Richard L. Cassin Publisher and Editor

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Elizabeth K. Spahn Editor Emeritus

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Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

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FCPA Blog Daily News


The Hard Timers

Compliance officers will want to keep a copy of the table below close at hand. What better way to answer those who insist that the FCPA is small potatoes, after all, when you look at the relatively few enforcement actions over the past 33 years.

Here are the 22 men (no women so far), most of them former company executives, who've spent time in prison for FCPA-related convictions. Each name that follows represents a terrible tragedy, often with permanent damage extending to families. As the compiler of the list said: "By my count there have been 187 people charged with violating the FCPA. This list will look a little different at the end of the year."

We'd like to thank the generous individual responsible for this post, but that's not possible. He or she has asked to remain anonymous, making this contribution pro bono publico.

The information is compiled from the Federal Bureau of Prisons' inmate locator. Readers with suggestions and corrections are welcome to let us know.



Related Company

Register #

Age Race Sex

Release Date









Ports Engineering Consultants Corporation


















General Electric






Tanner Management Corp






Central Asia American Enterprise Fund






Owl Securities and Investments












ITXC Corporation












ITXC Corporation






ITXC Corporation






World Bank


















American Rice












Alcatel SA












American Rice






AMAC International







Why So Many Words?

Parker Drilling is one of the dozen or so oil and gas-related companies dragged into FCPA compliance problems by Panalpina, the Swiss logistics firm that allegedly bribed overseas customs and licensing officials on behalf of its clients. Among those investigated by the DOJ and SEC in addition to Parker are Schlumberger, Shell, Tidewater, Nabors Industries, Transocean, GlobalSantaFe Corp., ENSCO, Cameron, Noble Corp., and Pride International.

In its latest quarterly report, Houston-based Parker, which trades on the New York Stock Exchange under the symbol PKD, disclosed details of the investigation, including potential compliance problems in Nigeria and, unexpectedly, Kazakhstan. Some might argue the amount of Parker's disclosure goes beyond the technical requirements of the securities laws. If that's true, why so many words?

First, there's really no downside risk in disclosing more instead of less. We've been debating this point for years with securities lawyers, who often ask us why there's so much voluntary FCPA disclosure when it may not be legally required. We in turn ask what's to be gained by not disclosing an internal investigation?

Second, there are two men named Parker on the board of directors -- Robert L. Parker, the Chairman Emeritus who bought the company from his father in 1957, and Robert L. Parker Jr., who now leads the firm. So although it's a public company, Parker Drilling retains a family-owned aspect. With their name on the door, the Parkers are probably more sensitive than most professional managers to reputational risks. No doubt they want to put the FCPA troubles in the rear-view mirror as soon as possible. One strategy for doing that is to disclose everything -- dissipate the news by releasing it to the public and the press in one go. Don't leave shareholders, bankers, customers, and other stakeholders guessing.

Finally, a detailed disclosure can reduce the chances of future compliance problems. It educates everyone inside the company about FCPA risks, especially in challenging places where oil drillers often find themselves. We think Parker's disclosure reads in some ways like an FCPA compliance manual, full of real-life warnings about what can go wrong, the damage caused, and the way to fix things.

*   *   *

Here's the full text of the FCPA disclosure from Parker Drilling Company's Form 10-Q dated May 7, 2010:

Customs Agent and Foreign Corrupt Practices Act (FCPA) Investigation
As previously disclosed, we received requests from the United States Department of Justice (DOJ) in July 2007 and the United States Securities and Exchange Commission (SEC) in January 2008 relating to our utilization of the services of a customs agent. The DOJ and the SEC are conducting parallel investigations into possible violations of U.S. law by us, including the FCPA. In particular, the DOJ and the SEC are investigating our use of customs agents in certain countries in which we currently operate or formerly operated, including Kazakhstan and Nigeria. We are fully cooperating with the DOJ and SEC investigations and are conducting an internal investigation into potential customs and other issues in Kazakhstan and Nigeria. The internal investigation has identified issues relating to potential non-compliance with applicable laws and regulations, including the FCPA with respect to operations in Kazakhstan and Nigeria. At this point, we are unable to predict the duration, scope or result of the DOJ or the SEC investigation or whether either agency will commence any legal action.
Further, in connection with our internal investigation, we also have learned that an individual who may be considered a foreign official under the FCPA owns in trust a substantial stake in a foreign subcontractor with whom we do business through a joint venture relationship in Kazakhstan. We are currently engaged in efforts to evaluate and implement alternatives to restructure or end the relationship with the subcontractor. At this point, we are unable to predict the outcome of our restructuring efforts or whether termination will result, either of which could negatively impact some of our operations in Kazakhstan and potentially have a material adverse impact on our business, results of operations, financial condition and liquidity.
The DOJ and the SEC have a broad range of civil and criminal sanctions under the FCPA and other laws and regulations, which they may seek to impose against corporations and individuals in appropriate circumstances including, but not limited to, injunctive relief, disgorgement, fines, penalties and modifications to business practices and compliance programs. These authorities have entered into agreements with, and obtained a range of sanctions against, several public corporations and individuals arising from allegations of improper payments and deficiencies in books and records and internal controls, whereby civil and criminal penalties were imposed. Recent civil and criminal settlements have included multi-million dollar fines, deferred prosecution agreements, guilty pleas, and other sanctions, including the requirement that the relevant corporation retain a monitor to oversee its compliance with the FCPA. In addition, corporations may have to end or modify existing business relationships. Any of these remedial measures, if applicable to us, could have a material adverse impact on our business, results of operations, financial condition and liquidity.
We have taken certain steps to enhance our anti-bribery compliance efforts, including retaining a full-time Chief Compliance Officer who reports to the Chief Executive Officer and Audit Committee, and implementing efforts for the adoption of revised FCPA policies, procedures, and controls; increased training and testing requirements; contractual provisions for our service providers that interface with foreign government officials; due diligence and continuing oversight procedures for the review and selection of such service providers; and a compliance awareness improvement initiative that includes issuance of periodic anti-bribery compliance alerts.
Demand Letter
In April 2010, we received a demand letter from a law firm representing Ernest Maresca. The letter states that Mr. Maresca is one of our stockholders and that he believes that certain of our current and former officers and directors violated their fiduciary duties related to the issues described above under “Customs Agent and Foreign Corrupt Practices Act (FCPA) Investigation.” The letter requests that our Board of Directors take action against the individuals in question. In response to this letter, the Board has formed a special committee to evaluate the issues raised by the letter and determine a course of action for the Company.


The Compliance Paradox

There are signs everywhere that the FCPA is a growth industry. Enforcement activity is up, law firms, auditors, and consultants now specialize in the practice. Even the mainstream press is getting into the act -- this week with Forbes' mindless clubbing of the DOJ - Biglaw revolving door.

So let's ask: How will all this attention impact the FCPA and those who deal with it? Will compliance become second nature, part of the corporate fabric, so that FCPA violations become rare? Will the growth and success of the compliance industry result in its own demise? Where are we on the growth curve -- at the beginning, somewhere near the middle, or already close to the end?

As we often say in this space, compliance isn't about math but human beings and how they behave. That's why we think the FCPA will grow, as it has for the past five years, then ebb somewhat, then grow again, and so on.

Here's the reason for the cycle. Effective FCPA compliance prevents most violations from happening. Illegal payments aren't made; books aren't cooked; corporate crack-ups are averted. That's all good news but it can produce unexpected results.

When allegations of overseas bribery hit the fan, people often appear from outside the company to control the damage and clean up the mess, and they get the credit. But when a company stays out of trouble, those responsible for compliance aren't in the news. And as more time passes without a compliance problem, they fall further from the corporate center. When enough time has passed with no FCPA blow up, others start asking what compliance people do all day, since there don't seem to be any FCPA problems around here that need fixing.

People seldom receive much credit for things that don't happen. We spend little time pondering non-events. Instead our attention falls on things that do happen, and the bigger the disaster, the more of our attention it gets. So rather than pinning medals on the heroes who have kept the company out of trouble, campaigns to undermine them spring up, usually through budget shrinkage. Companies can end up with no one watching for trouble. That in turn increases the chances of a compliance meltdown.

Taking a broader look, the pattern is similar. Today, compliance officers and related professionals are visible and valued. That's largely because the DOJ (backed by presidents, congress, and NGOs) threw enforcement into hyper-drive a few years ago. The feds grabbed the action and set the agenda. Companies everywhere, with help from the compliance community, have been scrambling since then to catch up. Eventually there'll be more equilibrium between enforcement and compliance, and that's when enforcement should begin to decline.

When it does, companies will start wondering what their compliance people do all day. And so once again the DOJ will find plenty of low-hanging enforcement fruit . . . .


Here Come The Global Guidelines

By Jeffrey M. Kaplan

In 1991, the U.S. government established a compelling and original model for promoting legal compliance by businesses. The federal sentencing guidelines applicable to organizations -- sometimes called the Corporate Sentencing Guidelines -- offered companies both strong incentives for implementing compliance and ethics (“C&E”) programs and meaningful guidance on how to do so. But until recently only a small number of other nations had followed this lead.

That changed dramatically with the recent issuance of anti-bribery compliance recommendations by an OECD working group representing 38 nations (the “Recommendation for Further Combating Bribery of Foreign Public Officials in International Business Transactions”). In U.S. Guidelines-like fashion, the Recommendation provides that “member countries should encourage . . . companies to develop and adopt adequate . . . [C&E programs] or measures for the purpose of preventing and detecting foreign bribery. . . . .”

The OECD Recommendation goes even further than the U.S. Guidelines regarding the “why” of C&E, by specifying that such countries should consider in some instances C&E programs “in their decisions to grant public advantages, including public subsidies, licences, public procurement contracts, contracts funded by official development assistance, and officially supported export credits.”

The Recommendation also offers guidance for the “how” of anti-bribery compliance. This includes, as one would anticipate, expectations concerning anti-bribery policies, training, internal controls, reporting systems, discipline for violations, compliance incentives, accountability for program management and program assessments. There is also considerable emphasis on third-party compliance measures. In fact the suggested measures resemble in many ways those from the U.S. Guidelines, recently summarized in the FCPA Blog's post Pop Quiz.

What may be of greatest interest to C&E officers and those who practice C&E law is the potential for this U.S. Guidelines-like approach to be expanded globally beyond the anti-bribery realm. This very real possibility is based on the fact that aspects of the Recommendation speak in a general (i.e., not anti-bribery specific) way to the need for C&E programs, and also on the experience of an Italian corporate criminal law being expanded beyond its original anti-corruption focus to cover areas such as insider trading compliance.

Download the OECD's Recommendation for Further Combating Bribery of Foreign Public Officials released December 9, 2009 here.

Download the OECD's Good Practice Guidance on Internal Controls, Ethics and Compliance dated February 18, 2010 here.

Download the U.S. Federal Sentencing Guidelines, Chapter 8 (Sentencing Organizations) here.

Jeffrey M. Kaplan, a partner at Kaplan & Walker LLP, has practiced in the compliance program area since 1991. He can be reached at Together with his partner Rebecca Walker, who is also a contributor to the FCPA Blog, Jeff is currently writing a chapter for the BNA/ACC Compliance Manual on Compliance with the Foreign Corrupt Practices Act.


HP's Disclosure Mystery

By Thomas Fox

Thanks to the FCPA Blog for its post Avon: A Pound of Cure. As you said, Avon voluntarily disclosed to the DOJ and SEC its discovery of potential FCPA violations and the on-going internal investigations. I looked into the public record and found that Avon first learned of these allegations via an internal company whistleblower in June 2008. I also discovered that the company made such disclosures as early as October 2008 in an SEC filing and also in its 2008 and 2009 Annual Reports.


Avon's approach contrasts with Hewlett-Packard's, another company recently making FCPA news. HP apparently first learned of a bribery and corruption investigation when it was served with document requests by German authorities in December 2009 -- around the same time that three former and current HP employees were arrested by the same German authorities for allegedly paying bribes to make sales in Russia. As reported by the Wall Street Journal, HP did not report this investigation to the DOJ and SEC until April 2010 and still has not made any public record filing on this bribery and corruption investigation.


The Box Score on these timings appears to be:





Initially Notified

June 2008

December 2009

How Notified

Company Whistleblower

Arrests of current/former employees, subpoena for documents

Self-Reported the DOJ/SEC

June 2008

April 2010

First reported in SEC Filing

October 2008

None found


One of the clear rules from the U.S. Federal Sentencing Guidelines is that self reporting may qualify a corporation for amnesty or reduced sanctions. I wondered if these differences in approaches in self reporting (or not as the case may be) could lead to higher penalties, monetary or otherwise to HP?


There are two other curious notes regarding HP.


In both its 2008 and 2009 Annual Reports, the company made the following statement: “In many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by laws and regulations applicable to us, such as the Foreign Corrupt Practices Act. Although we implement policies and procedures designed to facilitate compliance with these laws, our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, may take actions in violation of our policies. Any such violation, even if prohibited by our policies, could have a material adverse effect on our business.” Could this be the SEC-required admission of an on-going FCPA investigation?


And in October 2009, HP ordered (via fax transmission) its 155,000 channel operation partners to take an FCPA compliance training course, and pay to do so. Such training was required in a very short time frame or the channel operations partners risked losing their status with HP. Did HP order the training because an unreported and undisclosed FCPA investigation was ongoing?


I'd be interested to hear what others think.


Thomas Fox is an attorney in Houston, Texas, specializing in FCPA compliance, risk management and international transactions. His blog can be found here and he can be reached at


Pop Quiz

Does your organization have an effective compliance program? The questions below come from the government's official description of what's needed.

Congratulations if you can answer yes to everything. (Don't get cocky. Compliance isn't about math but human behavior. Just when you think everything is going well . . . .)

Ready to test yourself? Pencils up, and begin:

1. Does the leadership promote a culture that encourages ethical conduct and a commitment to compliance with the law?

2. Is the purpose of your compliance program to prevent and detect criminal conduct? Any other goal is secondary. (Hint: A program that doesn't work every time can still be effective.)

3. Are there clear and concise written standards and procedures?

4. Are those standards and procedures communicated through training programs appropriate to the listeners' respective roles and responsibilities?

5. Does the organization use due diligence to prevent and detect criminal conduct? Does it know its own employees, partners, agents, and suppliers?

6. Has overall and day-to-day operational responsibility for the program been assigned to high-level individuals? Do they know and understand the content and operation of the compliance and ethics program?

7.  Have they been given adequate resources, appropriate authority, and direct access to the top decision-making body? Do they report about compliance up the chain of command periodically?

8. Would anyone involved in the administration of the compliance program whose conduct is inconsistent with its aims and goals be removed?

9. Is the program monitored and audited by a third party to make sure it works to prevent and detect criminal conduct?

10. Is there a system in place to handle anonymous whislteblower complaints from employees and other stakeholders, without fear of retaliation?

11. Is the program promoted and enforced consistently throughout the organization, with rewards for compliance and punishment for non-compliance?

12. Does the organization respond  to criminal conduct with corrective action and appropriate modifications to the compliance program? 

View Chapter 8, Part B of the U.S. Federal Sentencing Guidelines here.


Avon: A Pound Of Cure

Avon Products Inc. on Friday said its expenses for an internal FCPA investigation that started two years ago have increased enough to impact results. Main Justice reported the costs to be $18 million for the last quarter.

In a release, the company said it incurred "significant professional fees associated with the company's internal investigation resulting from an allegation of Foreign Corrupt Practices Act ("FCPA") violations in China."

Last month Avon suspended four employees pending its internal bribery investigation. It put three executives in China and another in New York on administrative leave.

CEO Andrea Jung on Friday said during a conference call that the initial corruption allegations were contained in a letter written to her by an undisclosed whistleblower. The allegations concerned only China and related to travel, entertainment and other expenses. She said the company immediately "began an internal investigation under the oversight of our audit committee and conducted by outside counsel. Most importantly we voluntarily self-reported the allegations to the U.S. Securities and Exchange Commission as well as the Department of Justice."

The investigation has now expanded to at least "four international business units outside of China," she said.

Explaining the wider scope, she said: "I also want to emphasize again the allegation that triggered our investigation was in China only. Conducting compliance reviews in these additional markets is the appropriate thing to do in investigations of this type, and as we stated we've been cooperating with both governmental agencies."

Avon's investigation is following a typical path. Companies that self-report sensitive payments to the DOJ and SEC are always in a hurry to resolve any potential violations. The problem is that the feds need convincing there aren't more payments still left to be uncovered. Before the DOJ and SEC will settle a case, they want to be sure all the cards are on the table.

Siemens, for example, needed about a year more than it hoped to reach a deal with the U.S. government. The company's internal investigation kept uncovering more corrupt payments. So it had to do more and more to convince prosecutors they were seeing all the dirty laundry. In the end, according to some with knowledge of the investigation, Siemens' total costs topped $1 billion. But without the enormous effort, it couldn't have convinced U.S. agencies the case was ripe for resolution.

*   *   *

Avon's FCPA disclosure in its 2009 annual report (available here) said:

We are investigating Foreign Corrupt Practices Act (FCPA) and related U.S. and foreign law matters, and from time to time we may conduct other internal investigations and compliance reviews, the consequences of which could negatively impact our business. From time to time, we may conduct internal investigations and compliance reviews, the consequences of which could negatively impact our business.

Any determination that our operations or activities are not in compliance with existing United States or foreign laws or regulations could result in the imposition of substantial fines, interruptions of business, termination of necessary licenses and permits, and other legal or equitable sanctions. Other legal or regulatory proceedings, as well as government investigations, which often involve complex legal issues and are subject to uncertainties, may also follow as a consequence. It is our policy to cooperate with U.S. and foreign government agencies and regulators, as appropriate, in connection with our investigations and compliance reviews.

As previously reported, we have engaged outside counsel to conduct an internal investigation and compliance reviews focused on compliance with the FCPA and related U.S. and foreign laws in China and additional countries. The internal investigation and compliance reviews, which are being conducted under the oversight of our Audit Committee, began in June 2008. We voluntarily contacted the United States Securities and Exchange Commission and the United States Department of Justice to advise both agencies of our internal investigation and compliance reviews and we are, as we have done from the beginning of the internal investigation, continuing to cooperate with both agencies and have signed tolling agreements with them.

The internal investigation and compliance reviews, which started in China, are focused on reviewing certain expenses and books and records processes, including, but not limited to, travel, entertainment, gifts, and payments to third-party agents and others, in connection with our business dealings, directly or indirectly, with foreign governments and their employees. The internal investigation and compliance reviews of these matters are ongoing.

At this point we are unable to predict the duration, scope or results of the internal investigation and compliance reviews.

Any determination that our operations or activities are not in compliance with existing laws or regulations could result in the imposition of substantial fines, civil and criminal penalties, equitable remedies, including disgorgement, injunctive relief and other sanctions against us or our personnel. In addition, other countries in which we do business may initiate their own investigations and impose similar sanctions. Because the internal investigation and compliance reviews are ongoing, there can be no assurance as to how the resulting consequences, if any, may impact our internal controls, business, reputation, results of operations or financial condition.


Panalpina Expects Settlement Soon

Swiss logistics giant Panalpina said yesterday it has reserved about $110 million for an expected FCPA settlement with the Justice Department and Securities and Exchange Commission and a seperate antitrust resolution. It said the settlements should happen "in the near future."

The corruption investigation dates back to at least early February 2007. The DOJ noted then in connection with Vetco's FCPA settlement that bribes in Nigeria "were paid through a major international freight forwarding and customs clearance company to employees of the Nigerian Customs Service . . .”

In the following months, about a dozen leading oil and gas-related companies received letters from the DOJ and SEC asking them to "detail their relationship with Panalpina . . . ." Shell, Schlumberger, Tidewater, Nabors Industries, Transocean, GlobalSantaFe Corp., Noble Corp. and Pride International were among those involved.

In July 2007, Panalpina disclosed that some customers of its U.S. subsidiary had “been requested by U.S. authorities to produce documents related to the provision of its services to Nigeria for a specific customer and its contractor. This request was triggered by the plea agreement of such customer with the U.S. authorities for allegedly making improper payments to Nigerian officials to secure preferential customs treatment. . . . U.S. authorities have extended the scope of their review to Panalpina’s documents related to services into Nigeria, Kazakhstan and Saudi Arabia for a limited number of customers.”

In August 2008, Panalpina said compliance concerns had forced it to withdraw completely from the Nigerian domestic market. It had already suspended domestic logistics and freight forwarding services there in September 2007 for all oil and gas-related customers. It said then it was cooperating with the DOJ and SEC in a Foreign Corrupt Practices Act investigation.

Yesterday's full announcement, available here, said:

In view of the advanced stage of the settlement negotiations with the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC), Panalpina has decided to reserve CHF 120 million, an amount anticipated to cover fines, other penalties and legal expenses relating to the settlement of both the U.S. Foreign Corrupt Practices Act (FCPA) and the U.S. antitrust investigations. This amount will be reflected accordingly in the company's 2010 half year financial statements. The finalization of the settlement with the U.S. authorities is expected in the near future. The above reserve does not cover other ongoing, non-U.S. antitrust investigations against the international freight forwarding industry in particular the proceeding launched by the European Commission as Panalpina is unable to predict the amount of any potential fine with certainty.

The company operates through 500 branches in 80 countries with about 13,500 employees worldwide. It serves the rest of the world through local partners.

Panalpina Welttransport (Holding) AG trades on various European exchanges, and in the U.S. OTC pink sheets under the symbol PLWTF.PK.

Special thanks to Marc Alain Bohn for help with this post.


Green Sentence Again Delayed

Sentencing for Gerald and Patricia Green was delayed for the fourth time Thursday and rescheduled to June 3rd. The Hollywood producers were convicted last year of paying $1.8 million in bribes to a Thai official in exchange for contracts worth about $13.5 million to produce the Bangkok Film Festival.

Gerald Green, 78, and his wife Patricia, 53, were first scheduled to be sentenced by Judge George H. Wu in federal court in Los Angeles on December 17, 2009. The government and the Greens agreed to wait until January 21, 2010. The judge then reset the hearing to April 1 and then April 29, after asking the parties for information about sentences in similar cases.

Yesterday, according to the Los Angeles Independent, the judge asked lawyers for both sides for more details about Gerald Green's emphysema and what effect federal prison might have on him. The judge said there hadn't been "much in the way of medical evidence'' to support defense arguments that prison would be devastating to Mr. Green's condition.

An LA jury in September 2009 found the Greens guilty of conspiring to violate the Foreign Corrupt Practices Act, nine counts of violating the FCPA, and seven counts of money laundering. Patricia Green was also found guilty of two counts of falsely subscribing to a U.S. income tax return. The conspiracy and FCPA charges are each punishable by up to five years in prison, the money laundering counts by 20 years in prison, and the tax charges against Patricia Green each carry a maximum penalty of three years in prison. Prosecutors apparently are asking for sentences of 10 years for each of the Greens.

The Independent said Patricia Greens' attorney, Marilyn E. Bednarski, is arguing for no jail time. "These people have been destroyed,'' she said. Assistant U.S. Attorney Jonathan E. Lopez argued that the Greens put themselves in the situation and had  shown "no remorse or acceptance of responsibility.''

Assistant U.S. Attorney Bruce H. Searby said a stipulated forfeiture agreement for $1.8 million had been reached between the Greens and the U.S. government.

In January, the Thai official named in the Greens' prosecution was indicted with her daughter in Los Angleles. Juthamas Siriwan, the ex-governor of the Tourism Authority of Thailand, and Jittisopa Siriwan, were charged with one count of conspiracy, seven counts of transporting funds to promote unlawful activity (bribery), and one count of aiding and abetting. If convicted, Siriwan and her daughter each face up to 20 years in prison. Siriwan has said she is innocent.


Manhandled Abroad

The SEC said today that it brought a civil enforcement action against four former employees of Dimon, Inc., now Alliance One International, Inc. It charged them with violating the anti-bribery provisions of the Foreign Corrupt Practices Act and aiding and abetting violations. The defendants agreed to settle the charges.

From 1996 through 2004, Dimon's subsidiary in Kyrgyzstan paid more than $3 million in bribes to various government officials to purchase Kyrgyz tobacco. Defendant Bobby J. Elkin, Jr., 49, a former country manager for Kyrgyzstan, arranged the bribes through a bank account held under his name called the Special Account.

Another defendant, Baxter J. Myers, 65, a former regional financial director, authorized transfers from a Dimon subsidiary's bank account to the Special Account, and defendant Thomas G. Reynolds, 54, a former corporate controller, recorded the payments made from the Special Account in Dimon's books.

Dimon also paid bribes in a scenario familiar to many western companies operating in high-risk countries. Its office, according to the SEC's civil complaint, was subjected to continuous audits by Kyrgyz tax officials. Some Dimon personnel devoted most of their work hours to answering questions from the tax inspectors. As soon as one audit finished, another would begin. The inspectors were never satisfied. Because Dimon once "failed to submit two reports to the tax office," they imposed a  fine of about $171,741 and threatened to seize its bank accounts and tobacco inventory. The tax inspectors later offered to reduce the penalties in exchange for Dimon's cash payment.

Separately, from 2000 to 2003, Dimon paid bribes of about $542,590 to officials of the government-controlled Thailand Tobacco Monopoly in exchange for about $9.4 million in sales contracts. Defendant Tommy L. Williams, 55, a former sales executive, directed tobacco sales from Brazil and Malawi to the Thailand Tobacco Monopoly through Dimon's agent in Thailand. He authorized the payment of bribes to government officials of the Thailand Tobacco Monopoly. These bribes were characterized as commissions paid to Dimon's agent in Thailand.

Defendants Myers and Reynolds  agreed to pay civil penalties of $40,000 each. All four defendants also consented to the entry of final judgments permanently enjoining them from violating the anti-bribery provisions of the FCPA (Section 30A of the Securities Exchange Act of 1934) and aiding and abetting violations of Sections 13(b)(2)(A) and 13(b)(2)(B). 

Alliance One International, Inc. was formed in May 2005 -- after the offenses described in the SEC's complaint -- with the merger of Dimon and Standard Commercial Corporation. The company trades on the NYSE under the symbol AOI.

View the SEC's April 29, 2010 Litigation Release No. 21509 in Securities and Exchange Commission v. Bobby J. Elkin, Jr., Baxter J. Myers, Thomas G. Reynolds, and Tommy L. Williams, Civil Action No. 1:10-cv-00661 (RMU) (D.D.C.) (filed April 28, 2010) here.

Download a copy of the SEC civil complaint here.


Letter From Central Asia

Andy Spalding, a lawyer on a year-long Fulbright Research Grant in Mumbai, India, writes to us from time to time. Here's his latest dispatch:

Dear FCPA Blog,

I have just returned from a week in Almaty, Kazakhstan, which your readers know to be an FCPA hot spot. I tried to preach the anti-corruption message through a series of lectures at one of the law schools, and interviewed a number of local practitioners.  This experience taught two undeniable lessons:

1.  It is nearly impossible to overstate the importance of curbing corruption in Kazakhstan. Graft is endemic (the country ranked a miserable 120 on the 2009 Corruption Perception Index) and perpetuates all manner of legal and social pathologies. The citizens of Almaty are perhaps as cynical about their government as any I have ever met, and with very good reason. Worse yet, U.S. companies have participated in, and reinforced, this culture of corruption, as we all learned through watching the James Giffen case explode in 2003. But this brings me to the second lesson:

2.  The present FCPA enforcement regime has done that country tremendous harm. How did the U.S. respond to the discovery of systematic bribery by U.S. companies in Kazakhstan? The same way that we respond to nearly every such revelation: we slapped severe criminal sanctions on myriad U.S. persons and hoped that other companies would get the message. Those companies did indeed get a message; whether it is the message we want to convey is a very interesting question. Since Giffen's arrest, western investment in the oil and gas sector in Kazakhstan has dropped precipitously. This is hardly surprising, and some would argue that it is precisely the desired outcome. But consider what happened in its wake. In that same period of time, investment has gone up, just as rapidly, from a well-capitalized country that has refused to adopt the OECD Convention: China.

Query: is Kazakhstan any better off now? I can tell you that the Kazakhstanis most certainly do not think so. There is a level of apprehension there about rising Chinese investment and influence that is quite shocking. A lawyer from a leading U.S. firm said, "My clients used to all be from the west, and now they're almost all Chinese."  Another lawyer said, "The Chinese don't like to spend as much on lawyers, because they solve their legal problems through other means." Those of us in anti-corruption circles know exactly what that lawyer meant. The law students are petrified by the prospect of working for, or with, Chinese companies -- "they don't do business the same way," so many of them told me. And yet, many of these same students are taking Chinese language classes.

Will corruption go down in Kazakhstan after the Giffen case? Certainly not. Has our withdrawal of FDI from Kazakhstan somehow set that country on the road to reform? This answer is also certain.

What's the remedy? Finding a way to enforce the FCPA that deters bribery without deterring investment in developing countries like Kazakhstan. We're smart enough to figure it out. Simply washing our hands of corruption by pulling out of developing countries like Kazakhstan, leaving them to be ravaged by companies that bribe without any fear of penalty, is morally irresponsible.

Andy Spalding

*   *   *

Readers with experiences in Kazakhstan or similar countries are welcome to comment as well.


Not What They Had In Mind

A U.K.-funded anti-corruption court in Afghanistan this week sentenced the manager of a British company that guards the British embassy in Kabul to two years in prison for bribery.

Bill Shaw, a 28-year British army veteran who retired as a major and was awarded the MBE, will be sent next week to one of the country's most notorious jails, Pul-e-Charkhi, according to reports from the Guardian and others.

Shaw was also fined $25,000. Convicted with him was an an Afghan, Maiwand Limar, who was also sentenced to two years in prison.

Shaw said he made what he believed were legitimate payments of $25,000 to gain release of two bombproof vehicles confiscated by Afghan security forces last year. He said he used an intermediary and tried for weeks to obtain an official receipt.

He was sentenced by three judges sitting on an anti-corruption tribunal that's funded largely by the U.K. Shaw's case was one of the first to come before the special court.

Shaw said he cooperated with Afghan investigators, giving interviews and returning to the country in early January after a vacation in the U.K. He was arrested on March 3rd.

Shaw's lawyer, Kimberley Motley, criticized the trial. "For some reason," she said, "[the tribunal] decided not to follow Afghan law or the U.N. conventions to which Afghanistan is a party. Furthermore, the presumption of innocence did not exist for him."

The U.S. and other Western countries have criticized Afghan President Hamid Karzai for corruption. But he has blamed foreigners for importing most of the graft. Now his government is apparently targeting expatriates. In addition to Shaw's prosecution, three Italian medical workers in Helmand were arrested and held briefly last month for plotting to murder the local governor. This month in Kabul, police raided at least five bars and restaurants popular with foreigners, alleging illegal sales of alcohol.