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On December 29, 2014, the U.S. District Court for the District of Connecticut denied a motion to dismiss the indictment brought by Lawrence Hoskins, a former employee of Alstom S.A., the French power and transportation company that recently pleaded guilty to a massive scheme to violate the FCPA and agreed to a record $772 million criminal fine. Hoskins was charged in connection with activities involving a Connecticut-based Alstom subsidiary, Alstom Power, Inc. Alstom Power entered into a Deferred Prosecution Agreement as part of the broader Alstom settlement. Hoskins offered several arguments to dismiss the indictment, including that he had left Alstom (and therefore withdrawn from any conspiracy) outside the statute of limitations, that he was not actually an agent of Alstom Power and that the FCPA cannot be applied to purely extraterritorial conduct. With regard to the withdrawal claim, the court noted that the defendant bears the burden of proving some type of affirmative act of disavowal, not just a mere cessation of activity. Because the indictment did not contain facts establishing the defense and the government had not made a full proffer of its evidence, the court held that it could not determine pretrial whether the defendant had in fact withdrawn from the conspiracy. The court also held that a trial was required to resolve Hoskins's claim that he was not an agent of Alstom Power, noting that "the existence of an agency relationship is a highly factual inquiry" dependent on a number of factors. Lastly, while Hoskins claimed that the FCPA could not apply to him because he engaged in no conduct in the United States, the indictment alleged "that he used domestic wire transfers to promote the conspiracy."
On December 15, 2014, the SEC charged Bruker Corporation (Bruker) with violating the FCPA by making improper payments and paying for non-business-related travel expenses for Chinese government officials. Bruker, a Massachusetts-based global manufacturer of scientific instruments, paid approximately $2.4 million to settle the SEC's charges. The SEC used an administrative cease-and-desist order to settle the case. According to the SEC's order, Bruker's China subsidiaries made unlawful payments of approximately $230,000 to Chinese government officials who were employed by state owned entities that were Bruker customers. These payments included payments (i) for non-business travel (reimbursements to Chinese government officials for leisure travel to the United States and numerous European countries) and (ii) pursuant to collaboration and research agreements for which there was no legitimate business purpose. The SEC order found that Bruker violated the internal controls and books and records provisions of the FCPA. Bruker self-reported its misconduct and provided "significant" cooperation to the SEC.
On December 17, 2014, Avon and its China subsidiary resolved the DOJs FCPA investigation into the New York-based cosmetics companys operations in China and agreed to pay $68 million. Avon Products (China) Co. Ltd. (Avon China), a wholly owned subsidiary of Avon, pleaded guilty to a criminal information charging it with conspiring to violate the FCPAs books and records provisions. Avon entered into a deferred prosecution agreement (DPA) and admitted its criminal conduct, including its role in the conspiracy and failure to implement internal controls. Under the terms of the DPA, the DOJ will defer criminal prosecution of Avon for a period of three years and the company will appoint a compliance monitor. According to the companies admissions, from at least 2004 through 2008, Avon and Avon China conspired to falsify Avons books and records by falsely describing the nature and purpose of certain Avon China transactions, including disguising $8 million in gifts, cash and non-business travel, meals and entertainment that Avon China executives and employees gave to government officials in China in order to obtain and retain business benefits for Avon China. Also on Dec. 17 in related civil proceedings, the SEC charged Avon with violations of the Corporate books and records and internal control provisions of the FCPA and announced that Avon agreed to pay more than $67 million in disgorgement and prejudgment interest to settle the charges. The settlement has not yet been approved by the Court.
Parker Drillings Scotland-Based Unit Pays Over £170,000 to Resolve Bribery and Corruption Charges in Scotland
On Dec. 17, 2014, International Tubular Services (ITS), an oil and gas services firm based in Scotland that was acquired by Houston-based Parker Drilling (Parker) in 2013, agreed to pay £172,200 to resolve bribery and corruption charges. ITS admitted to benefiting from corrupt payments made by a former Kazakhstan -based employee to secure additional contractual work from a customer in Kazakhstan. Scotlands Prosecution Service noted that the bribery and corruption was discovered when the company was being sold to Parker and that Parker has taken steps to implement comprehensive anti-bribery policies and training. In 2013 in an unrelated investigation, Parker paid nearly $16 million to resolve DOJ and SEC FCPA charges related to bribery of Nigerian officials.
On December 10, 2014, the DOJ announced that it was settling FCPA charges with Dallas Airmotive, a company that provides aircraft engine maintenance services, after the company admitted to having violated the FCPA and agreed to pay a $14 million fine. A criminal information filed as part of the settlement charged the company with bribing government officials in Brazil, Peru and Argentina from 2008 to 2012 in exchange for contracts to provide maintenance and repair services on state-owned aircraft engines. According to the criminal information, Dallas Airmotive used "front" companies and third parties to pay bribes, and also directly provided things of value, such as paid vacations, to government officials. As part of the settlement, the company entered into a deferred prosecution agreement with DOJ. The company admitted to paying the bribes in a statement of facts accompanying the deferred prosecution agreement. In comments to the Wall Street Journal, Dallas Airmotive announced that the individuals responsible for the improper payments are no longer with the company. The settlement with Dallas Airmotive follows the recent FCPA-related settlement between the DOJ and BizJet, a subsidiary of Lufthansa Technik AG, which also concerned allegedly improper payments to government officials in Latin America in exchange for business related to aircraft maintenance and repair. In 2012, BizJet entered into a deferred prosecution agreement and agreed to pay an $11.8 million fine as part of the settlement, while Lufthansa entered into a non-prosecution agreement.
On December 2, the Organisation for Economic Co-operation and Development ("OECD") released a report that analyzed more than 400 bribery cases worldwide, from February 1999 to June 2014, involving companies or individuals from the 41 signatory countries to the OECD Anti-Bribery Convention who were involved in bribing foreign public officials. The OECD concluded that "most international bribes are paid by large companies, usually with the knowledge of senior management." The OECD found that bribes are generally paid to win contracts from state-owned or controlled companies in advanced economies, rather than in the developing world, and most bribe payers and takers are from wealthy countries. Notably, almost two-thirds of the cases occurred in just four sectors: extractive (19%), construction (15%), transportation and storage (15%), and information and communication (10%). Furthermore, the bribes were offered most often to employees of state-owned enterprises (27%), followed by customs officials (11%), health officials (7%), and defense officials (6%). The OECD report revealed that the time needed to resolve cases has increased over time, from around two years on average for cases concluded in 1999 to just over seven years today. According to the OECD, "this may reflect the increasing sophistication of bribers, the complexity for law enforcement agencies to investigate cases in several countries or that companies and individuals are less willing to settle than in the past." The OECD's bribery report can be found here.
On December 3, Transparency International released its 2014 Corruption Perceptions Index (CPI). The CPI ranks 175 countries based on the perception of public sector corruption and found that more than two-thirds of the countries had a score below 50 on a scale from 0 to 100 which shows that the levels of bribery and corruption in the public sector are still perceived to be very high. Denmark is at the top of the list with a CPI score of 92. The United States was 17th with a score of 74 but scored lower than numerous other G20 countries, including Australia, Germany, Japan, and the United Kingdom. China had one of the biggest falls, dropping four points from 40 in 2013 to 36 in 2014, despite the fact that its government launched an anti-corruption campaign targeting corrupt public officials. Transparency International called on countries where public sector corruption is limited to stop encouraging it elsewhere by doing more to prevent money laundering and to stop secret companies from hiding corruption. The 2014 CPI can be found at here.
On December 4, Asem Elgawhary, a former vice president of Bechtel Corporation, pled guilty in federal district court in Maryland to mail fraud, conspiracy to commit money laundering, and obstruction and interference with the administration of the tax laws for his role in a kickback scheme to manipulate the bidding process for state-run power contracts in Egypt. From 1996 to 2011, Elgawhary was the general manager of Power Generation Engineering and Services Company (PGESCo), a joint venture between Bechtel and Egypts state-owned electric company. PGESCo helped the Egyptian electric company select subcontractors by soliciting bids and awarding contracts for power projects. Elgawhary admitted to taking $5.2 million in kickbacks from three power companies to give them an unfair advantage in the bidding process. The power companies and their consultants paid the kickback payments into various off-shore and Swiss bank accounts under the control of Elgawhary. Elgawhary, a dual United States and Egyptian citizen, was indicted in February 2014 and is due to be sentenced on March 23, 2015. It is worth noting that this case was not brought under the FCPA. The DOJ did not allege that Elgawhary was a Egyptian government official or that PGESCo, while a joint venture between Bechtel and the Egyptian state-owned electric company, was a state-owned enterprise for FCPA purposes. The case, though, follows in the footsteps of similar prosecutions of foreign government officials who received bribes and shows the U.S. governments increasing willingness to police foreign recipients of bribes, even if those bribes are only commercial bribes.
According to a recent DOJ opinion release, an unidentified U.S. consumer products company would not face an FCPA enforcement action in connection with the planned acquisition of an unidentified foreign consumer products company and its wholly owned subsidiary. On April 30 of this year, the U.S. company requested guidance from the DOJ through its Opinion Release process due to concerns uncovered during pre-acquisition due diligence that the foreign firm had likely paid bribes of more than $100,000 to government officials in the firm's home country and engaged in deficient accounting and recordkeeping. Because the potential improper payments did not occur in the United States or involve U.S. individuals or issuers, and because no contracts or assets acquired through the bribery would remain in operation through which the U.S. company would derive financial benefit following the acquisition, the DOJ opined that it "would thus lack jurisdiction under the FCPA to prosecute" the acquiring company for improper payments made by the foreign firm prior to the acquisition. The opinion release is an important reaffirmation of the DOJ's position, as set out in its FCPA Resource Guide, that "successor liability does not . . . create liability where none existed before." The opinion release noted that the acquisition was "squarely addressed" by the illustrative example provided in the Resource Guide that "if an issuer were to acquire a foreign company that was not previously subject to the FCPA's jurisdiction, the mere acquisition of that foreign company would not retroactively create FCPA liability for the acquiring issuer." The DOJ also noted that the U.S. company had set forth a plan including remedial pre-acquisition measures and post-acquisition integration steps. While expressing "no view as to the adequacy or reasonableness" of the integration plan, the DOJ did encourage companies engaging in mergers and acquisitions generally to (1) conduct thorough risk-based FCPA and anti-corruption due diligence; (2) implement their codes of conduct and anti-corruption policies as quickly as practicable; (3) conduct FCPA and other relevant training for the acquired entity's directors, employees, third party agents and partners; (4) conduct an FCPA-specific audit of the acquired entity as quickly as practicable; and (5) disclose to the DOJ any corrupt payments discovered during the due diligence process. The issuance of an FCPA opinion release is relatively rare. Since 2004 the DOJ has released on average only about two such opinions every year. While the opinion creates a presumption that the acquisition is legal, it does not bind prosecutors should they later decide to pursue an enforcement action.
SBM Offshore Settles Corruption Investigation with Dutch and U.S. Authorities as Investigation Widens in Brazil
On November 12, Dutch oilfield company SBM Offshore N.V. announced that it had agreed to pay $240 million to the Dutch Public Prosecutor's Office to resolve an investigation into allegedly corrupt payments made to win contracts in several countries around the world. SBM also stated that the U.S. Department of Justice had simultaneously closed its investigation into the same matter, but news reports indicated that Brazilian and U.S. authorities were investigating payments made by SBM to Petrobras, the Brazilian state-owned oil company. The investigation in Brazil is part of a widening investigation into various allegations of corruption involving Petrobras, which has portrayed itself as a victim rather than perpetrator of misconduct. As to SBM Offshore, the Department of Justice's apparent willingness to accept the company's resolution with Dutch authorities is an encouraging indication that U.S. authorities are increasingly cognizant of the need to avoid imposing "double jeopardy" on multinationals. Moreover, while the Netherlands were termed as having "little or no enforcement" in Transparency International's recent "Exporting Corruption -- Progress Report 2014: Assessing Enforcement of the OECD Convention on Combating Foreign Bribery," this action seems certain to change perceptions about Dutch anti-corruption enforcement activity.
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