A Busy December: Highlights of Recent FCPA Enforcement Activity Involving Individuals
This month brought a string of developments related to individual enforcement actions under the US Foreign Corrupt Practices Act. Our partner David Krakoff just secured dismissal of three of six charges against one of the defendants in the long-running criminal FCPA trial here in Washington, D.C., called the SHOT Show trial.
In addition to this action, there have been numerous other important FCPA and anti-corruption developments, as outlined below: US Appeals Court Affirms Conviction of Investor Frederick Bourke The United States Court of Appeals for the Second Circuit affirmed the 2009 conviction of investor Frederick Bourke on charges of conspiring to violate the FCPA and other statutes. Bourke was sentenced to one year and one day of incarceration. In the Opinion, the Court evaluated Bourke's contention that the trial judge erred when instructing the jury on conscious avoidance, among other arguments. The appeals court rejected Bourke's arguments and found that there was "ample evidence to support a conviction based on the alternative theory of conscious avoidance." The Court identified a number of these evidentiary grounds, including awareness of "how pervasive corruption was in Azerbaijan generally," Bourke's business partner's reputation, creation of a complex series of advisory companies, and audio recordings in which Bourke professed ignorance while intimating that there might be corruption in the deals. The Take Away: The ruling reinforces the long-standing lesson from the Bourke conviction investors may not consciously avoid learning about corruption risks when working in corruption-prone markets. Diligence about business partners and the deal itself is critical, and the phrase "you don't want to know" is a vivid red flag. US Government Charges Former Siemens AG Executives The US Department of Justice indicted eight former executives of Siemens on charges of conspiring to violate the FCPA and other statutes. Seven of the eight were also charged in a civil action initiated by the US Securities and Exchange Commission.
The SEC action is assigned to the same judge who presided over the Bourke prosecution and whose rulings were just affirmed by the Second Circuit, Judge Scheindlin, while the criminal action is assigned to a different judge. The allegations involve conduct related only to Argentina, a subset of the much larger case against Siemens AG, which also involved Venezuela, China, Israel, Bangladesh, Nigeria, Vietnam, Russia, and Mexico. The Siemens AG matter was settled with the DOJ and SEC in 2008 for a combined monetary sanction in the US alone of $800 million, with numerous other countries pursuing enforcement actions against the company. None of the charged individuals is a US citizen and none of the defendants is currently in custody in the US. The SEC Complaint pointedly identifies the connection between each individual and either a meeting within the US, a bribe payment authorized by the defendant which was then paid into a US bank account, or a telephone conversation that occurred "in connection with the bribery scheme" while the other call participant was present in the US. The Indictment identified numerous overt acts involving conduct in the US, including US bank accounts and wire transfers to or from those accounts, faxes from a US phone line, meetings in the US, and an arbitration in the US related to the business allegedly related to the improper payments.
FCPA Convictions Dismissed for Prosecutorial Misconduct A judge in Los Angeles dismissed FCPA convictions against Lindsey Manufacturing Co., its owner and CFO, based on the finding that the Government had engaged in prosecutorial misconduct. In the Order, the Court wrote that [T]he Government team allowed a key FBI agent to testify untruthfully before the grand jury, inserted material falsehoods into affidavits submitted to magistrate judges in support of applications for search warrants and seizure warrants, improperly reviewed e-mail communications between one Defendant and her lawyer, recklessly failed to comply with its discovery obligations, posed questions to certain witnesses in violation of the Courts rulings, engaged in questionable behavior during closing argument and even made misrepresentations to the Court. The action in Los Angeles follows recent news related to the 2008 prosecution of Senator Ted Stevens and subsequent dismissal of that conviction by the DOJ, also for prosecutorial misconduct. A judge in Washington, D.C. recently issued an Order reporting that he had received a 500-page written evaluation of the case.
Quoting from the still-sealed report, the Order states that "the investigation and prosecution of Senator Stevens were 'permeated by the systematic concealment of significant exculpatory evidence which would have independently corroborated his defense and his testimony,'" but that there was no recommendation of "prosecution for criminal contempt." SEC FCPA Enforcement Actions - The Comprehensive List Finally, to add to your Bookmarks, the SEC has provided a comprehensive listing of all SEC enforcement actions involving the FCPA, most of which contain links to the underlying litigation papers. It may be found here.