Richard L. Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Elizabeth K. Spahn Editor Emeritus

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

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

Aarti Maharaj Contributing Editor

FCPA Blog Daily News


2009 FCPA Enforcement Index

[Updated December 31, 2009] In 2009, prosecutors kept their promise to pursue individuals who violated the Foreign Corrupt Practices Act. Thirty-three were named in enforcement actions brought by the DOJ or SEC -- the most for any year since enactment of the law in 1977. This year's list includes those indicted, arrested, convicted, sentenced, or civilly charged. Last year, we counted 24 individuals involved in similar enforcement actions, plus David Kay and Douglas Murphy, whose petition for certiorari to the U.S. Supreme Court was denied.

This year, 11 organizations (counting Halliburton and its one-time subsidiary KBR as one) were named in enforcement actions. Last year, our count was also 11. 

We're listing six new private lawsuits based on FCPA-related allegations; there were five in 2008. For more information about the securities class actions, we recommend Kevin LaCroix's D&O Diary (here). Mike Koehler has also covered Pride's suit here.

There were three FCPA-related trials, the most to occur in a year. The defendants were Frederic Bourke, William Jefferson, and Gerald and Patricia Green. As usual, no corporations contested FCPA charges in court.

The SEC expanded FCPA liability during the year. It filed a settled enforcement action against two officers of Nature's Sunshine Products Inc. -- Douglas Faggioli and Craig Huff. The complaint alleged that Faggioli and Huff, in their capacities as control persons, violated the books and records and internal controls provisions. It was the first time control-person liability was used in the FCPA context.

The dollar value of the corporate enforcement actions in 2009 -- including criminal penalties, civil fines, disgorgements and interest -- was just over $641 million, with Halliburton / KBR paying $579 million, the most for a U.S. company in an FCPA case. Last year's dollar value was about $890 million, swelled by Siemens' $800 million settlement, the largest ever.

The DOJ's Mark Mendelsohn said in November there are 130 FCPA cases open at the DOJ. They include industry-wide investigations of pharmaceutical companies, oil and gas services firms, and orthopedic device makers. 

A note on our count: Enforcement actions brought against a company and its affiliates by the DOJ, SEC or both are tabulated as a single case. So our numbers may be lower than those mentioned by the government, but they're consistent year-on-year.


 Organizations (countries involved) / U.S. enforcement agencies / financial penalties including fines, disgorgement and interest:

AGCO Corporation (Iraq, U.N. oil for food program) / DOJ, SEC /$19.9 million

Avery Dennison Corporation  (China) / SEC / $518,000

Control Components Inc.  (China, Korea, Malaysia, United Arab Emirates) / DOJ / $18.2 million

Helmerich & Payne Inc. (Argentina, Venezuela) / DOJ, SEC / $1.375 million

ITT Corporation (China) / SEC / $1.7 million

Kellogg Brown & Root LLC and Halliburton (Nigeria) / DOJ, SEC / $579 million

Latin Node Inc. (Honduras, Yemen) / DOJ / $2 million

Nature's Sunshine Products Inc. (Brazil) / SEC / $600,000 

Novo Nordisk A/S (Iraq, oil for food program) / DOJ, SEC / $18 million

United Industrial Corporation (Egypt) / SEC / $337,679

UTStarcom, Inc. (China, Thailand) / DOJ / SEC /$3 million



Fernando Maya Basurto (ABB sales agent) Guilty plea, sentencing pending

Bobby Benton (Pride International) Charged in SEC civil complaint, trial pending

Frederic Bourke (entrepreneur, co-founder of Dooney & Bourke) Convicted, sentenced to a year and a day in prison and fined $1 million, free on bail pending appeal

Hong (Rose) Carson (Control Components Inc.) Indicted, trial pending

Stuart Carson (Control Components Inc.) Indicted, trial pending

Wojciech Chodan (KBR) Indicted, arrest in U.K. pending

Paul Cosgrove (Control Components Inc.) Indicted, trial pending

Mario Covino (Control Components Inc.) Guilty plea, sentencing pending

Juan Diaz (J.D. Locator Services) Guilty plea, sentencing pending

David Edmonds (Control Components Inc.) Indicted, trial pending

Joel Esquenazi (Terra Telecommunications Corp.) Indicted, trial pending

Douglas Faggioli (Nature's Sunshine Products), Civil enforcement action resolved, $25,000 civil penalty

Marguerite Grandison (Telecom Consulting Services Corp.) Indicted, trial pending

Gerald Green (movie producer), Convicted, sentencing pending

Patricia Green (movie producer), Convicted, sentencing pending

Craig D. Huff (Nature's Sunshine Products), Civil enforcement action resolved, $25,000 civil penalty

William Jefferson (former member, U.S. House of Representatives) Convicted, sentenced to 13 years in prison, free on bail pending appeal

Charles Paul Edward Jumet (Ports Engineering Consultants Corporation, Overman Associates) Indicted, trial pending

Han Yong Kim  (Control Components Inc.) Indicted, trial pending

Joseph T. Lukas (Nexus Technologies Inc.) Guilty plea, sentencing pending

Oscar H. Meza (Faro Technologies, Inc.) Civil enforcement action resolved, $56,707 civil penalty, disgorgement, prejudgment interest

Richard Morlok (Control Components Inc.) Guilty plea, sentencing pending

Ousama Naaman (intermediary for U.S. chemical company) Arrested in Frankfurt, Germany, extradition pending

Paul G. Novak (consultant, Wilbros Group), Guilty plea, sentencing pending

John Joseph O'Shea (ABB) Indicted, trial pending

Antonio Perez (Telecom Consulting Services Corp.) Guilty plea, sentencing pending

Flavio Ricotti (Control Components Inc.) Indicted, trial pending

Carlos Rodriguez (Terra Telecommunications Corp.) Indicted, trial pending

Shu Quan-Sheng (rocket scientist / AMAC International Inc) Sentenced to 51 months in prison

Leo Winston Smith (Pacific Consolidated Industries) Guilty plea, sentencing pending

Jeffrey Tesler (KBR agent) Indicted, extradition from U.K. pending

John W. Warwick (Ports Engineering Consultants Corporation, Overman Associates) Indicted, trial pending

Thomas Wurzel (United Industrial Corporation) Civil enforcement action resolved, $35,000 civil penalty


Private FCPA-related litigation:

Aluminium Bahrain BSC filed a $31 million civil suit against Sojitz Corp. and Sojitz Corporation of America.

FARO Technologies resolved securities class action litigation.

Halliburton and  KBR sued in a securities class action.

Panalpina World Transport (Holding) Ltd. sued by an investment fund.

Pride International Inc. sued in a securites class action.

Siemens AG sued in a securities class action.


If we've missed any names that should be included in the 2009 index, please let us know. If necessary because of late announcements from the government or suggestions from readers, we'll amend this post to keep it accurate and complete.

The 2008 FCPA Enforcement Index can be found here.

[Post updated on December 31, 2009]


UTStarcom Pays $3 million To Settle Asia Bribes

California-based telecoms equipment maker UTStarcom Inc. agreed today to pay the Justice Department $1.5 million in criminal fines and the SEC an additional $1.5 in penalties to resolve Foreign Corrupt Practices Act violations in China and Thailand.

Its employees, according to the DOJ's release, "arranged and paid for employees of Chinese state-owned telecommunications companies to travel to popular tourist destinations in the United States, including Hawaii, Las Vegas and New York City." Although the trips were supposed to be for training at UTSI facilities, UTSI had no facilities in the destinations and conducted no training. The company's China subsidiary falsely recorded "training" expenses" when the purpose was actually " to obtain and retain lucrative telecommunications contracts."

The SEC's complaint, filed in the Northern District of California, alleged that UTStarcom spent nearly $7 million between 2002 and 2007 on "lavish gifts and all-expenses paid executive training programs in the U.S. for existing and potential foreign government customers in China and Thailand." The company also made improper payments to sham consultants in China and Mongolia while knowing that they would pay bribes to foreign government officials. As examples of the antibribery offenses, the SEC complaint alleged that:

On at least ten occasions between 2001 and 2005, UTSI provided or offered full time employment with UTSI in the U.S., including salaries and other benefits, to employees of government customers or their family members in China and Thailand. These offers were made for the purpose of obtaining or retaining business from the customers.

The complaint also said:

While UTSI's bid was under consideration, UTSI's general manager in Thailand spent nearly $10,000 on French wine as a gift to agents of the government customer, including rare bottles that cost more than $600 each. The manager also spent $13,000 for entertainment expenses for the same customer in an attempt to secure the contract.

The SEC charged the company with violating the antibribery, books and records, and internal controls provisions of the FCPA (Sections 30A, 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934).

The DOJ said it gave UTStarcom a non-prosecution agreement because of the company's "voluntary disclosure, thorough self-investigation of the underlying conduct, the cooperation provided by the company to the Department, and the remedial efforts undertaken by the company."

The case began in 2005 when the U.S. Embassy in Mongolia sent the DOJ allegations that bribes were paid or offered on the company's behalf to a Mongolian government official. The company launched an internal investigation in 2006 into possible illegal payments in China and Thailand and self-disclosed to the DOJ and SEC. It later said violations may have occurred in Mongolia, Southeast Asia, India, and China. 

UTStarcom designs, manufactures and sells network equipment and handsets. It was founded in 1991 by Hongliang Lu, a Chinese-born, U.S.-educated entrepreneur. The company's manufacturing and most of its large customers are in China.

UTStarcom, Inc. trades on Nasdaq under the symbol UTSI.

View a copy of the Justice Department's December 31, 2009 release here.

Download a copy of the DOJ's December 31, 2009 non-prosecution agreement here.

View a copy of the SEC's Litigation Release No. 21357 and Auditing Enforcement Release No. 3093 (December 31, 2009) here.

Download a copy of the complaint in Securities and Exchange Commission v. UTStarcom, Inc., Case No. CV-09-6094 (JSW) (N.D. Cal. filed Dec. 31, 2009) here.


Are We Safer Yet?

In light of the Christmas Day attack on Northwest Flight 253 from Amsterdam to Detroit, let's go off topic with an item from the December edition of Foreign Policy magazine. The story is hard to believe but apparently true:

Since 2007, the U.S. State Department has been issuing high-tech "e-passports," which contain computer chips carrying biometric data to prevent forgery. Unfortunately, according to a March report from the Government Accountability Office (GAO), getting one of these supersecure passports under false pretenses isn't particularly difficult for anyone with even basic forgery skills.

A [Government Accountability Office] investigator managed to obtain four genuine U.S. passports using fake names and fraudulent documents. In one case, he used the Social Security number of a man who had died in 1965. In another, he used the Social Security number of a fictitious 5-year-old child created for a previous investigation, along with an ID showing that he was 53 years old. The investigator then used one of the fake passports to buy a plane ticket, obtain a boarding pass, and make it through a security checkpoint at a major U.S. airport. (When presented with the results of the GAO investigation, the State Department agreed that there was a "major vulnerability" in the passport issuance process and agreed to study the matter.)

From "The Top 10 Stories You Missed in 2009," Foreign Policy (December 2009) here.

*   *   *

Proceed to passport control. Here's an excerpt from our March 9, 2009 post:

The government [of Kenya] in 2002 had said it wanted to update the way it printed and tracked its passports. Everything would be new and high-tech. A French company was found for the job, at a price of €6 million. But the contract went instead to an unknown U.K. company called Anglo Leasing Finance, at a price of €30 million. There was no public tender and the story only leaked to the press because of a junior civil servant. [Government graft-buster John] Githongo grabbed the investigation. Two years later, he'd uncovered about twenty government contracts awarded to phantom overseas companies at inflated prices, signaling the presence of high-level corruption. And most of the tainted contracts related to Kenya's security apparatus -- passport controls, forensic labs, security vehicles and satellite services, among others.


The Embarrassment Of Corporate Criminal Liability

Federal corporate prosecutions are never fair fights. Mindless companies are stripped of their right against self-incrimination and pummelled by respondeat superior into accepting plea deals. The government then uses evidence coerced from them to prosecute their employees. For fans of the Fifth Amendment and the presumption of innocence, it isn't pretty.

In an essay cited on the White Collar Crime Prof Blog here and available from SSRN here, Northwestern's Albert Alschuler, left, (BA and LLB Harvard) exposes the increasingly illogical practices behind corporate enforcement. 

Corporate defendants must produce incriminating documents even when the act of producing these documents would tend to incriminate them. Moreover, to ensure that corporations will not benefit from the privilege, the Supreme Court requires corporate officers to produce these records even when the act of production would incriminate them personally. The exception to the privilege for corporations swallows the rule applicable to individuals, and the tail wags the dog.

All corporate prosecutions are a weird fiction, he says --  there's “no soul to damn, no body to kick,” quoting Baron Thurlow, an 18th century Lord Chancellor of England. So, Prof Alschuler writes:

Innocent shareholders pay the fines, and innocent employees, creditors, customers, and communities sometimes feel the pinch too. The embarrassment of corporate criminal liability is that it punishes the innocent along with the guilty.

Because corporations are "mindless," the goal of punishing them should be to encourage compliance by their employees. That's not happening, he says, because of respondeat superior. It allows companies to be convicted for acts by single errant employees. And it doesn't recognize any defense based on good-faith attempts by the corporate body to obey the law.

Why is respondeat superior allowed to continue? Prof Alschuler says:

Neither John Ashcroft nor any other Attorney General in the past century has sought a narrowing of the respondeat superior standard of corporate liability. Although half the states employ narrower standards, Congress seems very unlikely to follow their lead. An alliance of Ralph Nader, the Justice Department, and most Members of Congress could be expected to resist any effort to deny prosecutors an important “tool” in the fight against corporate crime. Like the rest of the federal criminal justice system, the respondeat superior standard transforms prosecutors into czars while the politicians stand and say “yes, yes, yes.” This standard serves its real purpose marvelously.

That real purpose, Prof Alschuler says, is the power of prosecutors to impose whatever sanctions they like for whatever conduct they wish to punish.

Not everyone agrees that corporate prosecutions are harmful or ineffective. Sara Sun Beale from Duke law school addresses Prof Alschuler directly in her upcoming article, "A Response to the Critics of Corporate Criminal Liability." It's scheduled to appear in the American Criminal Law Review and is available now on SSRN here.

So the debate continues.

Albert Alschuler's essay, " Two Ways to Think About the Punishment of Corporations" (October 19, 2009), appears in the American Criminal Law Review and on SSRN here.

*   *   *

New Site. The Global Graft Report is open for business here. It picks up where the FCPA Blog leaves off -- with stories about public corruption and compliance that aren't about the FCPA or go beyond it.


Wonderful Things Happened

Christmas! 'Tis the season for kindling the fire of hospitality in the hall, the genial fire of charity in the heart.  -- Washington Irving

We're warmed by the generosity of those who support this project. Our readers let us know what they like, our sponsors provide financial and moral support, and many of you send hints, tips and ideas that eventually become posts.

Cody Worthington has been here since the beginning, lending a hand many times when we were stuck in deep snow. Marc Bohn, whom we haven't mentioned before, has been another stalwart -- with at least a dozen ideas and corrections (despite his own busy practice and publication schedule).  Among others who were an important part of the blog this year are Elizabeth Spahn, Rebecca Walker, and Andy Spalding.

We just heard from Andy. Writing from India, he said:

Dear FCPA Blog,

I hope this email finds you well. I thought you might be glad to know that the FCPA Blog has now become, among many other things, a social networking site! When I came to India to do my FCPA research I first went to the Blog and found the names of Mayur Joshi, CEO of Indiaforensic, and his then-colleague Pradeep Akkunoor. Mayur and Pradeep sponsored India's first FCPA conference back in 2007, which you generously covered on the Blog. As a result of these introductions, two wonderful things happened.

First, I discovered that Pradeep is now an MBA student at Sasin Business School in Bangkok, and he invited me out to the school to do a presentation on the FCPA, which I did on Dec. 4th. Then Mayur and I decided to organize our own conference in Pune, India, which was held on Dec. 18th. It was a tremendous success -- many of the biggest Indian companies attended, and we received ample coverage in the press. 

I wanted to thank you for making these connections possible. As you know, I am concerned about the sanctioning effect of the FCPA in developing countries, and I have come to believe that the most effective remedy is education. To the extent that we can raise awareness of the statute's provisions among potential business partners in historically bribery-prone countries, companies subject to the FCPA's jurisdiction will be less uneasy doing business there. And in my view, when that happens everybody wins. 

This effort would not be nearly as effective without a central repository of information on all things FCPA related, and in all seriousness, your blog is serving this purpose extraordinarily well.

Merry Christmas,

Andy Spalding

Now it's our turn to thank Andy and all of you for your countless gifts that simply couldn't be greater.


Did EU Rules Ruin BAE's Settlement?

The British press in September reported (here) that BAE Systems -- the U.K.'s biggest defense contractor -- had been given until the end of the month by the Serious Fraud Office to settle bribery charges related to sales in Africa and Eastern Europe or face prosecution. When the deadline passed with no settlement, the BBC reported the two sides couldn't agree, among other things, "on what BAE would admit." We may now know why they couldn't agree.

The Times said Friday BAE's admissions could lead to an EU ban:

Insiders told the Times that one of the major obstacles to a settlement is a European Union law on bribery that states that European governments must not give work to companies found guilty of corruption. The EU directive means that a criminal conviction could ruin BAE, which employs more than 100,000 people and is the biggest supplier to the British Armed Forces. Most experts believe that a financial settlement will be reached that will mean BAE admitting lesser charges not covered by the EU rules.

When BAE's settlement talks broke down in September and the SFO announced it would seek prosecution, British MP Sir Menzies Campbell hinted at the problem with the EU. He told Sky News: "The company is the principal contractor in the programs for the Eurofighter, the aircraft carriers and Joint Strike Fighter, and many other significant procurement projects. These developments have a considerable impact on all of these projects."

The Times and others say BAE may yet settle with the SFO. Both sides want to reach a compromise that may include a large fine but avoid criminal prosecution, saving BAE's business in Europe and elsewhere. 

A resolution like that would resemble settlements the U.S. Justice Department routinely reaches in Foreign Corrupt Practices Act enforcement actions. It uses plea arrangements and pre-trial agreements to avoid prosecuting corporations for antibribery offenses. That in turn allows them to continue doing business with the U.S. government and others.

Some commentators are critical of the American approach. But we've defended the practice:

[T]he DOJ is understandably reluctant to hit corporations head on. The Arthur Andersen prosecution in the aftermath of the Enron scandal demonstrated the catastrophic consequences that can result from a corporate felony charge. For Andersen it was an instant death sentence, even though the firm was later exonerated. That's why the DOJ has since adopted a softer approach to FCPA and other white collar offenses. It offers companies that want to cooperate alternatives in the form of negotiated settlements.

The Justice Deparatment, meanwhile, is reportedly still investigating BAE's payments of about $2 billion to Saudi Prince Bandar bin Sultan. The SFO dropped that investigation in 2006. But is the DOJ moving slowly because of the EU rules? Is there concern a typical Justice Department settlement might also lead to an EU ban on BAE? Is the DOJ having trouble harmonizing its practices with the SFO and the EU?

Lots more will be said and written about this in the coming weeks and months. Stay tuned.


Bribery Allegations Against Sojitz

Aluminium Bahrain BSC -- known as Alba -- has filed a $31 million civil suit in federal court in Houston against Japanese trading company Sojitz Corp. and its U.S. subsidiary, Sojitz Corporation of America. The suit alleges that from 1993 to 2006, Sojitz paid $14.8 million in bribes to two of Alba's employees in exchange for access to metals at below-market prices. Alba is majority-owned by the government of Bahrain.

There's no private right of action under the Foreign Corrupt Practices Act. So Alba's claims against Sojitz are based on RICO (18 U.S.C. § 1962(c)), conspiracy to violate RICO (18 U.S.C. § 1962(d)), fraud, and civil conspiracy to defraud. The complaint alleges that Sojitz used bribes to buy underpriced product and then "resold the aluminum it bought from Alba at below-market rates to U.S. companies including Enron Corp."

In September, the Wall Street Journal reported the U.S. Justice Department's investigation into "payments that Bahraini prosecutors allege were made by units of Japanese commodities-trading giant Sojitz Group to employees of an aluminum producer in Bahrain." The DOJ has never commented on the story. See our post here.

This is the second civil action Alba has filed in U.S. courts with allegations about potential FCPA violations. In March 2008, Alba sued Alcoa Inc., its long-time raw materials supplier, for corruption and fraud. The suit in federal court in Pittsburg alleged that Alba paid $2 billion in overcharges during a 15-year period. The money, according to the suit, first went to overseas accounts controlled by Alcoa's agent and some was then used to bribe Alba's executives in return for supply contracts.

Just weeks after Alba sued Alcoa, the Justice Department intervened in the case. It asked the court for a stay while the government investigates possible criminal violations of the FCPA and other laws by Alcoa and its executives and agent. The DOJ said the stay was needed to protect potential witnesses against civil discovery. The stay the court granted is still in effect. The DOJ hasn't commented on the status of its criminal investigation. Alcoa denied wrongdoing and said it is cooperating. See our post here.

Will the DOJ also intervene in Alba's suit against Sojitz? It needed the stay in the Alcoa case, it said, because:

The public is "an unnamed party in every lawsuit." United States v. Reaves, 636 F.Supp. 1575, 1578 (E.D. Ky. 1986) Here, the Complaint alleges that the defendants arranged for Alcoa, a public corporation, through its affiliates and agents, to make payments in violation of the anti-bribery provisions of the FCPA, among other crimes. The proposed stay enables the government to investigate these charges without potential prejudice to its investigation resulting from civil discovery . . . This would thus enable the government to vindicate the paramount public interest in the enforcement of federal criminal laws and resolution of the federal criminal investigation, should the government's investigation reveal evidence that federal criminal laws were violated. . . .

Sojitz Corp.'s website says that as of September 2009, its business consists of 555 companies including 165 subsidiaries and affiliates in Japan and 390 overseas, with 17,147 employees. Sojitz's U.S. subsidiary is headquartered in New York. The parent company's ADRs trade in the over-the-counter pink sheets under the symbol SZHFF.PK.

Download a copy of the December 18, 2009 federal civil complaint in Aluminium Bahrain B.S.C v. Sojitz Corporation and Sojitz Corporation of America here


Gov't Seeks Life Sentence For Gerald Green

The Justice Department wants Gerald Green sentenced to life in prison. In a December 14 court filing, prosecutors said although the pre-sentence report recommends a downward departure under the federal sentencing guidelines and a sentence of about 20 to 25 years, Green's sentence should instead be enhanced. He was the ring leader of the bribery plot, the DOJ said, and he "repeatedly and blatantly perjured himself" at his trial.

The government concludes the court filing by saying:

The [pre-sentence report] calculates defendant Gerald Green’s Total Offense Level as 38, his Criminal History Category as I, and his sentencing range as 235-293 months. With the inclusion of the additional role and obstruction enhancements recommended above, his Total Offense Level would be 44 and his sentencing range would be life in prison.

Hollywood film producers Gerald Green, 76, and his wife Patricia, 52, were scheduled to be sentenced by Judge George H. Wu in federal court in Los Angeles on December 17. But the government and the Greens agreed this week to postpone the sentencing until January 21, 2010. They said late delivery of the pre-sentence report on November 30 was the reason.

The Greens were convicted by a federal jury in September. The DOJ said evidence presented during their 2½-week trial showed that beginning in 2002 and continuing into 2007, the Greens conspired with others to bribe the former governor of the Tourism Authority of Thailand in order to land lucrative film festival contracts as well as other deals for the development of a Thai Privilege Card, and for a website, book, video, calendars, and public relations services. The Greens used different business entities, some with dummy addresses and telephone numbers, to hide how much they were receiving under the contracts.

At least $1.8 million from their take went to bribe the former governor. The DOJ said the Greens disguised the bribes as "sales commissions" and made the payments through bank accounts in Singapore, the United Kingdom and Jersey, some in the name of the former governor's daughter and a friend.

The jury found the Greens guilty of conspiring to violate the FCPA, 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 each carry a maximum penalty of five years in prison, each of the money laundering counts carries a maximum penalty of 20 years in prison, and the tax charges against Patricia Green each carry a maximum penalty of three years in prison.

Download a copy of the government's December 14, 2009 response and objections to the pre-sentence report for Gerald Green here.


Another Indictment In Panama Bribes Case

A Virginia man yesterday became the second person charged with bribing former Panamanian government officials in exchange for maritime contracts. John W. Warwick, 63, was indicted by a federal grand jury in Richmond for conspiracy to violate the Foreign Corrupt Practices Act. He allegedly plotted with others to pay foreign officials to obtain business for Ports Engineering Consultants Corporation (PECC). The company was a Panama affiliate of Overman Associates, a Virginia Beach engineering firm.

Last month in the same case, Charles Paul Edward Jumet, 53, pleaded guilty to a two-count criminal information. He admitted conspiring to violate the FCPA by making corrupt payments to government officials in Panama on behalf of PECC and giving a false statement to the FBI about how he paid some of the bribe money. He's scheduled to be sentenced on February 12, 2010. See our post here.

Warwick's indictment alleges that he, Jumet and others conspired to make corrupt payments totaling more than $200,000 to the former administrator and deputy administrator of the Panama Maritime Authority and to "a former, high-ranking elected executive official" of Panama. In December 1997, Panama awarded PECC a no-bid, 20-year contract to maintain lighthouses and buoys. Warwick was the company's former president.

If convicted, Warwick faces a maximum of five years in prison and a fine of the greater of $250,000 or twice the gain or loss. The indictment seeks forfeiture of the proceeds Warwick and Overman Associates received from PECC's Panama contracts.

As the DOJ says, an indictment is merely an accusation and the defendants are presumed innocent until and unless proven guilty at trial beyond a reasonable doubt.

View the Justice Department's December 16, 2009 release here.

Download a copy of the December 15, 2009 indictment in U.S. v. Warwick here.


SFO Gives Self-Reporting Guidance

This is a guest post from D.C. lawyers Drew Harker and Keith Korenchuk.


Dear FCPA Blog,

The director of the U.K.'s Serious Fraud Office, Richard Alderman, recently clarified some of the SFO's positions on its new approach to overseas corruption in a December 7, 2009 open letter to our partner, Marcus Asner. A full copy of the letter can be downloaded here. Here's a summary:

Mr. Alderman’s letter answered five questions about the SFO’s enforcement policy.

1. What criteria will the SFO apply when deciding whether to treat a self-reported matter criminally or civilly?

  • The seriousness of the wrongdoing;
  • Whether the matter is an isolated incident or whether the company has uncovered other examples of this type of misconduct;
  • Whether the wrongdoing is systematic and part of the company’s established practice;
  • Whether the affected group within the company was warned that its processes were inadequate;
  • Whether the company reported the matter to the SFO within a reasonable time of discovering the incident; and
  • Whether the report provided to the SFO is detailed and complete.

2. What scope of investigation will satisfy the SFO and avoid the need for additional, SFO-directed investigation?

The SFO’s strong preference is that all investigative work on the facts surrounding the wrongdoing be carried out by the company’s professional advisors and not by the SFO itself. The SFO expects self-reporting companies to present the SFO with reports that allow the SFO (1) to determine whether the company has fully investigated the issues; and (2) to discuss remediation measures with the company. Mr. Alderman recognized that the cost of investigations can become unwieldy and suggested a rule of reason will apply, noting: “we are anxious not to put disproportionate cost on the corporates.”

3. Under what circumstances would monitors be appointed?

The SFO is taking a nuanced approach to monitoring. Mr. Alderman stated that the SFO’s goal with monitorships will be to balance assuring the public that the company is genuinely committed to anti-corruption measures while not imposing disproportionate burdens on the company. Specifically, Mr. Alderman noted the SFO will not appoint a monitor in cases where a company’s board proves that it is committed to enforcing an anti-corruption corporate culture.

In cases involving more serious violations of anti-corruption laws, the SFO will implement some “light touch,” on-going monitoring. In those cases, the SFO will expect a company to propose monitors in the first instance. Mr. Alderman further stated that the SFO will not impose a specific monitor against the wishes of a company’s board. Finally, the SFO will work with its international counterparts in assigning monitors in cases where the conduct at issue involves other jurisdictions.

4. What position will the SFO take on attorney-client privilege?

Mr. Alderman acknowledged that the concept of the waiver of attorney client privilege differs under U.K. and U.S. law. The SFO will not expect companies to provide documents reflecting legal advice the company received on how to conduct the investigation, the types of remediation to be discussed with the SFO or issues relating to conducting negotiations with the SFO. However, the SFO does expect to be provided a full factual report on the investigation, including any relevant interview notes from the investigation. Mr. Alderman stated that the SFO expects companies to waive any privilege with respect to these materials. The SFO is primarily interested in factual reports and suggests that legal advisors seeking to protect the companies’ privileges could separate the fact issues from legal advice when preparing the materials to share with the SFO.

As has been discussed following the issuance of the U.S. Justice Department's Filip Memo, even a requirement that lawyer-discovered facts be disclosed raises genuine concerns about preservation of the attorney-client privilege. The SFO appears to go even a step further, suggesting it will require the production of actual interview notes.

5. Will the SFO ever close a voluntary disclosure case without any actions?

In limited cases, the SFO could terminate its involvement in a matter (1) if special circumstances apply and the company offers to pay suitable remediation; or (2) if after the company self-reported to the SFO at an early stage of the investigation, the ultimate report on the investigation provided to the SFO does not support the initial suspicions of corruption. Mr. Alderman stated that due to the strong public interest in publicly announcing these settlements, it expects that these instances will be comparatively rare. Mr. Alderman did not explain what special circumstances would lead to SFO’s terminating its investigation, but he noted that the SFO has done this in “a few cases at present.”



U.K. Bans Kenyans For Corruption

Britain has banned 20 Kenyans from entering the country. According to reports last week from the BBC and others, the names of those banned haven't been made public but they may include senior civil servants, politicians and businessmen. Britain's High Commissioner (ambassador) to Kenya, Rob Macaire, said the ban was necessary because Kenya has never convicted a senior official of corruption.

In November, the U.S. ambassador to Kenya, Michael Ranneberger, confirmed on his Twitter page that the U.S. government had denied a visa to Kenya's attorney general Amos Wako. It was the first time an American official had revealed a visa determination under Presidential Proclamation 7750, the executive order giving the State Department the power to exclude foreign kleptocrats, their families and friends. See our post here.

In July 2007, the U.K.'s Serious Fraud Office opened a criminal investigation into contracts between the Kenyan government and a U.K. business known as Anglo Leasing Finance. The contracts for passport controls and border security systems were awarded to phantom overseas companies at inflated prices that topped $100 million. Kenya refused to cooperate and in February this year the SFO ended its investigation, saying without support from the Kenyan government the case couldn't be prosecuted.

Attorney General Wako has denied being involved in corruption and blamed the lack of cooperation with the SFO on Kenya's judicial system. 

Kenya's former top anti-corruption officer, John Githongo, began investigating Anglo Leasing Finance after his appointment in 2002. He delivered his report to President Mwai Kibaki in November 2005. (A copy, later leaked to the public, can be downloaded here.) He received death threats and fled to England. From there, Githongo publicly blew the whistle on many of Kenya's top politicians. President Kibaki was forced to fire three ministers -- though he reappointed two of them a year and half later.


MAN Group Fined €150.6 Million For Bribery

German truck maker MAN Group said on Friday that two subsidiaries will pay fines of €75.3 million each to German authorities to resolve corruption charges first disclosed in May this year (here). The fines were imposed against MAN Nutzfahrzeuge AG (the commercial vehicles division) and MAN Turbo AG (the compressors / turbines division) by the public prosecutors' office in the Munich District Court. The company announced at the same time a €20 million settlement with German authorities for unpaid taxes. MAN's releases about the settlements are here and here.

The company separately disclosed (here) that two executive board members of MAN Turbo had resigned "to clear the way for new management." Dr. Gerhard Reiff had been on the board since 2005 and Dr. Stephan Funke since 2007.

MAN's internal investigation uncovered suspicious payments of €51.6 million relating to around 80 transactions. The payments were found in a number of countries and most were through agents and other intermediaries. The company said it has fired 20 employees and is considering suing them for damages. It didn't disclose the countries involved or who may have received illegal payments in the form of "so-called referral commissions." The internal investigation involved "around 70 lawyers, auditors and tax experts . . . working since mid-May to analyze the suspicious payments made in the last ten years at all of MAN’s subgroups."

MAN is Germany's second largest truck, bus and diesel-engine manufacturer behind Daimler AG. It reported revenue in 2008 of €14.9 billion and has 51,000 employees worldwide.

The company said it launched a compliance initiative in July. It said it will disclose to prosecutors any future suspected bribery cases and cooperate with them, establish a revamped compliance office on January 1, 2010 reporting directly to the executive board, provide hands-on compliance training to all employees in sales, purchasing, and marketing jobs, use an IT system designed to reveal any suspicious payments, abolish "referral commissions," and impose due diligence requirements on all agents. MAN said it will also continue talks with various anti-corruption NGOs about joint projects.

The company is listed on the German DAX and its largest shareholder is Volkswagen. MAN AG's ADRs trade on the over-the-counter pink sheets under the symbol MAGOY.PK. It hasn't disclosed any investigations by the U.S. Justice Department or SEC.