On October 24, the SEC released a cease-and-desist order that resolves FCPA allegations against a Michigan-based medical technology company. The SEC alleged that the company’s subsidiaries in five different countries—Argentina, Greece, Mexico, Poland, and Romania—bribed doctors, health care professionals, and other government officials to obtain or retain business. The alleged activities involved approximately $2.2 million in direct payments, travel and conference expenses, and donations to a university associated with a foreign official made over a four-and-a-half year period. The SEC investigation found that the payments were incorrectly described as legitimate expenses in the company’s books and records and were described as, among other things, charitable donations, consulting and service contracts, travel expenses, commissions, and legal expenses. Without admitting the allegations, the company agreed to disgorge approximately $7.5 million in profits obtained through the alleged activities, and to pay a $3.5 million civil penalty plus an additional $2.3 million in pre-judgment interest.
On October 22, the DOJ and the SEC announced parallel criminal and civil actions against a U.S. company for allegedly violating the FCPA by paying bribes and falsifying documents in connection with selling ATMs to bank customers in China, Indonesia, and Russia. The federal authorities allege that from 2005 to 2010 the company provided approximately $1.8 million of value to employees of its bank customers in China and Indonesia, including state-owned banks, in the form of payments, gifts, and non-business travel. The company allegedly attempted to disguise the benefits by routing the payments through third parties designated by the banks and by recording leisure trips for bank employees as “training” expenses. The government also alleges that from 2005 to 2009, the company entered into false contracts with a distributor in Russia for services that the distributor was not performing. Instead, the distributor allegedly used the approximately $1.2 million in payments to bribe employees of privately-owned Russian banks to secure ATM-related contracts for the company. The company entered into a deferred prosecution agreement with the DOJ, agreeing to pay a $25.2 million penalty, and it consented to a final judgment in the SEC action, pursuant to which it will disgorge approximately $22.97 million, inclusive of prejudgment interest. The company agreed to implement numerous specific changes to its internal controls and compliance systems and to retain a compliance monitor for at least 18 months. The government acknowledged the company’s voluntary disclosure, cooperation, and extensive internal investigation.
On May 29, the DOJ and the SEC announced that a French oil and gas company will pay nearly $400 million to resolve allegations that the company made illegal payments through third parties to an Iranian official in exchange for oil and gas concessions. The penalty is the third largest FCPA penalty ever obtained by federal authorities. The company entered a deferred prosecution agreement to resolve one count each of (i) conspiracy to violate the anti-bribery provisions of the FCPA, (ii) violating the internal controls provision of the FCPA, and (iii) violating the books and records provision of the FCPA, as detailed in a criminal information filed in the Eastern District of Virginia. Pursuant to the DPA, the firm will pay a $245.2 million penalty, cooperate with the DOJ and foreign law enforcement to retain an independent corporate compliance monitor for a period of three years, and continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations. A separate SEC Order resolves parallel civil charges and requires, among other things, that the company to disgorge $153 million in illicit profits.
The Supreme Court recently sharply narrowed the potential application of the Alien Tort Statute (ATS), which allows foreign plaintiffs to bring civil actions in U.S. district courts for torts committed in violation of the law of nations or a treaty of the United States. Kiobel v. Royal Dutch Petroleum Co., No. 10-1491, 2013 WL 1628935 (Apr. 17, 2013). Foreign plaintiffs traditionally have sought to use the ATS to hold firms liable for alleged human rights abuse committed by foreign governments. Here, a district court dismissed several claims brought by Nigerian nationals who alleged that several non-U.S. oil companies had aided and abetted the Nigerian government in committing human rights violations. On interlocutory appeal, the Second Circuit dismissed the entire complaint, reasoning that the law of nations does not recognize corporate liability. The Supreme Court unanimously affirmed on different grounds, focusing on when courts can recognize a cause of action under the ATS for violation of the law of nations occurring in a non-U.S. sovereign territory. The Court held that the presumption against extraterritorial jurisdiction applied to claims under the ATS, and nothing in the statute rebutted that presumption; even where claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application, which requires more than mere corporate presence. The Court’s ruling further limits the risk that foreign plaintiffs might expand ATS claims into new industries, including by bringing claims against financial institutions for global financial crime such as fraud and money laundering, or for financing projects during which alleged human rights abuses are committed.
On April 9, New York Governor Andrew Cuomo announced legislation to broaden the scope of public corruption crimes and enhance enforcement. The law would add and increase penalties for individuals found to have misused public funds and permanently bar those convicted of public corruption offenses from (i) holding any elected or civil office, (ii) lobbying, (iii) contracting, (iv) receiving state funding, or (v) doing business with New York, directly or through an organization. The new crimes would include bribery of a public servant, corrupting the government, and failure to report public corruption. The law also would create new penalties for certain offenses, such as fraud, theft, or money laundering, if the offense involves state or local government property. Finally, the law would extend the statute of limitations that would apply for non-government employees working in concert with government employees, and would limit the immunity available to a witness who testifies before a grand jury investigating fraud on government or official misconduct, allowing authorities to prosecute such a witness if the prosecutor develops evidence other than, and independent of, the evidence given by the witness.
On February 19, the U.S. District Court for the Southern District of New York held that the SEC’s allegations of personal jurisdiction over a former CEO of Siemens’ Argentinian subsidiary – a German citizen with no direct ties to the United States – were “far too attenuated from the resulting harm to establish minimum contacts,” and dismissed the case against him for lack of personal jurisdiction. SEC v. Sharef, No. 11-Civ-9073, 2013 WL 603135 (S.D.N.Y. Feb. 19, 2013). In the underlying case, the SEC alleged that, between 1996 and 2007, Siemens employees approved and paid millions of dollars of bribes to Argentinian government officials throughout the life of a contract with the Argentine government, during the renegotiation of that contract, and during an arbitration proceeding after the contract was canceled. The SEC alleged that the CEO participated in the renegotiation of the contract and “pressured” the CFO to approve the bribes. Applying the due process requirements of minimum contacts and reasonableness set forth in International Shoe v. Washington, 326 U.S. 310 (1945), the court reasoned, “[i]f this Court were to hold that [the CEO’s] support for the bribery scheme satisfied the minimum contacts analysis, even though he neither authorized the bribe, nor directed the cover up, much less played any role in the falsified filings, minimum contacts would be boundless.” This decision follows another recent decision in the Southern District of New York regarding personal jurisdiction over foreign FCPA defendants. In that case, the court reached the opposite outcome and found that the SEC had alleged personal jurisdiction because the defendants’ alleged conduct was “designed to violate” U.S. securities laws and thus was “directed toward the United States.” SEC v. Straub, No. 11-Civ-9645, 2013 WL 466600 (S.D.N.Y. Feb. 8, 2013). In Sharef, the court distinguished Straub on the basis that the individuals orchestrated a bribery scheme, “and as part of the bribery scheme signed off on misleading management representations to the company’s auditors and signed false SEC filings.”
On October 9, the United Kingdom Serious Fraud Office (SFO) issued policy statements and frequently-asked-questions (FAQs) with regard to: (1) facilitation payments, (2) hospitality and gifts, and (3) self-reporting. While the bulk of the guidance reasserts existing policies, the SFO did revise its guidance on self-reporting. The new guidance makes clear SFO’s position that self-reporting will not always shield a company from prosecution. The fact that a corporate body has reported itself will be a relevant consideration if it forms part of a “genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice.” A decision by the SFO to prosecute will be based on the Full Code Test in the Code for Crown Prosecutors, the joint prosecution Guidance on Corporate Prosecutions and, where relevant, the Joint Prosecution Guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010. As explained in the FAQs, the revised statement of policy is not limited to allegations involving overseas bribery and corruption, and if the requirements of the Full Code Test are not established, the SFO may consider civil recovery as an alternative to a prosecution.
On March 29, the United Kingdom’s Financial Services Authority (FSA) published the findings of its thematic review into anti-bribery and corruption systems and controls in U.K.-based investment banks. The FSA review also looked at related topics including (i) gift-giving practices and controls, (ii) staff recruitment and vetting, (iii) training, and (iv) incident reporting. The FSA report concludes that the U.K. investment banking sector has been too slow and reactive in managing bribery and corruption risk, and that substantial work remains. In response, the FSA published proposed revisions to its regulatory guide, “Financial crime: a guide for firms.” The FSA proposes to update Chapters 2 and 6 of Part 1 of the guide, with new guidance and examples of good and poor practice drawn from the report findings. The FSA also proposes to include a new Chapter 13 in Part 2 of the guide, which will consolidate all examples of good and poor practice highlighted in the thematic review. Stakeholders can submit comments on the proposed revisions through April 29, 2012.