FCPA Compliance and Ethics Blog

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

June 27, 2012

2012 First Half FCPA Enforcement Round-Up: Part I

The first half of 2012 is reaching to a close and we have had several significant enforcement actions so far this year. So to commemorate all those June Bride and Bride-Grooms out there, including my parents who celebrate their 56th wedding anniversary on June 30, I have put together a couple of posts reviewing my top 6 Foreign Corrupt Practices Act (FCPA) enforcement actions for the first 6 months of 2012. At this point I cannot see any clear trends but there are some key points that provide solid advice for the compliance practitioner going forward. In today’s blog, we take up the first three, in chronological order.

I.                   Aon

We begin with a Non-Prosecution Agreement (NPA) issued in the last week of 2011 where the insurance giant Aon received a NPA from the Department of Justice (DOJ) in settling enforcement actions against it by the DOJ and Securities and Exchange Commission (SEC). Aon agreed to total fines and penalties in an amount of $16.3 MM. This is in addition to a fine previously paid to the UK Financial Services Authority (FSA) in January, 2009, of £5.25 MM (approximately $8.2 MM at today’s exchange rate).

A.     Aon’s Remedial Actions Which Led to the NPA

The DOJ stated that it entered into the NPA based “in part, on the following factors: (a) Aon’s extraordinary cooperation with the Department and the U.S. Securities and Exchange Commission (“SEC”); (b) Aon’s timely and complete disclosure of the facts described in Appendix A as well as facts relating to Aon’s improper payments in Bangladesh, Bulgaria, Egypt, Indonesia, Myanmar, Panama, the United Arab Emirates and Vietnam that it discovered during its thorough investigation of its global operations; (c) the early and extensive remedial efforts undertaken by Aon, including the substantial improvements the company has made to its anti-corruption compliance procedures; (d) the prior financial penalty of £5.25 million paid to the United Kingdom’s Financial Services Authority (“FSA”) by Aon Limited, a U.K. subsidiary of Aon, in 2009, covering the conduct in, Bangladesh, Bulgaria, Indonesia, Myanmar, the United Arab Emirates and Vietnam; and (e) the FSA’s close and continuous supervisory oversight over Aon Limited.”

B.     Non-Bona Fide Travel and Educational Expenses

The primary activity for which Aon was sanctioned was a travel and education fund, initially designed to provide funds for foreign government employees involved with insurance to travel to educational conferences. However, the funds evolved into personal use for entertainment of the officials, their wives and families. In one instance, involving a fund in Costa Rica, travel was booked through a travel agency which was owned or managed by the Costa Rican officials who were entertained with monies from the educational and training funds.

C.     Books and Records

The largest portion of the Aon fine involved violations of the FCPA’s books and records requirements. The NPA noted, “With respect to the Costa Rican training funds, although Aon Limited maintained accounting records for the payments that it made from both the Brokerage Fund and the 3% Fund, these records did not accurately and fairly reflect, in reasonable detail, the purpose for which the expenses were incurred. A significant portion of the records associated with payments made through tourist agencies gave the name of the tourist agency with only generic descriptions such as “various airfares and hotel.” Additionally, to the extent that the accounting records did provide the location or purported educational seminar associated with travel expenses, in many instances they did not disclose or itemize the disproportionate amount of leisure and non-business related activities that were also included in the costs. In short, there was either no bona fide educational expense or not one which could be documented from Aon’s internal records.

Key Takeaway: You must completely document, document and document the basis of your expenditures. If there is no explanation, the assumption will be the payments are made for corrupt purposes.

II.                Smith & Nephew

The landscape of the FCPA world is littered with cases involving both agents and resellers, who are most clearly acting as representatives of the companies whose goods or services they sell in foreign countries. Many US businesses believe that the legal differences between agents/resellers and distributors insulate them from FCPA liability should the conduct of the distributor violate the Act. Under this same analysis, many US companies believe that the FCPA risk has also shifted from the US company to the foreign distributor. However, such belief is sorely miss-placed as was shown in the Smith & Nephew (SNN) enforcement action.

The FCPA violations revolved around a Greek distributor of SNN who paid bribes to Greek doctors so that they would purchase and use SNN products. SNN paid a monetary penalty of $16.8MM to the DOJ and $5.4MM to the SEC as a civil penalty, all for a total of $22.2MM in fines and penalties.

Entity Designation Domicile of Entity Commission Rate Services Provided Actual Services
Shell Company A UK 40% of sales of Greek distributor Marketing Did not perform any services
Shell Company B UK 26% of sales of Greek distributor Marketing None listed
Shell Company C UK 35% of sales of Greek distributor Marketing Did not perform any true services

A quick review of the above chart shows the FCPA problems; very high commissions were paid with no actual services provided. Or as stated by the FCPA Professor, SNN “falsely recorded or otherwise accounted for the payments to the shell companies on its books and records as ‘marketing services’ in order to conceal the true nature of the payments in the consolidated books and records of S&N.”

Key Takeaway: If your company uses a distributor model in its sales chain, I would suggest that you review and reassess your pricing structure in light of this enforcement action.

III.             BizJet

In the bribery and corruption world, the facts of this enforcement action are about as bad as it can get. It was reported the senior company personnel had actual knowledge or approved of the payment of cash to bribe foreign governmental officials to obtain or retain business. There was also a deliberate attempt to hide the true nature of the payments. But even with these damaging facts, the company was able to receive a significant reduction on the low end of the fine range as suggested under the US Sentencing Guidelines. So how did the company achieve this?

A.     Bribery Scheme

In this case, the company made a number of corrupt payments which were characterized as “commission payments” and “referral fees” on their books and records. Payments were made from both international and bank accounts here in the United States. In other words, this was as clear a case of a pattern and practice of bribery, authorized by the highest levels of the company, paid through US banks and attempts to hide all of the above by mis-characterizing them in their books and records.

BizJet Bribery Box Score

BizJet Executive or Employee Named Payment Made To Amount of Payment Others Involved
Sales Manager  A Official 6 Cell Phone and $10K Executive B and C
Sales Manager A Official 3 $2K Executive  B
Executive B, C and Sales Manager A Official 2 $20K
Executive C Official 2 $30K Sales Manager A
Executive B Mexican Federal Police Chief $10K Executive C and Sales Manager. A
Executive C Official 5 $18K Sales Manager A
Sales Manager A Official 4 $50K
Sales Manager A Mexican Federal Police $176 Executive C
Sales Manager A Official 4 $40K
Sales Manager A Mexican Federal Police $210K Executive C
Sales Manager A Official 5 $6K Executive C
Executive C Official 5 $22K

B. Reduction in Monetary Fine

I set out these facts in some detail to show the serious nature of enforcement action. However, the clear import is that a company can make a comeback in the face of very bad facts. The calculation of the fine, based upon the factors set out in the US Sentencing Guidelines, ranged between a low of $17.1MM to a high of $34.2MM. The final agreed upon monetary penalty was $11.8MM. This is obviously a significant reduction from the suggested low or high end, or as was noted by the FCPA Blog “BizJet’s reduction was 30% off the bottom of the fine range, and a whopping 65% off the top of the fine range.”

How did BizJet achieve this reduction and avoid an external monitor? As reported by the FCPA Professor, the following were factors:

(a) following discovery of the FCPA violations during the course of an internal audit of the implementation of enhanced compliance related to third-party consultants, BizJet initiated an internal investigation and voluntarily disclosed to the DOJ the misconduct …;

(b) BizJet’s cooperation has been extraordinary, including conducting an extensive internal investigation, voluntarily making US and foreign employees available for interviews, and collecting, analyzing, and organizing voluminous evidence and information for the DOJ;

(c) BizJet has engaged in extensive remediation, including terminating the officers and employees responsible for the corrupt payments, enhancing its due diligence protocol for third-party agents and consultants, and instituting heightened review of proposals and other transactional documents for all BizJet contracts;

(d) BizJet has committed to continue to enhance its compliance program and internal controls, including ensuring that its compliance program satisfies the minimum elements set forth in the” corporate compliance program set forth in an attachment to the DPA; and

(e) “BizJet has agreed to continue to cooperate with the DOJ in any ongoing investigation of the conduct of BizJet and its officers, directors, employees, agents, and consultants relating to violations of the FCPA.

C.        Reports to the DOJ

The company avoided an external monitor. However, it agreed that it would report “at no less that twelve-month intervals during the three year term” [of the DPA] to the DOJ on “remediation and implementation of the compliance program and internal controls, policies and procedures” which were listed in Attachment C to the DPA (the DOJ guidelines for a minimum best practices compliance program). The initial report was required to be delivered one year from the date of the DPA and would also include BizJet’s proposals “reasonably designed to improve BizJet’s internal controls, policies and procedures for ensuring compliance with the FCPA and other applicable anti-corruption laws.”

Key Takeaway: What you do after you discover the bribery and corruption will go a long way towards determining your penalty. No matter how bad the facts are, if you provide ‘extraordinary cooperation’ to the enforcement agencies, you can significantly reduce your final monetary penalty.

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

February 2, 2012

Final Jeopardy and July 1, 2011

It’s Final Jeopardy and the category is “Compliance”. As your company’s Compliance Officer you are positively salivating at the prospect. So you go all in and bet everything you have on this last question. You stand abated as Host Alex Trebek poses the following question: “Which two countries had anti-corruption laws go into effect on July 1, 2011?” The Union Jack is firmly planted in your mind (if not a picture of the Bribery Act guys) so you confidently write down “What is the United Kingdom…” but then you realize you cannot think of that second country. You stumble and as the iconic tick, tock of the Final Jeopardy theme runs down…all you can think of is one of the BRIC countries. You know you are close but then the buzzer sounds. You dejectedly show your final answer and and Alex says, “Sorry, but it is the UK and Ukraine.”

So why couldn’t you think of the answer? It might be that corruption is so endemic in Ukraine that is difficult to imagine the government would have the brass to tackle the problem. In 2011, Ukraine ranked number 152 out of 182 countries listed on the Transparency International Corruption Perceptions Index (TI-CPI). You recall that corruption in the Ukraine actually got worse from 2010 when the country ranked 134 out of 178 countries listed on the TI-CPI. Perhaps you recall that corruption has been termed “Problem No. 1” for the country and that even the President of Ukraine has called corruption in his country, “a shameful phenomenon.”

Nevertheless you take your winnings from your second place finish in Jeopardy and go home to find out more this new law. In your Google search you find a law entitled, “On the Prevention and Counteraction against Corrupt Practices”. In your research you find that the Ukraine law has three main components: (1) it defines corruption and corruptive defenses; (2) it sets forth the relevant persons who may be held liable for corruption offenses; and (3) it imposes restriction on these relevant persons, while also setting out the liability factors.

Corruption and Corruptive Offense

Corruption is defined as the use of authority to offer, grant or receive improper benefits as well as requesting such activity. Corruptive offense is defined as an intentional act, not only involving governmental officials, as in the US Foreign Corrupt Practices Act (FCPA), but also between private actors, as is prohibited by the UK Bribery Act. The law includes the offering, granting or receiving of improper benefits, either directly or through a third party.

Parties Covered by Law

The Ukraine law has the same public/private dichotomy set forth in the UK Bribery Act. It defines government officials as those in both the federal, state or local authorities but adds an additional category of person equal to governmental officials. This new category includes officers of public law legal entities who receive wages or a salary from the state, even though they may not be a ‘governmental official’. Both of these categories of persons are covered regarding restrictions imposed as measures aimed at preventing and counteracting corruption.

Restrictions and Liability Factors

Not only can such persons, as noted above, not accept gratuities but their immediate families cannot profit from their positions. Lastly these restrictions hold for up to one year after such persons may have left the government. In addition to these restrictions, the following also apply.

  • Gifts and Hospitalities – A person covered may not receive any gift in exchange for any decision, act or non-act. However, the law does allow a one-time gift, restricted to a value of 51% of one month’s salary. It should be noted that there were no restrictions on hospitality, such as travel, accommodation or meals.
  • Special Screening – The law requires that all job applicants must declare any criminal history and make an annual declaration of property and income. However, there are notable exclusions to this requirement.
  • Financial Control – With the annual declarations, as noted above, the information will be made publicly available. Government officials must also declare any foreign banks accounts they or their immediate family members may hold.
  • Reporting Requirements – Government officials just declare all charitable amounts which they receive as gifts allowed under the law.
  • Conflict of Interest – A covered official must take action to prevent any conflict of interest from arising but if such conflict does arise, it must be immediately disclosed.
  • Code of Conduct – The law requires that a written professional ethics standard exist.
  • Duty to Report Corruption – All persons covered by the law have a duty to report any corruption of which they may become aware. The law also has whistleblower protection.

You have now completed your review of this new Ukrainian law. As a Compliance Officer, you are pleased that Ukraine has entered the group of nations fighting corruption. You only wish you would have known about the law when it became effective and you would have not humiliated yourself on Final Jeopardy.

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The blog was based upon the article, “Ukraine’s New Anti-Corruption Law: Will it Really Stop Corruption in Ukraine?” by James T. Hitch, III and Yuliya Kuchma, published in the Fall 2011, Volume 45, Number 3 edition of The International Lawyer.

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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. 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

December 30, 2011

Top Ten 2011 Enforcement Actions-Corporate Division

As December is a time for reflection on the past twelve months, I have been considering the FCPA Enforcement Action year. I submit for your consideration my Top 10 FCPA Enforcement Actions for 2011 in the Corporate Division. Happy and Safe New Year to all and we will see you next week in 2012 with our list of Top FCPA issues from 2011.

1.         Alcatel-Lucent ($137MM) or non-cooperation will cost you.-the company lost between $10MM to $20MM in penalty reduction because its initial investigative counsel did not fully cooperate with the DOJ after self-disclosure.

2.         AON-($16.2MM)(NPA) or it’s still not a good thing to send that foreign official to Disneyland-the world wide insurer Aon was issued an NPA for setting up a “educational fund” which paid for travel and entertainment of Nicaraguan insurance officials and then not recording it properly.

 

3.         Armor Holdings ($10.29MM)(NPA) or you can step back from the abyss-the company which had 92 separate instances of disguising bribes yet was able to obtain a NPA, through self-disclose, cleaning house, remediation and implementing a best practices compliance program.

4.         Bridgestone ($28MM)-don’t double down a FCPA violation by adding Anti-Trust violationsthe company was found to have engaged in both bribery of foreign officials by using such corrupt acts in furtherance of bid-rigging.

5.         JGC ($218.8MM)-and then there were nonethe final corporate conclusion of the infamous Bonney Island, Nigeria Bribery Scandal. Joining with previously settled defendants, Halliburton, Technip and Snamprogetti/ENI to bring a total settlement amount of over $1.5 billion. Four of the top 6 FCPA settlements of all-time came out of this enforcement action and that does not even count the $147MM in disgorgement agreed to by Jeffery Tessler.

6.         Johnson and Johnson ($77MM)-enhanced compliance obligations, the new normal?-not only did J&J agree to implement a minimum best practices compliance program, it also agreed to “enhanced compliance obligations”.

7.         Maxwell Technologies ($14.3 MM) –start you day with a risk assessmentone of several cases where the DOJ specified some of the parameters of the risks you should assess to inform your compliance program. Further the implementation or enhancement of any anti-corruption compliance program should occur after and not before you complete your risk assessment. (Same holds true for the UK Bribery Act)

8.         SciClone ($2.5MM to date) or the plaintiff’s bar finds compliancenot an enforcement action but the settlement of a shareholder derivative action during the pendency of a FCPA investigation, where the company agreed to implement a best practices compliance program. Settlement of the enforcement action is yet to come.

9.         Tenaris ($8.9MM) or the SEC joins the DPA party-the first instance of the SEC entering into a Deferred Prosecution Agreement for the settlement of civil FCPA violations.

10.       Watts Water ($3.7MM) or it is a good thing to keep up with the news-the company’s General Counsel read about an enforcement action involving a non-related company in a different industry but with the same sales model as his company and wondered if it the same sales model might be a FCPA problem for his company. It was.

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, 2011

August 18, 2011

Stranger than Fiction: Questions in the FCPA World

I had intended to post Part II of my series the recent court rulings on instrumentalities. However, sometimes events overtake you. In the world of the Foreign Corrupt Practices Act (FCPA), some of the fact scenarios are so preposterous that if they were in a book, labeled as fiction, they would probably be placed on the Science Fiction shelf. I was reminded of the maxim that sometimes life is stranger than fiction when we saw the article “Lawyer for Mexico arm of US drugmaker Baxter recorded allegedly offering payment in lawsuitby reporter Ricardo Alonso-Zaldivar, in the Chicago Tribune’s August 17, 2011 edition. While I cannot say that the players came out of central casting, the facts certainly seem to have been dreamed up by a screen writer.

Alonso reported that a Chicago based US company, Baxter, is in litigation in Mexico with a local company Translog. Baxter alleges that Translog breached a contract for delivering certain time sensitive medical supplies. Translog alleges that Baxter breached the contract between the parties. Alonso reports that a trial lawyer for Baxter, Jorge Hernandez Martin, is alleged to have offered an expert, retained by Translog, Rafael Aspuru Alvarez money to “leave the country on a key court date to undermine the case”. At another point Alonso reports that Hernandez told Aspuru, “If you tell me, ‘You know I was going to charge 100,000 pesos (about $8,100),’ I’ll you double.”

All of the above was allegedly recorded by Aspuru during a meeting he held with Hernandez in February of this year. A Translog representative provided a copy of the recording to the Associated Press (AP). Hernandez is also reported to have said to Aspuru, “I told the company” presumably about the offer. Providing comment for article, a Baxter spokesman said to AP that “[Hernandez] now has absolutely no role in this matter or representing Baxter in any capacity.”

Inspired, as always by the FCPA Professor to question, question and question; we ask the following:

1.         Does the FCPA apply to judicial proceedings overseas?

2.         Is a private individual, who is an expert to assist a foreign court, a “foreign official” under the Act?

3.         Is such a private official an “instrumentality thereof” of a foreign government?

We could not find any FCPA enforcement actions relating to US lawyers involved in overseas litigation so there does not appear to be any case law, enforcement actions or Opinion Releases discussing this issue, we believe that US courts would find that the FCPA does apply to foreign judicial proceedings because you cannot get more ‘foreign government’ than a foreign country’s court system. We also believe that the Department of Justice (DOJ) would take the position that it does and give severe sanctions against an individual who attempts to use bribery to influence a foreign judicial proceeding. The FCPA Blog, in a post entitled, “Disorder in the Court” puts it more succinctly by noting, “judges, court clerks and others in the judicial system are ‘foreign officials’ under the U.S. Foreign Corrupt Practices Act. Bribing them can violate U.S. law and certainly violates local law.”

However, the FCPA requires an action “in order to assist such domestic concern in obtaining or retaining business for, or with, or directing business to, any person”. Right now all we have to go on is Alonso’s article. He reports that Baxter had a contract with Translog to have certain critical medical supplies shipped. Baxter alleges that Translog, after “running into financial problems” refused to make the shipments and Baxter was forced to use other shippers. Translog counters that it had an exclusive contract with Baxter and Baxter’s use of other shipping companies violates this exclusive contract. Alonso reports that the dispute is valued at $25 million. That certainly sounds like obtaining or retaining business.

Having opined that the answers to the above queries would be answered in the affirmative, is a private citizen, who provides a judge in a judicial proceeding “impartial technical advice” a private official under the FCPA?  Is this the ‘other’ referred to by the FCPA Blog? This is a closer question. In the US, an expert is generally viewed as one who can bring technical advocacy to a jury but an expert’s role may be different under the Mexican legal system. This difference might make such an expert a part of the Mexican judicial system and therefore covered by the FCPA.

So once again, unlike Socrates, we do not know the answers but at least we can pose some interesting questions. Sometimes I wonder if the FCPA Professor has to make up questions for his Final Examinations or he just reads the newspapers and get his ideas from the strange world of international business. The Baxter matter indicates that he only need look in the newspaper.

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, 2011

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