Government Contracts, Investigations & International Trade Blog : Government Contracts Lawyer & Attorney : Sheppard Mullin Law Firm : Bids, Licenses, Awards, Conflict of Interest.

By Anthony N. Moshirnia 

In 2008, Siemens AG paid $800 million to settle charges that it had violated the Foreign Corrupt Practices Act, which generally prohibits bribery of foreign officials for the purpose of obtaining or retaining business. That settlement amount remains the largest in the history of FCPA enforcement. In addition, the company agreed to substantially improve its procedures for identifying and preventing improper payments that could be used as bribes. According to a recently filed whistleblower complaint, however, since the 2008 settlement, Siemens employees have regularly circumvented the company’s internal controls, allowing “intermediaries” to pay kickbacks to government officials.

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By Anthony Moshirnia

On November 14, 2012, the SEC and the DOJ released their long-awaited Resource Guide to the Foreign Corrupt Practices Act, which can be found here. The Resource Guide consolidates and summarizes the government’s previously stated positions and case law regarding the FCPA and, unsurprisingly, confirms that FCPA enforcement will remain a priority for the foreseeable future. The publication uses hypotheticals to provide helpful clarification and practical advice on issues such as gift-giving and hospitality. The hypotheticals are also discussed in a recent posting on our Global Trade Law Blog, which can be read here.

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By John Hynes

We regularly report on Foreign Corrupt Practices Act ("FCPA") developments and have furnished subscribers with a primer on the FCPA. As expected, 2012 has proven to be yet another busy year for the government in enforcing the FCPA. This article highlights some of the most important recent developments in the anti-corruption and FCPA enforcement world, while a more comprehensive update can be found here.

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By Alison Kleaver and Joseph Barton

One of the goals of the Foreign Corrupt Practices Act (“FCPA”) is to prevent U.S. companies and individuals from paying bribes to foreign officials in exchange for business. To this end, the FCPA prohibits any domestic individual or business entity from making payments to a “foreign official” for the purpose of obtaining or retaining business. 15 U.S.C. § 78dd-2(a)(1). However, who, precisely, qualifies as a “foreign official” is the subject of much uncertainty. In particular, whether employees of a state-owned company qualify as foreign officials for purposes of FCPA is an area of great concern—and potential liability—particularly for U.S. companies doing business in Latin America where governments often have at least some level of involvement in various business sectors from education to utilities to health care.

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By John M. Hynes

In the past, we have reported on a number of Foreign Corrupt Practices Act ("FCPA") developments and have furnished subscribers with a primer on the FCPA. The latest developments in this area relate to an investigation of the motion picture industry and its activities in China.

On April 26, 2012, Reuters reported that the US Securities and Exchange Commission ("SEC") recently sent letters of inquiry to several prominent movie studios seeking information about their dealings in China that may constitute violations of the FCPA. Later reports indicate that the letters were sent to Twentieth Century Fox, Paramount Pictures, Sony Pictures, Universal Pictures, Walt Disney Studios, Warner Bros., and Dreamworks Animation.

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By Mike Emmick

In the fervor of the U.S.'s current anti-foreign-corruption efforts, a particularly misguided proposal has occasionally reared its ugly head: Requiring “mandatory debarment” for any company that violates the Foreign Corrupt Practices Act (“FCPA”).

On the merits, such a proposal is completely wrong-headed. Debarment is a severe, forward-looking administrative remedy – the corporate “death penalty” – not a vehicle to “boost” the penalties for past criminal FCPA violations.

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By Bethany Hengsbach

In a stunning conclusion to the U.S. Department of Justice’s first guilty jury verdict against a corporation under the Foreign Corrupt Practices Act (FCPA), the U.S. District Court, Central District of California granted the defendants’ request to vacate the conviction of Lindsey Manufacturing Co. and its executives, and dismiss the indictment due to prosecutorial misconduct.  U.S.A. v. Aguilar, No. 10-01031 (Cal. Dec. 1, 2011).

Click here to read the full article as published in the Daily Journal.

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By John M. Hynes

On November 1, 2011, Transparency International (“TI”) released its 2011 Bribe Payers Index (“BPI”), which ranks the countries whose companies are most likely to engage in bribery when doing business abroad. The BPI can serve as an important tool for companies in their efforts to avoid violations of the United States Foreign Corrupt Practices Act (“FCPA”).

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By Anthony N. Moshirnia

Blowing the whistle on alleged fraud against the Government does not entitle an employee to loot and disclose her employer’s records in violation of a confidentiality agreement – at least not in the Ninth Circuit. In an opinion handed down in March of this year, the Ninth Circuit refused to adopt a so-called “public policy exception to confidentiality agreements to protect [qui tam plaintiffs]” who misappropriate documents from their employers ostensibly to buttress claims brought under the federal False Claims Act (“FCA”). U.S. ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1061-62 (9th Cir. 2011). Though this opinion has been on the books since Spring, it remains relevant, and worth keeping an eye on, as it provides powerful ammunition against FCA plaintiffs that continue to tout the “public policy” exception as though it were unassailable. 

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By Thaddeus McBride & Cheryl Palmeri

On October 26, 2011, Joel Esquenazi was sentenced to 15 years in prison for committing and conspiring to commit both money laundering and violations of the Foreign Corrupt Practices Act (“FCPA”). Esquenazi is the former president of Terra Telecommunications Corporation (“Terra”), an international telecommunications company. According to the U.S. Department of Justice (“DOJ”), this is the longest prison sentence yet imposed in a case involving the FCPA.

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By Thaddeus McBride & Cheryl Palmeri 

On October 5, 2011, the U.S. Department of Justice (“DOJ”) and Bridgestone Corporation (“Bridgestone”) filed a plea agreement in U.S. District Court in which Bridgestone admitted to violating the Sherman Antitrust Act (15 U.S.C. § 1) (“Sherman Act”) and the Foreign Corrupt Practices Act (18 U.S.C. § 371) (“FCPA”). Under the terms of the resolution, Bridgestone agreed to (i) plead guilty to violating the Sherman Act and the antibribery provisions of the FCPA, (ii) implement a comprehensive FCPA compliance program, and (iii) cooperate fully in the DOJ’s ongoing investigations of antitrust and FCPA violations resulting from the manufacture and sale of marine hose. Under the agreement, Bridgestone will pay a criminal fine of $28 million. In exchange, the DOJ agreed not to bring further charges against Bridgestone or its affiliates for acts taken before the date of the agreement in furtherance of the charged crimes.[1]

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On April 8, 2011, the U.S. Department of Justice announced that it had reached a settlement with Johnson & Johnson and its subsidiaries for Foreign Corrupt Practices Act violations. Compared to prior FCPA settlements, the DOJ elaborated much more specific compliance measures that it expected Johnson & Johnson to take as part of the settlement.  When considered together with the decline in the number of corporate compliance monitors assigned since late 2010, the Johnson & Johnson settlement may signal that the DOJ is considering the use of enhanced compliance requirements in lieu of independent compliance monitors, even in some cases involving companies with multiple FCPA violations.

Click here to read the full article -Getting Specific About FCPA Compliance - written by Scott Maberry, Thad McBride, Mark Jensen and Corey Phelps, that was recently published by Law360 on June 29, 2011.

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As the DOJ and SEC broaden their FCPA enforcement efforts to include target industries beyond the usual suspects - energy and defense - all businesses with overseas ties should take a hard look at their internal anti-corruption procedures.  The nearly $2 billion in FCPA fines and penalties imposed in 2010 alone teach at least one lesson: the costs of ignoring FCPA compliance or "burying our heads in the sand" are just too high. In this rapidly-developing area of law, there is no substitute for a robust anti-corruption compliance program that prepares employees to avoid conduct and situations that can drag down an entire organization.
 

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By Thaddeus McBride and Reid Whitten

On April 20, 2011, in a prosecution brought against Lindsey Manufacturing Company (“Lindsey”) and several of its officers and employees, a U.S. Federal District Court Judge ruled that the term “instrumentalities” applies to foreign state-owned enterprises under the Foreign Corrupt Practices Act (“FCPA”). Under this broad ruling, any employee or officer of a foreign state-owned enterprise would be considered a “foreign official” under the FCPA.
 

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By Bethany Hengsbach

On March 30, 2011, the United Kingdom (“U.K.”) Ministry of Justice (“MOJ”) issued its long-awaited guidance on the U.K. Bribery Act (the “Guidance”), the U.K.’s answer to the U.S. Foreign Corrupt Practices Act and domestic bribery laws.  The implementation of the U.K. Bribery Act (the “Act”) has been delayed twice, but now will take place on July 1, 2011. Thus, the time has come for companies to assess their anti-corruption compliance programs and make adjustments to ensure that they address the nuances of the Act.
 

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By John M. Hynes

Companies doing business in the People’s Republic of China (“PRC”) have yet another path to potential criminal liability. On February 25, 2011, the PRC legislature passed 49 amendments to the PRC Criminal Law. One such amendment – Amendment No. 8 of the PRC Criminal Law – criminalizes the payment of bribes to non-PRC government officials and to international public organizations (the “Amendment”). While the Amendment is brand new and no interpretive guidance has been issued, it appears to be the PRC’s version of the United States Foreign Corrupt Practices Act (“FCPA”).
 

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By Bethany Hengsbach and Anthony Moshirnia

Through enforcement, administrative action, and new legislation, the Foreign Corrupt Practices Act (“FCPA”) grew additional muscle and even sharper teeth in 2010.  The U.S. government assessed nearly $2 billion in FCPA-related penalties and fines in 2010, and announced eight of the top ten FCPA settlements of all time.
 

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By Bethany Hengsbach

The United Kingdom’s answer to the Foreign Corrupt Practices Act (“FCPA”) has arrived.  The UK Bribery Act 2010, which received Royal Assent on April 8, 2010, is both stricter and broader than the FCPA.  The U.K. Ministry of Justice announced on July 23, 2010 that the implementation of the Act will be delayed until April 2011, which gives companies much-needed time to prepare for the changes it will bring.

The following article by Bethany Hengsbach was originally published in the Financial Executive. To read the article please click here, or visit the Financial Executive website.

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By Bethany Hengsbach

Primarily as a result of the recent dramatic increase in the U.S. government’s enforcement effort, the Foreign Corrupt Practices Act (“FCPA”) has received a great deal of attention of late. The financial reform legislation signed by President Obama on July 21, 2010 adds an incentive that will likely further increase the dangers posed to companies and individuals by the FCPA. The law contains a provision that will reward whistleblowers who voluntarily provide information leading to the successful enforcement of U.S. securities laws, including the FCPA, with between 10% and 30% of any recovery over $1,000,000. The whistleblower must provide “original” information, not already known to the SEC and not merely derived from existing investigations, audits, or reports. The SEC will have discretion to set the amount within the 10% - 30% range, based on the significance of the information to the success of the action, the whistleblower’s degree of assistance, and the interest of the SEC in using whistleblower payments to deter problematic conduct in the future. The provision also extends the reward to “related actions” taken by other prosecuting agencies based on the reported information, and thus will apply to actions initiated by the DOJ and other federal, state, and foreign law enforcement agencies. 
 

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By Neil Ray

The U.K. Bribery Act 2010 (the “Act”) represents a fundamental reform of the U.K. anti-bribery regime and greatly expands the potential legal exposure of companies and individuals that do business, including practice of a trade or profession, in the U.K. For example, it criminalizes purely private bribery with no involvement of a government official and creates a new corporate offence of “failing to prevent” bribery. These offences are subject to unlimited fines and a 10-year maximum prison sentence for individuals. The Act bears some similarity to its U.S. counter-part, the Foreign Corrupt Practices Act (“FCPA”), but is in general stricter and broader. Accordingly, companies with business operations in the U.K. must not assume that even robust FCPA compliance programs will assure compliance with the requirements of the Act.
 

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By Bethany Hengsbach

An often-overlooked provision in the financial reform legislation now before Congress would allow employee whistleblowers to receive a reward of up to 30% of the fines collected by the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) from corporations who violate the Foreign Corrupt Practices Act (“FCPA”). We have reported in this blog on several occasions the increase in FCPA enforcement by the government in recent years. The passage of a bill containing this proposed whistleblower provision could lead to even more government enforcement, as well as multi-million dollar awards to whistleblowers.
 

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The recent explosion in Foreign Corrupt Practices Act ("FCPA") enforcement has made headlines of late, with three articles in the Wall Street Journal alone during the week of April 12th. Numerous multi-million dollar settlements and indictments of individuals demonstrate that no company with any international presence is beyond the reach of the statute.
 

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2010 is promising to be a banner year for enforcement of the Foreign Corrupt Practices Act ("FCPA"). In mid-January of this year, the DOJ unsealed sixteen indictments charging twenty-two individuals with violations of the FCPA's anti-bribery provisions. A few weeks later, in early February, British defense industry giant, BAE Systems plc ("BAE"), announced that it would plead guilty to one charge of conspiring to make false statements to the U.S. Government regarding its ongoing compliance with the FCPA. In connection with its guilty plea, BAE also agreed to pay a $400 million penalty. Notably, the DOJ did not allege that BAE violated the FCPA or that BAE executives willfully looked the other way while their agents or subordinates violated the Act. Instead, the crux of the DOJ’s case appears to be that BAE failed to install a compliance system capable of detecting FCPA violations in the first place.
 

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Recent trends demonstrate that virtually every industry is vulnerable to potential liability under the Foreign Corrupt Practices Act (FCPA) and global Anti-Bribery Conventions. Moreover, regulators are increasingly conducting both industry-wide reviews and global investigations of targeted organizations. The recent indictments of twenty-two individuals in the military equipment industry demonstrate that, regardless of size, any company involved in international commerce is now a potential target.
 

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On January 19, 2010, the Department of Justice (“DOJ”) unsealed sixteen indictments charging twenty-two individuals with violations of the Foreign Corrupt Practices Act (“FCPA”), allegedly arising from schemes to bribe foreign government officials. The DOJ also announced that, in connection with the indictments, the FBI had executed fourteen search warrants across the U.S., and the City of London police had executed seven search warrants in the U.K. The product of an FBI sting operation hailed in a DOJ press release as “the largest single investigation and prosecution against individuals in the history of the DOJ’s enforcement of the [FCPA],” the indictments may signal a fundamental shift in the DOJ’s ongoing campaign “to erase foreign bribery from the corporate playbook.”
 

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On July 10, 2009 a federal jury in New York convicted Frederic Bourke, co-founder of handbag maker Dooney & Bourke, of conspiring to violate the Foreign Corrupt Practices Act ("FCPA"). The conviction is significant for the two FCPA enforcement trends it highlights. First, the prosecution of Mr. Bourke demonstrates that both the U.S. Department of Justice and the U.S. Securities and Exchange Commission are focused on investigating and charging individuals for violating the FCPA. In the first half of 2009 alone, the Department of Justice indicted eight people on charges of violating the FCPA, illustrating that no longer will companies alone be the subject of FCPA prosecutions.
 

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Please click here to read about the Foreign Corrupt Practices Act: provisions, penalties, compliance programs and trends.

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The Foreign Corrupt Practices Act (FCPA) is a federal law which prohibits companies from obtaining or directing business through the payment of bribes to foreign governmental officials and political figures. The renewed focus on corporate accountability in recent years has led to a dramatic increase in the number of FCPA enforcement actions -- from 5 in 2004 to 38 in 2007. The attached presentation, utilized in connection with a recent in-house presentation, summarizes the FCPA and why it is imperative that every company doing business in the global marketplace be aware of its provisions and serious penalties, including civil penalties, criminal fines, and imprisonment, in the event of a violation.

Click here to view the presentation.

Presented by:

Bethany Hengsbach

(213) 617-4125

bhengsbach@sheppardmullin.com

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A Dozen Questions to Ask

• Are you an issuer, US person or US entity?
• Have any foreign agents or subsidiaries?
• Are you a foreign person or company whose transactions touch the US?
• Promised or paid anything of value to a foreign official (governmental, political, NGO) for business purposes?
• Did you or a third party know or suspect it would be passed on to a foreign official?
• Have you consciously disregarded circumstances indicating improper payments occured?
• Do you maintain an adequate system of internal controls?
• Was the payment to facilitate a routine governmental action (grease payment) permitted by the foreign country?
• Do your books fairly reflect the transactions and properly characterize expenditures, such as "entertainment?"
• Have you conducted comprehensive due diligence on your foreign business partner?
• Is your industry historically prone to corruption?
• Are you doing business in a country with a "corrupt" environment?

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