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It should come as no surprise that much of the recent 2022 ACI Foreign Corrupt Practices Act (“FCPA”) conference centered around Department of Justice (DOJ) Deputy Attorney General Lisa Monaco’s September 15, 2022 memorandum (the “revised Monaco memo”) concerning updates to the DOJ’s corporate criminal enforcement policies.  Among other things, that memo directs components of DOJ to provide further guidance on (1) corporate compensation structures that promote compliance, (2) corporate use of personal devices and third-party applications, and (3) voluntary self-disclosure by corporations. Although attendees were hoping to receive that further guidance at the FCPA conference, the government stated only that it would be forthcoming. 

Of the three topics expected to be further clarified, many multi-national entities that have previously resolved FCPA or other regulatory violations are eagerly awaiting further guidance on voluntary self-disclosure and, in particular, whether recidivism is an aggravating factor that puts a guilty plea back on the table of possible outcomes for a corporation that otherwise voluntarily self-discloses, cooperates, and remediates. …

Continue Reading Is Corporate Recidivism an Aggravating Factor that Undermines the Potential Benefit of Voluntary Self-Disclosure to DOJ?  Time Will Tell.

On September 27, 2022, the United States Securities and Exchange Commission (SEC) announced a settlement with Oracle Corporation (Oracle) to resolve allegations that its subsidiaries in India, Turkey, and the United Arab Emirates violated the Foreign Corrupt Practices Act (FCPA) by creating off-the-books slush funds and using those slush funds to bribe foreign government officials.

Without admitting or denying the SEC’s findings, Oracle agreed to cease and desist from violating the anti-bribery, books and records, and accounting provisions of the FCPA and to pay approximately $8 million in disgorgement and a $15 million penalty.

Notably for both attorneys and companies, the SEC’s order provides insights into how to design an effective corporate compliance program to minimize legal risk, including FCPA risk.

The SEC’s Findings

The SEC found that, from at least 2014 to 2019, Oracle’s subsidiaries in India, Turkey, and the United Arab Emirates “used discount schemes and sham marketing reimbursement payments” to finance slush funds, which were held by Oracle’s “channel partners” (i.e., distributors and resellers) in those markets. The subsidiaries transacted through these channel partners during the relevant period under Oracle’s indirect sales model, by which channel partners sell Oracle products to end customers. According to the SEC, the subsidiaries and the complicit channel partners used the slush funds—which employees of the subsidiaries referred to as the “buffer,” “moneybox,” “pool,” and “wallet”—to bribe government officials in return for business. Specifically, the SEC determined that, among other things, (i) employees of Oracle Turkey and Oracle UAE used slush funds to pay for travel for government officials, including to Oracle’s annual technology conference in California; (ii) an Oracle Turkey employee directed cash bribes to government officials; (iii) an Oracle UAE employee paid approximately $130,000 in bribes to the chief technology officer of a state-owned entity (SOE) in return for six contracts in 2018 and 2019; (iv) Oracle India employees funneled $330,000 to an entity known for paying government officials; and (v) an Oracle India employee maintained a spreadsheet indicating that $67,000 was available to make payments to a government official.…

Continue Reading Key Compliance Takeaways from Oracle’s $23M FCPA Settlement with the SEC

On May 24, 2022, Glencore International A.G. (“Glencore”), a multi-national resource extraction and commodities trading company, pleaded guilty in the Southern District of New York to one count of conspiracy to violate the anti-bribery provision of the Foreign Corrupt Practices Act (“FCPA”). The same day, its subsidiary, Glencore Ltd., separately pleaded guilty in the District of Connecticut to one count of conspiracy to engage in commodity price manipulation. 

At the same time, Glencore, Glencore Ltd., and Chemoil Corporation (another Glencore subsidiary) also settled a parallel enforcement matter brought by the Commodity Futures Trading Commission (“CFTC”) alleging commodity price manipulation involving foreign corruption in violation of the Commodities Exchange Act (“CEA”). 

Glencore and its subsidiaries have agreed to pay over $1.1 billion to the Department of Justice (“DOJ”) and the CFTC to resolve these three U.S. enforcement matters, which are part of a coordinated global resolution with criminal and civil authorities in at least the United States, the United Kingdom, and Brazil. Notably, the three resolutions highlight the more aggressive approach to corporate enforcement previewed in public statements by DOJ officials under the Biden Administration, as well as the CFTC’s continued interest in pursuing market manipulation and fraud involving foreign corruption.…

Continue Reading Glencore Resolves Charges of Global Corruption and Market Manipulation

On April 14, 2020, the U.S. Department of Justice made a long-awaited move towards enhanced transparency into the corporate compliance monitorship selection process in launching a new webpage that lists the names of all independent compliance monitors for the Fraud Section’s thirteen active monitorships.  Seven of the active monitorships are associated with the FCPA Unit,…

One of the many challenges companies face when assessing their Foreign Corrupt Practices Act (“FCPA”) liability is determining whether a potential business partner constitutes a “foreign government official” under the FCPA.  From a definitional perspective, the FCPA is far from a model of clarity on this point.  See 15 U.S.C. § 78dd-2(h)(2)(A).

By way of example, consider the compliance sandbars companies must circumnavigate to determine whether (and when) providing something of value to “traditional authorities” (including First Nations, Métis and Inuit peoples) could impose FCPA liability.  This question often arises when U.S.-based companies are asked to make donations to American Indian tribes with whom they interact, or to do favors for individual members of a tribe.  For instance, a tribal elder may ask that a company doing business with the tribe employ a certain tribal member, or provide an internship to the chief’s son, etc.  Under such circumstances, companies might find themselves evaluating the contemplated transaction through the amorphic lens of the FCPA.

Understanding the Definitional Challenge

Going back to basics, the FCPA’s anti-bribery provisions define a “foreign official” as:

[A]ny officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization. 15 U.S.C. § 78dd-2(h)(2)(A).

Do American Indian tribes fit under this definition?  While there is little guidance on this analysis outside the United States (see this helpful article by my colleagues on that issue), there is even less in the context of  American Indian tribes, even though they possess much-discussed “sovereign status” in the United States.  This is both surprising and concerning.
Continue Reading American Indian Tribes and “Foreign Officials” Under the FCPA

Last month, attorneys from around the world descended upon Buenos Aires to tango with criminal justice and anti-corruption experts at the International Bar Association’s 22nd Annual Transnational Crime Conference.  Conference highlights included remarks from distinguished members of the Argentine government, including the Minister of Justice and Human Rights, President of the Financial Information Unit, and Supreme Court President.  These officials focused their comments on criminal justice reforms in Argentina, the role of regulators and the judiciary in establishing and inspiring confidence in the rule of law, and the hope that such efforts would improve Argentina’s reputation in the global fight against graft and corruption.

Panelists and attendees also discussed similar efforts across the globe, cross-border cooperation, and collateral issues to consider when representing clients subject to international anti-corruption inquiries or enforcement actions. Of note were discussions regarding the following:

Evolving Mechanisms for Detecting and Penalizing Corruption  

  1. Increased use of money laundering statutes and administrative remedies.

Although most anti-corruption laws around the world criminalize the payment of bribes to government officials, the receipt of bribes (passive bribery) is conspicuously absent from laws like the U.S. Foreign Corrupt Practices Act (“FCPA”).  As a result, beneficiaries of bribes have traditionally escaped FCPA liability.  However, panelists noted, recent years have seen an increase in anti-money laundering prosecutions and civil administrative actions targeting profits from corrupt dealings that otherwise fall outside the reach of traditional anti-bribery paradigms.  Using money laundering statutes, U.S. prosecutors were able to prosecute officials working for Venezuela’s state-owned energy company, Petroleos de Venezuela, S.A., who accepted bribes from several U.S. executives (themselves prosecuted under the FCPA).

Panelists noted that more than €2 billion in anti-money laundering fines were assessed globally in 2018 alone, calling banks not yet penalized for money laundering issues “the exception and not the norm.”  Another new norm is the decoupling of predicate offenses (i.e., conduct generating illegal proceeds) from allegations that such proceeds were in fact “laundered,” allowing prosecutors to bring intentional and negligent money laundering cases.  Panelists also warned that lawyers were being targeted more than ever as negligent money launderers, based on the sources of client payments.
Continue Reading Highlights from Transnational Crime Conference: Expanding Anti-Corruption Enforcement & Cross-Border Cooperation

In United States v. Hoskins, 902 F.3d 69 (2d Cir. 2018) the Second Circuit held that a non-resident foreign national cannot be criminally liable for aiding and abetting or conspiring to violate the FCPA unless the government can establish that such an individual acted as an agent of one of the categories of persons subject to liability as a principal.

Background

The DOJ charged Lawrence Hoskins, a British national and former Alstom UK executive based in Paris, with FCPA and money-laundering violations.  The government alleged that Hoskins had approved payments to consultants that were funneled to Indonesian officials to secure a $118 million infrastructure contract with a state-owned power company.  Hoskins was never physically present in the U.S., but he called and emailed alleged conspirators who themselves were present in the U.S., and Hoskins authorized payments from Alstom S.A. to the consultants, one of whom had a Maryland bank account.

Hoskins moved to dismiss charges alleging indirect FCPA violations—i.e., that he aided and abetted or conspired to violate the FCPA—arguing that he did not fall within the narrowly-circumscribed group of people for whom the FCPA prescribes liability: American companies, citizens, and their employees and agents, as well as foreign persons acting on American soil.  The lower court agreed with Hoskins and dismissed Count I of the indictment.  On appeal, the question for the Second Circuit was whether Hoskins could be charged as either a conspirator or an accomplice to the asserted FCPA violations, despite not falling within the categories of persons subject to liability as a principal.  The Second Circuit concluded that the statute’s text, combined with its legislative history and the presumption against extraterritoriality, compelled the conclusion that foreign nationals who act abroad and lack a direct connection to one of the categories of persons subject to principal FCPA liability cannot be liable as accomplices or conspirators.

Agency Liability Post-Hoskins

Hoskins creates some uncertainty regarding FCPA prosecutions of individuals or entities who could not be charged as principals. The decision creates a stronger jurisdictional defense for companies that are subject to DOJ or SEC actions solely based on their business association with a U.S. concern.  Under the Second Circuit opinion, it will take more than mere conspiracy or assistance to bring such entities within the scope of liability.

It is also likely that investigators will put more emphasis on developing evidence of agency relationships between principal violators and entities otherwise unreachable under Hoskins.  Indeed, the court in Hoskins held that the government could present agency evidence and pursue Hoskins as an agent of, for example, Alstom S.A.’s U.S.-based subsidiary.  Prosecutors may also attempt to broaden the traditional definitions of agency under the FCPA, particularly as agency theory becomes a critical link to reach now unreachable defendants.
Continue Reading Revisiting Agency Liability Under the FCPA Post-Hoskins

On December 26, 2018, the Securities and Exchange Commission (“SEC”) announced a settlement with communications technology firm Polycom, Inc. (“Polycom” or the “Company”) for violating the books and records and internal accounting controls provisions of the Foreign Corrupt Practices Act (“FCPA”) in connection with a scheme to bribe Chinese government officials. Under the settlement, Polycom agreed to pay the SEC approximately $12.5 million in disgorgement and prejudgment interest and a civil money penalty of $3.8 million. The Polycom settlement illustrates the liability that can arise from reliance on third-party agents such as distributors, but—as explored below—also presents a missed opportunity for the SEC to provide some clarifying guidance for companies looking to avoid similar outcomes.
Continue Reading SEC’s Polycom FCPA Settlement Leaves Unanswered Questions

Last month, a D.C. federal judge ordered the Department of Justice to turn over the names of prospective monitors nominated to oversee the corporate compliance programs of fifteen companies found to be in violation of the Foreign Corrupt Practices Act (FCPA).  While recognizing that these individuals have “more than a de minimis privacy interest in their anonymity,” the court found that any such privacy interest was outweighed by the public’s interest in learning their identities.

In April 2015, journalist Dylan Tokar filed a FOIA request seeking records related to the review and selection of corporate compliance monitors in FCPA settlement agreements between DOJ and fifteen corporate defendants.  Tokar, a reporter for the trade publication Just Anti-Corruption, hoped these records would shed light on the monitor selection process, including whether DOJ had been abiding by the guidelines for monitor selection set forth in its 2008 Morford Memorandum.  The Memorandum, which establishes several principles to avoid potential and actual conflicts of interest and address concerns of cronyism, prescribes the consideration of “at least three qualified monitor candidates” whenever practicable.  Accordingly, Tokar requested the names of the three monitor candidates and their associated firms for fifteen cases.

More than eighteen months later, DOJ provided Tokar with a table purportedly responding to his request, but redacted the names of the monitor candidates who were nominated but not selected, as well as their affiliated firms in some cases.  DOJ asserted that these redactions were necessary and justified under FOIA Exemptions 6 and 7(C), which exempt from disclosure certain information that would constitute an “unwarranted invasion of personal privacy.”

After both parties cross-moved for summary judgment, the court concluded that the redactions were improper and ordered DOJ to release the candidates’ names.  It found that while DOJ had demonstrated sufficient privacy interests to warrant coverage under Exemptions 6 and 7(C)—as it was “plausible that these individuals would prefer to have their consideration and ultimate[] non-selection withheld from the public’s view”—these interests were outweighed by the public’s interest in disclosure.  The court agreed with Tokar that without disclosure of the candidates’ names, it would be “difficult (if not impossible) to know whether either the government or the corporate entity under investigation is taking advantage of the selection process in a manner that undermines the objectives of the DPA” and the principles delineated in the Morford Memorandum.
Continue Reading Monitoring the Monitors: DOJ Ordered to Disclose Info on Monitor Selections