FCPA Compliance and Ethics Blog

May 20, 2011

Jonathan Marks Tweets and Why You Should Be On Twitter

Yesterday my Fraud Examiner colleague Tracy Coenen posted a blog entitled, “Why I’m quitting Twitter (and you should too)”. My blog today will set forth the reasons why the compliance practitioner should refrain from quitting Twitter, actively participate and why the greater compliance world benefits from participation from experts like Tracy Coenen. So Tracy, do not quit!

Twitter is an excellent resource for anyone in the compliance community. It provides real time reporting and more importantly excellent resources for the compliance practitioner. AND BEST OF ALL IT IS FREE!

Why should you participate on Twitter? My experience is that it is one of the most efficient ways to get your name out in the field you practice. Whether it is law, forensic accounting, finance or selling flowers, it does not matter. The key is to stay focused on your area of specialty. If you tweet about where you are or that you are the Mayor of some such place it will not assist you professionally.

What did I do? I began my social media journey focusing on Twitter. Beginning in January, 2010, I reposted every tweet I could find on the Foreign Corrupt Practices Act (FCPA). I did not post original content because I was learning the Twitter ropes and was not sure what to do. I stayed focused on the area of the FCPA which led to me being named in February as one of the Top 15 “Must Follows” in the area of Securities Law (FCPA) by Bruce Carton, author of the Securities Docket Blog and his list was posted in Compliance Week.

I then decided to see if I could begin to send articles to different blogs and websites for posting. I always send an email introducing myself and they all come back with something along the lines of the following, “We know who are and thanks for re-tweeting our tweets.” To date they have all said yes to me sending in a contribution for consideration. So I was able to make a name for myself through Twitter. Of course I had to follow up with substantive content and perhaps I could have sent blind submissions but Twitter was the tool which introduced me to the wider compliance world.

How else can one use Twitter to meet and develop substantive business? In December 2010, I noticed a tweet by Jonathan Marks where he mentioned that he had developed a 13-step action plan for FCPA compliance programs. I thought that this was an interesting item but there was no link to the document or information, so I took the direct approach and Direct Messaged Jonathan, on Twitter, to ask if he would be willing to share with us the 13-step action plan, which he was willing to do.

I met Jonathan (virtually) through LinkedIn and his hosting of the LinkedIn group ‘Fraud Pentagon.’ Through his profile I was able to discover Jonathan’s interesting professional journey, he is the Partner In-Charge of the Fraud, Ethics and Anti-Corruption practice at Crowe Horwath and has worked with the US Attorney’s office, the FBI, the IRS Criminal Investigation Division and US Customs officials during his career. Jonathan has also served as the Chief Audit Executive at several public companies and is a Certified Public Accountant, Certified Fraud Examiner and is certified in financial forensics.

I spoke to Jonathan to find out how he developed this plan and he told me that from his meetings with clients, on the issue of compliance over the years, he wanted to develop a non-legalistic approach that he could easily convey to clients. After the interview and his sharing of his 13-step program I wrote a blog about the program by which a company could review its FCPA compliance program, assess where the program is in terms of best practices, and then use the same action plan as a guide for implementing some or all of the best practices.

The response to the blog posting was so great that Jonathan wrote a White Paper on his 13-step program which I assisted him with some of the drafting. All of this happened because he tweeted about his 13-step program. In other words, one little tweet led to all of the above.

How does all of this relate to Ms. Coenen and her pronouncement? I say to Tracy, do not stop tweeting – WE NEED YOU. One other reason to continue to participate in Twitter is the absolute wealth of information that is available to any chosen profession. However, I can speak only to the compliance world and in that world there is significant information available to all AT NO COST. If you are in a company on a budget, and who is not, you can obtain the best practices of FCPA compliance, Bribery Act compliance, fraud and forensic accounting compliance by participating on Twitter. Tracy’s tweets are substantive and if she retweets someone else’s tweets, I am confident that it is substantive as well.

Twitter is but one tool and to any professionals a quiver of tools it is a significant and useful tool (did I mention that it is FREE?) for both marketing and research. I do agree with Tracy that I cannot point to one client I have obtained exclusively from Twitter. It is always some combination of Twitter/LinkedIn/Blogging/Speaking/White Papers and word of mouth. But it is a significant tool and, in my opinion, a tool that you should not forsake.

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

January 26, 2010

Spanning the Globe to Bring You…22 FCPA Indictments

For those of you (and we know who we are) who came of age in the 1960s, you will remember ABC’s “Wide World of Sports” and its iconic opening of “Spanning the Globe to bring you the thrill of victory and the agony of defeat” (I still ache for that ski jumper). The scope of last week’s arrest of the Foreign Corrupt Practices Act (FCPA) sting of the gun industry was truly “spanning the globe.”

From the arrest of 22 defendants to the scale of the undercover operation, the breadth and scope is unprecedented. While many details have not been released some information is coming out, with the identity of at least one of the FCPA sting operators having been released last week. As reported by Main Justice Richard Birdsong, a former vice president for international sales at Florida-based Armor Holdings, assisted the FBI in building the cases. Justice Department Criminal Division chief Lanny Breuer described the undercover operation as a “two-and-a-half-year operation”.

Equally broad in scope is the geographic reach of both the operation and the number of countries involved. As reported in the London Evening Standard on January 21, 2010, five British executives have been arrested after an undercover FBI operation into alleged attempted bribery of foreign government officials. Three of the British executives were named: Pankesh Patel, 43; David Painter, 56 and Lee Wares, 43. The remaining two British citizens have yet to be named but it was reported the information on their citizenship came out during last week’s court appearances. The City of London Overseas Anti-Corruption Unit was involved in executing seven search warrants in the UK on the day of the arrests.

As reported in the Jerusalem Post on January 23, 2010, four of the indicted individuals are known to be Israeli nationals. They are Ofer Paz, president and chief executive officer of Paz Logistics; Haim Geri, president of a Florida-based company that also serves as a sales agency. The remaining two Israeli citizens were identified as Israel Wissler and Yochanan Cohen. The January 19, 2010 edition of the Miami Herald even reported that one of the indicted defendants is from Peru, who has yet to be identified.

In addition to the variety of nationalities involved as defendants in this sting operation, the countries where search warrants were executed included the United States, the United Kingdom, and most probably the home countries of the Israeli and Peruvian defendants. As the sting claimed the bribes were for an African official and UN officials located in The Netherlands, in all likelihood some part of the sting operation occurred in Africa and in the Netherlands. For those of you counting that’s five of the Globe’s seven continents (that we are aware of—maybe Australia and Antarctica can join in as well), truly “spanning the globe”. With the Department of Justice announcing that it has 140 open overseas investigations, it will surely portend a greater FCPA global reach.

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For a viewing of the opening to ABC’s Wide World of Sports go to YouTube at http://www.youtube.com/watch?v=wNqps7GN7CA&feature=related
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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.

© Thomas R. Fox, 2010

January 19, 2010

EFFECTIVE COMPLIANCE TRAINING

Effective Compliance Training

“Conducting effective training programs” is listed in the 2005 Federal Sentencing Guidelines as one of the factors the Department of Justice will take into account when a company, accused of an FCPA violation, is being evaluated for a sentence reduction. The Sentencing Guidelines mandate states “(4) (A) The organization shall take reasonable steps to communicate periodically and in a practical manner its standards and procedures, and other aspects of the compliance and ethics program, to the individuals referred to in subdivision (B) by conducting effective training programs and otherwise disseminating information appropriate to such individuals’ respective roles and responsibilities.”

But what is an “effective training program”? Andrea Wrage has written in her blog Wragblog and Ethisphere Magazine that she believes there are two general approaches to ethics and compliance training. The first approach focuses on knowledge of the rules “as clear and sharp as barbed wire” so that the cowboys in the company will not run wild. This is the approach most US in-house lawyers feel is required for their company’s operations teams and is generally designed to help avoid criminal liability.

The second is to train on ethical values and is more prevalent in Europe where ethics and compliance are more designed to communicate a company’s underlying corporate values in its operations. This approach anticipates that most employees are decent and law-abiding and will not knowingly engage in bribery and corruption. Additionally, you can never create enough rules to govern every situation and train each employee on every rule so a company must hire trustworthy people and give them sufficient information to make the correct ethical and compliant decision. Ms. Wrage characterizes the two different approaches as “ethics” vs. “values”.

Both approaches have merit but both can catastrophically fail without the other components of an effective compliance program. Although it was not brought down by an FCPA violation, the Enron Code of Ethics was viewed (at least at one time) as one of the strongest in the energy industry. And not to focus on US companies only, Siemens had one of the most robust Codes of Ethics for a European company before its multi-billion dollar (or euro-take your pick) fine and profit disgorgement. So the training on both of these company’s “Gold Standard” codes of ethics did not turn out to be too helpful.

So what should a company’s training focus on to be “effective” under the Sentencing Guidelines? It appears that effective ethics and compliance training should emphasize both approaches. Americans are long taught what the rules are in whatever life they choose. They expect to be told what the rules will be so that they know where the line is drawn that they should not step over. Probably the single comment I have heard the most when putting on ethics and compliance training in the US is “Just tell me what I can and can’t do”. However, really effective training requires that employees be able to apply the rules to the incredibly wide and ever-changing situations which confront them in the real world. This is where communicating a company’s values are important. In other words, how would your conduct look if it was plastered on You Tube the next week?

This is the first of a two-part series on ethics and compliance training.

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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.

© Thomas R. Fox, 2010

January 11, 2010

Robert Kennedy, the Travel Act and the FCPA

Robert Kennedy, the Travel Act and the FCPA

What does Robert Kennedy have to do with the Foreign Corrupt Practices and how has a nearly 50 year old statute aimed at US based organized crime now impacted the FCPA? It turns out quite a bit and perhaps it will be quite a bit more in significantly widening the scope of the FCPA.

Robert Kennedy’s contribution is that while Attorney General, he urged Congress to enact the Travel Act in 1961 which was passed as part of the same series of bills as the Wire Act and was a part of his program to combat organized crime and racketeering. The Travel Act is aimed at prohibiting interstate travel or use of an interstate facility in aid of a racketeering or an unlawful business enterprise. It prohibits the use of communications and travel facilities to commit state or federal crimes, but until now was mostly known for its use in prosecutions for domestic crimes. Its impact to the FCPA is that the Travel Act applies to foreign as well as interstate commerce; it can be also used to prosecute those US companies and individuals which engage in bribery and corruption of foreign officials AND commercial bribery and corruption of private foreign citizens.

The Travel Act elements are: (1) use of a facility of foreign or interstate commerce (such as email, telephone, courier, personal travel); (2) with intent to promote, manage, establish, carry on, or distribute the proceeds of: (3) an activity that is a violation of state or federal bribery, extortion or arson laws, or a violation of the federal gambling, narcotics, money-laundering or RICO statutes. This means that, if in promoting or negotiating a private business deal in a foreign country, a sales agent in the United States or abroad offers and pays some substantial amount to his private foreign counterpart to influence his acceptance of the transaction, and such activity may a violation of the state law where the agent is doing business, the Justice Department may conclude that a violation of the Travel Act has occurred. For instance, in the state of Texas there is no minimum limit under its Commercial Bribery statute (Section 32.43, TX. Penal Code), which bans simply the agreement to confer a benefit which would influence the conduct of the individual in question to make a decision in favor of the party conferring the benefit. As noted below, the state of California bans payment of more than $1,000 between private parties for the purposes of influencing a business decision.

The Travel Act was most recently used when four executives of Control Components, Inc. (“CCI”) were indicted on April 8, 2009 for alleged violations of the FCPA’s anti-bribery provision and the Travel Act. According to the indictment, the defendants conspired to make hundreds of corrupt payments with the purpose of influencing the recipients to award contracts to CCI or skew technical specifications of competitive tenders in CCI’s favor. The Travel Act came into play as the DOJ alleged the CCI employees violated or conspired to violate California’s anti-bribery law (California Penal Code section 641.3), which bans corrupt payments anywhere of more than $1,000 between any two persons, including private commercial parties. In the indictments, the Travel Act charges relied on alleged violations of California’s anti-corruption law.

On July 31, 2009, CCI itself pleaded guilty to substantive FCPA anti-bribery charges and to conspiring to violate both the FCPA and the Travel Act. CCI admitted that, between 2003 and 2007, its employees made more than 150 corrupt payments, totaling approximately $4.9 million, to officials of state-owned enterprises in China, Korea, Malaysia, and the United Arab Emirates, and paid $1.95 million in bribes to officers and employees of foreign and domestic private companies in violation of the Travel Act. CCI agreed to pay a criminal fine of $18.2 million and to retain an independent compliance monitor for three years.

In July 31, 2009 Press Release announcing CCI’s guilty plea, the DOJ referenced the Company’s private overseas bribery. It said:

According to the information and plea agreement, from 1998 through 2007, CCI violated the FCPA and the Travel Act by making corrupt payments to numerous officers and employees of state-owned and privately-owned customers around the world, including in China, Korea, Malaysia and the United Arab Emirates, for the purpose of obtaining or retaining business for CCI. Specifically, from 2003 through 2007, CCI paid approximately $4.9 million in bribes, in violation of the FCPA, to officials of various foreign state-owned companies and approximately $1.95 million in bribes, in violation of the Travel Act, to officers and employees of foreign and domestic privately-owned companies. [DOJ Press Release: http://www.justice.gov/criminal/pr/press_releases/2009/07/07-31-09control-guilty.pdf

The CCI matter was not the first case to use the Travel Act in conjunction with the FCPA. As reported in the FCPABlog, is the mater of U.S. v. David H. Mead and Frerik Pluimers, (Cr. 98-240-01) D.N.J., Trenton Div. 1998. In this case defendant Mead was convicted following a jury trial of conspiracy to violate the FCPA and the Travel Act (incorporating New Jersey’s commercial bribery statute) and two counts each of substantive violations of the FCPA and the Travel Act. In its 2008 article entitled, “The Foreign Corrupt Practices Act: Walking the Fine Line of Compliance in China” the law firm of Jones, Day reported the case of United States v. Young & Rubicam, Inc., 741 F.Supp. 334 (D.Conn. 1990), where a Company and individual defendants pled guilty to FCPA and Travel Act violations and paid a $500,000 fine. In addition to the Mead and Young and Rubicam cases, the DOJ’s website on “A Lay Person’s Guide to the FCPA, specifically states that “other statutes such as the mail and wire fraud statutes, 18 U.S.C. § 1341, 1343, and the Travel Act, 18 U.S.C. § 1952, which provides for federal prosecution of violations of state commercial bribery statutes, may also apply…” to US companies doing business overseas. See: http://www.justice.gov/criminal/fraud/docs/dojdocb.html

What does this mean for US companies doing business overseas? The FCPA Professor and others have written extensively on the broadening of the definitions of who is a ‘foreign official’ and what is a ‘state owned entity’ under the FCPA. However with the incorporation of the Travel Act into FCPA prosecutions, these broad definitions may be completely blurred away if all foreign private citizens can be brought in under the FCPA by application of the Travel Act. US companies doing business overseas, which have a distinction in their FCPA compliance policies between gifts for and travel and entertainment of employees of private companies, and employees of state owned entities or foreign officials should immediately rethink this distinction in approach. The new decade is upon us the Kennedy-era statute of the Travel Act may become as relevant in overseas law enforcement in the 20-teens as it was in the domestic arena for the past 50 years.

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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.

© Thomas R. Fox, 2010

January 4, 2010

UTStarcom and Gifts and Entertainment Under the FCPA

To close out the FCPA year, on December 31 the telecom equipment maker UTStarcom Inc. agreed to pay the Justice Department $1.5 million in criminal fines and pay the SEC an additional $1.5 in penalties to resolve Foreign Corrupt Practices Act violations in China and Thailand. Other FCPA penalties were agreed to by the company.

As reported in the FCPABlog and the FCPA Professor last week, UTStarcom is alleged to have engaged in conduct which violated the FCPA which included:

1. Arranging and paying for travel to popular tourist destinations in the United States, including Hawaii, Las Vegas and New York City, when such trips were recorded as training expenses at UTStarcom facilities. However UTStarcom had no facilities in these areas. These trips included a cash allowance of between $800 and $3,000 per person.

2. Spending nearly $7 million lavish gifts and all-expenses paid executive training programs in the U.S. for existing and potential foreign government customers in China and Thailand.

3. Presenting expensive gifts to and engaging in entertainment with government agents such as nearly $10,000 on French wine, as a gift to agents of a government customer and spending $13,000 on entertainment expenses for the same customer in an attempt to secure business.

4. Providing foreign government customers or their family members with work visas and purportedly hiring them to work for UTStarcom in the U.S., when in reality they did no work for UTStarcom.

5. UTStarcom was also alleged to have made payments to sham consultants in China and Mongolia while knowing that they would pay bribes to foreign government officials.

Guidelines for Gifts and Entertainment under the FCPA

The UTStarcom matter provides an opportunity to review the application of the FCPA to gifts and business entertainment expenditures to foreign officials. While gift and business entertainment is an area open to vagueness under the FCPA as there are no clear guidelines in the FCPA itself or the legislative history, the conduct of UTStarcom goes far beyond anything that has been previously approved or discussed in any DOJ Release Opinions. While prohibiting payment of any money or thing of value to foreign officials to obtain or retain business, the FCPA arguably permits incurring certain expenses on behalf of these same officials. Under the FCPA, the following affirmative defense regarding the payment of expenses exists:

[it] shall be an affirmative defense [that] the payment, gift, offer or promise of anything of value that was made, was a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to…the promotion, demonstration, or explanation of products or services; or…the execution or performance of a contract with a foreign government or agency thereof. 15 U.S.C. § 78dd-1(c)(2)(A)-(B).

There is no de minimis provision. The presentation of a gift or business entertainment expense can constitute a violation of the FCPA if this is coupled with the corrupt intent to obtain or retain business. With the above in mind and DOJ Release Opinions, the following are suggested guidelines for gifts and business entertainment.

A. Gifts to Governmental Officials

Based upon the FCPA language and relevant Release Opinions (Opinions 81-01, 81-02 and 82-01), a Company can provide gifts up to an amount of value of $250. Below are the guidelines which the Release Opinions would suggest that a Compliance Policy incorporate regarding gifts:

• The gift should be provided as a token of esteem, courtesy or in return for hospitality.
• The gift should be of nominal value but in no case greater than $250.
• No gifts in cash.
• The gift shall be permitted under both local law and the guidelines of the employer/governmental agency.
• The gift should be a value which is customary for country involved and appropriate for the occasion.
• The gift should be for official use rather than personal use.
• The gift should showcase the company’s products or contain the company logo.
• The gift should be presented openly with complete transparency.
• The expense for the gift should be correctly recorded on the company’s books and records.

B. Business Entertainment of Governmental Officials

Based upon the FCPA language (there are no Release Opinions on this point), there appears to be a threshold that a Company can establish a value for business entertainment of up to the amount of $250. However this must be tempered with clear guidelines incorporated into the business expenditure component of a Compliance Policy, which should include the following:

• A reasonable balance must exist for bona fide business entertainment during an official business trip.
• All business entertainment expenses must be reasonable.
• The business entertainment expenses must be permitted under (1) local law and (2) customer guidelines.
• The business entertainment expense must be commensurate with local custom and practice.
• The business entertainment expense must avoid the appearance of impropriety.
• The business entertainment expense must be supported by appropriate documentation and properly recorded on the company’s book and records.

C. Travel and Lodging for Governmental Officials

A Company should be able to bring foreign officials into the United States for legitimate business purposes. Once again, a key component is guidelines clearly articulated in a Compliance Policy. Based upon Releases Opinions 07-01 and 07-02, the following should be incorporated into a Compliance Policy regarding travel and lodging:

• Any reimburse for air fare will be for economy class.
• Do not select the particular officials who will travel. That decision will be made solely by the foreign government.
• Only host the designated officials and not their spouses or family members.
• Pay all costs directly to the service providers; in the event that an expense requires reimbursement, you may do so, up to a modest daily minimum (e.g., $35), upon presentation of a written receipt.
• Any souvenirs you provide the visiting officials should reflect its business and/or logo and would be of nominal value, e.g., shirts or tote bags.
• Apart from the expenses identified above, do not compensate the foreign government or the officials for their visit, do not fund, organize, or host any other entertainment, side trips, or leisure activities for the officials, or provide the officials with any stipend or spending money.
• The training costs and expenses will be only those necessary and reasonable to educate the visiting officials about the operation of your company.

The incorporation of these concepts into a Company’s Compliance Policy is a good first step towards preventing any FCPA violations from arising, but it must be emphasized that they are only a first step. These guidelines must be coupled with active training of all personnel, not only on a Company’s Compliance Policy, but also on the corporate and individual consequences that may arise if the FCPA is violated regarding gifts and entertainment. Lastly, it is imperative that all such gifts and entertainment by properly recorded, as required by the books and records component of the FCPA. One of the FCPA violations alleged against UTStarcom was that it falsely recorded these trips as ‘training’ expenses, while the true purpose for providing these trips was to obtain and retain lucrative telecommunications contracts. All business gifts, entertainment and expenses must be properly recorded.

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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.

© Thomas R. Fox, 2010

December 31, 2009

2009-The Year of the Trial

2009 FCPA-The Year of the Trial

At the end of this year, many commentators have weighed in on the changes in enforcement under the Foreign Corrupt Practices Act (FCPA) over the past decade or the catastrophic increase in fines and disgorgement of profits over the past year. I believe that in the FCPA world 2009 will be remembered as the Year of the Trial. Here is a summary of the three FCPA enforcement actions which went to a full jury verdict this year and their outcomes.

A. Frederick Bourke

The first of the convictions was delivered on July 10, 2009, when Frederic Bourke was convicted of conspiring to violate the Foreign Corrupt Practices Act; the Travel Act and lying to FBI agents. The jury found that he invested in Czech-born promoter Viktor Kozeny’s unsuccessful attempt in 1998 to gain control of Azerbaijan’s state oil company, State Oil Company of the Azerbaijan Republic (SOCAR), despite knowing Kozeny planned to bribe Azeri leaders.

In its Press Release, the Department of Justice (DOJ) stated that evidence was presented at trial established that Bourke was a knowing participant in a scheme to bribe senior government officials in Azerbaijan with several hundred million dollars in shares of stock, cash, and other gifts. These bribes were meant to ensure that those officials would privatize SOCAR in a rigged auction that only Bourke, fugitive Czech investor Viktor Kozeny and members of their investment consortium could win, to their massive profit. [DOJ Press Release can be found at http://www.justice.gov/opa/pr/2009/July/09-crm-677.html%5D

On November 12, Bourke was sentenced by the trial judge, Shira Scheindin to a sentence of ‘a year and a day’, followed by three years of probation and a $1,000,000 fine. The government had sought a sentence of 10 years as” a deterrence to others”. At the Sentencing Hearing Judge Scheindin is reported to have said: “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.”

B. William Jefferson

On August 5, former nine-term congressman William Jefferson was convicted on 11 of 16 corruption charges. As reported in the FCPABlog, Jefferson was acquitted on Count 11 of the indictment — the only substantive FCPA charge he faced. But the jury convicted him on Count 1; which alleged three separate illegal conspiracies — to solicit bribes, deprive citizens of honest services and violate the FCPA. The jury’s verdict form did not require it to specify which of the three illegal conspiracies the panel believed he engaged in so Jefferson’s conviction on Count 1 may or may not have included a finding that he conspired to violate the FCPA. [DOJ Press release can be found at http://washingtondc.fbi.gov/dojpressrel/pressrel09/wfo111309b.htm ]

Jefferson was sentenced on November 14 to 13 years in prison by Judge T.S. Ellis. It is not clear if Judge Ellis used the FCPA-related conspiracy element to calculate Jefferson’s sentence as the jury acquitted Jefferson on the substantive FCPA charge but was convicted then on conspiracy to violate the FCPA. It may never be known. Jefferson is currently on bail pending his appeal. The DOJ had asked the trial judge for a sentence ranging from 27 to 33 years in prison.

C. Gerald and Patricia Green

The third FCPA related verdict was handed down on September 14, when Gerald Green and his wife Patricia were convicted of FCPA violations. According to the DOJ Press Release, during the period from 2002 through 2007, the Greens conspired with others to bribe the former governor of the Tourism Authority of Thailand (to the tune of $1.8MM) in order to acquire lucrative film festival contracts as well as other deals for the development of a Thai Privilege Card, a website, book, video, calendars and public relations services.

As reported in the FCPABlog on December 18, 2009, the Greens used different business entities, some with dummy addresses and telephone numbers, to hide how much they were receiving under the contracts. The jury found that Greens disguised the bribes as “sales commissions” and made the payments through foreign bank accounts of intermediaries in Singapore, the United Kingdom and Jersey, some in the name of the former governor’s daughter and a friend. [DOJ Press Release can be found at http://www.usdoj.gov/opa/pr/2009/September/09-crm-952.html.%5D

Sentencing was originally scheduled for December 17; however it has been rescheduled to January 21, 2010. The Pre-Sentencing Report was filed on December 14, 2009 and now the Justice Department now wants Gerald Green, aged 76, sentenced to life in prison. In a December 14 court filing, prosecutors said although the Pre-Sentence Report recommended a downward departure under the federal sentencing guidelines and a sentence of about 20 to 25 years, Green’s sentence should instead be enhanced. The DOJ alleged that Green was “the ring leader of the bribery plot” and said he “repeatedly and blatantly perjured himself” at his trial.

FCPA cases rarely go to trial. And even when they do, such trials rarely result in acquittals. There has not been an outright acquittal in an FCPA case since 1991. After this year, it may be that no individuals are willing to take their chances by putting their fate in front of a judge or jury for an FCPA charge. Why is it so difficult to win an FCPA case for an individual? I believe it comes down to two reasons.

The first reason relates to judges and the law. Trial judges and Courts of Appeal have not been friendly to technical legal arguments over the language of the FCPA. “What is a business nexus”; “who is a foreign official”; “what is obtaining or retaining business”, or the invocation of a “local law defense” have not received favorable rulings from courts. The second reason relates to juries and the facts. Juries do not take well to the payment of bribes. No matter how these payments are described, such as payments of over $1 million to intermediaries by the Greens, $90,000 in cash stuffed in a freezer in the Jefferson case, or, as in the Bourke case as related by the Jury Foreman, “we thought he knew” that bribery and corruption were involved in the business deal in which he was a participant, to the tune of an $8 million investment, but equally importantly “he definitely should have known”.

One of the first things one learns in law school is that “if the facts are against you argue the law” and “if the law is against you argue the facts”. However, in FCPA cases, it appears that individual defendants cannot seem to argue either way as there has been no favorable law (legal) ruling which may form the basis of legal defenses AND all FCPA cases involve large amounts of cash or money, so that the facts always look bad. So the lesson from 2009 is that a defendant should be very careful in weighing the benefits vs. the risk of an FCPA criminal trial.

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