FCPA Compliance and Ethics Blog

July 10, 2013

Dog Bite Defense No. 4 and the Defense of an FCPA Claim

As most readers of this blog know, I am a recovering trial lawyer. I almost always acted as defense counsel for corporations in my trial lawyer career. In the trial lawyer world, there are four recognized defenses to any claim which are known as the “Dog Bite Defenses”. They are:

  1. My dog didn’t bite you.
  2. Even if my dog did bite you, it’s because you provoked him.
  3. Even if my dog did bite you, you really aren’t injured.
  4. My dog didn’t bite you because I don’t have a dog.

The fourth version of the Dog Bite defense is certainly an ‘all-in’ move. You had either (1) better be right or (2) have some big kahunas to make that argument to a jury with a straight face.

I recently saw a couple of examples of the ‘Dog Bite’ defense which caught my eye. The first was in an article in the most recent issue of The New Yorker, entitled “Buried Secrets”, by Patrick Radden Keefe. His article discussed the ongoing situation involving the Beny Steinmetz Group Resources Group (BSGR), its mining concession in the country of Guinea and its representative Frederic Cilins, who is in jail in New York, denied bail and awaiting jail for obstruction of justice charges. In an exhaustively reported article, Keefe wrote about his interviews with many of the principal players in this saga including BSRG founder Beny Steinmetz, its representative Cilins and the current President of Guinea, Alpha Condé.

As reported in two Financial Times (FT) articles, entitled “Contracts link BSGR to alleged bribes” (the “mine rights article”) and “FBI sting says that ‘agent’ sought to have mining contracts destroyed” (the “FBI sting article”), by the same triumvirate of FT reporters Tom Burgis, Misha Glenny and Cynthia O’Murchu; there are allegations that “The resources arm of Beny Steinmetz Group agreed to pay $2m to the wife of an African president to help it secure rights to one of the world’s richest untapped mineral deposits, according to documents seen by the Financial Times”. These payments were allegedly memorialized in “Copies of two contracts from 2007 and 2008, apparently signed by BSGR’s representatives in the mineral-rich west African nation of Guinea, set out agreements for the company to make payments and transfer shares to Mamadie Touré, wife of the then president Lansana Conté.”

The FBI sting article reported that on Sunday April 14, 2013, “Frederic Cilins held the last of a series of meetings with the widow of an African dictator to discuss what she was going to do with some sensitive documents.” Unfortunately for Cilins he “did not realise that the woman he was talking to was wearing a wire and that FBI agents were watching. As he left the meeting, the agents arrested him carrying envelopes filled with $20,000 in cash, the indictment says. That was a pittance compared with the $5m he was taped offering the dictator’s widow during what US authorities say was a two-month campaign to tamper with a witness and destroy records.”

So how does the Dog Bite defense come into play here? As reported by Keefe during his interview with Beny Steinmetz, Steinmetz said “the documents that were discussed in Jacksonville did not prove anything, he said-they were forgeries”, these were the ‘alleged documents’ that Cilins was so keen to get back from Mamadie Touré. Keefe also reported that the BSGR representative, Asher Avidan, when presented with a photograph of a signature told Keefe that the signature “was identical to his own but dismissed it as “a simple Photoshop.”

While it might not be anything new to claim that a signature on a contract is a forgery, especially if you do not want to acknowledge that you signed the document in question, the next line of defense is certainly an ‘all-in’ play. During the interview with Avidan, he said that Mamadie Touré was “not his [the deceased President’s] wife. Not even sleeping with him. Then he added, “She is a lobbyist. Like a thousand others.” What this means for a defense under the Foreign Corrupt Practices Act (FCPA) is if the payments were made but they were not to a foreign government official or spouse, it might not be covered under the FCPA. The problem with this defense is that you do have to admit that (1) the contracts exist and (2) the payments were made or promised. So you had better hope that the jury believes it when you claim the counter-party to the contract was not the wife of the President.

And that ladies and gentlemen is Dog Bite defense No. 4.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2013

November 6, 2012

Election Day – Just Who is a Foreign Government Official?

Ed. Note-we continue our series of guest posts from our colleague Mary Shaddock Jones, who today looks at the issue of foreign government officials under the FCPA. Both she and I urge you to exercise that most important right of all Americans–to vote for the candidate of your choice.

Today is a monumental day for the United States – Election 2012.  I am writing this blog on Monday, October 22, and as such, have no idea who will actually be elected as the next president of the United States.  However, regardless of whom you voted for or whether they won or lost – it is always important to keep in mind that we as a nation are blessed to be a democracy.  Let us never lose sight of the importance of freedom of speech, and the concomitant duty that freedom imposes upon us all, to speak up for what we believe is right or wrong.  Speaking of which, this leads me to today’s topic – the Haiti Telecom case.

In 2009 the Department of Justice charged Juan Diaz with conspiracy to make corrupt payments to Haitian officials for the purpose of securing business advantages from Haiti’s state-owned telecommunications company.  In October 2011, Joel Esquenazi and Carlos Rodriquez, the former president and vice president of Terra Telecommunications, were sentenced for their roles in a scheme to bribe officials in Haiti’s state-owned telecom company.  Esquenazi received 15 years, the longest sentence imposed in the history of the FCPA and Rodriquez received 7 years behind bars.

Both men have appealed their convictions, and one of the key  issues on appeal is “Whether Esquenazi (Rodriquez) is entitled to an acquittal because employees of Haiti Teleco were not “foreign officials” within the  meaning of FCPA simply because the National Bank of Haiti owned shares of Haiti Teleco and the Haitian government appoints board members and directors”.

The Brief filed by Appellant, United States v. Joel Esquenazi, No 11-15331 (7th Cir, May 9, 2010) poses the following argument “ Esquenazi is also entitled to an acquittal on all FCPA-based counts because the term “instrumentality” in the FCPA should be construed to encompass only foreign entities performing governmental functions similar to departments or agencies.  Here, the Government failed to establish that Haiti Teleco performed a governmental function.  Despite the Government’s continued reliance on the premise that state-ownership or state-control of a business entity makes that entity and “instrumentality” of the government under the FCPA, that theory was explicitly considered by the drafters of the FCPA, but not included in the statute, and is inconsistent with the language of the statute as drafted.  Because so many individuals and companies prosecuted by the Government prefer to resolve their cases prior to trial, the validity of the Government’s theory has seldom been tested in court, and never before by a United States Court of Appeals.  This case presents an opportunity to review the Government’s aggressive enforcement of a less-than-clear federal statute and properly limit its scope to corrupt payments made to “foreign officials,” including employees of “instrumentalities” that perform governmental functions similar to governmental departments and agencies”.   I have no reason to doubt that all of the above is absolutely true – but do you want to spend millions of dollars defending your actions and trying to keep your CEO out of jail based upon the meaning of the term “instrumentality”?

The practical pointer for today’s blog is this – doesn’t it make more sense for companies to prohibit all forms of bribery both commercial bribery (improper payment made with the corrupt intent to a private, rather than a governmental, person, company, or other entity in order to receive a business advantage) and governmental bribery?  The U.K. Bribery Act takes this stance by prohibiting bribery in the private sector.  Furthermore, the U.K. Act doesn’t just limit the criminal offense to bribing foreign officials, but also prohibits both the offer and the acceptance of a bribe.  I am not advocating that the United States expand the reach of the Foreign Corrupt Practices Act to include international bribery of private entities or individuals.  However, from a practical perspective – doesn’t it make sense, and send a more unified message to your employees when you say “We do not permit bribes in any way, shape or form. Period, Full Stop”?

Consider the following Policy Statement:

It is Company policy to comply with all applicable anti-bribery laws, including but not limited to the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and all applicable local laws where Company operates, and to accurately reflect all transactions on Company’s books and records.  It is also Company’s policy to require those agents, consultants and business partners who work on Company’s behalf to comply with these same laws and practices.  Bribery is a criminal offense in most countries in which we operate and corrupt acts expose the Company and our employees to the risk of prosecution, fines and imprisonment as well as endangering the Company’s reputation. Fines assessed against individuals may and will not be reimbursed by the Company.

This policy prohibits all forms of bribery.  As such, all Company employees, and all those acting for or on the Company’s behalf, are strictly prohibited from offering, paying, soliciting or accepting bribes or kick-backs, including facilitation payments to any person or entity for the purpose of obtaining or retaining business or gaining any improper business advantage, regardless of whether or not the person or entity is governmental or private. Third parties, contractors, agents, representatives and intermediaries who act on behalf of the foundation must comply with these anti-bribery provisions. This policy also requires due diligence of Business Partners, internal approvals, books and records entries, and it imposes records retention requirements in key risk areas related to Government Officials and Business Partners.  It requires audits to help ensure compliance, as well as appropriate scrutiny of acquisition and joint venture target companies for compliance with this policy, particularly where the target companies have had government sales and other significant governmental interaction.

Like other facets of a Company’s operations, its  anti-corruption policy and/or Code of Conduct  should  be tailored to meet its particular business needs, policies, and procedures.  However, when drafting your code of conduct you should ask yourself:  What do you want your company to stand for?

In 1919, King George the V dedicated November 7th as a day of remembrance for members of the armed forces who were killed during World War I.  The joint venture by the U.S. and Great Britain to defeat the enemy in both World Wars is an excellent segue to discuss the risks and rewards of Foreign Joint Ventures.  Stay tuned.

  Mary Shaddock Jones has practiced law for 25 years in Texas and Louisiana primarily in the international marine and oil service industries.  She was of the first individuals in the United States to earn TRACE Anti-bribery Specialist Accreditation (TASA).  She can be reached at msjones@msjllc.com or 337-513-0335. Her associate, Miller M. Flynt, assisted in the preparation of this series.  He can be reached at mmflynt@msjllc.com.

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This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication.

October 15, 2012

How Casanova Informs Your FCPA Compliance Program

One cannot use ‘sex’ in the title of a blog or company email filters will pick it up as spam. So while our title today focuses on Casanova and lust, this post will focus on sex. Yesterday, an article in the Sunday New York Times (NYT) entitled “Strauss-Kahn Say Sex Parties Went Too Far, But Lust Is No Crime” caught my eye. In the article reporters Doreen Carvajal and Maia de la Baume detailed the libertine sex life of the former Managing Director of the International Monetary Fund (IMF) Dominique Strauss-Kahn (DSK).

I.                   The Times Article

It turns out that DSK’s little tryst with the maid in the hotel in New York was but a small sampling of his escapades. According to the NYT article, “The exclusive orgies called “parties fines” — lavish Champagne affairs costing around $13,000 each — were organized as a roving international circuit from Paris to Washington by businessmen seeking to ingratiate themselves with Mr. Strauss-Kahn. Some of that money, according to a lawyer for the main host, ultimately paid for prostitutes because of a shortage of women at the mixed soirees orchestrated largely for the benefit of Mr. Strauss-Kahn, who sometimes sought sex with three or four women.” Apparently such events had a long and treasured history in France where “Libertinage” goes back to the 16th Century.

According to DSK he said, “I long thought that I could lead my life as I wanted,” in an interview with the French magazine Le Point. “And that includes free behavior between consenting adults.” Ah those French. Where is Casanova when you need him to explain how a Frenchman needs a little liaison with 3 or 4 women now and again?

However, it turns out that our Libertine DSK was not exactly paying for ‘services rendered’. These sex romps cost a lot of money, as stated in the NYT article, over $13,000 per event. The events started out with lavish dinners and then couples would pair off and pair off and pair off. (Cue the Viagra pop-up ad now.) More ominously, DSK did not pay for these events himself. The NYT article quoted Karl Vandamme, a defense lawyer who represents Fabrice Paszkowski, the owner of a medical supply company who played a crucial role in organizing the sex parties. “Libertines are people like you and me: people who have a normal life,” said Mr. Vandamme, who said his client invested around $65,000 in party expenses, betting on the political rise of Mr. Strauss-Kahn.” (Emphasis mine)

So what is the Foreign Corrupt Practices Act (FCPA) compliance angle here? I think that everyone would agree that providing prostitutes to foreign governmental officials to obtain or retain business would be a violation of the FCPA. But here there are a couple of points that I found of interest far beyond simply providing hookers.

II.                FCPA Application

A.       Covered Recipient

The first is who precisely does the FCPA cover? Certainly it covers foreign governmental officials and I would certainly argue that it covers employees of state owned enterprises and it does cover other persons as well. Under the FCPA officers or employees of public international organizations are covered. The definition reads as follows:

For purposes of this section:

(1)   A) The term “foreign official” means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization. (emphasis supplied)

The IMF is a public international organization. Prior to becoming the Managing Director of the IMF in 2007, DSK was active in French politics, holding several government offices and even unsuccessfully running for the Socialist Party candidate for President in 2007. He was the Managing Director of the IMF from 2007 until he resigned after having been accused of sexual assault by a hotel maid in New York City in 2012.

B.        Obtain or Retain Business

So our Libertine friend DSK could be covered by the FCPA if a US company was participating in conduct which would violate the FCPA. One person was quoted in the NYT article that his client, both personally and through his company, invested money to pay for the sex romps “betting on the political rise” of DSK. The FCPA makes illegal “use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value” which are intended to do any of the following:

(A) (i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage; or

(B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such issuer in obtaining or retaining business for or with, or directing business to, any person

Here we have clients paying for lavish gift parties, which I would argue are per se unreasonable under the Gifts and Entertain affirmative defense under the FCPA. (No snickers here please as I am not arguing that a $100 for hooker is reasonable.) Further, the clear intent of at least the client of the above quoted Mr. Vandamme was “betting on the political rise of” DSK. Think the client, Fabrice Paszkowski, the owner of a medical supply company, was just shelling out that kind of money so DSK could ‘enjoy himself’ or is it more probable that Paszkowski, would expect to “obtain or retain” some business or other benefit from his now sated buddy DSK?

There are several learning moments from the fall of DSK and FCPA compliance. The first is to remember that the FCPA covers more than simply foreign government officials and employees of state owned enterprises. As stated it also covers officers and employees of public international organizations. It is even broader as it also covers political parties and those seeking political office in foreign countries. The DSK Libertine Sex Party lifestyle also reminds us that the FCPA not only prohibits bribes paid in cash but the ubiquitous “anything of value”. (And no I am not going to debate whether having sex with four partners a night is “anything of value” particularly if Viagra is included in the cost.)

It could certainly be interesting if the names of any companies subject to the FCPA come up in the ongoing investigation into DSK.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012

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