Tuesday, February 15, 2011

Grand Juries Are Not For Trial Preparation

In a case pending and set for trial in March in the Central District of California, with allegations of FCPA and money laundering violations, DOJ prosecutors are seeking to start another grand jury investigation of the defendants. Lawyers for the defendants cried foul and moved to quash five subpoenas calling for testimony today. As a result, the federal judge presiding over the case imposed stringent conditions on any use of the grand jury by DOJ prosecutors. 

A grand jury is not to be used for "strengthening [a] case on a pending indictment or as a substitute for discovery." (Beasley, Simels, Arthur Andersen).  Prosecutors claimed that their purpose in questioning these witnesses, all current employees of the company under indictment, was for a "new" investigation. Interestingly, the filings show that this "new" grand jury investigation came immediately after DOJ prosecutors were denied access to the employees for pre-trial, witness preparation interviews.

Defense lawyers Jan Handzlik and Janet Levine also argued that the DOJ prosecutors were "manufacturing" a new investigation to create reasons to postpone the trial, set for March 29th. They suspected the government would seek a superseding indictment leading to a trial continuance. Prosecutors disagreed and filed an under seal, in camera declaration to justify the new investigation.

US District Judge Howard Matz denied the defense motion to quash the grand jury subpoenas, but issued an order that handed the DOJ prosecutors what some of us consider to be a stinging defeat. He placed conditions on what the government could do if it chose to proceed with its "new" investigation, stating in part:

(1) At the upcoming trial, the Government may not proffer or refer to any newly obtained evidence derived from the testimony of any witness before any grand jury session conducted after the return of the First Superseding Indictment on October 21, 2010. . . .

(2) The Government may not, and shall not, question any witness about any business and financial relationship that the [defendant ] Company had with [other individuals and entities named in the pending indictment]

(3) The Government may not, and shall not, question any witness about any of the other events that directly form the basis for the charges contained in the first superseding indictment.

(4) The Government shall file under seal a transcript or transcripts of the grand jury testimony it obtains from the aforementioned witnesses, and it shall do so by not later than one week before the start of trial, and

(5) The Government may not point to or rely on whatever evidence it obtains at the upcoming grand jury sessions to seek or obtain a continuance of the trial date.

Defense counsel in this case are Jan L. Handzlik (Greenberg Traurig LLP) and Janet I. Levine (Crowell Moring).

See Court's Order - Download Matz min order re GJ

See also Richard Cassin, FCPA Blog, Sparks Fly Before LA Trial


February 15, 2011 in Defense Counsel, FCPA, Grand Jury, Investigations, Judicial Opinions, Money Laundering, Prosecutors | Permalink | Comments (1) | TrackBack (0)

Friday, January 7, 2011

Bill Black Sounds The Toscin: Whatever Happened To Prosecuting Real Fraud?

Okay, let me take off my white collar defense attorney hat and put on my former prosecutor hat for a minute. Call it my citizenship hat. Don't most of us want real, unadulterated big-time crooks to be investigated and, where appropriate, charged? Where are all the investigations and prosecutions of the accounting control fraud that caused one of the greatest recessions in U.S. history? You know, the current recession. 

Back in the late 1980s, when the S&L Crisis hit and the Dallas-based S&L Task Force was formed, federal law enforcement officials quickly realized that, in many instances, colossal fraud had been committed by the very players who controlled the S&Ls. The S&L fraud was overwhelmingly based on sham transactions and sham accounting for those transactions. Massive resources were committed to investigating and prosecuting the S&L fraud. It was understood that the crooked players had hijacked their S&Ls and defrauded depositors and/or the FSLIC. This rather elementary distinction between the savings and loan as an institution and the fraudsters who controlled it was grasped by AUSAs and effectively conveyed to juries across the land.

Nothing like this is happening today with respect to the federal government’s investigation of the housing bubble, liars’ loans, and Wall Street's subprime lending scandal. The overwhelming number of investigations and prosecutions seem to be focused on piker fraudsters—corrupt individual borrowers or mortgage brokers. These cases are easy pickings, but do not get to the massive fraud that clearly permeated the entire financial system.

Professor William Black, of Keating Five fame, has written a scathing piece all about this for the Huffington Post. Here it is. Among Black's revelations? "During the current crisis the OCC and the OTS - combined - made zero criminal referrals." Astounding. These two agencies accounted for thousands of criminal referrals per year during the S&L Task Force years. More fundamentally, Black argues that today's federal prosecutorial authorities do not comprehend that individuals in control of an institution can have an incentive to engage in short-term fraud that enriches them individually while destroying the long-term prospects of the institution and the larger economy.

Nobody should be charged with a white collar crime unless the crime is serious and the prosecution believes in good faith that a jury will find guilt beyond a reasonable doubt. But how about a substantive investigative effort, including commitment of appropriate resources? Why are such huge resources being spent on dubious endeavors like insider trading and FCPA enforcement, while elite financial control fraud goes largely unaddressed? Professor Black's piece is highly recommended reading.


January 7, 2011 in Current Affairs, FCPA, Fraud, Insider Trading, Investigations, Mortgage Fraud, Prosecutions, Prosecutors, Scholarship, Securities | Permalink | Comments (0) | TrackBack (0)

Friday, October 1, 2010

NACDL's 6th Annual Defending the White Collar Case Seminar – “Passport, Please: Defending in an International Enforcement Climate,” Friday, October 1, 2010

Guest Blogger: Ellen C. Brotman, Partner, White Collar Crime & Government Investigations Department, Montgomery McCracken Walker & Rhoads (Philadelphia, PA)

Moderator: Abbe David Lowell

Panelists: Peter Binning, Charles E. Duross, Linda Friedman Ramirez, Mark F. Mendelsohn, Barry J. Pollack and David Schertler

It’s a small world after all and the last panel of the conference: “Passport, Please: Defending in an International Enforcement Climate” demonstrated the complexity of defending multi-national corporations and their officers in the new global business environment.  There were a lot of familiar themes with some unfamiliar twists and they were all revealed through the discussion of the hypo, summarized here:

Zurich Auto is a Swiss company that produces parts for customization of high-end automobiles.  It is headquartered in Zurich with an office in Amaz, the capital city of a very wealthy oil-producing country called Petrastan.  For its sales in Petrastan until 2008, the officials in the Petrastan Transportation Ministry added a 10% fee to Zurich’s invoices and then collected that fee from a separate bank account, set up with the help of Zurich Auto’s agent in Amaz, Barack Peres.  Barack has his own company, Barack Supplies, established in the Emirates of Tamir (E.T.) where Peres is a citizen.  He is also a dual citizen of France.  Peres made all the arrangements for the 10% fee being paid and was paid bonuses by Zurich Auto based on total sales he was able to arrange in this system.  In addition, Peres had some side arrangement with Petrastan officials where they exchanged gifts from time to time (e.g., vacation, jewelry, dinners, spending money).  Swiss law and French law make it illegal for anyone to pay a bribe or inducement to a public official in exchange for any official action and Swiss law requires Swiss companies to report accurately to Swiss tax and other authorities the revenue and expenses it collects and pays.  Zurich Auto never reported the additional 10% as income.

In 2007, the U.S. company U.S. Motors, a vehicle manufacturing company, acquired Zurich Auto.   As soon as U.S. Auto became aware of the 10% program in 2008, it stopped making such payments but, at the direction of its CFO Thomas Turner, it never reported on any of its S.E.C. or other filings either the payments that had been made by its now subsidiary before or after the acquisition.   In 2010, a Wall Street Journal articles revealed the long-standing 10% fee program that had been occurring on all products sold in Petrastan and mentioned Zurich Auto as one of two dozen companies involved.

The panel’s moderator, Abbe Lowell, acted as GC of U.S. Motors and reviewed with the panel the various issues that can come up, including: When do you go to the government and tell them you are aware of the problem? What do you tell them you’re doing about it? What is the scope of your document preservation letter, and who sends it? Do you conduct an internal investigation and do you include in house counsel? How does the issue of successor liability enter into your analysis? How do you account for the possibility of a whistleblower to the SEC? When do you have to make a decision about issuing a new SEC filing relating to material risk?

As is often the case here at the White Collar Conference, we had a representative from the Justice Department on the panel who emphasized that publicity about an FCPA problem of this nature would surely capture their attention and necessitate a phone call to the company if they hadn’t heard from them by Monday morning.  An interesting point made here was that any delay in contact would create a suspicion of the possibility of obstruction.

After a discussion of the corporate exposure, we turned to the issues facing the individuals: the seller of the company, the CFO of U.S. Autos and the agent in the foreign country.  This discussion raised the following issues:  Is the seller of the company still on the hook? And is he better off dealing with law enforcement authorities, in Switzerland or the U.S.?  We also turned to the ubiquitous question of who’s paying the individual’s bills because, of course, these individuals have exposure and need separate counsel.  This part of the discussion raised some familiar questions about joint defense agreements and advancement of fees, and whether outside counsel still have concerns that these arrangements won’t be perceived well by DOJ and may not be in the company’s best interests.  The DOJ representative denied that these factors would be taken into account, but it seemed to me that other panelists did not feel as sure.

The discussion then turned to some of  the specific issues created by the multi-national nature of the company and the investigation, including: Will the Swiss company and US Auto work together in gathering evidence? Is there a greater ability to protect documents in Europe, and can that be used to an American company’s advantage? An interesting comparison of punitive consequences was also briefly discussed.

The last topic that was discussed was the representation of foreign individuals, and whether and how to negotiate the service of any period of incarceration in their home countries.  The panel agreed that prisoner transfer issues can sometimes be worked out ahead of time, but it can’t happen until one’s client is in BOP custody.  At DOJ, the Office of Enforcement Operations is in charge of prisoner transfer operations, but an attendee noted that, as in many other situations, the agreement of the line assistant to these arrangements is critical.

This closes out another great NACDL conference on white collar issues.  To purchase the audio recording of this program, click here.  For more information, visit NACDL's White Collar page here.  


October 1, 2010 in Conferences, FCPA | Permalink | Comments (0) | TrackBack (0)

Monday, September 20, 2010

Dodd-Frank FCPA Whistleblowers: The Coming Wave

Take the FCPA, add in expansive new whistleblower protections, start employing the willful blindness doctrine with abandon, and presto! You've got a real growth industry on your hands.

The new whistleblower provisions in the Dodd-Frank Act should significantly increase federal civil and criminal fraud enforcement actions in the coming years. Whistleblowers will now be able to reap potentially huge monetary rewards for the timely reporting of corporate fraud to the SEC and CFTC, if recoveries of over a million dollars are made by those entities, the DOJ, or other regulators. Under Dodd-Frank, the pool of qualified whistleblowers has been enlarged and there is no requirement that whistleblowers file qui tam actions in order to be compensated for their information.

Expect to see exponential growth in the already burgeoning area of FCPA enforcement, fueled by new whistleblower activity. Recall that the FCPA is a creature of the securities fraud statutes, and is therefore within the SEC's purview. 

All of this and more is detailed in my friend Michael E. Clark's excellent new article in the September issue of ABA Health eSource, Publicly Traded Health Care Entities at Risk from New SEC Whistleblower Incentives and Protections in Dodd-Frank Act. Clark is with Duane Morris's Houston office. As with all ABA publications, Mike's article may not be copied or disseminated, in whole or in part, in any form or by any means, or downloaded or stored in an electronic database or retrieval system, without the express written consent of the American Bar Association.


September 20, 2010 in Civil Enforcement, Congress, Current Affairs, FCPA, Fraud, Qui Tam, SEC | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 7, 2010

Snamprogetti Netherlands B.V. to Pay $240 Million in FCPA Resolution

A press release of the DOJ advises that "Snamprogetti Netherlands B.V., (Snamprogetti) has agreed to pay a $240 million criminal penalty to resolve charges related to the Foreign Corrupt Practices Act (FCPA) for its participation in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement and construction (EPC) contracts..."  The company entered into a deferred prosecution agreement in the Sothern District of Texas. The press release states that:

Under the terms of the deferred prosecution agreement, the department agreed to defer prosecution of Snamprogetti for two years. Snamprogetti, its current parent company, Saipem S.p.A., and its former parent company, ENI S.p.A. (ENI), agreed to ensure that their compliance programs satisfied certain standards and to cooperate with the department in ongoing investigations. If Snamprogetti and its current and former parent companies abide by the terms of the deferred prosecution agreement, the department will dismiss the criminal information when the term of the agreement expires.


July 7, 2010 in FCPA | Permalink | Comments (0) | TrackBack (0)

Thursday, March 18, 2010

Innospec - FCPA Plea - But Hats Off to Hon. Ellen Segal Huvelle

The DOJ reports that "Innospec Inc., a Delaware corporation, pleaded guilty today to defrauding the United Nations (UN), to violating the Foreign Corrupt Practices Act (FCPA) and to violating the U.S. embargo against Cuba."  The plea was to a "12-count information charging wire fraud in connection with Innospec’s payment of kickbacks to the former Iraqi government under the UN Oil for Food Program (OFFP), as well as FCPA violations in connection with bribe payments it made to officials in the Iraqi Ministry of Oil. Innospec also admitted to selling chemicals to Cuban power plants, in violation of the U.S. embargo against Cuba." The company agreed to pay $14.1 million and to retain an independent compliance monitor. It is interesting to see that the British subsidiary also plead guilty today in London and Innopec Ltd "will pay a criminal penalty of $12.7 million."  It is also interesting to see the international cooperation in securing this result.

Innospec has a "Foreign Corrupt Practices Act Policy" online that is dated February 2010.  

But Christopher Matthews. Main Justice, has an interesting story titled, Judge Blasts Compliance Monitors at Innospec Plea Hearing.

Many cases have deferred prosecution or non-prosecution agreements that allow the DOJ to oversee much of what happens, putting the companies at a disadvantage (see here).  But it is nice to see, here, in this plea agreement that the judiciary is questioning the costs of compliance monitors.

See also The FCPA Blog here


March 18, 2010 in FCPA | Permalink | Comments (0) | TrackBack (0)

Sunday, February 14, 2010

Former Wilbros Execs

Two former executives of Wilbros were sentenced with one receiving 15 months and the other 12 months. The case arose under the FCPA (see DOJ Press Release here) and involved alleged bribes in Nigeria.  These two individuals plead to one conspiracy count but had guidelines exposure higher than the amount given to them. Most likely substantial assistance proved important to these former executives. Mark Weinhardt represented one of the individuals in this case.

See also Jesse Sunenblick, Main Justice, Former Willbros Executives Sentenced for Nigeria Bribery Scheme; Mary Flood, Houston Chronicle, Former Willbros executives get prison in bribery case; FCPA Blog,  Prison for Ex-Willbros Execs


February 14, 2010 in FCPA, Sentencing | Permalink | Comments (0) | TrackBack (0)

Sunday, January 3, 2010

End of Year Deal - UTStarcom on FCPA

DOJ Press Release, UTstarcom Inc. Agrees to Pay $1.5 Million Penalty for Acts of Foreign Bribery in China states:

"UTStarcom Inc. (UTSI) has entered into an agreement with the Department of Justice, agreeing to pay a $1.5 million fine for violations of the Foreign Corrupt Practices Act (FCPA) by providing travel and other things of value to foreign officials, specifically employees at state-owned telecommunications firms in the People’s Republic of China."


"In a related matter, UTSI reached a settlement today with the U.S. Securities and Exchange Commission under which it agreed to pay an additional $1.5 million penalty and satisfy additional obligations for a period of four years."

See also David Barboza, NYTimes, Telecom Company to Pay $3 Million in China Bribe Case


January 3, 2010 in Deferred Prosecution Agreements, FCPA | Permalink | Comments (0) | TrackBack (0)

Thursday, December 3, 2009

Site for Anti-Bribery Information

Interesting site - TRACE Compendium that catalogs Anti-Bribery Compliance Worldwide.  See here


December 3, 2009 in FCPA | Permalink | Comments (0) | TrackBack (0)

Friday, November 13, 2009

Breaking News: William Jefferson Sentenced to 13 Years

Guest Blogger:  Tiffany M. Joslyn, National Association of Criminal Defense Lawyers (NACDL)

U.S. District Judge T.S. Ellis III has sentenced ex-congressman William Jefferson to 13 years in prison for his conviction on 11 counts of public corruption. See breaking news coverage below:

Bruce Alpert, Times-Picayune, William Jefferson sentenced to 13 years in prison

Matthew Barakat, The Washington Post (AP), Ex-congressman gets 13 years in freezer cash case

John Bresnahan, Politico, William Jefferson gets 13 years in prison


November 13, 2009 in Congress, Current Affairs, FCPA, Money Laundering, RICO, Sentencing | Permalink | Comments (1) | TrackBack (0)

Thursday, November 12, 2009

Year & A Day in FCPA Case - But Will It Hold on Appeal?

Guest Blog - Matthew Reinhard, Miller & Chevalier Chartered

Lost in this week’s maelstrom of white collar activity – the acquittal of the Bear Stearns bankers, the accusations that Blackwater bribed Iraqi officials, and the sentencing of former Congressman Jefferson this Friday – was the sentencing of handbag mogul turned would-be Caspian petroleum mogul Frederic Bourke. Convicted earlier this summer of conspiring to violate the Foreign Corrupt Practices Act ("FCPA") and making false statements to the FBI in connection with his investment in a consortium attempting to purchase the Azerbaijan state-owned oil company ("SOCAR"), Bourke’s trial was straight out of Hollywood and included testimony from a former U.S. Senator, allegations of suitcases full of cash changing hands, and an alleged co-conspirator nicknamed the "Pirate of Prague" who is currently fighting extradition from his estate in the Bahamas while freely admitting he bribed Azeri officials.

Judge Shira Scheindlin, of the Southern District of New York, sentenced Bourke to a year and one day (the "one day" being important in that it will allow Bourke to receive good behavior credit if he is ever incarcerated) and fined him $1 million. Any confinement in a federal prison is something to be avoided at all costs, but the 366 days doled out by the court is far less than the 10-year sentence prosecutors were seeking and could signal the court’s doubts about Bourke’s ultimate culpability. While any appeal from a jury verdict presents enormous challenges, I like Bourke’s odds at this point.

Bourke’s appeal will squarely frame important evidentiary issues concerning how the government must prove knowledge and, thus, intent, in FCPA and white-collar conspiracy contexts. The Government’s allegations against Bourke notably did not claim that Bourke himself paid bribes. Rather, the Government charged that, as an investor in a consortium attempting to gain control of SOCAR, Bourke had knowledge of the conspiracy’s "unlawful purpose" (i.e., to bribe Azeri officials). However, not only did the Government not charge Bourke with actually making the bribes, it set out to prove Bourke’s "knowledge" for the purpose of the conspiracy not by showing that he had "actual" knowledge of the unlawful purpose, but that he "consciously avoided" gaining actual knowledge – essentially that Bourke stuck his head in the sand to avoid "knowing" that he was engaging in a criminal enterprise.

The Government did not create the "conscious avoidance" standard out of whole cloth. Indeed, it is defined within the FCPA’s broader knowledge standard, which states that "when knowledge of the existence of a particular circumstance is required for an offense, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless he actually believes the circumstance does not exist." 15 U.S.C. § 78dd-1(f)(2)(B) (2004) (emphasis added). When the government indicated its intention to travel on this standard, Judge Scheindlin appropriately ruled that to prevail on such a theory the Government would need to prove that Bourke decided not to learn a key fact, not that he was merely negligent in failing to learn it. To a lay-person (and perhaps even to many lawyers) that may seem like a tough distinction to make, but it is also the bright line that separates civil liability from criminal activity.

This distinction quickly became an issue during and after Bourke’s trial. During trial the court admitted testimony and evidence from the Government about Azeri officials’ general reputation for corruption, and conversations between Bourke and other investors regarding concerns that the head of the investor consortium was paying bribes. In objecting to this evidence Bourke’s lawyers specifically noted that the evidence could confuse the jury into believing that the "conscious avoidance" standard is the same as the "should have known" negligence standard. Such fears appear well founded. Interviewed after the verdict, the jury foreman sounded as if he was reading from a tort-law hornbook when he dismissed the need for the court to have even given the "conscious avoidance" instruction, stating: "We thought he knew and he definitely should have known. He’s an investor. It’s his job to know." See Entrepreneur Is Found Guilty of Conspiracy in Azerbaijan, Mark Hamblett, New York Law Journal, July 13, 2009 (emphasis added). That is a clear enunciation of the negligence standard, but it is notably not the "conscious avoidance" standard. I expect Bourke’s attorneys to include a judicially-appropriate re-phrasing of "we told you so" in their appeal briefs.

Next, at sentencing, Judge Scheindlin provided Bourke’s counsel with even more ammunition for appeal. In sentencing Bourke, Judge Scheindlin observed that: "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." That sounds a lot like reasonable doubt to my ears. Judge Sheindlin obviously did not feel she had enough to overturn the jury verdict on a Motion for Judgment of Acquittal ("MJOA"), but when a sentencing judge says she is not sure whether a defendant is a "victim or a crook" that must raise substantial questions about the quality of the Government’s evidence.

This case may ultimately be proof that the road to Hell is paved with good intentions. Few would disagree with Judge Scheindlin’s admonition that "[b]ribes must and will result in jail sentences." Nonetheless, the Bourke case will now force the influential Second Circuit Court of Appeals to pass on the appropriate knowledge standard in FCPA and white-collar conspiracy cases, and what evidence can be used to prove that "knowledge." However, given the number of close facts, the apparent skepticism of the trial judge, and the confusion evidenced (perhaps unwittingly) by the jury itself, many observers may rightfully be left wondering whether this is really the case where the Government wants test these theories. We all know that jury verdicts are notoriously difficult to overturn on appeal, but I like Bourke’s chances here.

* For a terrific in-depth analysis of the "conscious avoidance" standard, as well as other important FCPA issues that arose during the Bourke trial, see the article written by my colleague, James Tillen, for Bloomberg Law Reports.


November 12, 2009 in FCPA, Sentencing | Permalink | Comments (0) | TrackBack (0)

Thursday, October 1, 2009

NACDL's 5th Annual Defending the White Collar Case Seminar - "Keynote Address: Lanny A. Breuer, Assistant Attorney General, Criminal Division, U.S. Department of Justice," Thursday, October 1, 2009

Guest Blogger:  Ivan J. Dominguez, Assistant Director of Public Affairs & Communications, National Association of Criminal Defense Lawyers

Keynote Address:  Lanny A. Breuer, Assistant Attorney General, Criminal Division, U.S. Department of Justice*

Assistant Attorney General of the Criminal Division Lanny A. Breuer traveled from Washington, D.C., to deliver a lunchtime address to NACDL’s 5th Annual White Collar Seminar at Fordham Law School in New York City.

Breuer, who was confirmed almost six months ago, repeatedly emphasized his admiration for the professionalism and commitment of career prosecutors. He shared his perspective that, as a general proposition, career law enforcement officials have an “abiding commitment to the highest standards of ethical conduct.” He also told of how he recently returned from Mexico City where he met with a U.S. resident legal adviser and said that it is his goal to meet all resident legal adviserss around the world. 

The focus of his talk was an overview of some of the DOJ’s, and specifically the Criminal Division’s, law enforcement priorities, stating that “the risks we face from white collar criminals have never been greater.” This is so, he said, because of the ever-growing sophistication of white collar criminals combined with a financial intervention by the government “on a massive scale…unparalleled in our history.”  “We’ve already seen egregious instances of fraud and abuse on the road to [economic] recovery,” he said.

Breuer specifically identified the “unprecedented amounts” that Congress has made available to facilitate recovery as giving rise to the government’s focus here. Indeed, he further explained that Congress has expressed its concern that government be vigilant as it guards against those who would take advantage of the $787 billion American Recovery and Reinvestment Act. In order to accomplish its goals in the face of these challenges, Breuer explained that his mantra is that the Department be “smart, nimble and focused” in fighting white collar crime. Specifically, throughout his speech he emphasized (i) the importance of interagency cooperation and collaboration and (ii) the value of using vast storehouses of data to drive the Department’s work.

Breuer also individually explored the following “white collar crime priorities”: health care fraud, financial fraud (including mortgage fraud) and public corruption.

On the topic of health care fraud, which he called “particularly severe,” Breuer said that much of the $800 billion dollars per annum that the government spends on Medicare and Medicaid is lost to “waste, fraud and abuse,” which he estimated at a minimum of 3% of those expenditures. In this context, interagency efforts are being pursued in what he characterized as an “innovative, data driven approach.” For example, pointing to multiple recent indictments in Detroit, Mich., he said that government investigation is driven by data such as information about which geographic areas have higher Medicare billing. He promised that such enforcement action will be spreading to new cities, explaining that government data shows that Medicare billings go down after the strike force goes into cities.

“Nowhere do you see [interagency] collaboration as much as in [financial fraud] arena,” Breuer said. In the area of mortgage fraud, he said that the Department is focused on those exploiting the most vulnerable homeowners among us.” He pointed to the National Mortgage Fraud team’s access to a “warehouse” of FBI data to aid in their work, explaining that the team at the FBI has developed sophisticated techniques with the data and that law enforcement is using this intelligence to combat mortgage fraud in “a very targeted” way.

Continue reading

October 1, 2009 in Conferences, Current Affairs, FCPA, Forfeiture, Fraud, Investigations, Mortgage Fraud, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 7, 2009

FCPA - Some New Items

Check out the FCPA Blog here for a discussion of the FCPA count in William Jefferson's trial.  The question is asked " Is William Jefferson still on trial for violating the Foreign Corrupt Practices Act?"

Andy Spaulding, Fulbright Scholar at the University of Mumbai, India, posted a piece on the FCPA on SSRN here.  Here's an abstract of the piece -

Unwitting Sanctions:  Understanding Anti-Bribery Legislation as Economic Sanctions Against Emerging Markets
Although the purpose of international anti-bribery legislation, particularly the U.S. Foreign Corrupt Practices Act, is to deter bribery, empirical evidence demonstrates a more problematic effect:  in countries where bribery is perceived to be relatively common, the present enforcement regime goes beyond deterring bribery and actually deters investment.  Drawing on literature from political science and economics, this article argues that anti-bribery legislation, as presently enforced, functions as de facto economic sanctions.  A detailed analysis of the history of FCPA enforcement shows that these sanctions have most often occurred in emerging markets, where historic opportunities for economic and social development otherwise exist and where public policy should encourage investment.  This effect is contrary to the purpose of the FCPA which, as the legislative history shows, is to build economic and political alliances by promoting ethical overseas investment.

These perverse and unanticipated consequences create two policy problems.  First, the sanctions literature suggests that the resulting foreign direct investment void may be filled by capital-rich countries that are not committed to effectively enforcing anti-bribery measures.  This dynamic can be observed, for example, in China's aggressive investment in Africa, Latin America, and Central Asia, and creates myriad ethical, economic, and foreign policy problems.  Second, by enforcing these laws without regard to their sanctioning effects, developed nations are unwittingly sacrificing poverty reduction opportunities to combat bribery.  The paper concludes with various proposed reforms to the text and enforcement of international anti-bribery legislation that would further the goal of deterring bribery without deterring investment.

July 7, 2009 in FCPA | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 12, 2009

Novo Nordisk Deferred Prosecution Agreement

A DOJ Press Releasereports on a deferred prosecution agreement entered into by "Novo Nordisk A/S (Novo), a Danish corporation based in Bagsvaerd, Denmark."  The agreement calls for the company to pay a penalty of "$9 million penalty for illegal kickbacks paid to the former Iraqi government."  This case is part of the DOJ's investigation "into the UN Oil-for-Food program." The DOJ filed "one count of conspiracy to commit wire fraud and to violate the books and records provisions of the Foreign Corrupt Practices Act (FCPA)."  The DOJ Press Release states:

"According to the agreement and the information filed today, between 2001 and 2003, Novo paid approximately $1.4 million to the former Iraqi government by inflating the price of contracts by 10 percent before submitting the contracts to the United Nations for approval and concealed from the United Nations the fact that the price contained a kickback to the former Iraqi government. Novo also admitted it inaccurately recorded the kickback payments as "commissions" in its books and records."

See also FCPA Blog here; Reuters here.


May 12, 2009 in Deferred Prosecution Agreements, FCPA, Settlement | Permalink | Comments (0) | TrackBack (0)

Monday, March 2, 2009

Shortcuts on FCPA Due Diligence Today Will Be Costly Tomorrow

Guest Blogger, Sharie A. Brown of DLA Piper -

The current financial crisis and market volatility understandably focuses corporate executives and their employees on corporate survival and improved financial performance. In my experience, corporate consolidations, divestitures, restructurings, and employee layoffs create organizational distractions that can distort sound judgment and reward short-term, but ill-conceived business solutions. At a recent General Counsel Forum in Chicago last week focusing on fraud prevention and anticorruption strategies, the attendees from corporate legal departments and financial functions indicated that they will be required to operate with fewer compliance and internal controls resources. None of the attendees thought their companies will be more susceptible to fraud and corruption violations this year compared to other years. Yet, my observations over the years indicate that from late 2009 through 2012, we should expect to see several currently reputable, large U.S. companies and individual corporate managers under investigation for fraud, corruption, and other criminal and civil violations. These companies and individuals will face enforcement scrutiny because they did not fight the tendency of managers and business units to shortcut legal compliance, internal controls, and due diligence procedures designed to prevent and detect financial crimes, particularly violations of the US Foreign Corrupt Practices Act ("FCPA").

One of the most important FCPA compliance and internal controls involves the conduct of appropriate, risk-based due anticorruption diligence on third party intermediaries, agents and consultants, as well as overseas joint venture partners, and international merger and acquisition target companies in high risk countries and industries for public corruption. This risk-based approach requires companies to take into account the following factors, among others: i) the reputation of the party or agent for corruption in the industry; ii) the local country’s reported reputation for public corruption; iii) whether the party is the subject of local media scandal or enforcement scrutiny, or on any international governmental lists; iv) whether the acquiring company has industry contacts that have information about the targeted party; v) the apparent competence and qualifications of the party for the project or activity contemplated; vi) whether the party was referred by a foreign official; vii) the availability and reliability of information about the targeted party in public databases, websites, and business reporting services; viii) whether the party is a foreign government official within the meaning of the FCPA, and whether there is shareholding by a foreign official in the party ; ix) whether the party is an agency or instrumentality of a foreign government; and x) whether the party or its shareholders are a relative or close associate of a foreign government official. Appropriate FCPA anticorruption due diligence would take into account and address these issues.

A more rigorous due diligence is appropriate in situations where the third party relationship or target company acquisition is highly strategic and economic, but the public corruption risks for the country and the industry are well-documented. For this important high-risk acquisition or joint venture relationship, there is no substitute for an in-country review consisting of in-person interviews of the parties and their key personnel, as well as relevant document reviews and sampling by U.S. professionals who regularly apply U.S. FCPA standards, in consultation with local professionals, to ensure that local anticorruption, data protection, and related fraud laws and rules, are recognized. Yet, during times of tight corporate finances, some companies will forgo such FCPA due diligence in favor of database reviews only, or they will rely on background or financial investigators whose reports list "FCPA" in the report title, but unfortunately those reports do not recognize or actually examine high risk FCPA/anticorruption activities. These seemingly cost-effective due diligence shortcuts actually result in expensive FCPA legal exposure for the acquiring company due to the FCPA risk items overlooked or misunderstood by the background investigators.

U.S.enforcement agencies are watching companies, and seem more determined to ensure that FCPA compliance, and other U.S.legal and financial compliance requirements continue to be fulfilled during the financial crisis. The U.S. Securities and Exchange Commission ("SEC") Office of Compliance Inspections and Examinations issued a letter to CEOs of SEC-registered firms to remind them of the important role that compliance programs play in helping companies meet their obligations under the securities laws. The SEC emphasized that even with the current financial crisis, corporate cost cutting-measures should take into account the need to maintain adequate compliance programs and internal financial controls systems. See Lori Richards, Director, Office of Compliance Inspections and Examinations U.S. Securities and Exchange Commission, Open Letter to CEO's of SEC-Registered Firms (Dec. 2, 2008) (available here). Companies should consider this SEC notice to be an early indication that the financial crisis, standing alone, will not insulate a company against U.S. enforcement actions for fraud, FCPA violations, or other financial and reporting violations arising from a high risk environment created by the failure to maintain controls, or follow FCPA procedures, and test compliance systems.

Aggressive U.S. enforcement of financial fraud, corruption, and other criminal and civil violations is also forecast as a result of Congressional efforts with respect to the Supplemental Anti-Fraud Enforcement Markets Act ("SAFE Markets Act"). This anticipated legislation seeks to materially increase funding for investigative and prosecutorial resources by $110 million for enforcement actions involving financial fraud, corruption, ring the financial crisis may be particularly challenging for companies this year. Senator Charles E. Schumer (D-NY) and Senator Richard C. Shelby (R-Ala) of the Senate Banking Committee believe that 50 new assistant U.S. attorneys and 100 new SEC enforcement employees need to be hired to investigate and prosecute financial crimes.

Further, the U.S. Department of Justice ("DOJ") and the SEC are expected to continue aggressive investigation and enforcement of the FCPA, while imposing several millions (and possibly additional billions) of dollars in fines, penalties, and disgorgements for future violations. Thus, the lesson is clear: in the practice of FCPA due diligence for agents, joint venture partners, and merger and acquisition targets, a due diligence shortcut for savings, could ultimately become the most devastating and costly strategy for companies, managers, individual employees, and corporate boards under the FCPA.


March 2, 2009 in FCPA | Permalink | Comments (1) | TrackBack (0)

Wednesday, February 11, 2009

Kellogg, Brown & Root LLC Pleads on FCPA

According to a DOJ Press Release "Kellogg Brown & Root LLC (KBR), a global engineering, construction and services company based in Houston, pleaded guilty today to charges related to the Foreign Corrupt Practices Act (FCPA) for its participation in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement and construction (EPC) contracts. . ."  The company plead to a "five-count criminal information" and "agreed to pay a $402 million criminal fine." The company issued a press release that stated that:

"[u]nder the terms of the settlement announced earlier today, KBR will make payments totaling $20 million over the next eight quarters to the DOJ. The information contained in the DOJ and SEC settlements note aggregate financial penalties totaling $579 million. The remainder of the penalties will be paid by Halliburton pursuant to indemnities under the 2006 Master Separation Agreement between KBR and Halliburton."

KBR has also agreed "to retain a compliance monitor to review KBR's continued compliance with anti-corruption laws."  See also the FCPA Blog here


February 11, 2009 in FCPA | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 28, 2009


Check out the FCPA Blog, Halliburton Announces Pending Settlement; Dan Slater, WSJ Blog, Halliburton Breaks FCPA Settlement Record for U.S. Companies.

How much can you fine a company for violating the law? At what point does the fine exceed a cost of doing business and become a deterrent for future conduct, not to mention a general deterrent to other companies?


January 28, 2009 in FCPA | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 16, 2008

More on Siemens

Initially discussed here, the Siemens plea is an interesting one. The go-to place for information on this case is the FCPA Blog here. Some observations -

  • Unlike many cases involving a company, this does not appear to be a deferred prosecution agreement - but rather is a plea agreement with specified terms.
  • The fine is huge, but it allows the company to resolve the case and move forward and the plea is not to an anti-bribery act, but rather the reporting provisions.
  • The timing on this resolution is interesting - before the new administration takes over, before the end of the year - or is that reading too much into this.
  • Unlike the deferred prosecution agreement in KPMG (here -p. 26) there is no explicit statement in the agreement precluding debarment. Also in Titan (FCPA case) there was a statement by the company that spoke to there being no debarment. One can find a reference to that here:

"Titan announced that it had reached a settlement to avoid debarment from work on U.S. government contracts. Avoiding debarment was particularly important to Titan, which is a leading provider of information and communications systems to U.S. government agencies."

But here again, we are only discussing reporting provisions and not anti-bribery.  And certainly no one should want to hurt innocent people associated with the company.

  • At the government press conference it was stated - "Siemens' cooperation, in a word, has been exceptional.   Siemens has faced facts, accepted responsibility, retained experienced counsel to conduct thorough internal investigations, and has implemented real reforms."  And in the sentencing memo of the government there are repeated references to the extraordinary cooperation of the company.  For example, it states "[t]he reorganization and remediation efforts of Siemens have been extraordinary and have set a high standard for multi-national companies to follow."   The sentencing memo has an incredible description of the internal amnesty program of the company.
  • DOJ has a website that provides the FCPA, a lay person's guide, etc.  A key problem one finds is that because most of the cases are resolved, one is unlikely to find a significant body of reported decisions resolving issues involving companies who were alleged to violate the FCPA.  And as for individuals - the DOJ website lists 2 cases, but notes that they last updated the website in 2004.(here)
  • The plea agreement letter provides for cooperation, but does not call for providing any privileged material -  something that is good to see on the part of DOJ. (See FCPA Blog here)
  • The agreement does limit the ability of the company from disseminating information regarding this matter without first obtaining the approval of DOJ. It states:

"Press Releases: Defendant agrees that if Siemens AG or any of its direct or indirect affiliates or subsidiaries issues a press release in connection with this agreement, defendant shall first consult the Department to determine whether (a) the text of the release is true and accurate with respect to matters between the Department and defendant; and (b) the Department has no objection to the release. Statements at any press conference concerning this matter shall be consistent with this press release."

A waiver of first amendment rights - is the government fearful of the company saying something?  This may explain why the document on the Siemens website - to investors - is extremely brief -Download 20081215_settlement_eng.pdf


Addendum - Jordan Weissmann, BLT Blog, Siemens AG Lawyers View $800 Million Fine As a Victory

December 16, 2008 in FCPA | Permalink | Comments (3) | TrackBack (0)

Monday, December 15, 2008

Siemens AG & 3 Subsidiaries Plead

A DOJ press release is titled - Siemens AG and Three Subsidiaries Plead Guilty to Foreign Corrupt Practices Act Violations and Agree to Pay $450 Million in Combined Criminal Fines - Coordinated Enforcement Actions by DOJ, SEC and German Authorities Result in Penalties of $1.6 Billion.  At a press conference called to announce this settlement, Acting Assistant Attorney General Friedrich stated:

"Under the terms of the plea agreement announced today, first, Siemens AG will plead guilty and has pled guilty to one count of failure to maintain internal controls and a one-count books and records violation.   In addition, three Siemens subsidiaries, those located in Bangladesh, Venezuela and Argentina, have pled guilty to conspiring to violate provisions of the FCPA. 

"Second, Siemens will pay a criminal fine to the United States in the amount of $450 million.   This is far and away the largest criminal fine in FCPA enforcement in U.S. history. 

"Third, Siemens will retain an independent monitor for a period of four years and will continue to implement enhanced controls."

With regard to this last point, the press release states that:

"Under the terms of the plea agreement, Siemens AG agreed to retain an independent compliance monitor for a four-year period to oversee the continued implementation and maintenance of a robust compliance program and to make reports to the company and the Department of Justice.  Siemens AG also agreed to continue fully cooperating with the Department in ongoing investigations of corrupt payments by company employees and agents."

See also FCPA Blog, Final Settlements for Siemens


December 15, 2008 in FCPA | Permalink | Comments (0) | TrackBack (0)

Monday, November 3, 2008

KPMG Study Shows the Difficulties Faced By Companies in FCPA Matters

A KPMG study released today demonstrates the difficulties faced by companies trying to comply with the Foreign Corrupt Practices Act (FCPA). A Press Release accompanying the study notes that "[m]ost multinational U.S.companies have programs to meet Foreign Corrupt Practices Act (FCPA) guidelines, but many executives surveyed by the audit, tax and advisory firm KPMG LLP acknowledge they still may not know enough about those with whom they do business in other countries." For example, "78 percent said they had trouble identifying and assessing FCPA risk."  The report can be found here - Download postable_pdf.pdf


November 3, 2008 in FCPA | Permalink | Comments (0) | TrackBack (0)