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Entries in Control Person (3)

Monday
Oct312016

Brackett and Neale: Enforcement Innovations for the Post-Yates Environment

During a recent webinar sponsored by the Washington Legal Foundation, we explored the impacts intensive individual-focused criminal enforcement can have on an industry, using the recent history of criminal enforcement of food safety laws as a case study. 

Click to read more ...

Monday
Nov092009

Toss Jefferson's FCPA Conspiracy Count

Before getting to William Jefferson, this reminder: Frederic Bourke is scheduled to be sentenced in Manhattan today (Tuesday, November 10) at 2:30 pm. He could be jailed for up to ten years for conspiracy to violate the Foreign Corrupt Practices Act and lying to federal investigators.

Now Jefferson: He'll learn his sentence this Friday in Alexandria, Virginia. Prosecutors want him jailed for 27 to 33 years. And once again there's a question whether the jury found Jefferson guilty of any FCPA-related offense. This time the answer could influence how long he'll spend behind bars. Here's the issue.

The former nine-term congressman was convicted in August on 11 of 16 corruption charges. He was acquitted on Count 11 of the indictment -- the only substantive FCPA charge he faced. But the jury convicted him on Count 1. It alleged three separate illegal conspiracies -- to solicit bribes, deprive citizens of honest services, and violate the FCPA. The jury's verdict form did not require it to specify which of the three illegal conspiracies the panel believed he engaged in. So Jefferson's conviction on Count 1 may or may not have included a finding that he conspired to violate the FCPA.

Since the verdict, many have wondered whether Jefferson was really convicted of an FCPA-related offense. Could he have been acquitted of the substantive charge and convicted on the conspiracy? Our view (here) was yes, the jury could have convicted Jefferson of conspiracy to violate the FCPA. The evidence supported it. And a guilty verdict recorded for Count 1 meant all three alleged conspiracies could be presumed proven, including the FCPA-related charge.

The government has now said the same thing in its sentencing memo: "The verdict form completed by the jury on August 5, 2009 did not require the jury to delineate which, if not all, of the objects charged in the conspiracy in Count 1 were found to have been proved, only that at least one of the objects was proven by the government beyond a reasonable doubt." Jefferson's lawyers argue that based on the facts, the jury couldn't have convicted him of the FCPA conspiracy once it acquitted him of the substantive FCPA offense.

Will Judge Ellis use the FCPA-related conspiracy element to calculate Jefferson's sentence? We hope not. Trying to read the jury's mind when imposing a sentence on any defendant is wrong. In Jefferson's case, not requiring the jury to declare which of the three conspiracy objects it voted to convict on was an error. Fundamental to a defendant's rights at trial and for appeal is jury accountability. That accountability was lacking as to Count 1. So the count should be tossed as to all three conspiracies it alleged, and none of them should be included in the sentencing computation.

William Jefferson is scheduled to be sentenced on November 13, 2009 at 9:00 am in the U.S. District Court for the Easter District of Virginia (Alexandria Division) by Judge T.S. Ellis, III.

Download a copy of the government's sentencing memorandum in U.S. v. Jefferson dated November 6, 2009 here.

Download a copy of William Jefferson's memorandum in aid of sentencing dated November 9, 2009 here.

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The D & O Diary reports the resolution of an FCPA-related civil suit on November 6, 2009 against Nature’s Sunshine Products. The company agreed to pay $6 million. The plaintiffs in the securities lawsuit had alleged the company lacked appropriate internal controls and that its books and records did not reflect the foreign transactions.

In late July, the SEC filed a settled enforcement action against Nature's Sunshine Products Inc. (NSP), its CEO Douglas Faggioli and its former CFO Craig D. Huff. The charges involved bribes by NSP's Brazilian subsidiary to customs officials and false accounting to conceal the payments. The SEC's complaint alleged that Faggioli and Huff, in their capacities as control persons, violated the books and records and internal controls provisions of the securities laws in connection with the Brazilian bribes. See our post here.
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Sunday
Aug232009

FCPA Liability Keeps Growing

In late July, the SEC filed a settled enforcement action against Nature's Sunshine Products Inc. (NSP), its CEO Douglas Faggioli and its former CFO Craig D. Huff. The charges involved bribes by NSP's Brazilian subsidiary to customs officials and false accounting to conceal the payments. As we said here, the SEC's complaint alleged that Faggioli and Huff, in their capacities as control persons, violated the books and records and internal controls provisions of the securities laws in connection with the Brazilian bribes.

As control persons. What's that mean?

A nice explanation appears on law.com from Philip Urofsky, the editor-in-chief of the FCPA Digest. He said in an interview that NSP's officers, Faggioli and Huff, were charged individually under Section 20(a) of the Securities Exchange Act of 1934 as those "in control" of the Brazilian employees who paid the bribes. Urofsky said it's the first time control-person liability has been used in the FCPA context. He explained:

What [the SEC charges] allege is that the current CEO, who was at the time the COO, had overall responsibility for the international operations of the company, including the export of products to Brazil. And the people who would know about these issues were under his control, and that the former CEO had authority and responsibility for the internal controls and books and records. This is a departure from the former practice. It's consistent with Section 20A as it's used in private litigation, but I've never seen the SEC use it in an FCPA case.
How significant is the appearance of control-person liability? Urofsky again:
It's an indication of the SEC's willingness to use all the tools at its disposal to hold individuals liable for acts within the corporation. Up until now, they usually would allege some knowledge, direct knowledge, and involvement of an individual. That is limiting because sometimes they don't have the evidence, don't have the last link. Also, in this case it's the CEO and CFO. But Section 20A has been used against a much wider variety of corporate officers and even directors in civil litigation. So there's potential where the directors are very active and involved in the operations of the company. In those circumstances, the SEC might very well look and see if there are facts to justify holding that person responsible.
There's a lot more in the interview on law.com here.
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