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FCPA Blog Daily News

Entries in Domestic Concern (9)

Friday
Apr222016

No FCPA jurisdiction based solely on conspiracy and accomplice liability, court rules

On March 16, the U.S. District Court for the District of Connecticut affirmed its earlier ruling that a non-resident foreign national cannot be charged with conspiracy to violate the Foreign Corrupt Practices Act or with aiding and abetting a violation of the FCPA, unless the government can show that he acted as an agent of a “domestic concern” or while physically present in the United States.

Click to read more ...

Tuesday
Feb232010

Bourke Witness Faces Sentencing

Hans Bodmer, a key witness against Frederic Bourke, faces sentencing today in federal court in Manhattan for conspiracy to launder money. Photo by edenpicturesHans Bodmer, the Swiss lawyer who once represented Viktor Kozeny and provided key testimony against Frederic Bourke, may learn his sentence today. He's scheduled to appear in U.S. federal district court in Manhattan before Judge Shira A. Scheindlin, who oversaw Bourke's trial last summer.

Bodmer was indicted by a New York federal grand jury in August 2003 on single counts of conspiracy to violate the Foreign Corrupt Practices Act and to launder money. A copy of the indictment can be downloaded here. The court dismissed the FCPA charge, ruling that before being amended in 1998, the FCPA didn't apply to non-U.S.-resident foreign nationals who served as agents of domestic concerns. Bodmer then pleaded guilty in October 2004 to conspiracy to launder money.

He was released on bail of $1.5 million, including $1.45 million in cash first held at the Royal Bank of Scotland in London and later transferred with Judge Scheindlin's consent to Thurgauer Kantonalbank in Switzerland.

Bodmer faces ten years in prison on the money-laundering conspiracy charge. Because of his guilty plea and cooperation with the DOJ in the prosecution of Frederick Bourke, his sentence will be much lighter.

Bloomberg's David Glovin gave this account of Bodmer's June 2009 appearance for the prosecution at Bourke's trial:

Bodmer, who is testifying for prosecutors in exchange for leniency and admits knowing of the bribery scheme, testified yesterday that he told Bourke about the payments. . . .

[S]peaking methodically through a thick German accent, [he] told jurors he was surprised when Bourke asked him about the “arrangement” [to pay Azeri officials bribes] because it was a “sensitive matter.” After getting permission from Kozeny, Bodmer said he outlined the scheme. Justice Department lawyer Robertson Park asked Bodmer how Bourke responded.

“No specific response,” Bodmer testified.

Bourke was convicted in July 2009 of conspiracy to violate the FCPA and lying to FBI agents. Judge Scheindlin sentenced him to a year and a day in prison. He's free on bail while he appeals his conviction.

Bodmer's one-time client, Czech-born Victor Kozeny, is the best-known FCPA fugitive. Last month he won a decision in a Bahamas appellate court that continues to block his extradition to the U.S. He's lived in the Bahamas for about ten years. A federal grand jury in Manhattan indicted Kozeny in May 2005 for a plot to bribe Azeri leaders to gain control of the state oil company. His co-defendant Bourke was accused of investing in the scheme despite knowing Kozeny planned to use bribes.

[Editor's note: Bodmer's sentencing was postponed today until August 23, 2010.]

Sunday
Jan102010

Non-Public Issuer Discloses Investigation

In what may be the first case of its kind, a U.S. company that has no securities traded on an exchange but files periodic reports with the Securities and Exchange Commission has disclosed an internal investigation into possible Foreign Corrupt Practices Act violations.

In a December 30, 2009 SEC filing (here), Tampa-based PBSJ Corporation said it will miss the filing deadline for its Annual Report on Form 10-K for the year ended September 30, 2009 "due to an internal investigation being conducted by the Audit Committee of the Board of Directors." The company said the purpose of the internal investigation "is to determine whether any laws have been violated, including the Foreign Corrupt Practices Act, in connection with certain projects undertaken by PBS&J International, Inc., one of the Company’s subsidiaries, in certain foreign countries."

The FCPA's antibribery provisions apply to "domestic concerns," which include all U.S. companies; the books and records and internal controls provisions apply only to "issuers" -- corporations that have issued securities that have been registered in the United States or who are required to file periodic reports with the SEC. See 15 U.S.C. §§ 78c(a)(8), 78dd-1(a) and our post here.

PBSJ Corporation is a "domestic concern" subject to the anti-bribery provisions. It has no publicly traded securities. But because it has so many shareholders -- about 4,000 mainly current and former employees  -- it must file periodic reports with the SEC. That makes it an "issuer" subject to the books and records and internal controls provisions.

The Company said it self-reported to the SEC and Justice Department "the circumstances surrounding this internal investigation. Should the SEC or DOJ decide to conduct its own investigation, the Company will cooperate fully."

PBSJ provides engineering and construction management for government agencies worldwide, usually for road-building projects. It has 80 offices and 3,900 employees.

The company has had other compliance problems and internal controls lapses. The Tampa Business Journal said in March 2005 PBSJ discovered "what eventually was determined to be a $36.6 million embezzlement scheme by the former CFO and two other workers. Discovery of the scheme triggered a series of events, including repayments to clients that had been overbilled in an effort to cover the missing funds and a restatement of financial information for several years."

The company was also investigated by the Federal Election Commission. The FEC said for years PBSJ hid  campaign contributions to political candidates. It also encouraged employees to contribute to campaigns, then secretly reimbursed them for their payments, which violates the law.

Thursday
Sep172009

We Get It

Lawyers are trained to quibble and criminal defense lawyers do it best. After all, their job is to create reasonable doubt. So it's no surprise that when talking about the Foreign Corrupt Practices Act, they say it's complicated, technically challenging and obscure, poorly drafted and badly organized. But don't believe it. There's no evidence in the record that judges or juries have any trouble understanding the FCPA. Just the opposite.

Case in point: U.S. v. Gerald and Patricia Green. Judge George Wu's final jury instructions show just how simple the FCPA's antibribery provisions really are. His words are neat, clear and concise. All that's missing is the ambiguity lawyers like to talk about. (The instructions refer to "an instrumentality of interstate commerce," a pre-1998 holdover discussed here and here.)

Seeing Judge Wu's complete FCPA instructions should help dispel the idea that the law is shrouded in mystery. It's not. That's one reason why there hasn't been an acquittal in an FCPA trial since 1991. Juries get it. Which means anyone who's completed a typical compliance training program has no excuse for not understanding the FCPA.

Here's what Judge Wu said:
___________

Foreign Corrupt Practices Act

One of the alleged objects of the conspiracy charged in Count One of the Indictment is a violation of the Foreign Corrupt Practices Act (henceforth "FCPA"). In addition, Counts Two through Ten charge both Defendants with nine separate FCPA violations. See paragraph 26 of the Indictment for a description of each of the FCPA counts.

A FCPA violation is described in 15 U.S.C. § 78dd-2(a) as follows:

It shall be unlawful for any domestic concern . . . or for any officer, director, employee, or agent of such domestic concern . . . , to make use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to--

(1) any foreign official [or]

* * * * * *
[(3) any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official . . .]

for purposes of -

(A)(i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage; or

(B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality,

in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person . . .

15 U.S.C. § 78dd-2(g) (2)(A) makes it a crime for a person to "willfully violate" Section 78dd-2.

Elements Of A FCPA Violation

To establish that a Defendant violated the FCPA, the Government must prove each of the following seven elements beyond a reasonable doubt:

First, that Defendant was a "domestic concern" or an officer, director, employee or agent of a domestic concern;

Second, the Defendant made use of the mails or any means or instrumentality of interstate commerce;

Third, at which time the Defendant was acting "corruptly";

Fourth, when the Defendant authorized, offered to pay, or made a gift or payment of anything of value to a foreign official or to any person (knowing that all or a part of such gift or payment would be offered or given directly or indirectly to a foreign foreign official);

Fifth, for the purpose of (a) influencing any act or decision of such foreign official in his official capacity, (b) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (c) securing any improper advantage;

Sixth, the gift or payment was authorized or made to assist the domestic concern in obtaining or retaining business for or with (or directing business to) any person; and

Seventh, the Defendant acted willfully.

A "domestic concern" means any individual who is a citizen or resident of the United States and / or any corporation, partnership or business entity which is organized under the laws of a State of the United States or which has its principal place of business in the United States.

A "foreign official" means any officer or employee of a foreign government or any department, agency or instrumentality of the foreign government; or any person acting in an official capacity or on behalf of any such foreign government, department or agency.

The term "interstate commerce" means trade, commerce, transportation or communications among the several States of this country, or between any foreign country and any State, or between any State and any location outside of that State. The term also includes the use of a telephone or other interstate means of communication or any other interstate instrumentality, such as fax transmissions, e-mail correspondence and wire transfers of funds between persons in different States or countries.

An act is "corruptly" done if done voluntarily and intentionally, and with a bad purpose or evil motive of accomplishing either an unlawful end or result, or a lawful end or result but by some unlawful method or means. The term "corruptly" in FCPA is intended to connote that the offer, payment, or promise was intended to induce the recipient to misuse his or her official position.

A violation of the FCPA is "willful" if: 1) the Defendant's actions are intentional and not the result of an accident or mistake, and 2) the Defendant knows that his or her actions are in some way unlawful. As to the second point, the Defendant does not have to be aware of the existence of the FCPA itself, but the Defendant must have proceeded with the knowledge that he or she was doing a "bad" act under the general rules of law, doing an act with a bad purpose, or taken the action without any ground to believe that it was lawful.
_________

Download a copy of the specific jury instructions in U.S. v. Green here.

Download a copy of the March 11, 2009 second superseding indictment in U.S. v. Green here.

View prior posts about the Greens here.
.

Thursday
Mar052009

KBR's U.K. Middlemen Indicted

Two U.K. citizens who allegedly helped Houston-based Kellogg Brown & Root (KBR) bribe Nigerian officials have been indicted for violating the Foreign Corrupt Practices Act. Jeffrey Tesler, 60, of London, England, and Wojciech Chodan, 71, of Maidenhead, England, were indicted on Feb. 17, 2009 by a federal grand jury sitting in Houston. The Justice Department didn't unseal the indictments until after yesterday's arrest of Tesler by British police, who acted at the request of U.S. authorities. Chodan hasn't been arrested but faces an outstanding U.S. warrant. The DOJ said it will try to extradite Tesler and Chodan from the U.K. to stand trial in the U.S.

Tesler, a lawyer in London, and Chodan, a former employee and consultant of KBR's U.K subsidiary, were charged with one count of conspiracy to violate and ten counts of violating the FCPA. They face up to 55 years in prison if convicted on all counts. The indictment also seeks forfeiture from them of more than $132 million.

The indictment says a joint venture that included KBR entered into consulting contracts with a Gibraltar corporation allegedly controlled by Tesler called Tri-Star Investments. The joint venture paid Tri-Star about $132 million to be used to bribe Nigerian government officials. The bribes were intended to secure contracts worth more than $6 billion to build liquefied natural gas facilities on Bonny Island, Nigeria. The joint venture, known as TSKJ, was equally owned by KBR, Technip, SA of France, Snamprogetti Netherlands B.V. (a subsidiary of Saipem SpA of Italy) and JGC of Japan. Chodan allegedly participated in meetings where the bribery was discussed and he wired $50 million from KBR-controlled accounts to a Japanese trading company to be used to bribe Nigerian officials.

Among the details in the indictment: In August 2002, a KBR representative, using money KBR provided to Tesler, "delivered a pilot's briefcase containing one million U.S. dollars in one-hundred dollar bills to the [Nigerian] Official at a hotel in Abuja, Nigeria, for the benefit of a political party in Nigeria." And in April 2003, a KBR representative "delivered a vehicle containing Nigerian currency valued at approximately $500,000 to the hotel of the [Nigerian] Official in Abuja, Nigeria, for the benefit of a political party in Nigeria, leaving the vehicle in the hotel parking lot until the . . . Official caused the money to be removed."

Last month, KBR pleaded guilty to violating the Foreign Corrupt Practices Act. It agreed with the DOJ to pay a $402 million fine. KBR and its former parent company, Halliburton Company, also agreed to pay $177 million in disgorgement to the Securities and Exchange Commission to settle the FCPA offenses. KBR's former CEO, Albert "Jack" Stanley, pleaded guilty in September 2008 to conspiring to violate the FCPA and to mail and wire fraud charges. He has been cooperating with prosecutors. His sentencing is now scheduled for Aug. 27, 2009.

The DOJ said it had help in the case from "authorities in France, Italy, Switzerland and the United Kingdom, including in particular the Serious Fraud Office’s Anti-Corruption Unit, the London Metropolitan Police and the City of London Police."

The indictment against Tesler and Chodan contains only FCPA charges. Usually the DOJ adds other criminal counts, such as money-laundering, mail and wire fraud. Relying strictly on alleged antibribery offenses will test the jurisdictional reach of the FCPA over foreign citizens who apparently were not in the U.S. at any times relevant to the charged conduct.

The FCPA asserts jurisdiction over foreign companies and nationals that take any act in furtherance of a corrupt payment while within the territory of the United States. See §78dd-3(a), (f)(1). This part of the FCPA is untested in court, but the DOJ interprets it expansively as conferring jurisdiction whenever a foreign company or national acting as an agent of an issuer or domestic concern causes an act to be done within the territory of the United States. (See the United States Attorneys' Manual, Title 9, Criminal Resource Manual §1018 “Prohibited Foreign Corrupt Practices” here.) The indictment says Tesler and Chodan were agents of KBR and sent some of the bribe money through U.S. bank accounts.

Another unusual aspect of the indictment is the use of the forfeiture remedy against Tesler and Chodan. (See 28 USC Section 2461, and Title 18 USC Section 981 (a)(l )(C), "all property, real and personal, which constitutes or is derived from proceeds traceable to the violations.") The U.S. government says it wants the entire $132 million that KBR transferred to Tesler's Gibraltar company or the property derived from it. The DOJ apparently isn't distinguishing the KBR money Tesler allegedly paid out in bribes from amounts he may have kept.

Jeffrey Tesler was identified in KBR's 2007 annual report. British and French authorities investigated him two years ago but didn't file any charges. In 2007, British authorities searched his London office at the request of U.S. officials. He is listed as a consultant to a small North London law firm called Kaye Tesler & Co. Among other things, the firm offers anti-money laundering training. 

As the Justice Department says: Criminal indictments are only charges and not evidence of guilt. A defendant is presumed to be innocent until and unless proven guilty.

The DOJ's March 5, 2009 release can be downloaded here.

The federal grand jury's February 17, 2009 indictment of Jeffrey Tesler and Wojciech Chodan can be downloaded here.

Sunday
Feb222009

Sir Allen And The FCPA

Since hearing about Allen Stanford's cozy relationships with certain Caribbean leaders, we've wondered if he'll eventually face criminal charges under the Foreign Corrupt Practices Act. Neither bribery nor the FCPA have been mentioned yet in connection with Stanford. But here's what's been reported, so far, in the New York Times and elsewhere.

Because of the SEC's suspicions, the FBI helped gather evidence about Stanford's business practices. The investigation led to the SEC's February 16 civil complaint. It alleged that Stanford's representations about his bank's certificates of deposit were false and misleading. It wasn't true, the SEC charged, that the funds were managed by at least 20 professionals and invested in safe, liquid assets. The truth, instead, was that the money went wherever Stanford himself and a couple of close associates directed, including into risky real estate and private equity deals. And at least $8 billion can't be accounted for.

Stanford, 58, is a U.S. citizen (from Texas) and therefore an FCPA "domestic concern." He has to comply with the antibribery provisions. (Before the recent headlines, we always thought he was British or maybe South African; he calls himself "Sir Allen," sports a small mustache, wears crested blazers, and is crazy about international cricket.)

About Stanford's cozy relationships with foreign leaders -- the tightest, it appears, was with the rulers of Antigua, population 85,000. He resettled his offshore bank there after it was booted off neighboring Montserrat in 1996 for unspecified reasons. His closeness to Antigua's former prime minister, Lester Bird, led to him being "knighted" by the tiny country's government a few years ago. On the Stanford website, he signs the chairman's letter as "Sir Allen Stanford." A note on the homepage says, "Stanford Financial Group and other Stanford entities are currently controlled and managed by a receiver."

In the late 1990s, the New York Times said, Prime Minister Bird appointed Stanford to Antigua's banking advisory board. The appointment created a blatant conflict of interest. The advisory board regulated the banks on Antigua, including those owned by Stanford. What's more, the Times said, "The [advisory board] project was paid for by the Antiguan government by money either lent or granted by Mr. Stanford."

Could those loans or grants have violated the FCPA? Not likely. A payment to a foreign government -- even a payment intended to influence decisions in favor of the donor -- cannot violate the FCPA. An FCPA antibribery offense requires a corrupt payment to a foreign official -- that is, to a human being. See §§ 78dd-1(a), 78dd-2(a). See also the DOJ's FCPA Opinion Procedure Release No. 97-02 (November 5, 1997) discussed in our post here. The DOJ said, because the "requestor's donation would go directly to a government entity -- and not to any foreign government official -- the provisions of the FCPA do not appear to apply to this prospective transaction."

In its civil complaint, the SEC alleged no facts about overseas corruption; the complaint focused on misrepresentations related to the certificates of deposit and unregistered investment-adviser activity by Stanford's companies. And we've seen no reports of credible evidence about illegal payments to foreign officials by Stanford or on his behalf. That doesn't mean evidence won't surface, however. In a couple of other recent cases, when the FBI was called in to investigate foreign business practices unrelated to FCPA concerns, it also discovered evidence of antibribery violations.

That's apparently what happened, for example, to Shu Quan-Sheng, the Virginia-based rocket scientist. The naturalized U.S. citizen sold defense-related goods and services to China without first obtaining U.S. export licenses or State Department approvals. During its export-related investigation, the FBI learned Shu was bribing Chinese government officials to buy his products. Shu pleaded guilty in November 2008 to violating the Arms Export Control Act and the FCPA. And in September last year, four U.S. citizens and their Philadelphia-based company, Nexus Technologies, were charged under the Foreign Corrupt Practices Act with bribing government officials in Vietnam. The FBI may have been investigating the defendants' alleged sales of sensitive equipment to Vietnamese government agencies when it discovered the potential FCPA offenses.

Stanford hasn't been charged by U.S. authorities with any criminal acts. The SEC's complaint is a civil enforcement action and, as mentioned, is limited to securities law issues. The New York Times pointed out, though, that he and his organization were big donors to U.S. politicians and courted them with favors and perks. "Mr. Stanford," the Times said, "also wooed lawmakers and their staff with plane rides and 'fact-finding' trips to vacation destinations. Many were paid for by the Inter-American Economic Council, a nonprofit organization that he supported."

Similar donations, gifts and favors to foreign officials might violate the Foreign Corrupt Practices Act. The law prohibits giving or promising to give, directly or indirectly, anything of value -- including cash, gifts and perks -- to a foreign official for the purpose of obtaining or retaining business. There are three narrow exceptions in the FCPA -- for facilitating payments, promotional expenses, and payments legal under the written laws of the host country. The Justice Department and the courts, however, view the FCPA's "obtaining or retaining business" prohibitions expansively, and take a narrow view of the limited exceptions.

So is this an FCPA story? Not yet. But it's one to watch.

The SEC's Feb. 17, 2009 press release is here. With the press release are links to the SEC's Litigation Release No. 20901 (February 17, 2009) in Securities and Exchange Commission v. Stanford International Bank, et al., Case No. 3-09CV0298-L (N.D.TX.) (here), the SEC's civil complaint (here), the SEC's memorandum of law (here), and information for Stanford customers concerning the federal court's order freezing assets and appointing a receiver over property of Stanford and his companies (here).
.

Tuesday
May132008

From The Mailbag

The question our readers most want answered -- after we tell them bloggers have no way to predict Powerball winners -- is, Who's covered by the Foreign Corrupt Practices Act? It's always the jurisdiction thing -- and for good reason. How, for gosh sakes, does the FCPA reach from Washington to the four corners of the earth and back again? It's unnatural -- until you know how it works. Then it's just plain terrifying.

So to keep the FCPA's jurisdiction straight, we take inspiration from the Justice Department. That means we think about it by categories. Here's how:

Category One: Issuers. An "issuer" is a corporation that has issued securities that have been registered in the United States or who is required to file periodic reports with the SEC. See 15 U.S.C. §§ 78c(a)(8), 78dd-1(a). All issuers are covered by the FCPA, wherever they are.

Category Two: Domestic concerns. A "domestic concern" is any individual who is a citizen, national, or resident of the United States, or any corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship which has its principal place of business in the United States, or which is organized under the laws of a State of the United States, or a territory, possession, or commonwealth of the United States. See § 78dd-2(h)(1). All domestic concerns are covered by the FCPA, wherever they are. Helpful hint: If your lawyer calls you a domestic concern, it's more likely to be a warning than an insult.

Category Three: Parent companies. U.S. parent corporations (issuers or domestic concerns) may be held liable for the acts of their foreign subsidiaries if they (the U.S. parent) authorized, directed, or controlled the activity in question, as can U.S. citizens or residents, themselves domestic concerns, who were employed by or acting on behalf of such foreign-incorporated subsidiaries.

Category Four: Foreign companies and individuals. A foreign company or person is subject to the FCPA if it, he or she takes any act in furtherance of a corrupt payment while within the territory of the United States. See § 78dd-3(a), (f)(1). When a foreign company or person acts on U.S. soil, the FCPA applies. Note, however, that the Justice Department interprets Category Four much more expansively. The government's position --untested in court -- is that there's FCPA jurisdiction whenever a foreign company or national (wherever they are) causes an act to be done within the territory of the United States by any person acting as that company's or national's agent.

Those are the categories. As we said, they're inspired by the Justice Department -- specifically the United States Attorneys' Manual, Title 9, Criminal Resource Manual §1018 “Prohibited Foreign Corrupt Practices” (November 2000).

And now, back to our Powerball picks.

View CRM §1018 here.

Wednesday
Jan092008

The Curious Case Of The Cautious Requestor

A typical reader of this blog will tell you that he or she is reasonably prudent when it comes to complying with the Foreign Corrupt Practices Act. But we're all downright reckless compared with the sweet lady who stars in the most recent FCPA Opinion Procedure Release. She needed to pay $9,000 to a foreign court as advance fees for the administration of an overseas estate. Although there's never been an FCPA enforcement action based on such a payment (and never will be), our Requestor somehow got spooked by the law. So before paying a dime to the foreign court, she insisted on a green light from none other than the United States Department of Justice.

Opinion Procedure Release No.: 07-03 of December 21, 2007 is truly unique, so we'll let it speak for itself. We'll only point out that it combines features never seen together in another FCPA Release. First -- and we couldn't make this up -- there is no payment to a foreign official. Second, there is no intent to obtain or retain business. In fact, the DOJ is forced to imagine some mens rea just to move things along. Third, the payment to the foreign court was entirely legal under the written laws of the subject country, and apparently a routine requirement. In short, we wonder how the Requestor thought to knock on the DOJ's door at all -- unless she has a young relative in law school someplace.

We're just guessing, but perhaps our Requestor was scared straight by her somewhat incomplete knowledge about the FCPA. That's understandable -- lots of us have been there before. And maybe she was addled because, as a U.S. permanent resident from Asia, she feared the foreign payment might spoil her one chance to someday gain American citizenship, a goal we unreservedly applaud. Whatever the cause, the DOJ didn't want to disappoint this lovely woman. So look closely below and you'll see evidence that the Department of Justice must have had an emotional moment.

We're babbling a bit, but read on and you'll know why. This Release is a charitable (we almost said "heartwarming") act by the DOJ. We've read it a dozen times already, and it always brings a smile.

* * *
No.: 07-03


Date: December 21, 2007

Foreign Corrupt Practices Act Review

Opinion Procedure Release

The Department has reviewed the FCPA Opinion Request (the "Request") of a lawful permanent resident of the United States (the "Requestor"). The person is a "domestic concern"within meaning of the FCPA. The Requestor proposes to make a payment required by a family court judge in an Asian country to cover certain litigation-related costs.

The Requestor is a party to disputed judicial proceedings in the Asian country relating to the disposition of real and personal property in a deceased relative's estate. One of the Requestor's family members has defacto control over the assets of the estate, a portion of which the Requestor believes she legally owns. The estimated value of the estate is equivalent to roughly $600,000, consisting of approximately 30.4% in foreign securities, 40.6% in bank and postal accounts, and 29.0% in real estate. In connection with the judicial proceedings, the Requestor submitted an application for the court to appoint an estate administrator pending the court"s decision on the disposition of the estate assets. The court then requested an advance payment equivalent to approximately $9,000 to cover expenses related to the court-appointed administrator and other miscellaneous court costs. Due to misgivings about the legality of such a payment under the FCPA, the Requestor withdrew the application for appointment of an administrator. In the coming months, if this Opinion Request results in a favorable response, the Requestor plans to renew such application and comply with the court's payment requirement. The Requestor has asked for a determination of the Department's present enforcement intention under the FCPA.

The Requestor has represented, among other things, that:

* the Requestor has not yet made the advance payment ordered by the foreign judge because she has withdrawn her request for the appointment of an estate administrator(1);

* nothing in the Requestor's communications with the foreign court indicated that the requested payment was sought for the purpose of influencing the court, misusing the judge's official position, or inducing the judge or the estate administrator to do anything improper;

* the Requestor has obtained written assurance, a copy of which has been provided to the Department of Justice, from a lawyer who received law degrees in both the U.S. and the foreign country, and who is a member of an established law firm, that the Requestor's proposed payment described in the request is not contrary to, and is in fact explicitly lawful under, the written law of the foreign country (the "legal opinion");

* the proposed payment would be made to the clerk's office of the family court, not to the individual judge presiding over the dispute;

* the Requestor would request an official receipt and an accounting of how the funds are spent, both of which, according to the legal opinion, are discretionary, but often granted upon request; and

* the Requestor would request that the court refund her any remaining amount of the payment not spent in the proceedings, as the legal opinion states is required under foreign law.

In addition, the Requestor has provided copies (and translations) of the relevant provisions of written foreign law and regulation that: (a) authorize a court, in connection with the administration of an estate, to "take necessary measures to preserve the estate;" and (b) govern family law proceedings and grant courts the authority to require parties to make advance payments to cover necessary expenses.

The FCPA Opinion procedure enables a domestic concern "to obtain an opinion of the Attorney General as to whether certain specified, prospective - not hypothetical - conduct conforms with the Department's present enforcement policy regarding the antibribery provisions of the Foreign Corrupt Practice Act."28 C.F.R. § 80.1.

The FCPA's antibribery provisions are implicated when a payment is made in order to obtain or retain business for or with, or to direct business to, any person. See 15 U.S.C. § 78dd-2(a). In this instance, in order to provide the Requestor with the guidance she seeks, the Department will assume that the proposed payment could be reasonably understood to relate to the Requestor's efforts "in obtaining or retaining business for or with, or directing business to, any person." Id. Thus, based on this assumption, the transaction sufficiently implicates the FCPA's antibribery provisions and is appropriately the subject of an FCPA Opinion.

Based upon all of the facts and circumstances, as represented by the Requestor, the Department does not presently intend to take any enforcement action with respect to the proposal described in this Request for two reasons. First, based on the Requestor's representations and consistent with the FCPA, the payment will be made to a government entity, the court clerk's office, rather than a foreign official. Cf. 15 U.S.C. § 78dd-2(a)(1) (emphasis added) ("It shall be unlawful to make use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment...to any foreign official..."); 15 U.S.C. § 78dd-2(h)(2)(A) ("The term 'foreign official' means any officer or employee or a foreign government..."). Moreover, there is nothing to suggest that the presiding judge or the estate administrator will personally benefit from the funds after they are paid into the government account belonging to the court clerk's office. Second, consistent with the FCPA's law affirmative defense, the contemplated payment is "lawful under the written laws and regulations" of the foreign country according to an experienced attorney retained by the Requestor in the Asian country. 15 U.S.C. § 78dd-2(c)(1).

The FCPA Opinion Letter referred to herein, and this release, have no binding application to any party which did not join in the Request, and can be relied upon by the Requestor only to the extent that the disclosure of facts and circumstances in the Request is accurate and complete and continues to accurately and completely reflect such facts and circumstances.

(1) If this Opinion Request results in a favorable response, the Requestor intends to reapply for the appointment of an estate administrator and comply with the court's request for the advance payment.


* * *

View Opinion Procedure Release No.: 07-03 (December 21, 2007) Here.

Monday
Aug272007

The Long, Strong Arm of the FCPA

Its jurisdictional reach is legendary, but understanding exactly why the FCPA's coverage stretches so far and wide is not always easy. One explanation comes from the United States Attorneys' Manual, in this clear and sometimes ominous exposition:

Under the FCPA, U.S. jurisdiction over corrupt payments to foreign officials depends upon whether the violator is an "issuer," a "domestic concern," or a foreign national or business. An "issuer" is a corporation that has issued securities that have been registered in the United States or who is required to file periodic reports with the SEC. See 15 U.S.C. §§ 78c(a)(8), 78dd-1(a). A "domestic concern" is any individual who is a citizen, national, or resident of the United States, or any corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship which has its principal place of business in the United States, or which is organized under the laws of a State of the United States, or a territory, possession, or commonwealth of the United States. See § 78dd-2(h)(1).

Issuers and domestic concerns may be held liable under the FCPA under either territorial or nationality jurisdiction principles. For acts taken within the territory of the United States, issuers and domestic concerns are liable if they take an act in furtherance of a corrupt payment to a foreign official using the U.S. mails or other means or instrumentalities of interstate commerce. See §§ 78dd-1(a), 78dd-2(a). For acts taken outside the United States, U.S. issuers and domestic concerns are liable if they take any act in furtherance of a corrupt payment, even if the offer, promise, or payment is accomplished without any conduct within U.S. territory. See §§ 78dd-1(g), 78dd-2(i). In addition, U.S. parent corporations may be held liable for the acts of their foreign subsidiaries where they authorized, directed, or controlled the activity in question, as can U.S. citizens or residents, themselves "domestic concerns," who were employed by or acting on behalf of such foreign-incorporated subsidiaries.

Prior to 1998, foreign companies, with the exception of those who qualified as "issuers," and most foreign nationals were not covered by the FCPA. The 1998 amendments expanded the FCPA to assert territorial jurisdiction over foreign companies and nationals. A foreign company or person is now subject to the FCPA if it takes any act in furtherance of the corrupt payment while within the territory of the United States. There is, however, no requirement that such act make use of the U.S. mails or other means or instrumentalities of interstate commerce. See § 78dd-3(a), (f)(1). Although this section has not yet been interpreted by any court, the Department interprets it as conferring jurisdiction whenever a foreign company or national causes an act to be done within the territory of the United States by any person acting as that company's or national's agent.

(emphasis in original)

From the United States Attorneys' Manual, Title 9, Criminal Resource Manual §1018 “Prohibited Foreign Corrupt Practices” (November 2000).

View CRM §1018 Here.