Technical Service Bulletins to address concerns about vehicle stability control dashboard warning lights -- but at least 20 customers declined to get the repairs since they can cost $1,500.
• Here are some interesting facts about the Chinese auto market, now the largest in the world: 90% of new car buyers pay cash; China has 50 cars for every 1000 people – the US is nearly 10 times that; GM is the top seller with 1,826,424 sales last year, for a 13.4% share, up from 1.5% ten years ago; a Buick Enclave built in Lansing sells for around $87,000 in China.
• Correction: The overnite drive drawing will be held in the cafeteria Thursday, April 29 at 8:30, not lunch time. A schedule matrix will be filled in as the names are drawn and will be on display. All winners will be notified.
• Thanks to everyone who took time yesterday to vote. A total of 896 active and retired members voted. Congratulations to delegates Van Simpson, Mike Bullock, Ernie Pace and Dan Howell and alternates Paco Martinez and Wanda Richard.
• From the Detroit News: Toyota Motor Corp. recalled about 50,000 2003 Sequoia SUVs today to upgrade its anti-rollover software -- the latest in a string of callbacks by the Japanese automaker. The recall of the full-sized SUV, disclosed in a letter obtained by The Detroit News, comes 16 months after the National Highway Traffic Safety Administration opened an investigation. It had received 50 complaints over sudden unexpected braking or slowing of the vehicles. Toyota said in an earlier response to NHTSA that it believed several issues are responsible. The automaker said it is "most likely related to the application of the traction control system" and not its vehicle stability control systems -- but Toyota didn't believe a recall was necessary at the time. NHTSA said Toyota has issued at least three Technical Service Bulletins to address concerns about vehicle stability control dashboard warning lights -- but at least 20 customers declined to get the repairs since they can cost $1,500.
• Here are some interesting facts about the Chinese auto market, now the largest in the world: 90% of new car buyers pay cash; China has 50 cars for every 1000 people – the US is nearly 10 times that; GM is the top seller with 1,826,424 sales last year, for a 13.4% share, up from 1.5% ten years ago; a Buick Enclave built in Lansing sells for around $87,000 in China.
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Hiring a "Foreign Official"
Labels:
Opinion Procedure Release
Hiring a "foreign official" can be risky. Particularly when the "foreign official" is recommended by a foreign government. These are certain FCPA "red flags."
However, "red flags" don't always turn out red and in this case the "red flags" turn a pleasant shade of pink because the "foreign official" recommended by a foreign government is being hired in connection with a U.S. government contract.
That at least appears to be one take-away from FCPA Opinion Procedure Release No. 10-01 (see here).
According to the Release, a U.S. company (the "Requestor") "entered into a contract with an agency of the U.S. government to perform work in a foreign country." "Pursuant to that contract, the Requestor is obligated to hire and compensate individuals in connection with that work" and "at least one individual to be hired, and perhaps more, is a foreign official within the meaning of the FCPA."
Among other things, the Requestor represented that: (i) the foreign country selected the "foreign official" to be hired based upon the individual's qualifications for the position; (ii) the U.S. government directed the Requestor to hire the "foreign official"; (iii) the "foreign official" will be compensated $5,000 per month to provide services as directed by the foreign country; (iv) the foreign official currently serves as a paid officer for an agency of the foreign country, but the individual's position does not relate to the work at issue and the services that the individual will perform are separate and apart from those performed by the individual as a "foreign official"; and (v) the "foreign official" will not perform any services on behalf of, or make any decision affecting the Requestor including any procurement or contracting decisions.
Based on this information, the DOJ stated that it "does not presently intend to take any enforcement action with respect to the proposed service contract described in this request."
According to the DOJ, "[w]hile the Individual is a “foreign official” within the meaning of the FCPA, and will receive compensation as Facility Director, through a subcontractor, from the Requestor, the Individual is being hired pursuant to an agreement between the U.S. Government Agency and the Foreign Country, and will not be in a position to influence any act or decision affecting the Requestor."
The DOJ further stated:
"The Requestor is contractually bound to hire and compensate the Individual as directed by the U.S. Government Agency. The Requestor did not play any role in selecting the Individual, who was appointed by the Foreign Country based upon the Individual’s qualifications. Moreover, the Individual’s position is separate and apart from the Individual’s position as a Foreign Officer. In neither position will the Individual perform any services on behalf of, or receive any direction from, the Requestor. Accordingly, the Individual will have no decision-making authority over matters affecting the Requestor, including procurement and contracting decisions."
To read more about the detailed requirements of the Foreign Corrupt Practices Act Opinion Procedure process (see here and here).
For additional FCPA Opinion Procedure Releases on the topic of hiring a "foreign official" or otherwise doing business with a "foreign official" see 80-4 (here), 82-03 (here), 86-01 (here), 93-01 (here), 93-02 (here), 94-01 (here), 96-02 (here), 00-01 (here), 01-02 (here), 08-01 (here)
However, "red flags" don't always turn out red and in this case the "red flags" turn a pleasant shade of pink because the "foreign official" recommended by a foreign government is being hired in connection with a U.S. government contract.
That at least appears to be one take-away from FCPA Opinion Procedure Release No. 10-01 (see here).
According to the Release, a U.S. company (the "Requestor") "entered into a contract with an agency of the U.S. government to perform work in a foreign country." "Pursuant to that contract, the Requestor is obligated to hire and compensate individuals in connection with that work" and "at least one individual to be hired, and perhaps more, is a foreign official within the meaning of the FCPA."
Among other things, the Requestor represented that: (i) the foreign country selected the "foreign official" to be hired based upon the individual's qualifications for the position; (ii) the U.S. government directed the Requestor to hire the "foreign official"; (iii) the "foreign official" will be compensated $5,000 per month to provide services as directed by the foreign country; (iv) the foreign official currently serves as a paid officer for an agency of the foreign country, but the individual's position does not relate to the work at issue and the services that the individual will perform are separate and apart from those performed by the individual as a "foreign official"; and (v) the "foreign official" will not perform any services on behalf of, or make any decision affecting the Requestor including any procurement or contracting decisions.
Based on this information, the DOJ stated that it "does not presently intend to take any enforcement action with respect to the proposed service contract described in this request."
According to the DOJ, "[w]hile the Individual is a “foreign official” within the meaning of the FCPA, and will receive compensation as Facility Director, through a subcontractor, from the Requestor, the Individual is being hired pursuant to an agreement between the U.S. Government Agency and the Foreign Country, and will not be in a position to influence any act or decision affecting the Requestor."
The DOJ further stated:
"The Requestor is contractually bound to hire and compensate the Individual as directed by the U.S. Government Agency. The Requestor did not play any role in selecting the Individual, who was appointed by the Foreign Country based upon the Individual’s qualifications. Moreover, the Individual’s position is separate and apart from the Individual’s position as a Foreign Officer. In neither position will the Individual perform any services on behalf of, or receive any direction from, the Requestor. Accordingly, the Individual will have no decision-making authority over matters affecting the Requestor, including procurement and contracting decisions."
To read more about the detailed requirements of the Foreign Corrupt Practices Act Opinion Procedure process (see here and here).
For additional FCPA Opinion Procedure Releases on the topic of hiring a "foreign official" or otherwise doing business with a "foreign official" see 80-4 (here), 82-03 (here), 86-01 (here), 93-01 (here), 93-02 (here), 94-01 (here), 96-02 (here), 00-01 (here), 01-02 (here), 08-01 (here)
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State of the Union April 27, 2010
Reminder: Entry forms for the overnite drive program (VAP) need to be turned in by the end of the shift today in the cafeteria. The drawing will be held Thursday, April 29 at lunch time in the cafeteria. Good luck!
• The final total for the March of Dimes collection is $3112.45. This is a new record, surpassing the 2007 total of $3097 – with only one shift! Thanks to Tina Hayes, who co-chaired the event, and all of you once again for all your extraordinary generosity!
• From Automotive News: Ford posted net income of $2.1 billion in the first quarter, almost twice the figure projected by analysts, fueled by a 37 percent rise in U.S. sales. The profit compared with a loss of $1.4 billion a year earlier. Revenue rose to $28.1 billion from $24.4 billion. Ford's automotive operations had a pre-tax operating profit of $1.2 billion, vs. a loss of $1.9 billion a year earlier.
• More Automotive News: General Motors said today it will invest more than $850 million to upgrade five North American factories to make its next-generation V-8 engines more fuel efficient. The new V-8s will differ from the current versions by using direct injection and a new combustion system, spokeswoman Sharon Basel said. The next-generation engines will also be lighter. GM will build them exclusively from aluminum, compared with the current versions' aluminum and iron makeup, Basel said. All of the engines will be able to run on E85 ethanol. The investment will create or save positions for about 1,600 workers, GM said today in a statement. GM's pool of laid off workers currently numbers more than 4,000 in the U.S., spokeswoman Kim Carpenter said.
• The final total for the March of Dimes collection is $3112.45. This is a new record, surpassing the 2007 total of $3097 – with only one shift! Thanks to Tina Hayes, who co-chaired the event, and all of you once again for all your extraordinary generosity!
• From Automotive News: Ford posted net income of $2.1 billion in the first quarter, almost twice the figure projected by analysts, fueled by a 37 percent rise in U.S. sales. The profit compared with a loss of $1.4 billion a year earlier. Revenue rose to $28.1 billion from $24.4 billion. Ford's automotive operations had a pre-tax operating profit of $1.2 billion, vs. a loss of $1.9 billion a year earlier.
• More Automotive News: General Motors said today it will invest more than $850 million to upgrade five North American factories to make its next-generation V-8 engines more fuel efficient. The new V-8s will differ from the current versions by using direct injection and a new combustion system, spokeswoman Sharon Basel said. The next-generation engines will also be lighter. GM will build them exclusively from aluminum, compared with the current versions' aluminum and iron makeup, Basel said. All of the engines will be able to run on E85 ethanol. The investment will create or save positions for about 1,600 workers, GM said today in a statement. GM's pool of laid off workers currently numbers more than 4,000 in the U.S., spokeswoman Kim Carpenter said.
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Facilitating Payments or Bribes?
In Greece, it's the "little envelopes" that affect everyone from "hospital patients to fishmongers." (see here for the Wall Street Journal story).
In India, it's needing to "string up some wire and get licenses from the government" to start a "tiny business delivering telephone and Internet service" but "getting those things done without hassles require[s] a bribe." (see here for the story from National Public Radio).
In July 2009, Nature's Sunshine Products found out that it's about payments to Brazilian customs agents to import certain unregistered products into Brazil (see here).
Also in July 2009, Helmerich & Payne found out that it's about payments to various officials and representatives of the Argentine and Venezuelan customs services in connection with importation and exportation of goods and equipment (see here).
Numerous other examples abound.
Facilitating payments or bribes?
The FCPA has a specific exception for "facilitating or expediting payment[s] to a foreign official ... the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official."
Where a facilitating payment ends and where a payment to "obtain or retain business" begins is a difficult question.
U.S. v. Kay, 359 F.3d 738 (5th Cir. 2004) is commonly viewed as answering that question.
However, Kay merely holds that Congress intended for the FCPA to apply broadly to payments intended to assist the payor, directly or indirectly, in obtaining or retaining business and that payments to a “foreign official” to reduce custom and tax liabilities can, under appropriate circumstances, fall within the statute. The Kay court empathically stated that not all such payments to a “foreign official” outside the context of directly securing a foreign government contract violate the FCPA; it merely held that such payments “could” violate the FCPA. The key question, according to Kay, is whether the payments at issue were intended to lower the company's costs of doing business enough to assist the company in obtaining or retaining business. The Kay court recognized that “there are bound to be circumstances” in which such attenuated payments merely increase the profitability of an existing profitable company and thus, presumably, do not assist the payer in obtaining or retaining business. In fact, the court specifically stated: “…if the government is correct that anytime operating costs are reduced the beneficiary of such advantage is assisted in getting or keeping business, the FCPA’s language that expresses the necessary element of assisting in obtaining or retaining business would be unnecessary, and thus surplusage – a conclusion that we are forbidden to reach.”
Post-Kay none of the above seems to matter much.
Because the Nature's Sunshine Products and Helmerich & Payne enforcement actions (as well as numerous other similar enforcement actions) were not challenged, it remains an open question whether the payments at issue in these cases, if subjected to judicial scrutiny, would satisfy the “obtain or retain business” element as interpreted in Kay or would be excepted as facilitating payments.
Many of these payments would appear attenuated to any specific cause-and-effect business nexus or otherwise would appear to have merely increased the profitability of an existing profitable business and, per the Kay holding, would presumably not satisfy this key FCPA antibribery element.
While some find facilitating payments to be a corrupt payment under a different name, the fact remains that the FCPA passed by Congress and signed by the President contains an express exception for facilitating payments.
It is this statute that the enforcement agencies are obligated to enforce and this express exception would certainly appear relevant to the above-described actions. Because these enforcement actions were not challenged, this obviously relevant defense was not explored in these cases and these post-Kay cases stand as de facto FCPA case law, notwithstanding the fact that the alleged conduct in these cases may have been excused because of the FCPA’s facilitating payment exception.
It's a complex world.
Congress recognized that when it passed the FCPA, including the facilitating payment exception.
The Kay court recognized that when concluding that not all such attenuated payments violate the FCPA.
In India, it's needing to "string up some wire and get licenses from the government" to start a "tiny business delivering telephone and Internet service" but "getting those things done without hassles require[s] a bribe." (see here for the story from National Public Radio).
In July 2009, Nature's Sunshine Products found out that it's about payments to Brazilian customs agents to import certain unregistered products into Brazil (see here).
Also in July 2009, Helmerich & Payne found out that it's about payments to various officials and representatives of the Argentine and Venezuelan customs services in connection with importation and exportation of goods and equipment (see here).
Numerous other examples abound.
Facilitating payments or bribes?
The FCPA has a specific exception for "facilitating or expediting payment[s] to a foreign official ... the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official."
Where a facilitating payment ends and where a payment to "obtain or retain business" begins is a difficult question.
U.S. v. Kay, 359 F.3d 738 (5th Cir. 2004) is commonly viewed as answering that question.
However, Kay merely holds that Congress intended for the FCPA to apply broadly to payments intended to assist the payor, directly or indirectly, in obtaining or retaining business and that payments to a “foreign official” to reduce custom and tax liabilities can, under appropriate circumstances, fall within the statute. The Kay court empathically stated that not all such payments to a “foreign official” outside the context of directly securing a foreign government contract violate the FCPA; it merely held that such payments “could” violate the FCPA. The key question, according to Kay, is whether the payments at issue were intended to lower the company's costs of doing business enough to assist the company in obtaining or retaining business. The Kay court recognized that “there are bound to be circumstances” in which such attenuated payments merely increase the profitability of an existing profitable company and thus, presumably, do not assist the payer in obtaining or retaining business. In fact, the court specifically stated: “…if the government is correct that anytime operating costs are reduced the beneficiary of such advantage is assisted in getting or keeping business, the FCPA’s language that expresses the necessary element of assisting in obtaining or retaining business would be unnecessary, and thus surplusage – a conclusion that we are forbidden to reach.”
Post-Kay none of the above seems to matter much.
Because the Nature's Sunshine Products and Helmerich & Payne enforcement actions (as well as numerous other similar enforcement actions) were not challenged, it remains an open question whether the payments at issue in these cases, if subjected to judicial scrutiny, would satisfy the “obtain or retain business” element as interpreted in Kay or would be excepted as facilitating payments.
Many of these payments would appear attenuated to any specific cause-and-effect business nexus or otherwise would appear to have merely increased the profitability of an existing profitable business and, per the Kay holding, would presumably not satisfy this key FCPA antibribery element.
While some find facilitating payments to be a corrupt payment under a different name, the fact remains that the FCPA passed by Congress and signed by the President contains an express exception for facilitating payments.
It is this statute that the enforcement agencies are obligated to enforce and this express exception would certainly appear relevant to the above-described actions. Because these enforcement actions were not challenged, this obviously relevant defense was not explored in these cases and these post-Kay cases stand as de facto FCPA case law, notwithstanding the fact that the alleged conduct in these cases may have been excused because of the FCPA’s facilitating payment exception.
It's a complex world.
Congress recognized that when it passed the FCPA, including the facilitating payment exception.
The Kay court recognized that when concluding that not all such attenuated payments violate the FCPA.
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State of the Union April 26, 2010
There was one more member recalled today. The new seniority date to hold the plant is 1-5-1997. That leaves 233 members still laid off.
• Delegate and Vice President elections will be tomorrow. Polls will be open from 4:30 am until 8:30 pm at the Union Hall. Please make every effort to come out and vote.
• From the International Union UAW: Workers' Memorial Day is April 28 and our union will pause to remember those who lost their lives on the job in the last 12 months and in years past. We should also pause to reflect on how we can all do our jobs safer until fatalities and injuries on the job are eliminated. There were three fatalities among the UAW-represented workforce since last year's Workers' Memorial Day. The three UAW fatalities were among skilled-trades workers who typically suffer a higher fatality rate (3.5 deaths per 100,000 workers in 2009) than the rate for all workers (1.5 fatalities per 100,000 workers). The rate for skilled-trades workers remains the same as it was in 2008. But the rate for all workers has steadily dropped; in 2000 it was 2.05.
• From the Detroit Free Press: More than repaying taxpayer loans, increased sales or profits, hiring will be the most credible evidence that automakers are recovering, and two respected sources foresee the industry adding about 88,000 jobs over the next year. The forecast, from the Center for Automotive Research in Ann Arbor and IHS Global Insight, shows that total automotive employment in the U.S., including automakers and suppliers, will grow from an average of 565,700 this year to 653,600 in 2011 and 742,200 in 2012. Between 2006 and the end of 2009, Chrysler, Ford and General Motors shed 117,530, or 40%, of their U.S. workers.
• Delegate and Vice President elections will be tomorrow. Polls will be open from 4:30 am until 8:30 pm at the Union Hall. Please make every effort to come out and vote.
• From the International Union UAW: Workers' Memorial Day is April 28 and our union will pause to remember those who lost their lives on the job in the last 12 months and in years past. We should also pause to reflect on how we can all do our jobs safer until fatalities and injuries on the job are eliminated. There were three fatalities among the UAW-represented workforce since last year's Workers' Memorial Day. The three UAW fatalities were among skilled-trades workers who typically suffer a higher fatality rate (3.5 deaths per 100,000 workers in 2009) than the rate for all workers (1.5 fatalities per 100,000 workers). The rate for skilled-trades workers remains the same as it was in 2008. But the rate for all workers has steadily dropped; in 2000 it was 2.05.
• From the Detroit Free Press: More than repaying taxpayer loans, increased sales or profits, hiring will be the most credible evidence that automakers are recovering, and two respected sources foresee the industry adding about 88,000 jobs over the next year. The forecast, from the Center for Automotive Research in Ann Arbor and IHS Global Insight, shows that total automotive employment in the U.S., including automakers and suppliers, will grow from an average of 565,700 this year to 653,600 in 2011 and 742,200 in 2012. Between 2006 and the end of 2009, Chrysler, Ford and General Motors shed 117,530, or 40%, of their U.S. workers.
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Bourke's Appeal
As previously noted (here), the Frederic Bourke case is arguably the most complex and convoluted case in the history of the FCPA.
The trial court portion of the case ended in November 2009 when Judge Scheindin sentenced Bourke to 366 days for, among other things, conspiracy to violate the FCPA. At sentencing Judge Scheindin stated - “After years of supervising this case, it’s still not entirely clear to me whether Mr. Bourke is a victim or a crook or a little bit of both.”
Bourke has appealed his conviction to the Second Circuit.
An FCPA trial like Bourke's is rare. An FCPA appeal is even more rare. An FCPA appeal to the influential Second Circuit is even more rare.
Thus, with good reason, this case is of great interest to those who follow the FCPA in that it is hoped to shed some light on the FCPA's knowledge element, and perhaps other issues as well.
First step in the appeal is Bourke's brief (see here) filed April 1st. The brief principally focuses on the FCPA's knowledge element, including the trial court's conscious avoidance jury instruction (a portion of the brief is redacted and a portion deals with Bourke's false statement conviction).
This post summarizes the FCPA related issues in Bourke's brief.
*****
According to the brief, the "trial focused on two related issues: whether Bourke knew that Kozeny was bribing the Azeris, and whether he willfully and corruptly joined the bribery conspiracy."
The brief argues that the district court "committed a series of errors that crippled Bourke's mens rea defense."
The brief then discusses three such errors.
"First, the court instructed on conscious avoidance, despite the absence of evidence that Bourke deliberately avoided knowledge of Kozeny's bribes." According to the brief, this instruction was error "because there was no evidence that Bourke deliberately avoided learning about Kozeny's bribery." The brief states that the conscious avoidance instruction "was particularly damaging because the government presented evidence and argued that Bourke failed to exercise adequate due diligence, thus exacerbating the risk inherent in the conscious avoidance instruction that the jury would convict for negligence or recklessness." The brief cites Second Circuit case law which emphasizes that "essential to the concept of conscious avoidance is the requirement that the defendant be shown to have decided not to learn the key fact, not merely to have failed to learn it through negligence" and argues that "the trial record contains no evidence that Bourke decided not to learn about Kozeny's bribery."
Bourke also argues that the court erred in admitting testimony about the due diligence performed by Texas Pacific Group ("TPG"), an investment fund that did not make the same investment as Bourke, because its lawyers advised of the FCPA risk. The brief states, "[b]ecause Bourke knew nothing about their work, their testimony was irrelevant to his state of mind" particularly since the results were never shared or communicated with Bourke. According to the brief, "the government offered the testimony [...] solely as a contrast with the comparatively skimpy inquiry that Bourke and his lawyers performed." "That testimony" according to the brief, "increased the risk, created by the conscious avoidance instruction and heightened by the government's closing, that the jury would convict Bourke based on his negligence or recklessness -- what he should have known, rather than what he actually knew." The brief argues that the "government's tactic had its intended effect on the jury" and it cites the foreman of the of jury telling the press, "It was Kozeny, it was Azerbaijan, it was a foreign country .... We thought he knew and definitely could have known. He's an investor. It's his job to know."
The brief further argues that, having admitted the above testimony relating to TPG, "the district court should at least have permitted Bourke to present the contrasting testimony" of the head of investments for Columbia University that would have established that "Columbia invested $15 million with Kozeny in Azeri privatization after due diligence comparable to Bourke's." According to the brief, this excluded testimony "would have rebutted the government's claim that Bourke's lack of due diligence compared to TPG established his culpability." The brief argues that "once the district court permitted the government to present TPG's due diligence as a benchmark for measuring Bourke's inquiry, fairness demanded that Bourke be allowed to present the contrasting picture of Columbia's due diligence, which resembled his own."
Second, the brief states - "the court refused to instruct that conviction for conspiracy requires the same mens rea as the underlying FCPA offense -- meaning (among other things) a bad purpose to disobey or disregard the law." According to the brief, "the district court compounded its error in giving the conscious avoidance instruction by rejecting Bourke's requested instruction [as to the conspiracy charge] that the government had to prove that he acted corruptly and willfully." The brief argues that "when the district court turned to the mens rea required for the conspiracy offense, rather than for a substantive FCPA offense, it omitted the requirement that the defendant act corruptly" and that this "watering-down of the mens rea requirement for the conspiracy charged [...] undermined Bourke's defense, which rested on his state of mind."
"Third, the court rejected Bourke's proposed good faith instructions, even though Bourke produced ample evidence to warrant the instructions and no other instruction covered the point." The brief argues that Bourke's proposed instruction "accurately reflected the principle that a defendant's good faith belief that he acted lawfully negates the mens rea for specific intent offenses." While the brief concedes that Bourke's efforts to investigate the investment "were not as extensive" as others, his efforts "suffice for a good faith instruction." Because the case turned on Bourke's state of mind, the brief states "there is no doubt that the good faith defense, if accepted by the jury, would have produced an acquittal."
The brief argues that "any one of the errors concerning Bourke's knowledge of Kozeny's bribes and his specific criminal intent, standing alone, warrants reversal" and if any one error is harmless in isolation, then their "cumulative effect profoundly damaged Bourke's defense."
Next up ... the DOJ which has until July 29th to file its response brief.
The trial court portion of the case ended in November 2009 when Judge Scheindin sentenced Bourke to 366 days for, among other things, conspiracy to violate the FCPA. At sentencing Judge Scheindin stated - “After years of supervising this case, it’s still not entirely clear to me whether Mr. Bourke is a victim or a crook or a little bit of both.”
Bourke has appealed his conviction to the Second Circuit.
An FCPA trial like Bourke's is rare. An FCPA appeal is even more rare. An FCPA appeal to the influential Second Circuit is even more rare.
Thus, with good reason, this case is of great interest to those who follow the FCPA in that it is hoped to shed some light on the FCPA's knowledge element, and perhaps other issues as well.
First step in the appeal is Bourke's brief (see here) filed April 1st. The brief principally focuses on the FCPA's knowledge element, including the trial court's conscious avoidance jury instruction (a portion of the brief is redacted and a portion deals with Bourke's false statement conviction).
This post summarizes the FCPA related issues in Bourke's brief.
*****
According to the brief, the "trial focused on two related issues: whether Bourke knew that Kozeny was bribing the Azeris, and whether he willfully and corruptly joined the bribery conspiracy."
The brief argues that the district court "committed a series of errors that crippled Bourke's mens rea defense."
The brief then discusses three such errors.
"First, the court instructed on conscious avoidance, despite the absence of evidence that Bourke deliberately avoided knowledge of Kozeny's bribes." According to the brief, this instruction was error "because there was no evidence that Bourke deliberately avoided learning about Kozeny's bribery." The brief states that the conscious avoidance instruction "was particularly damaging because the government presented evidence and argued that Bourke failed to exercise adequate due diligence, thus exacerbating the risk inherent in the conscious avoidance instruction that the jury would convict for negligence or recklessness." The brief cites Second Circuit case law which emphasizes that "essential to the concept of conscious avoidance is the requirement that the defendant be shown to have decided not to learn the key fact, not merely to have failed to learn it through negligence" and argues that "the trial record contains no evidence that Bourke decided not to learn about Kozeny's bribery."
Bourke also argues that the court erred in admitting testimony about the due diligence performed by Texas Pacific Group ("TPG"), an investment fund that did not make the same investment as Bourke, because its lawyers advised of the FCPA risk. The brief states, "[b]ecause Bourke knew nothing about their work, their testimony was irrelevant to his state of mind" particularly since the results were never shared or communicated with Bourke. According to the brief, "the government offered the testimony [...] solely as a contrast with the comparatively skimpy inquiry that Bourke and his lawyers performed." "That testimony" according to the brief, "increased the risk, created by the conscious avoidance instruction and heightened by the government's closing, that the jury would convict Bourke based on his negligence or recklessness -- what he should have known, rather than what he actually knew." The brief argues that the "government's tactic had its intended effect on the jury" and it cites the foreman of the of jury telling the press, "It was Kozeny, it was Azerbaijan, it was a foreign country .... We thought he knew and definitely could have known. He's an investor. It's his job to know."
The brief further argues that, having admitted the above testimony relating to TPG, "the district court should at least have permitted Bourke to present the contrasting testimony" of the head of investments for Columbia University that would have established that "Columbia invested $15 million with Kozeny in Azeri privatization after due diligence comparable to Bourke's." According to the brief, this excluded testimony "would have rebutted the government's claim that Bourke's lack of due diligence compared to TPG established his culpability." The brief argues that "once the district court permitted the government to present TPG's due diligence as a benchmark for measuring Bourke's inquiry, fairness demanded that Bourke be allowed to present the contrasting picture of Columbia's due diligence, which resembled his own."
Second, the brief states - "the court refused to instruct that conviction for conspiracy requires the same mens rea as the underlying FCPA offense -- meaning (among other things) a bad purpose to disobey or disregard the law." According to the brief, "the district court compounded its error in giving the conscious avoidance instruction by rejecting Bourke's requested instruction [as to the conspiracy charge] that the government had to prove that he acted corruptly and willfully." The brief argues that "when the district court turned to the mens rea required for the conspiracy offense, rather than for a substantive FCPA offense, it omitted the requirement that the defendant act corruptly" and that this "watering-down of the mens rea requirement for the conspiracy charged [...] undermined Bourke's defense, which rested on his state of mind."
"Third, the court rejected Bourke's proposed good faith instructions, even though Bourke produced ample evidence to warrant the instructions and no other instruction covered the point." The brief argues that Bourke's proposed instruction "accurately reflected the principle that a defendant's good faith belief that he acted lawfully negates the mens rea for specific intent offenses." While the brief concedes that Bourke's efforts to investigate the investment "were not as extensive" as others, his efforts "suffice for a good faith instruction." Because the case turned on Bourke's state of mind, the brief states "there is no doubt that the good faith defense, if accepted by the jury, would have produced an acquittal."
The brief argues that "any one of the errors concerning Bourke's knowledge of Kozeny's bribes and his specific criminal intent, standing alone, warrants reversal" and if any one error is harmless in isolation, then their "cumulative effect profoundly damaged Bourke's defense."
Next up ... the DOJ which has until July 29th to file its response brief.
Post Title
→Bourke's Appeal
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→https://manufacturing-holdings.blogspot.com/2010/04/bourke-appeal.html
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FCPA Goes Main Street
Labels:
Avon
,China
,Lucent
,UTStarcom Inc.
Growing up in a village of 1,054 in central Wisconsin, I was not exposed to oil and gas companies, defense contractors, or other companies that tend to have a high FCPA risk profile.
Yet one person I did have contact with on a near daily basis, because she lived around the corner, was the "Avon Lady."
Thus, a bit of my youthful innocence was taken away upon learning last week that Avon Products Inc. (here) of all companies "suspended four executives amid an internal investigation into alleged bribery that began with the company's China operation" and "now involves a dozen or more countries" according to the Wall Street Journal. According to the WSJ, the executives suspended include the president, chief financial officer and top government affairs executive of Avon's China unit as well as a senior executive in New York who was Avon's head of internal audit until the middle of last year.
According to the WSJ, Avon's chief exectuive, Andrea Jung is a "corporate celebrity" in China and she has met frequently with "senior government officials."
The conduct at issue involves alleged "purchase of trips to France, New York, Canada, and Hawaii for Chinese government officials with ties to Avon's business." However, according to the WSJ, "the scope of the investigation has since widened to regions including Latin America, where the company garners the bulk of its sales and profits."
According to the WSJ, what sparked the investigation was "an employee who wrote a letter to Ms. Jung alleging improper spending related to travel with Chinese government officials."
Here is what the company had to say in its 2009 Annual Report (filed in March 2010):
"As previously reported, we have engaged outside counsel to conduct an internal investigation and compliance reviews focused on compliance with the FCPA and related U.S. and foreign laws in China and additional countries. The internal investigation and compliance reviews, which are being conducted under the oversight of our Audit Committee, began in June 2008. We voluntarily contacted the United States Securities and Exchange Commission and the United States Department of Justice to advise both agencies of our internal investigation and compliance reviews and we are, as we have done from the beginning of the internal investigation, continuing to cooperate with both agencies and have signed tolling agreements with them.
The internal investigation and compliance reviews, which started in China, are focused on reviewing certain expenses and books and records processes, including, but not limited to, travel, entertainment, gifts, and payments to third-party agents and others, in connection with our business dealings, directly or indirectly,
with foreign governments and their employees. The internal investigation and compliance reviews of these matters are ongoing. At this point we are unable to predict the duration, scope or results of the internal investigation and compliance reviews."
Based on information that is publicly available, this potential FCPA enforcement action fits the mold of Lucent Technologies and UTStarcom (here), in that it appears focused on excessive travel and entertainment benefits to Chinese "foreign officials."
However, looking to the prior "on-point" Lucent and UTStarcom enforcement actions may not provide much useful guidance. But you probably already knew that, this is FCPA enforcement after all, where predictabilty and transparency are not distinguishing features.
If ever two FCPA enforcement actions were carbon-copies of each other, it would be the December 2007 enforcement action against Lucent and the December 2009 enforcement action against UTStarcom ("UTS") Both enforcement actions involved telecommunications companies, both enforcement actions principally concerned business conduct in China, both enforcement actions involved payment of excessive travel and entertainment expenses, and both enforcement actions were resolved through a DOJ NPA and an SEC settled civil complaint and consent decree. Despite these similarities the end results were significantly different.
UTS settled its matter by agreeing to pay $3 million in total fines and penalties for FCPA antibribery, books and records and internal control violations. However, Lucent settled its matter by agreeing to pay $2.5 million in total fines and penalties for merely FCPA books and records and internal controls violations – in other words no antibribery violations. This despite the fact that, per the government’s statement of facts and allegations, Lucent sponsored more trips than UTS (315 compared to 225) and spent more money on the problematic trips than UTS ($10 million compared to $7 million) to influence more foreign officials in the hopes of winning billion dollar and multi-million contracts. Also relevant is that UTS was charged with antibribery violations and paid a higher combined fine/penalty amount compared to Lucent (based on less severe allegations) despite the fact that UTS, per the DOJ’s release, voluntarily disclosed the conduct at issue – a factor noticeably absent in the DOJ’s Lucent release.
Yet one person I did have contact with on a near daily basis, because she lived around the corner, was the "Avon Lady."
Thus, a bit of my youthful innocence was taken away upon learning last week that Avon Products Inc. (here) of all companies "suspended four executives amid an internal investigation into alleged bribery that began with the company's China operation" and "now involves a dozen or more countries" according to the Wall Street Journal. According to the WSJ, the executives suspended include the president, chief financial officer and top government affairs executive of Avon's China unit as well as a senior executive in New York who was Avon's head of internal audit until the middle of last year.
According to the WSJ, Avon's chief exectuive, Andrea Jung is a "corporate celebrity" in China and she has met frequently with "senior government officials."
The conduct at issue involves alleged "purchase of trips to France, New York, Canada, and Hawaii for Chinese government officials with ties to Avon's business." However, according to the WSJ, "the scope of the investigation has since widened to regions including Latin America, where the company garners the bulk of its sales and profits."
According to the WSJ, what sparked the investigation was "an employee who wrote a letter to Ms. Jung alleging improper spending related to travel with Chinese government officials."
Here is what the company had to say in its 2009 Annual Report (filed in March 2010):
"As previously reported, we have engaged outside counsel to conduct an internal investigation and compliance reviews focused on compliance with the FCPA and related U.S. and foreign laws in China and additional countries. The internal investigation and compliance reviews, which are being conducted under the oversight of our Audit Committee, began in June 2008. We voluntarily contacted the United States Securities and Exchange Commission and the United States Department of Justice to advise both agencies of our internal investigation and compliance reviews and we are, as we have done from the beginning of the internal investigation, continuing to cooperate with both agencies and have signed tolling agreements with them.
The internal investigation and compliance reviews, which started in China, are focused on reviewing certain expenses and books and records processes, including, but not limited to, travel, entertainment, gifts, and payments to third-party agents and others, in connection with our business dealings, directly or indirectly,
with foreign governments and their employees. The internal investigation and compliance reviews of these matters are ongoing. At this point we are unable to predict the duration, scope or results of the internal investigation and compliance reviews."
Based on information that is publicly available, this potential FCPA enforcement action fits the mold of Lucent Technologies and UTStarcom (here), in that it appears focused on excessive travel and entertainment benefits to Chinese "foreign officials."
However, looking to the prior "on-point" Lucent and UTStarcom enforcement actions may not provide much useful guidance. But you probably already knew that, this is FCPA enforcement after all, where predictabilty and transparency are not distinguishing features.
If ever two FCPA enforcement actions were carbon-copies of each other, it would be the December 2007 enforcement action against Lucent and the December 2009 enforcement action against UTStarcom ("UTS") Both enforcement actions involved telecommunications companies, both enforcement actions principally concerned business conduct in China, both enforcement actions involved payment of excessive travel and entertainment expenses, and both enforcement actions were resolved through a DOJ NPA and an SEC settled civil complaint and consent decree. Despite these similarities the end results were significantly different.
UTS settled its matter by agreeing to pay $3 million in total fines and penalties for FCPA antibribery, books and records and internal control violations. However, Lucent settled its matter by agreeing to pay $2.5 million in total fines and penalties for merely FCPA books and records and internal controls violations – in other words no antibribery violations. This despite the fact that, per the government’s statement of facts and allegations, Lucent sponsored more trips than UTS (315 compared to 225) and spent more money on the problematic trips than UTS ($10 million compared to $7 million) to influence more foreign officials in the hopes of winning billion dollar and multi-million contracts. Also relevant is that UTS was charged with antibribery violations and paid a higher combined fine/penalty amount compared to Lucent (based on less severe allegations) despite the fact that UTS, per the DOJ’s release, voluntarily disclosed the conduct at issue – a factor noticeably absent in the DOJ’s Lucent release.
Post Title
→FCPA Goes Main Street
Post URL
→https://manufacturing-holdings.blogspot.com/2010/04/fcpa-goes-main-street.html
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Quiz Time Answer
In a prior post (here), I noted that in 2009 there were three FCPA trials - Frederic Bourke, William Jefferson, and Gerald and Patricia Green.
I then posted the question - what is the common thread in these three FCPA enforcement actions - a fact which speaks to the great difficulty individual FCPA defendants generally have in mounting a legal defense?
Before the answer, the background.
Individual FCPA defendants tend to work for companies. Under respondeat superior theories of liability, the company is going to have a very difficult time "distancing" itself from its employees conduct.
Thus, all corporate FCPA enforcement actions tend to be resolved through a non-prosecution agreement, a deferred prosecution agreement, or a plea. Entering into one of these resolution vehicles is often easier, more cost efficient, and more certain than actually mounting a legal defense based on the FCPA's statutory elements. Further, because these resolution vehicles are subject to little or no judicial scrutiny and are entered into the context of the DOJ possessing certain "carrots" and "sticks" they do not necessarily reflect the triumph of one party's legal position over the other.
While these resolution vehicles may indeed avert "another Arthur Anderson" here is the problem.
A key feature of each resolution vehicle is a statement along the following lines:
"[company] admits, accepts, and acknowledges responsibility for the conduct set forth in [the statement of facts] and agrees not to make any public statement contradicting [the statement of facts]" (see UTStarcom NPA here);
"[company] admits, accepts and acknowledges that it is responsible for the acts of its officers, employees and agents as set forth in the Statement of Facts [...] and that the facts described [...] are true and accurate [...] and that should the DOJ initiate prosecution that is deferred by this agreement [company] agrees that it will neither contest the admissibility of, nor contradict, in any such proceeding, the Statement of Facts" (see AGA Medical DPA here); or
"Defendant admits,agrees and stipulates that the factual allegations set forth in the Statement of Facts [...] are true and correct, that it is responsible for the acts of its former officers and employees described in the Statement of Facts, and that the Statement of Facts accurately reflects CCI’s criminal conduct" (see Control Components Inc. Plea Agreement here).
So what can you do if you are the targeted employee of such a company?
More likely than not, your employee has already terminated you (even before all the facts may be known) to demonstrate to the DOJ that it is implementing "prompt remedial actions" - a factor DOJ will consider when making its charging decision (see here).
Then, because of the resolution vehicle your employer entered into to make the DOJ go away, you are stuck with your employer admitting and accepting responsibility for your misconduct, even though there has been no finding that your conduct was even misconduct.
Against this backdrop, it is no surprise that nearly all FCPA individual defendants plead. What choice do they really have?
So that brings us back to the quiz answer.
Perhaps it was pure coincidence, perhaps not, but the three individual FCPA trials all occurred in the context of there being no parallel NPA, DPA or plea with a corporate entity.
I then posted the question - what is the common thread in these three FCPA enforcement actions - a fact which speaks to the great difficulty individual FCPA defendants generally have in mounting a legal defense?
Before the answer, the background.
Individual FCPA defendants tend to work for companies. Under respondeat superior theories of liability, the company is going to have a very difficult time "distancing" itself from its employees conduct.
Thus, all corporate FCPA enforcement actions tend to be resolved through a non-prosecution agreement, a deferred prosecution agreement, or a plea. Entering into one of these resolution vehicles is often easier, more cost efficient, and more certain than actually mounting a legal defense based on the FCPA's statutory elements. Further, because these resolution vehicles are subject to little or no judicial scrutiny and are entered into the context of the DOJ possessing certain "carrots" and "sticks" they do not necessarily reflect the triumph of one party's legal position over the other.
While these resolution vehicles may indeed avert "another Arthur Anderson" here is the problem.
A key feature of each resolution vehicle is a statement along the following lines:
"[company] admits, accepts, and acknowledges responsibility for the conduct set forth in [the statement of facts] and agrees not to make any public statement contradicting [the statement of facts]" (see UTStarcom NPA here);
"[company] admits, accepts and acknowledges that it is responsible for the acts of its officers, employees and agents as set forth in the Statement of Facts [...] and that the facts described [...] are true and accurate [...] and that should the DOJ initiate prosecution that is deferred by this agreement [company] agrees that it will neither contest the admissibility of, nor contradict, in any such proceeding, the Statement of Facts" (see AGA Medical DPA here); or
"Defendant admits,agrees and stipulates that the factual allegations set forth in the Statement of Facts [...] are true and correct, that it is responsible for the acts of its former officers and employees described in the Statement of Facts, and that the Statement of Facts accurately reflects CCI’s criminal conduct" (see Control Components Inc. Plea Agreement here).
So what can you do if you are the targeted employee of such a company?
More likely than not, your employee has already terminated you (even before all the facts may be known) to demonstrate to the DOJ that it is implementing "prompt remedial actions" - a factor DOJ will consider when making its charging decision (see here).
Then, because of the resolution vehicle your employer entered into to make the DOJ go away, you are stuck with your employer admitting and accepting responsibility for your misconduct, even though there has been no finding that your conduct was even misconduct.
Against this backdrop, it is no surprise that nearly all FCPA individual defendants plead. What choice do they really have?
So that brings us back to the quiz answer.
Perhaps it was pure coincidence, perhaps not, but the three individual FCPA trials all occurred in the context of there being no parallel NPA, DPA or plea with a corporate entity.
Post Title
→Quiz Time Answer
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→https://manufacturing-holdings.blogspot.com/2010/04/quiz-time-answer.html
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Africa Sting - Superseding Indictment, Additional Guilty Plea Expected
Labels:
Africa Sting
During a February hearing, Judge Richard Leon, the judge assigned to the Africa Sting cases, reportedly said he had "zero sense that there was an omnibus grand conspiracy" alleged in the 16 separate indictments charging 22 individuals with, among other things, conspiracy to violate the FCPA and substantive FCPA violations (see here). Judge Leon also reportedly told the DOJ that "what you think is so transparent is not" and he urged the DOJ to "take a step back" given that the DOJ may be so "close to trees that it can't see the forest." (see here).
The DOJ presumably took a step back, went back to the grand jury, and the grand jury returned a superseding indictment (see here) charging, among other things, all 22 individual defendants in one big conspiracy to violate the FCPA.
The superseding indictment, unlike the previously filed superseding indictment against Daniel Alvirez (see here), does not add much in terms of substance, although it does contain greater detail regarding certain e-mails, meetings, and telephone calls relevant to the conduct at issue compared to the original indictments. Further, this allegation in the superseding indictment was not apparent from the original indictments - "the defendants would agree that the products they would supply in connection with Phase One [of the deal] would be consolidated for shipment to Country A."
Judge Leon previously indicated that he would not try 22 individuals together in one case. In response, the DOJ has proposed a "reasonable division" of the defendants into four groups. (See here and here for more).
Also, Christopher Matthews of Main Justice, who attended today's court hearing, is reporting (here) that another defendant, Jonathan Spiller, is in plea agreement talks with the DOJ and is likely to plead guilty. Matthews reports that neither Spiller, nor his counsel, were present at today's hearing.
The DOJ presumably took a step back, went back to the grand jury, and the grand jury returned a superseding indictment (see here) charging, among other things, all 22 individual defendants in one big conspiracy to violate the FCPA.
The superseding indictment, unlike the previously filed superseding indictment against Daniel Alvirez (see here), does not add much in terms of substance, although it does contain greater detail regarding certain e-mails, meetings, and telephone calls relevant to the conduct at issue compared to the original indictments. Further, this allegation in the superseding indictment was not apparent from the original indictments - "the defendants would agree that the products they would supply in connection with Phase One [of the deal] would be consolidated for shipment to Country A."
Judge Leon previously indicated that he would not try 22 individuals together in one case. In response, the DOJ has proposed a "reasonable division" of the defendants into four groups. (See here and here for more).
Also, Christopher Matthews of Main Justice, who attended today's court hearing, is reporting (here) that another defendant, Jonathan Spiller, is in plea agreement talks with the DOJ and is likely to plead guilty. Matthews reports that neither Spiller, nor his counsel, were present at today's hearing.
Post Title
→Africa Sting - Superseding Indictment, Additional Guilty Plea Expected
Post URL
→https://manufacturing-holdings.blogspot.com/2010/04/africa-sting-superseding-indictment.html
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State of the Union April 21, 2010
• Union meeting is today at 3 pm and 15 minutes after the longest first shift line time.
• There will be a gate drive for March of Dimes, March for Babies, tomorrow.
• We have been informed that the May schedule has been finalized. The daily schedule will be 10.5 and we will work three Fridays – May 7, 21 and 28.
• I addition to announcing the repayment in full of the US and Canadian government loans, GM is going to invest $257 million in the Fairfax and Hamtramck plants for the next-generation Malibu.
• From Automotive News: Chrysler Group said it posted a $143 million operating profit in the first three months of the year after cutting costs and introducing a big pickup. Chrysler reported a net loss of $197 million in the first quarter, compared with a net loss of $2.69 billion in the final three months of last year. After emerging from bankruptcy June 10 through the end of 2009, Chrysler said it lost $3.8 billion on revenue of $17.7 billion. Chrysler forecast 2010 earnings of $2.5 billion to $2.7 billion before taking into account interest, taxes, depreciation and amortization.
• From the Detroit Free Press: In March, when Toyota launched its aggressive incentives and saw its sales surge 41%, the Japanese automaker came within 1,148 vehicles of outselling GM. But nearly three of every four of those sales was financed with the expensive no-interest loans that erode profits, according to the consumer automotive Web site Edmunds.com. Studies show that Toyota's image is already beginning to bounce back (like a dead cat). Toyota's good news: the automaker's score on the BrandIndex daily consumer perception survey rose 12.7 points from early March to the end of the month. The bad news: Toyota's latest BrandIndex score is still -42, which means it is getting less love than either Goldman Sachs (-19.8) or Bank of America (-11.6) -- two primary architects of the nation's financial implosion.
• There will be a gate drive for March of Dimes, March for Babies, tomorrow.
• We have been informed that the May schedule has been finalized. The daily schedule will be 10.5 and we will work three Fridays – May 7, 21 and 28.
• I addition to announcing the repayment in full of the US and Canadian government loans, GM is going to invest $257 million in the Fairfax and Hamtramck plants for the next-generation Malibu.
• From Automotive News: Chrysler Group said it posted a $143 million operating profit in the first three months of the year after cutting costs and introducing a big pickup. Chrysler reported a net loss of $197 million in the first quarter, compared with a net loss of $2.69 billion in the final three months of last year. After emerging from bankruptcy June 10 through the end of 2009, Chrysler said it lost $3.8 billion on revenue of $17.7 billion. Chrysler forecast 2010 earnings of $2.5 billion to $2.7 billion before taking into account interest, taxes, depreciation and amortization.
• From the Detroit Free Press: In March, when Toyota launched its aggressive incentives and saw its sales surge 41%, the Japanese automaker came within 1,148 vehicles of outselling GM. But nearly three of every four of those sales was financed with the expensive no-interest loans that erode profits, according to the consumer automotive Web site Edmunds.com. Studies show that Toyota's image is already beginning to bounce back (like a dead cat). Toyota's good news: the automaker's score on the BrandIndex daily consumer perception survey rose 12.7 points from early March to the end of the month. The bad news: Toyota's latest BrandIndex score is still -42, which means it is getting less love than either Goldman Sachs (-19.8) or Bank of America (-11.6) -- two primary architects of the nation's financial implosion.
Post Title
→State of the Union April 21, 2010
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→https://manufacturing-holdings.blogspot.com/2010/04/state-of-union-april-21-2010.html
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103 years of production
Each year the directors of Brandauer write a report on the trading year and we have ours going back many decades. Each report contains very useful information on the 'life' of the Company during each financial year. Particular interest to me is the information about the production and operations of C Brandauer & Co Ltd during each year.
On 1st March 1965 my Father (J A L Petit, Chairman) completed a re-structuring of C Brandauer & Co Ltd by creating Brandauer Holdings Ltd, of which C Brandauer & Co Ltd became a wholly owned subsidiary of the new Company.
On the cover of the Report of Directors and Statement of Accounts for the year ended 31 March 1965 the new company Brandauer Holdings Ltd is mentioned as 'Manufacturers of Light Pressings and Pens'. Over the following years this changes as the business expands into new areas. However, back to 1965 to find out what was important in that first year of trading for Brandauer Holdings Ltd.
The Chairman noted in the Report of the Directors for the year ended 31 March 1965 that the factory extensions, to include a new press shop and precision assembly shop, were nearly complete. It is interesting to read that part of the assembly shop's output was already sold for indirect export to an American computer company. Also, to remain competitive there had been a large amount of plant purchased for the toolroom and press shop.
During 1964/65 C Brandauer & Co Ltd concluded a selling agency and distributorship agreement with the Brush Beryllium Corporation of America so that it became their sole UK agent for Beryllium Oxide Ceramics. At the time this was a new and unique material used in the electronics industry. It is interesting to read that parts produced by Brandauer from this new material were to be used in the first UK satellite to be launched by the USA later in 1965.
From reading the Report of the Directors for the year ending 31 March 1965 there is much excitement and enthusiasm for new materials and products but hidden away in the middle is a sad note, to quote my Father, as follows:
"The Pen making side of our business suffered a decline in sales and production during 1964/65. It is abundantly clear that the overall market for pens can no longer support an economic operation. Your Board, therefore, had to make the reluctant decision to phase out pen production by March 1966, after 103 years of pen making. Our many customers have regretfully been informed and except for the No 518 Lithographic pen which stills enjoys a world-wide demand, no further pens will be produced after the end of the current year."
This marked the end of the Company's original reason for trading when it was set-up in 1862. However, in 1965 one of the directors - Colin Petit (grandson of the original Petit) was requested to take special interest in the pen side of the business, which he did until his death in 1988. I remember vividly 'Uncle' Colin in his office in the factory and the corner cupboard full of pen nibs so that when customers requested product he was able, for many years, to sell them the particular pen nib they needed.
Brandauer pens are still used by calligraphers and cartoonists to this day and often I am contacted by them requesting product. It is now much more difficult to supply customers but through various contacts I have in the pen world I can often help them out. So, production may have finished (not including the 518) 44 years ago but Brandauer pens are still the favoured product of artists and calligraphers due to their outstanding quality.
On 1st March 1965 my Father (J A L Petit, Chairman) completed a re-structuring of C Brandauer & Co Ltd by creating Brandauer Holdings Ltd, of which C Brandauer & Co Ltd became a wholly owned subsidiary of the new Company.
On the cover of the Report of Directors and Statement of Accounts for the year ended 31 March 1965 the new company Brandauer Holdings Ltd is mentioned as 'Manufacturers of Light Pressings and Pens'. Over the following years this changes as the business expands into new areas. However, back to 1965 to find out what was important in that first year of trading for Brandauer Holdings Ltd.
The Chairman noted in the Report of the Directors for the year ended 31 March 1965 that the factory extensions, to include a new press shop and precision assembly shop, were nearly complete. It is interesting to read that part of the assembly shop's output was already sold for indirect export to an American computer company. Also, to remain competitive there had been a large amount of plant purchased for the toolroom and press shop.
During 1964/65 C Brandauer & Co Ltd concluded a selling agency and distributorship agreement with the Brush Beryllium Corporation of America so that it became their sole UK agent for Beryllium Oxide Ceramics. At the time this was a new and unique material used in the electronics industry. It is interesting to read that parts produced by Brandauer from this new material were to be used in the first UK satellite to be launched by the USA later in 1965.
From reading the Report of the Directors for the year ending 31 March 1965 there is much excitement and enthusiasm for new materials and products but hidden away in the middle is a sad note, to quote my Father, as follows:
"The Pen making side of our business suffered a decline in sales and production during 1964/65. It is abundantly clear that the overall market for pens can no longer support an economic operation. Your Board, therefore, had to make the reluctant decision to phase out pen production by March 1966, after 103 years of pen making. Our many customers have regretfully been informed and except for the No 518 Lithographic pen which stills enjoys a world-wide demand, no further pens will be produced after the end of the current year."
This marked the end of the Company's original reason for trading when it was set-up in 1862. However, in 1965 one of the directors - Colin Petit (grandson of the original Petit) was requested to take special interest in the pen side of the business, which he did until his death in 1988. I remember vividly 'Uncle' Colin in his office in the factory and the corner cupboard full of pen nibs so that when customers requested product he was able, for many years, to sell them the particular pen nib they needed.
Brandauer pens are still used by calligraphers and cartoonists to this day and often I am contacted by them requesting product. It is now much more difficult to supply customers but through various contacts I have in the pen world I can often help them out. So, production may have finished (not including the 518) 44 years ago but Brandauer pens are still the favoured product of artists and calligraphers due to their outstanding quality.
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BHP Billiton Discloses
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BHP Billiton
In a statement today (see here), BHP Billiton, announced:
"Following requests for information from the U.S. Securities and Exchange Commission as a part of an investigation relating primarily to certain terminated minerals exploration projects, the Company has disclosed to relevant authorities evidence that it has uncovered regarding possible violations of applicable anti-corruption laws involving interactions with government officials. Accordingly, the Company is cooperating with the relevant authorities including conducting an internal investigation, which is continuing. It is not possible at this time to predict the scope or duration of the investigation or its likely outcome."
According to the Wall Street Journal:
"The company said it was first contacted about the projects by the SEC last August. It declined to identify the projects other than to say they were small and had ended for "commercial grounds" prior to the SEC's inquiry. It said it has hired Davis Polk & Wardwell LLP to assist with its internal investigation."
BHP Billiton, a resource extraction company based in Australia and the United Kingdom, has ADR shares traded on the New York Stock Exchange.
"Following requests for information from the U.S. Securities and Exchange Commission as a part of an investigation relating primarily to certain terminated minerals exploration projects, the Company has disclosed to relevant authorities evidence that it has uncovered regarding possible violations of applicable anti-corruption laws involving interactions with government officials. Accordingly, the Company is cooperating with the relevant authorities including conducting an internal investigation, which is continuing. It is not possible at this time to predict the scope or duration of the investigation or its likely outcome."
According to the Wall Street Journal:
"The company said it was first contacted about the projects by the SEC last August. It declined to identify the projects other than to say they were small and had ended for "commercial grounds" prior to the SEC's inquiry. It said it has hired Davis Polk & Wardwell LLP to assist with its internal investigation."
BHP Billiton, a resource extraction company based in Australia and the United Kingdom, has ADR shares traded on the New York Stock Exchange.
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State of the Union April 20, 2010
Union meeting Wednesday, April 21 at 3 pm and end of first shift.
• There will be a gate drive for March of Dimes, March for Babies, Thursday, April 22.
• The 40th anniversary of Earth Day is Thursday, April 22. There will be displays and recycling vendors in the cafeteria from 8 – 11 am. You can also bring in your old shoes for Shoeman Water Projects, which is an organization that sells the shoes to exporters and recyclers for resale or materials for new items. These funds are then used for providing clean water in places like Kenya and Haiti. Just tie or rubber band your shoes together and drop them off in the cafeteria.
• Daimler AG has announced price cuts for the 2010 Sprinter. According to Wards Auto, a ’10 chassis cab (cutaway) Sprinter starts at $34,270, down from $36,190. Cargo vans start at $35,995, compared with $38,425 for ’09. And passenger models start at $39,820, down from $42,150. There are currently 68 Mercedes dealers who sell the vans with plans to up that to 160 by year’s end.
• From the Detroit News: The heads of the House Energy and Commerce Committee and its subcommittee on oversight have asked for more information from ToyotaMotor Corp. about the causes of unintended acceleration in preparation for a hearing scheduled for May 6. Rep. Henry Waxman, D-Calif., and Rep. Stupak wrote to Jim Lentz, president and chief operating officer of Toyota Motor Sales USA, asking him to testify. Lentz also was asked to provide all contracts, correspondence and emails relating to unintended acceleration between Toyota and Exponent, a firm retained recently by Toyota to test its vehicles.
• There will be a gate drive for March of Dimes, March for Babies, Thursday, April 22.
• The 40th anniversary of Earth Day is Thursday, April 22. There will be displays and recycling vendors in the cafeteria from 8 – 11 am. You can also bring in your old shoes for Shoeman Water Projects, which is an organization that sells the shoes to exporters and recyclers for resale or materials for new items. These funds are then used for providing clean water in places like Kenya and Haiti. Just tie or rubber band your shoes together and drop them off in the cafeteria.
• Daimler AG has announced price cuts for the 2010 Sprinter. According to Wards Auto, a ’10 chassis cab (cutaway) Sprinter starts at $34,270, down from $36,190. Cargo vans start at $35,995, compared with $38,425 for ’09. And passenger models start at $39,820, down from $42,150. There are currently 68 Mercedes dealers who sell the vans with plans to up that to 160 by year’s end.
• From the Detroit News: The heads of the House Energy and Commerce Committee and its subcommittee on oversight have asked for more information from ToyotaMotor Corp. about the causes of unintended acceleration in preparation for a hearing scheduled for May 6. Rep. Henry Waxman, D-Calif., and Rep. Stupak wrote to Jim Lentz, president and chief operating officer of Toyota Motor Sales USA, asking him to testify. Lentz also was asked to provide all contracts, correspondence and emails relating to unintended acceleration between Toyota and Exponent, a firm retained recently by Toyota to test its vehicles.
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State of the Union April 19, 2010
From Chairman Mike Bullock: Under rumor control, we will not be changing the schedule plan that we are working under. Management had requested approval from the Shop Committee to switch from plan A to plan B (5-10 hour days with 6 Saturdays per model year). Their request was denied. We will continue working under plan A for the remainder of the model year, which ends Aug. 27. Regarding the rumor that Missouri Gov. Jay Nixon was/is going to visit the plant – there were/are no plans for Gov. Nixon to come here.
• Union meeting Wednesday, April 21 at 3 pm and end of first shift.
• There will be a gate drive for March of Dimes, March for Babies, Thursday, April 22. UAW President Ron Gettelfinger is national co-chair for this year’s drive. “I was honored … to be asked to serve in this role,” said Gettelfinger. “This year’s campaign will reach nationwide to all men and women of the UAW. We’re focused on bringing people together to make a real difference.” Your generosity, as always, will be greatly appreciated.
• We have received an order for 300 vans from FedEx, a longtime Ford and Sprinter customer. This is a small portion of their business but this is new for us and could lead to more orders in the future.
• Toyota agreed this morning to pay the $16.4 million fine levied by the US Transportation Department. Reports had indicated that Toyota would admit no wrongdoing in agreeing to pay the fine (huh?). In other news, Toyota is recalling 870,000 Sienna minivans in the US and Canada for spare tire retention cables that could rust and cause the tire to fall off the vehicle. Is there a safe place to be around a Toyota vehicle on the road?
• Union meeting Wednesday, April 21 at 3 pm and end of first shift.
• There will be a gate drive for March of Dimes, March for Babies, Thursday, April 22. UAW President Ron Gettelfinger is national co-chair for this year’s drive. “I was honored … to be asked to serve in this role,” said Gettelfinger. “This year’s campaign will reach nationwide to all men and women of the UAW. We’re focused on bringing people together to make a real difference.” Your generosity, as always, will be greatly appreciated.
• We have received an order for 300 vans from FedEx, a longtime Ford and Sprinter customer. This is a small portion of their business but this is new for us and could lead to more orders in the future.
• Toyota agreed this morning to pay the $16.4 million fine levied by the US Transportation Department. Reports had indicated that Toyota would admit no wrongdoing in agreeing to pay the fine (huh?). In other news, Toyota is recalling 870,000 Sienna minivans in the US and Canada for spare tire retention cables that could rust and cause the tire to fall off the vehicle. Is there a safe place to be around a Toyota vehicle on the road?
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→State of the Union April 19, 2010
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Two-Tiered Justice?
Certain corporations (acting through employees and agents) in certain industries, most often selling certain things, to certain customers can seemingly violate the FCPA's anti-bribery provisions with very little consequence. In fact, with increasingly frequency, such companies are not even charged with FCPA antibribery violations and/or may not even have to plead guilty to anything. See here for the recent Daimler, here for the recent BAE, and here for the (somewhat) recent Siemens "bribery, yet no bribery" enforcement actions. Sure these companies coughed up hundreds of millions of dollars, in some cases offered up a few subsidiaries to take the fall, but yet were allowed to escape the full legal consequences of their action despite DOJ and SEC allegations that these companies paid hundreds of millions of dollars in bribes to obtain or retain hundreds of millions, and in some cases billions, of dollars of business. The deterrent message in these cases is so strong that the U.S. government continues to do business with these companies - see here for the recent $28 million dollar contract between the U.S. government and a BAE business unit - see here for a general overview of Siemens post-bribery scandal U.S. government contracts.
Charles Paul Edward Jumet of Fluvanna County, Virginia will probably not be getting U.S. government contracts in the near future.
In fact, he probably will not be doing much of anything (other than sitting around) in the near future.
Why?
Because yesterday he was sentenced to approximately 7.25 years in federal prison (see here for the DOJ release).
His crime?
Conspiring to violate the same law that Daimler, BAE, Siemens, its employees, and several other corporations, apparently are immune from violating ... the FCPA's anti-bribery provisions.
Surely, Jumet's conduct was more egregious than that of Daimler, BAE, Siemens, and others?
Well, not exactly.
Not to make light of his crime, but according to the DOJ, the total amount that Jumet and others paid to Panamanian government officials to receive a lighthouse and buoy contract was approximately $200,000 - an amount that pales in comparison to the hundreds of millions of bribe payments in the above referenced enforcement actions.
Even though Jumet's sentence is equal part FCPA and equal part making false statements to federal agents, it is not surprisingly being termed the "longest prison term imposed against an individual for violating the FCPA."
The DOJ release contains the usual get tough language (i.e. "foreign corruption carries with it very serious penalties," "bribery isn't just a cost of doing business overseas [... but] a serious crime that the U.S. government is intent on enforcing."
Serious penalties and intent on enforcing against whom is the question.
The issue is not whether the DOJ was too lenient in the Daimler, BAE, and Siemens case or whether the DOJ was too harsh in the Jumet case.
Rather, the issue is that there appears to be a two-tiered justice system when it comes to FCPA enforcement.
As noted in the DOJ's release, Jumet's co-defendant John Warwick, who also pleaded guilty, is scheduled to be sentenced by the same judge on May 14th. (See here for prior posts on this entire enforcement action).
Charles Paul Edward Jumet of Fluvanna County, Virginia will probably not be getting U.S. government contracts in the near future.
In fact, he probably will not be doing much of anything (other than sitting around) in the near future.
Why?
Because yesterday he was sentenced to approximately 7.25 years in federal prison (see here for the DOJ release).
His crime?
Conspiring to violate the same law that Daimler, BAE, Siemens, its employees, and several other corporations, apparently are immune from violating ... the FCPA's anti-bribery provisions.
Surely, Jumet's conduct was more egregious than that of Daimler, BAE, Siemens, and others?
Well, not exactly.
Not to make light of his crime, but according to the DOJ, the total amount that Jumet and others paid to Panamanian government officials to receive a lighthouse and buoy contract was approximately $200,000 - an amount that pales in comparison to the hundreds of millions of bribe payments in the above referenced enforcement actions.
Even though Jumet's sentence is equal part FCPA and equal part making false statements to federal agents, it is not surprisingly being termed the "longest prison term imposed against an individual for violating the FCPA."
The DOJ release contains the usual get tough language (i.e. "foreign corruption carries with it very serious penalties," "bribery isn't just a cost of doing business overseas [... but] a serious crime that the U.S. government is intent on enforcing."
Serious penalties and intent on enforcing against whom is the question.
The issue is not whether the DOJ was too lenient in the Daimler, BAE, and Siemens case or whether the DOJ was too harsh in the Jumet case.
Rather, the issue is that there appears to be a two-tiered justice system when it comes to FCPA enforcement.
As noted in the DOJ's release, Jumet's co-defendant John Warwick, who also pleaded guilty, is scheduled to be sentenced by the same judge on May 14th. (See here for prior posts on this entire enforcement action).
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→Two-Tiered Justice?
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Jefferson Jurors Speak
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William Jefferson
In August 2009, former Congressman William Jefferson (D-LA) was found guilty by a federal jury of a variety of charges (solicitation of bribes, honest services wire fraud, money laundering, racketeering, and conspiracy).
The jury found Jefferson not guilty of a substantive FCPA charge, a charge principally based on allegations that Jefferson attempted to bribe Nigerian officials (including the former Nigerian Vice President) to assist himself and others obtain or retain business for a Nigerian telecommunications joint venture. The famous "cash in the freezer" was allegedly part of the bribery scheme. (See here for prior post).
Just what conspiracy charge the jury found Jefferson guilty of was unclear.
The indictment charged conspiracy to solicit bribes, to commit honest services wire fraud, and to violate the FCPA.
Problem is, the jury was instructed, that to convict on this charge, it only needed to find Jefferson guilty on two out of three of those counts.
In announcing the jury verdict, the court did not specify which counts the jury agreed on (see here and here).
A recent article in the New Orleans Times-Picayune (here) contains statements by "three jurors who spoke to The Times-Picayune on the condition they remain anonymous to avoid angering federal Judge T.S. Ellis III, who advised against talking to the news media."
These anonymous juror statements, while clearly not official in any sense, may shed some light on Jefferson's FCPA verdict.
For instance, why didn't the jury convict Jefferson of the substantive FCPA offense?
According to the article, "because two members of the 12-member panel believed that the congressman planned to keep the money for himself rather than to bribe the vice president of Nigeria as alleged by federal prosecutors."
The article states: "Two of the jurors explained the jury's decision to return an innocent verdict on a single charge of violating the Foreign Corrupt Practices Act. Jefferson was the first elected official ever charged with violating the law, which is intended to block payments of bribes by U.S. citizens to foreign officials. According to the interviews, two jurors expressed doubts that Jefferson actually intended to use the $100,000 in cash given to him by Mody to bribe Atiku Abubakar, then the vice president of Nigeria, as he said he would in the taped conversations. 'I think there was some thought he intended to keep the money himself, and that's not the crime he was accused of,' said one juror who added that the remaining 10 jurors eventually went along with the sentiments of their two colleagues."
What about the conspiracy conviction - did that conviction include conspiracy to violate the FCPA?
According to the jurors comments - yes.
The article states: "But jurors decided that his discussion about wanting to keep Abubakar happy was enough to support a charge of conspiracy to violate the Foreign Corrupt Practices Act."
As the article notes: "The question about whether the jury found Jefferson guilty of conspiracy to solicit bribes domestically or internationally is important because, as part of Jefferson's appeal, his attorneys contend that influencing foreign officials isn't part of a congressional member's official duties and therefore can't be prosecuted under federal bribery laws."
In November 2009, Jefferson was sentenced to 13 years in federal prison. He remains free on bail while his appeal is pending.
The jury found Jefferson not guilty of a substantive FCPA charge, a charge principally based on allegations that Jefferson attempted to bribe Nigerian officials (including the former Nigerian Vice President) to assist himself and others obtain or retain business for a Nigerian telecommunications joint venture. The famous "cash in the freezer" was allegedly part of the bribery scheme. (See here for prior post).
Just what conspiracy charge the jury found Jefferson guilty of was unclear.
The indictment charged conspiracy to solicit bribes, to commit honest services wire fraud, and to violate the FCPA.
Problem is, the jury was instructed, that to convict on this charge, it only needed to find Jefferson guilty on two out of three of those counts.
In announcing the jury verdict, the court did not specify which counts the jury agreed on (see here and here).
A recent article in the New Orleans Times-Picayune (here) contains statements by "three jurors who spoke to The Times-Picayune on the condition they remain anonymous to avoid angering federal Judge T.S. Ellis III, who advised against talking to the news media."
These anonymous juror statements, while clearly not official in any sense, may shed some light on Jefferson's FCPA verdict.
For instance, why didn't the jury convict Jefferson of the substantive FCPA offense?
According to the article, "because two members of the 12-member panel believed that the congressman planned to keep the money for himself rather than to bribe the vice president of Nigeria as alleged by federal prosecutors."
The article states: "Two of the jurors explained the jury's decision to return an innocent verdict on a single charge of violating the Foreign Corrupt Practices Act. Jefferson was the first elected official ever charged with violating the law, which is intended to block payments of bribes by U.S. citizens to foreign officials. According to the interviews, two jurors expressed doubts that Jefferson actually intended to use the $100,000 in cash given to him by Mody to bribe Atiku Abubakar, then the vice president of Nigeria, as he said he would in the taped conversations. 'I think there was some thought he intended to keep the money himself, and that's not the crime he was accused of,' said one juror who added that the remaining 10 jurors eventually went along with the sentiments of their two colleagues."
What about the conspiracy conviction - did that conviction include conspiracy to violate the FCPA?
According to the jurors comments - yes.
The article states: "But jurors decided that his discussion about wanting to keep Abubakar happy was enough to support a charge of conspiracy to violate the Foreign Corrupt Practices Act."
As the article notes: "The question about whether the jury found Jefferson guilty of conspiracy to solicit bribes domestically or internationally is important because, as part of Jefferson's appeal, his attorneys contend that influencing foreign officials isn't part of a congressional member's official duties and therefore can't be prosecuted under federal bribery laws."
In November 2009, Jefferson was sentenced to 13 years in federal prison. He remains free on bail while his appeal is pending.
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What Others Are Saying About Mendelsohn's Departure
Earlier this week (see here), it was reported that Mark Mendelsohn (DOJ Deputy Chief - Fraud Section responsible for overseeing FCPA prosecutions) is headed to the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP.
Earlier today, Paul Weiss released this statement. Among other things, the Paul Weiss release says that Mendelsohn "is internationally acknowledged and respected as the architect and key enforcement official of the DOJ’s Foreign Corrupt Practices Act (FCPA) enforcement program." The release notes that Mendelsohn "built the DOJ’s modern FCPA program," "designed and implemented the DOJ’s current FCPA enforcement program," and "was responsible for overseeing all investigations and prosecutions under the FCPA." According to the release, Mendelsohn's "background and experience will be an enormous asset to our clients, which are facing increased scrutiny on FCPA and other cross-border criminal and regulatory issues."
For other coverage of Mendelsohn's departure see below.
The FCPA Blog (here) notes, among other things, that "Mark Mendelsohn transformed the FCPA from a legal backwater to a headline practice" and that during his "term, no corporations mounted a courtroom defense against FCPA charges; instead all made deals with the DOJ to settle their cases." According to the FCPA Blog, "[t]hat gave Mendelsohn extraordinary power -- in the FCPA realm, he and the DOJ became prosecutor, judge, and jury."
Compliance Week (here) notes, among other things, that Mendelsohn "led a revival of FCPA enforcement when the law had lain largely dormant for more than 20 years" and that Mendelsohn "spoke at just about any public event he could find [...] to preach the gospel of FCPA compliance." The Compliance Week post contains unattributed comments calling Mendelsohn “the Moses of FCPA,” and “a veritable Oracle of Delphi … if he spoke at a conference, the high priests of the compliance world would work feverishly to decipher the meaning of his words.”
Main Justice (here) notes that Mendelsohn, "the face of the Justice Department’s aggressive crack down on Foreign Corrupt Practices Act violations" ... "now stands to make millions in the private sector, where the business of offering advice to companies and individuals about complying with anti-bribery laws or dealing with investigations is a hot and burgeoning area of the law."
Earlier today, Paul Weiss released this statement. Among other things, the Paul Weiss release says that Mendelsohn "is internationally acknowledged and respected as the architect and key enforcement official of the DOJ’s Foreign Corrupt Practices Act (FCPA) enforcement program." The release notes that Mendelsohn "built the DOJ’s modern FCPA program," "designed and implemented the DOJ’s current FCPA enforcement program," and "was responsible for overseeing all investigations and prosecutions under the FCPA." According to the release, Mendelsohn's "background and experience will be an enormous asset to our clients, which are facing increased scrutiny on FCPA and other cross-border criminal and regulatory issues."
For other coverage of Mendelsohn's departure see below.
The FCPA Blog (here) notes, among other things, that "Mark Mendelsohn transformed the FCPA from a legal backwater to a headline practice" and that during his "term, no corporations mounted a courtroom defense against FCPA charges; instead all made deals with the DOJ to settle their cases." According to the FCPA Blog, "[t]hat gave Mendelsohn extraordinary power -- in the FCPA realm, he and the DOJ became prosecutor, judge, and jury."
Compliance Week (here) notes, among other things, that Mendelsohn "led a revival of FCPA enforcement when the law had lain largely dormant for more than 20 years" and that Mendelsohn "spoke at just about any public event he could find [...] to preach the gospel of FCPA compliance." The Compliance Week post contains unattributed comments calling Mendelsohn “the Moses of FCPA,” and “a veritable Oracle of Delphi … if he spoke at a conference, the high priests of the compliance world would work feverishly to decipher the meaning of his words.”
Main Justice (here) notes that Mendelsohn, "the face of the Justice Department’s aggressive crack down on Foreign Corrupt Practices Act violations" ... "now stands to make millions in the private sector, where the business of offering advice to companies and individuals about complying with anti-bribery laws or dealing with investigations is a hot and burgeoning area of the law."
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State of the Union 16, 2010
Here’s what UAW President Ron Gettelfinger had to say about CEO compensation: “In 1980, it was 40 times [what the ordinary worker gets paid], and now it's 344 times -- because some [CEOs] took a cut in pay to $6.5 million, something like that. People say we [UAW members] think we're entitled. The only thing we're entitled to is to work 58 minutes out of the hour, and at the end of the day we're working just as hard as at the beginning. Is anybody [among CEOs] working that hard? I'd like to see it.”
• From the Atlanta Journal Constitution: A Toyota driver said her car accelerated out of control before plunging through a wall of her home Wednesday. The driver of the Camry told firefighters she was pulling into her garage when the vehicle accelerated forward out of control. It went through the closed garage door and came to rest after crashing through the back wall of the house, fire officials report.
• From the Sheboygan Press: Federal and state investigators were in Sheboygan Falls on Wednesday to examine a Toyota Camry that reportedly accelerated on its own into a wall, injuring the driver. The car has been in police impound since March 29, when it slammed into the south wall of the Sheboygan Falls YMCA. The driver, Myrna Marseille, 76, of Kohler, suffered a broken sternum as she slammed into the steering wheel because the airbags did not deploy. Marseille said she was pulling into a parking stall with her foot on the brake when the car surged forward with an "awful roar" and traveled up a slight embankment into the wall. Chief Steve Riffel has said witness accounts appear to confirm Marseille's account, and Marseille said she was told those witnesses saw her brake lights illuminated as the car accelerated.
• From the Atlanta Journal Constitution: A Toyota driver said her car accelerated out of control before plunging through a wall of her home Wednesday. The driver of the Camry told firefighters she was pulling into her garage when the vehicle accelerated forward out of control. It went through the closed garage door and came to rest after crashing through the back wall of the house, fire officials report.
• From the Sheboygan Press: Federal and state investigators were in Sheboygan Falls on Wednesday to examine a Toyota Camry that reportedly accelerated on its own into a wall, injuring the driver. The car has been in police impound since March 29, when it slammed into the south wall of the Sheboygan Falls YMCA. The driver, Myrna Marseille, 76, of Kohler, suffered a broken sternum as she slammed into the steering wheel because the airbags did not deploy. Marseille said she was pulling into a parking stall with her foot on the brake when the car surged forward with an "awful roar" and traveled up a slight embankment into the wall. Chief Steve Riffel has said witness accounts appear to confirm Marseille's account, and Marseille said she was told those witnesses saw her brake lights illuminated as the car accelerated.
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H-P Under Scrutiny
A few weeks ago the U.S. wrapped up an FCPA enforcement action against a German company for improper conduct in, among other places, Russia (see here).
This week, it is German and Russian authorities investigating a U.S. company for improper conduct in Russia.
It's an ironic world we live in.
Tit for tat or merely a coincidence?
Likely the later.
As widely reported, German and Russian authorities are investigating whether Hewlett-Packard Co. (H-P) executives paid millions of dollars in bribes to win a contract in Russia with ... get this ... the office of the prosecutor general of the Russian Federation - the office that handles criminal prosecutions in Russia, including corruption cases.
According to "investigation-related documents submitted to a German court and reviewed by the Wall Street Journal," the payments, approximately $11 million, were reportedly funneled through a "network of shell companies and accounts in places including Britian, Austria, Switzerland, the British Virgin Islands, Belize, New Zealand, Latvia, Lithuania, Delaware and Wyoming."
According to the Wall Street Journal, "H-P learned details of the probe in December when police in Germany and Switzerland presented search warrants detailing allegations against 10 suspects."
Media reports indicate that earlier this week Russian investigators raided H-P's Moscow headquarters in connection with the investigation.
According to the Wall Street Journal, both the DOJ and SEC have joined the probe.
According to the Wall Street Journal, "the investigation was started in 2007 when a tax auditor discovered bank records showing that between 2004 and 2006, the H-P subsidiary paid €22 million into the account of ProSoft Krippner GmbH, a small computer-hardware company in Leipzig" and that "the size of the payment to ProSoft Krippner caught the tax auditor's attention, and that he flagged the transfer to a special prosecution team in Dresden that handles major corruption cases." The Wall Street Journal reports that ProSoft Krippner's Chief Executive, Ralf Krippner, is also a member of the local parliament in the German district of North Saxony."
According to the WSJ, "an H-P spokeswoman said the company had discussions Thursday with the SEC regarding the German probe 'and is fully cooperating with U.S. and German authorities on this matter.'"
This week, it is German and Russian authorities investigating a U.S. company for improper conduct in Russia.
It's an ironic world we live in.
Tit for tat or merely a coincidence?
Likely the later.
As widely reported, German and Russian authorities are investigating whether Hewlett-Packard Co. (H-P) executives paid millions of dollars in bribes to win a contract in Russia with ... get this ... the office of the prosecutor general of the Russian Federation - the office that handles criminal prosecutions in Russia, including corruption cases.
According to "investigation-related documents submitted to a German court and reviewed by the Wall Street Journal," the payments, approximately $11 million, were reportedly funneled through a "network of shell companies and accounts in places including Britian, Austria, Switzerland, the British Virgin Islands, Belize, New Zealand, Latvia, Lithuania, Delaware and Wyoming."
According to the Wall Street Journal, "H-P learned details of the probe in December when police in Germany and Switzerland presented search warrants detailing allegations against 10 suspects."
Media reports indicate that earlier this week Russian investigators raided H-P's Moscow headquarters in connection with the investigation.
According to the Wall Street Journal, both the DOJ and SEC have joined the probe.
According to the Wall Street Journal, "the investigation was started in 2007 when a tax auditor discovered bank records showing that between 2004 and 2006, the H-P subsidiary paid €22 million into the account of ProSoft Krippner GmbH, a small computer-hardware company in Leipzig" and that "the size of the payment to ProSoft Krippner caught the tax auditor's attention, and that he flagged the transfer to a special prosecution team in Dresden that handles major corruption cases." The Wall Street Journal reports that ProSoft Krippner's Chief Executive, Ralf Krippner, is also a member of the local parliament in the German district of North Saxony."
According to the WSJ, "an H-P spokeswoman said the company had discussions Thursday with the SEC regarding the German probe 'and is fully cooperating with U.S. and German authorities on this matter.'"
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→H-P Under Scrutiny
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State of the Union April 15, 2010
April 15, 2010
There will be 16 more members called back Monday, April 19. The new seniority date to hold the plant is 12-16-1996. The number of members still laid off is 242.
• From the Detroit Free Press: UAW President Ron Gettelfinger said Wednesday that he is hopeful the UAW can reverse its declining membership as the economy recovers and the nation's labor laws are changed. Many Americans still want to join unions, Gettelfinger said, but U.S. laws make it difficult to organize. Employers can delay certification votes and even threaten workers with recriminations or even firing. In 2007, he said 58,000 U.S. workers voted to join a union. Two years later, 37% of those workers were still without a labor contract with their employer.
• Toyota has now halted global sales of the Lexus GX460. In addition, they are testing all of their SUVs for the same problem. For their part, Consumer Reports says that the Lexus was the only SUV they tested that skidded sideways, including the Toyota 4Runner. The GX460 is nothing more than a 4Runner with a Lexus grille and a nicer interior. Oh yeah, it also costs $20,000 more. Yet obviously something is amiss in the electronic stability control, which performed just fine in the 4Runner.
• From the NY Times: In response to a recent warning from Consumer Reports that the 2010 Lexus GX 460 is not safe to drive, Toyota engineers asked the magazine if they could use its test track to perform its own tests. Consumer Reports declined.
• And finally, the best Toyota-related line, from Jesse Snyder of Automotive News in his column “Toyota’s ‘automatic’ status is slip-sliding away”: “Without that bulletproof quality reputation, what exactly is the reason to buy a Toyota?”
There will be 16 more members called back Monday, April 19. The new seniority date to hold the plant is 12-16-1996. The number of members still laid off is 242.
• From the Detroit Free Press: UAW President Ron Gettelfinger said Wednesday that he is hopeful the UAW can reverse its declining membership as the economy recovers and the nation's labor laws are changed. Many Americans still want to join unions, Gettelfinger said, but U.S. laws make it difficult to organize. Employers can delay certification votes and even threaten workers with recriminations or even firing. In 2007, he said 58,000 U.S. workers voted to join a union. Two years later, 37% of those workers were still without a labor contract with their employer.
• Toyota has now halted global sales of the Lexus GX460. In addition, they are testing all of their SUVs for the same problem. For their part, Consumer Reports says that the Lexus was the only SUV they tested that skidded sideways, including the Toyota 4Runner. The GX460 is nothing more than a 4Runner with a Lexus grille and a nicer interior. Oh yeah, it also costs $20,000 more. Yet obviously something is amiss in the electronic stability control, which performed just fine in the 4Runner.
• From the NY Times: In response to a recent warning from Consumer Reports that the 2010 Lexus GX 460 is not safe to drive, Toyota engineers asked the magazine if they could use its test track to perform its own tests. Consumer Reports declined.
• And finally, the best Toyota-related line, from Jesse Snyder of Automotive News in his column “Toyota’s ‘automatic’ status is slip-sliding away”: “Without that bulletproof quality reputation, what exactly is the reason to buy a Toyota?”
Post Title
→State of the Union April 15, 2010
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→https://manufacturing-holdings.blogspot.com/2010/04/state-of-union-april-15-2010.html
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A U.K. First
Labels:
Greece
,Serious Fraud Office
History was made in the U.K. today when Robert John Dougall, a former DePuy executive, pleaded guilty to conspiring with other "to make corrupt payments and/or give other inducements" to "medical professionals within the Greek state health care system" contrary to Section 1 of the UK Prevention of Corruption Act of 1906 (see here).
According to the SFO release (here) and media reports (here and here), Dougall, a former Director of Marketing with responsibility for business development in Greece, blew the whistle on others within the company thus becoming the "first 'co-operating defendant' in a major SFO corruption investigation."
According to the SFO release, DePuy made commission payments to a distributor "to induce or reward surgeons to use" DePuy products.
A SFO spokesperson said that Dougall's seniors "were clearly consenting and driving the [improper] activity" and Dougall reportedly told investigators that he considered the payments "distasteful" but that he didn't feel like he had any other choice.
Dougall was sentenced to 12 months imprisonment. In sentencing Dougall, the judge rejected a joint suggestion by the SFO and the defense that he should be given a suspended sentence.
According to the SFO, Dougall is cooperating and providing substantial assistance in connection with the ongoing investigation. The case commenced following a referral to the SFO by the DOJ in October 2007.
Even though the charge Dougall pleaded guilty to does not contain a "foreign official" or "foreign public official" element, it is clear that the SFO is taking an expansive view as the recipients in this case were Greek surgeons. This is not surprising given that the SFO has stated its intention to model its enforcement on the DOJ's enforcement of the FCPA.
In November 2009, Assistant Attorney General Breuer, speaking before a pharma audience (see here), provided an expansive interpretation of the "foreign official" element in the context of the health care industry.
Dougall may be thinking, "what if I worked for BAE" or what if my name was "Count Alfons Mensdorff-Pouilly"?
Why? (see here)
But then again, the "I was speeding just like the rest of traffic" has never been a good legal defense.
According to the SFO release (here) and media reports (here and here), Dougall, a former Director of Marketing with responsibility for business development in Greece, blew the whistle on others within the company thus becoming the "first 'co-operating defendant' in a major SFO corruption investigation."
According to the SFO release, DePuy made commission payments to a distributor "to induce or reward surgeons to use" DePuy products.
A SFO spokesperson said that Dougall's seniors "were clearly consenting and driving the [improper] activity" and Dougall reportedly told investigators that he considered the payments "distasteful" but that he didn't feel like he had any other choice.
Dougall was sentenced to 12 months imprisonment. In sentencing Dougall, the judge rejected a joint suggestion by the SFO and the defense that he should be given a suspended sentence.
According to the SFO, Dougall is cooperating and providing substantial assistance in connection with the ongoing investigation. The case commenced following a referral to the SFO by the DOJ in October 2007.
Even though the charge Dougall pleaded guilty to does not contain a "foreign official" or "foreign public official" element, it is clear that the SFO is taking an expansive view as the recipients in this case were Greek surgeons. This is not surprising given that the SFO has stated its intention to model its enforcement on the DOJ's enforcement of the FCPA.
In November 2009, Assistant Attorney General Breuer, speaking before a pharma audience (see here), provided an expansive interpretation of the "foreign official" element in the context of the health care industry.
Dougall may be thinking, "what if I worked for BAE" or what if my name was "Count Alfons Mensdorff-Pouilly"?
Why? (see here)
But then again, the "I was speeding just like the rest of traffic" has never been a good legal defense.
Post Title
→A U.K. First
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→https://manufacturing-holdings.blogspot.com/2010/04/uk-first.html
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State of the Union April 14, 2010
April 14, 2010 online at www.uawlocal2250.com
• There will be a Union Label Committee meeting today after first shift at the Union Hall.
• Some excerpts from the March sales report from Marketing Manager Andrew Reyntjes: I am pleased to let you know that we exceeded our corporate objectives for the month with 5,456 deliveries. We did this despite low inventory levels at dealers. Given the seasonality of Fleet buying cycles there has been a lack of availability for dealers to obtain stock, this means that a customer walking into a GM dealership looking for a van is being turned away due to lack of availability of the product that they want and are going to the Ford dealer next door. We are hoping to benefit from built-up demand as businesses have held onto their vans until business conditions improve. When this happens hopefully we will have available inventory to take advantage of the change. We need to continue to watch Transit Connect, they continue to do well and unfortunately we had a loss of 1000 Tyco vans (a long time customer) that went to Ford Transit Connect. This impact will flow through in coming months’ results.
• From USA Today: At least 131 Toyotaowners report experiencing unintended acceleration after their recalled vehicles were repaired at dealerships, a USA TODAY review of federal records shows. Daily complaints — from three on Monday to 11 on March 5 — to the National Highway Traffic Safety Administration come as Toyota continues to contend mechanical, and not electronics, issues are to blame. One of the many complaints came from a Toyota Tundra owner from Needham, Mass., who had the accelerator pedal repaired in February after the (truck) took off while in reverse. "I just thank God there was not a child behind my car," the driver told NHTSA. Since then, the driver says, the car accelerates on its own at least five to nine times a week.(park the damn thing!)
• There will be a Union Label Committee meeting today after first shift at the Union Hall.
• Some excerpts from the March sales report from Marketing Manager Andrew Reyntjes: I am pleased to let you know that we exceeded our corporate objectives for the month with 5,456 deliveries. We did this despite low inventory levels at dealers. Given the seasonality of Fleet buying cycles there has been a lack of availability for dealers to obtain stock, this means that a customer walking into a GM dealership looking for a van is being turned away due to lack of availability of the product that they want and are going to the Ford dealer next door. We are hoping to benefit from built-up demand as businesses have held onto their vans until business conditions improve. When this happens hopefully we will have available inventory to take advantage of the change. We need to continue to watch Transit Connect, they continue to do well and unfortunately we had a loss of 1000 Tyco vans (a long time customer) that went to Ford Transit Connect. This impact will flow through in coming months’ results.
• From USA Today: At least 131 Toyotaowners report experiencing unintended acceleration after their recalled vehicles were repaired at dealerships, a USA TODAY review of federal records shows. Daily complaints — from three on Monday to 11 on March 5 — to the National Highway Traffic Safety Administration come as Toyota continues to contend mechanical, and not electronics, issues are to blame. One of the many complaints came from a Toyota Tundra owner from Needham, Mass., who had the accelerator pedal repaired in February after the (truck) took off while in reverse. "I just thank God there was not a child behind my car," the driver told NHTSA. Since then, the driver says, the car accelerates on its own at least five to nine times a week.(park the damn thing!)
Post Title
→State of the Union April 14, 2010
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→https://manufacturing-holdings.blogspot.com/2010/04/state-of-union-april-14-2010.html
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Mendelsohn To Paul Weiss
The Wall Street Journal is reporting (see here) that Mark Mendelsohn (DOJ Deputy Chief - Fraud Section responsible for overseeing FCPA prosecutions) is headed to the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP.
According to a source, Mendelsohn "stands to earn $2.5 million annually." The WSJ notes that this is a significant sum "particularly for a lawyer arriving at firm without a ready list of clients."
The WSJ notes that "Mr. Mendelsohn has overseen a hot field in prosecution in recent years" and that "it has been up to the Justice Department - and specifically to Mr. Mendelsohn - to interpret the law."
The WSJ notes that "corporations are likely to be eager for his inside views on how the Justice Department goes about deciding which cases to investigate and prosecute among the many that it comes across every year."
According to the WSJ, Mendelsohn was courted by several other firms.
According to a source, Mendelsohn "stands to earn $2.5 million annually." The WSJ notes that this is a significant sum "particularly for a lawyer arriving at firm without a ready list of clients."
The WSJ notes that "Mr. Mendelsohn has overseen a hot field in prosecution in recent years" and that "it has been up to the Justice Department - and specifically to Mr. Mendelsohn - to interpret the law."
The WSJ notes that "corporations are likely to be eager for his inside views on how the Justice Department goes about deciding which cases to investigate and prosecute among the many that it comes across every year."
According to the WSJ, Mendelsohn was courted by several other firms.
Post Title
→Mendelsohn To Paul Weiss
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Clarifying Comments
When I launched this blog in July 2009, part of my mission was to "explore the more analytical 'why' questions increasingly present in this current era of aggressive FCPA enforcement" and 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 (see here for the complete mission statement).
From time to time, I am in contact with journalists who are interested in learning more about the FCPA, FCPA enforcement, and the issues explored in this blog.
I enjoy these exchanges, including the public service component of assisting (mostly non-lawyer) journalists better understand the FCPA and FCPA enforcement issues.
It is also gratifying to have one's ideas and scholarship covered by various outlets.
However, from time to time, one's ideas and opinions can be taken a bit out of context and that is, I believe, what occurred in the Corporate Crime Reporter's ("CCR") recent piece (see here).
Thus, the purpose of this post is to provide important clarifying comments - some of which appear in the more "complete" version of the interview in the print edition of CCR.
The CCR piece suggests that I am "constantly butting heads with FCPA Inc." I don't believe this is accurate. I have friends working at law firms who have an FCPA practice and through this blog, I have come to know many other FCPA practitioners, some of whom have accepted my invitation to guest post in this space. Other FCPA practitioners have told me "thanks for the very helpful blog ... [it] goes a long way toward knitting together the FCPA and anti-corruption bar."
In speaking of "FCPA, Inc." I am speaking of an issue previously covered by other news outlets, including the Washington Post (see here). Among other things, the Post pieces notes that "FCPA business is booming, a welcome growth area for Washington law offices just as work on mergers and securities offerings has begun to wane." The Post piece note as well that also "sharing in the bonanza [are] accounting firms, forensic computer specialists and a growing army of compliance consultants." The Post piece concludes with this "... don't think law firms aren't playing off those fears by aggressively marketing their services as investigators, risk mitigators and compliance counselors" and the article notes that "the result is [a] sudden flood of labor-intensive legal work for both partners and associates, particularly in the local offices of big international firms."
To suggest, as the CCR piece does, that my position is that the DOJ's enforcement of the FCPA "is all a facade" is not true. The author of the CCR piece has a copy of my draft article titled "The Facade of FCPA Enforcement" which clearly states on page 1 that "This article does not argue, or even suggest, that every FCPA enforcement action is unwarranted or that no company or individual has never violated the FCPA. Rather, this article demonstrates that a significant majority of recent FCPA enforcement actions are a façade and argues that addressing the façade and subjecting FCPA enforcement actions to judicial scrutiny is in the public interest and of vital importance to those subject to the FCPA as well as the broader marketplace." When presenting my paper at Georgetown Law School on March 22nd, I also made these clarifying remarks.
The CCR article discusses my contrarian position regarding Mark Mendelsohn's defense of the Siemens matter and my follow up "point-counterpoint" exchange with Billy Jacobson that I included on my blog with his written permission (see here and here). What was a respectful exchange and critique has been recast in a way that may leave the appearance that I was questioning the integrity of these individuals. Do I disagree with the legal and policy positions of these current and former DOJ officials - often times yes. Am I accusing them of any actual improper conduct - most assuredly no.
Last week the Wall Street Journal ran a piece titled "SEC Lawyer One Day, Opponent the Next" (see here). Among other things, this article noted that "Iowa Sen. Charles Grassley, a Republican who has criticized the SEC's revolving door, says the commission could include more-stringent limitations than the law requires in employees' contacts, but more disclosure would help, too."
In talking about the undeniable fact that most DOJ FCPA enforcement officials have big law firm FCPA experience and that most leading FCPA practitioners have DOJ or SEC FCPA enforcement experience, I am merely extending the WSJ's SEC piece to the DOJ in the FCPA context.
I continue to believe, like many others, that such dynamics can raise red flags and have the potential for conflicts of interest. In a similar vein, my December 2009 post titled "Voluntary Disclosures and Role of FCPA Counsel" talks about potential conflicts of interest present in representing corporate clients in an FCPA enforcement investigation or action. (That post bolds the word potential at least 15 times).
Finally, I was clear in my more complete comments to CCR that I was raising issues of potential conflicts of interest and potential red flags. Left out of the CCR web article are my significant clarifying comments that I am not accusing anyone of anything, but rather raising, as others have, significant public policy concerns that, as evidenced by the WSJ article, are being raised and debated at the highest levels of government as well.
From time to time, I am in contact with journalists who are interested in learning more about the FCPA, FCPA enforcement, and the issues explored in this blog.
I enjoy these exchanges, including the public service component of assisting (mostly non-lawyer) journalists better understand the FCPA and FCPA enforcement issues.
It is also gratifying to have one's ideas and scholarship covered by various outlets.
However, from time to time, one's ideas and opinions can be taken a bit out of context and that is, I believe, what occurred in the Corporate Crime Reporter's ("CCR") recent piece (see here).
Thus, the purpose of this post is to provide important clarifying comments - some of which appear in the more "complete" version of the interview in the print edition of CCR.
The CCR piece suggests that I am "constantly butting heads with FCPA Inc." I don't believe this is accurate. I have friends working at law firms who have an FCPA practice and through this blog, I have come to know many other FCPA practitioners, some of whom have accepted my invitation to guest post in this space. Other FCPA practitioners have told me "thanks for the very helpful blog ... [it] goes a long way toward knitting together the FCPA and anti-corruption bar."
In speaking of "FCPA, Inc." I am speaking of an issue previously covered by other news outlets, including the Washington Post (see here). Among other things, the Post pieces notes that "FCPA business is booming, a welcome growth area for Washington law offices just as work on mergers and securities offerings has begun to wane." The Post piece note as well that also "sharing in the bonanza [are] accounting firms, forensic computer specialists and a growing army of compliance consultants." The Post piece concludes with this "... don't think law firms aren't playing off those fears by aggressively marketing their services as investigators, risk mitigators and compliance counselors" and the article notes that "the result is [a] sudden flood of labor-intensive legal work for both partners and associates, particularly in the local offices of big international firms."
To suggest, as the CCR piece does, that my position is that the DOJ's enforcement of the FCPA "is all a facade" is not true. The author of the CCR piece has a copy of my draft article titled "The Facade of FCPA Enforcement" which clearly states on page 1 that "This article does not argue, or even suggest, that every FCPA enforcement action is unwarranted or that no company or individual has never violated the FCPA. Rather, this article demonstrates that a significant majority of recent FCPA enforcement actions are a façade and argues that addressing the façade and subjecting FCPA enforcement actions to judicial scrutiny is in the public interest and of vital importance to those subject to the FCPA as well as the broader marketplace." When presenting my paper at Georgetown Law School on March 22nd, I also made these clarifying remarks.
The CCR article discusses my contrarian position regarding Mark Mendelsohn's defense of the Siemens matter and my follow up "point-counterpoint" exchange with Billy Jacobson that I included on my blog with his written permission (see here and here). What was a respectful exchange and critique has been recast in a way that may leave the appearance that I was questioning the integrity of these individuals. Do I disagree with the legal and policy positions of these current and former DOJ officials - often times yes. Am I accusing them of any actual improper conduct - most assuredly no.
Last week the Wall Street Journal ran a piece titled "SEC Lawyer One Day, Opponent the Next" (see here). Among other things, this article noted that "Iowa Sen. Charles Grassley, a Republican who has criticized the SEC's revolving door, says the commission could include more-stringent limitations than the law requires in employees' contacts, but more disclosure would help, too."
In talking about the undeniable fact that most DOJ FCPA enforcement officials have big law firm FCPA experience and that most leading FCPA practitioners have DOJ or SEC FCPA enforcement experience, I am merely extending the WSJ's SEC piece to the DOJ in the FCPA context.
I continue to believe, like many others, that such dynamics can raise red flags and have the potential for conflicts of interest. In a similar vein, my December 2009 post titled "Voluntary Disclosures and Role of FCPA Counsel" talks about potential conflicts of interest present in representing corporate clients in an FCPA enforcement investigation or action. (That post bolds the word potential at least 15 times).
Finally, I was clear in my more complete comments to CCR that I was raising issues of potential conflicts of interest and potential red flags. Left out of the CCR web article are my significant clarifying comments that I am not accusing anyone of anything, but rather raising, as others have, significant public policy concerns that, as evidenced by the WSJ article, are being raised and debated at the highest levels of government as well.
Post Title
→Clarifying Comments
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→https://manufacturing-holdings.blogspot.com/2010/04/clarifying-comments.html
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State of the Union April 12, 2010
Reminder: Thursday, April 15, is the last day to submit resolutions for the constitutional and bargaining conventions. They must be received at the Union Hall by 5 pm.
• The stamping plant began production of the Tahoe door side rings for Arlington today. This arrangement is a “temporary factory assist” due to press problems at Spring Hill. We have been told, however, that the potential exists to keep production of these parts here.
• There was an article last week in the Suburban Journal about our annual Easter basket drive. Here’s an edited version:
An assembly line running March 30 at the General Motors assembly center in Wentzville wasn't cranking out vans, but Easter baskets. Workers and some close relatives were rounding tables in the plant's cafeteria, dropping candies and toys one by one into brightly colored baskets. The 75 or so baskets would be tied up with ribbon and dropped off at the Salvation Army in O'Fallon that night. "It's not a huge project, but it's a worthwhile project," said Mike Bridgins, community services chairman at the plant. United Auto Workers Local 2250 has been assembling the baskets to donate each Easter since 1995. Last year, they put together 200 baskets. They got the idea after donating items to children around Christmas. "We figured out that kids that weren't getting Christmas presents weren't getting Easter baskets, either," Bridgins said. And Bridgins could tell it had been some children's first time getting an Easter basket. "They liked the stuff inside, but they didn't get the idea of the basket," he said. Workers on the floor had donated money, candy or other goodies for the effort. Some stopped by the cafeteria the afternoon of March 30 to help assemble the baskets. Shop Chairman Mike Bullock said the drive is a good example of how the workers give back to the community. Dan Howell, president of UAW Local 2250, agreed, with this drive in particular providing Easter goodies to children who otherwise wouldn't have any. "UAW's always been part of helping the middle class and the downtrodden," Howell said. "We're trying to help bring the bottom up."
• The stamping plant began production of the Tahoe door side rings for Arlington today. This arrangement is a “temporary factory assist” due to press problems at Spring Hill. We have been told, however, that the potential exists to keep production of these parts here.
• There was an article last week in the Suburban Journal about our annual Easter basket drive. Here’s an edited version:
An assembly line running March 30 at the General Motors assembly center in Wentzville wasn't cranking out vans, but Easter baskets. Workers and some close relatives were rounding tables in the plant's cafeteria, dropping candies and toys one by one into brightly colored baskets. The 75 or so baskets would be tied up with ribbon and dropped off at the Salvation Army in O'Fallon that night. "It's not a huge project, but it's a worthwhile project," said Mike Bridgins, community services chairman at the plant. United Auto Workers Local 2250 has been assembling the baskets to donate each Easter since 1995. Last year, they put together 200 baskets. They got the idea after donating items to children around Christmas. "We figured out that kids that weren't getting Christmas presents weren't getting Easter baskets, either," Bridgins said. And Bridgins could tell it had been some children's first time getting an Easter basket. "They liked the stuff inside, but they didn't get the idea of the basket," he said. Workers on the floor had donated money, candy or other goodies for the effort. Some stopped by the cafeteria the afternoon of March 30 to help assemble the baskets. Shop Chairman Mike Bullock said the drive is a good example of how the workers give back to the community. Dan Howell, president of UAW Local 2250, agreed, with this drive in particular providing Easter goodies to children who otherwise wouldn't have any. "UAW's always been part of helping the middle class and the downtrodden," Howell said. "We're trying to help bring the bottom up."
Post Title
→State of the Union April 12, 2010
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- State of the Union April 30, 2010
- BAE ... Inside the SFO
- State of the Union April 29, 2010
- Kyrgyzstan, Thailand, Tobacco, and Piranha Fishing
- Daimler Under Investigation in Russia
- State of the Union April 28, 2010
- Hiring a "Foreign Official"
- State of the Union April 27, 2010
- Facilitating Payments or Bribes?
- State of the Union April 26, 2010
- Bourke's Appeal
- FCPA Goes Main Street
- Quiz Time Answer
- Africa Sting - Superseding Indictment, Additional ...
- State of the Union April 21, 2010
- 103 years of production
- BHP Billiton Discloses
- State of the Union April 20, 2010
- State of the Union April 19, 2010
- Two-Tiered Justice?
- Jefferson Jurors Speak
- What Others Are Saying About Mendelsohn's Departure
- State of the Union 16, 2010
- H-P Under Scrutiny
- State of the Union April 15, 2010
- A U.K. First
- State of the Union April 14, 2010
- Mendelsohn To Paul Weiss
- Clarifying Comments
- State of the Union April 12, 2010
- Quiz Time
- State of the Union April 9, 2010
- BAE Plea Agreement Challenge Dropped
- State of the Union April 8, 2010
- State of the Union April 7, 2010
- Africa Sting Updates
- State of the Union April 6, 2010
- Lord Justice Thomas's Innospec Sentencing Remarks
- State of the Union April 5, 2010
- A Happy Ending
- Daimler - "That's All Folks"
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