Presenting a live 90-minute webinar with interactive Q&A FCPA and Anti-Corruption Enforcement on the Rise Leveraging Guidance from Recent DOJ and SEC Enforcement Actions and UK Prosecutions WEDNES DAY, MAY 16, 2012 1pm East ern | 12pm Cent ral | 11am Mount ain | 10am Pacific Today’s faculty features: Mat t hew J. Feeley, S hareholder, Buchanan Ingersoll & Rooney , Miami Edward J. Fishman, Part ner, K&L Gates , Washingt on, D.C. Elizabeth Robert son, Part ner, K&L Gates , London, England The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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FCPA and Anti-Corruption Enforcement on the Rise U.S. Department of Justice Trends and Developments • Individual Prosecutions • Third Party Risk • Industry Sweeps • Deferred Prosecution Agreements/Non-Prosecution Agreements • Guidance and/or Reform Matthew J. Feeley Miami Matthew.feeley@bipc.com 305-347-5794 May 16, 2012
Individual Prosecutions “ The number of individual prosecutions has risen and that’s not an accident. . . . It is our view that to have a credible deterrent effect, people have to go to jail.” Mark Mendelsohn, then the DOJ’s chief FCPA prosecutor, September 2008 6
Individual Prosecutions DOJ Backs up the Talk : ▫ In 2006 there were 6 individual FCPA indictments ▫ In 2010 there were 48 individual FCPA indictments 7
Individual Prosecutions The “ice has been broken” on the FCPA ▫ Individual defendants have more incentive to take a case to trial ▫ Companies usually want to settle rather than face the reputational harm of a criminal conviction ▫ Mixed bag of results ▫ DOJ FCPA omnipotence a thing of the past ▫ Case law development 8
Individual Prosecutions Jefferson Case – Success ▫ Former U.S. Congressman William Jefferson ▫ March 26, 2012, Fourth Circuit rejected Jefferson appeal ▫ 13 years sentence – including conspiracy to violate FCPA ▫ Included charges under domestic bribery, wire fraud and money laundering ▫ Jefferson solicited and accepted bribes in exchange for promoting services to African officials and bribing other African officials 9
Individual Prosecutions O’Shea Case – Failure ▫ On January 17, 2012, U.S. District Judge Lynn Hughes (S.D. Tex.) granted O’Shea’s motion for acquittal and threw out 12 substantive FCPA counts and one FCPA conspiracy count ▫ O’Shea, a former manager of ABB, Inc. was accused of bribing officials at Mexico’s state owned electric utility company, the Comission Federal de Electricidad (“CFE”) ▫ Lack of documentary evidence, unconvincing cooperating witnesses 10
Individual Prosecutions SHOT Show Cases – Failure (Absolute) ▫ February 21, 2012, U.S. District Court Judge Richard L. Leon called the cases “a long and sad chapter of white-collar criminal enforcement” ▫ 22 individuals arrested in January, 2010 and charged with attempting to bribe Gabon government in order to win $15 million contract to supply law enforcement and defense equipment to Gabonese government ▫ Mistrials, hung juries, acquittals and eventual voluntary dismissal against all remaining defendants ▫ On March 29, 2012, DOJ moved to dismiss charges against defendants that previously pled guilty to FCPA conspiracy charge 11
Individual Prosecutions Looking forward : ▫ Greater pushback from individual defendants ▫ Possible DOJ retrenchment and focus on corporate prosecutions ▫ Certain “tightening” of investigations and prosecutions; back to basics ▫ FCPA enforcement is still a high DOJ priority and it will not be abandoned because of particular failures or embarrassments 12
Third Party Risk “Third party risk still remains most significant FCPA risk.” Charles E. Duross, Deputy Chief, Fraud Section, Criminal Division, U.S. Department of Justice, November 8, 2011 13
Third Party Risk Corrupt payments made through third parties are still the most dominate type scheme found in DOJ enforcement actions Agents, consultants, even distributors Local reputation/background check, FCPA certification, provision of sample contracts/contract language, training and monitoring 14
Industry Wide Sweeps DOJ concedes that industry wide investigations are “just easier” Not targeted as a matter of policy. Single investigations yield information about problematic industry-wide practices 15
Industry Wide Sweeps “If your market competitor has FCPA problems, do not rejoice; you may be next. Ask yourself, are their problems the same problems I have?” Charles E. Duross, Deputy Chief, Fraud Section, Criminal Division, U.S. Department of Justice, November 8, 2011 16
Industry Wide Sweeps Health Care/Medical Device ▫ Biomet – paid illicit commissions to employees of publicly employed heath care providers to encourage purchase of product ($17.28 million DOJ fine) ▫ Coupled with previous enforcement actions against Johnson & Johnson and Smith & Nephew 17
Industry Wide Sweeps Financial Services ▫ Bad credit markets resulted in looking to Sovereign Wealth Funds for capital ▫ Several financial institutions are subject to ongoing investigations ▫ Corrupt inducement to invest is the same as corrupt inducement to buy products or services 18
Increased use of DPAs and NPAs Settlement continues to be enforcement action of choice for companies ▫ Tangible benefit for cooperation ▫ Avoid criminal conviction and possible contractual disbarment (e.g., foreign governments, U.S. governments, World Bank) Settlement documents good resource for development of content of compliance policies and programs 19
Increased Use of DPAs and NPAs Deferred Prosecution Agreement (“DPA”) ▫ No conviction ▫ No plea hearing ▫ Criminal information ▫ Acceptance of responsibility and statement of facts ▫ Agreement is public filing ▫ Perhaps independent monitor ▫ If defendant meets obligations of agreement over an agreed time period, charges are dismissed ▫ Biomet DPA: http://www.justice.gov/criminal/fraud/fcpa/cases/biom et/2012-03-26-biomet-dpa.pdf 20
Increased Use of DPAs and NPAs Non-Prosecution Agreement (“NPA”) ▫ Agreement is not public filing, although it may be disclosed to the public ▫ DOJ agrees not to prosecute if company agrees to compliance undertakings ▫ Acceptance of responsibility and possible fine ▫ Less formal ▫ Breach will result in prosecution ▫ Tolls statute of limitations ▫ Since 2010 every NPA was a voluntary disclosure ▫ Lufthansa Technik NPA: http://www.justice.gov/criminal/fraud/fcpa/cases/luftha nsa-technik/2011-12-21-lufthansa-npa.pdf 21
DOJ Guidance and/or FCPA Reform FCPA Enforcement Criticism ▫ Given the dearth of FCPA case law and preference for DPAs and NPAs, there is limited guidance and too much prosecutorial discretion ▫ FCPA enforcement puts U.S. companies at a strategic disadvantage 22
DOJ Guidance and/or FCPA Reform U.S. Chamber of Commerce ▫ Michael Mukasey leading the effort ▫ Proposed reforms: – Compliance defense – Limiting successor liability – Adding willfulness requirement to corporate criminal liability – Limiting parent’s liability for acts of foreign subsidiary – Clarifying definition of “foreign official” 23
DOJ Guidance and/or FCPA Reform 24
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