On December 18, 2018, the District of Columbia Circuit Court of Appeals issued an important ruling in In re Grand Jury Subpoena, holding that foreign state-owned corporations are subject to criminal jurisdiction in the United States and that the exceptions to sovereign immunity set forth in the Foreign Sovereign Immunities Act (the “FSIA”) apply to criminal as well as to civil cases. The court also rejected the foreign sovereign entity’s argument that it should be excused from complying with a subpoena because doing so would violate the law of the respondent’s country of incorporation. Although In re Grand Jury Subpoena arises in the context of enforcing a grand jury subpoena, its language and holding could potentially be extended to criminal prosecutions of a foreign state or state-owned entity.
Last month, Guatemalan President Jimmy Morales effectively shut down the operation of the UN-operated International Commission against Impunity in Guatemala (called by its Spanish initials, “CICIG”) by declining to renew its mandate past its September 2019 expiration date and by barring the head of CICIG, Iván Velásquez, from re-entering the country. CICIG, a uniquely independent organ of the United Nations (“U.N.”), was created in 2007 to support and assist Guatemalan institutions in identifying, investigating, and prosecuting public corruption. Over the past decade, it has investigated nearly 200 public officials, and its efforts led to the prosecution and ultimate resignation of former Guatemalan President, Otto Pérez Molina. Continue Reading Anti-Corruption in Guatemala: A Critical Moment for CICIG
On September 27, 2018, in remarks delivered at the 5th Annual Global Investigations Review New York Live Event, Deputy Assistant Attorney General Matthew S. Miner reported on the accomplishments of the Department of Justice (“DOJ”) over the course of the last twelve months. Importantly, he also discussed recent changes to the DOJ’s policies on prosecution of business organizations and how those changes have been implemented. Miner highlighted the DOJ’s efforts to incentivize and provide guidance to companies to self-report, cooperate and remediate corporate misconduct while underscoring the importance of robust compliance programs to detect and prevent wrongdoing and to obtain full credit in resolving investigations by the DOJ. Continue Reading DOJ Remarks Highlight Changes to White Collar Policy
On September 14, 2018, a federal judge in the Southern District of New York certified as a class action a securities fraud suit against hedge fund Och-Ziff Capital Management Group LLC (“Och-Ziff”) and two of its executives. Shortly after the decision certifying the class, the parties informed the court that they had reached an agreement in principle to settle the case, which had gone forward on the basis of allegations that Och-Ziff had failed to make adequate disclosures related to its knowledge of the investigation. Continue Reading Certification of Securities Class Action Against Och-Ziff Relating to FCPA Violations Highlights Potential Collateral Consequences of FCPA Investigations
On September 4, 2018, the Securities and Exchange Commission (“SEC”) announced a $25.2 million settlement with French pharmaceutical company Sanofi (“Sanofi” or the “Company”) for violating the books and records and internal controls provisions of the Foreign Corrupt Practices Act (“FCPA”) in connection with a scheme to bribe foreign officials to increase sales of Sanofi products. The Sanofi settlement encompasses conduct by three Sanofi subsidiaries organized in Kazakhstan, Lebanon and the United Arab Emirates (“UAE”). The Sanofi settlement follows a recent enforcement action by U.S. authorities against another French company—Société Générale—for FCPA violations. In announcing the Sanofi resolution, the SEC signaled its intention to focus further on bribery risk in the pharmaceutical industry. Continue Reading Sanofi Settles FCPA Charges With SEC for $25.2 Million
On August 27, 2018, the Securities and Exchange Commission (“SEC”) announced a $34.5 million settlement with investment management firm Legg Mason, Inc. (“Legg Mason” or the “Company”) for violating the internal controls provision of the Foreign Corrupt Practices Act (“FCPA”) in connection with a scheme to bribe Libyan government officials to secure investments from Libyan state-owned financial institutions. The SEC settlement follows a June 2018 non-prosecution agreement between Legg Mason and the U.S. Department of Justice (“DOJ”) regarding the same conduct. Under the non-prosecution agreement, Legg Mason agreed to pay $64.2 million. The Legg Mason settlements reflect the increased focus of U.S. authorities on coordinating with other authorities in imposing penalties on a company, including not “piling on,” and the continued enforcement of the FCPA, while highlighting the potential risks under the FCPA of not having proper controls in place for assessing use of third party intermediaries.
On August 24, 2018, the Second Circuit in United States v. Hoskins issued a decision limiting the FCPA’s reach, holding that foreign nationals who cannot be convicted as principals under the FCPA also cannot be held liable for conspiring to violate or aiding and abetting a violation of the statute. The decision, written by Judge Pooler (joined by Chief Judge Katzmann and Judge Lynch, who also wrote a concurring opinion), concluded that, due to affirmative legislative policy and extraterritoriality concerns, the FCPA’s reach cannot be extended via conspiracy or complicity liability to implicate individuals who cannot violate the FCPA as principals. Although the decision limits the government’s ability to prosecute foreign nationals for conspiring to commit or aiding and abetting a violation of the FCPA, practically speaking, the decision will apply only to a small class of foreign nationals and entities – those who engaged in a bribery scheme in which there is otherwise jurisdiction under the FCPA, but who are not themselves subject to the FCPA’s jurisdiction. That said, the ruling is significant as one of the few cases limiting the FCPA’s jurisdiction due to the statute’s unique, extraterritorial nature, which may encourage charged defendants in other cases to challenge the DOJ’s broad interpretation of its jurisdiction.
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DOJ has expanded its efforts to give more concrete guidance to companies facing FCPA risk to M&A transactions and the question of successor liability. In a speech on July 25, 2018, at the American Conference Institute’s 9th Global Forum on Anti-Corruption Compliance in High Risk Markets, Deputy Assistant Attorney General Matthew S. Miner highlighted DOJ’s views on successor liability for FCPA violations by acquired companies. Miner sought to clarify DOJ’s policy regarding the voluntary disclosure of misconduct by successor companies and to highlight the benefits of such disclosure as spelled out in the joint DOJ and SEC FCPA Resource Guide (the “Resource Guide”). In general, as with other recent pronouncements and actions by DOJ, such as the FCPA Corporate Enforcement Policy, Miner’s speech seemed intended to highlight ways in which firms can gain cooperation credit (up to and including a declination) in FCPA investigations. Continue Reading DOJ Remarks Provide Guidance on Addressing FCPA Risk in M&A Transactions
Yesterday the U.S. Department of Justice (“DOJ”) announced a non-prosecution agreement (“NPA”) with a Hong Kong-based subsidiary of Credit Suisse Group AG arising out of the so-called “princelings” scandals of recent years—the practice of hiring unqualified, but politically-connected, relatives of Chinese officials to garner business from state-owned firms. Per Credit Suisse’s admissions, “bankers discussed and approved the hiring of close friends and family of Chinese officials in order to secure business,” resulting in $46 million “in profits from business mandates with Chinese” state-owned enterprises. As part of the resolution, Credit Suisse agreed to a $47 million criminal penalty, to continue to cooperate with DOJ, and to enhance its compliance program, including adopting additional controls around hiring. In addition, Credit Suisse agreed to pay nearly $25 million in disgorgement and $4.8 million in prejudgment interest to the Securities and Exchange Commission (“SEC”). In its press release, DOJ stated that it was giving Credit Suisse a 15 percent discount from the bottom end of the U.S. Sentencing Guidelines for its cooperation in the investigation, while also (as discussed more below) noting steps the firm did not take that worked to limit the amount of such cooperation credit. While this is hardly the first of the “princelings” cases, it does demonstrate DOJ’s continued commitment to the cooperation framework it laid out in its FCPA Corporate Enforcement Policy (“Enforcement Policy”) late last year.
On June 13, 2018, in its latest decision in a long-running litigation, the U.S. District Court for the District of Columbia considered the applicability of certain exemptions under the Freedom of Information Act (“FOIA”) to documents sought by journalists relating to the actions of the independent compliance monitor that Siemens AG was required to retain under the terms of its 2008 plea agreement for violations of the Foreign Corrupt Practices Act (the “FCPA”). Broadly speaking, although the court concluded that portions of the documents that related to Siemens’ business operations and the DOJ’s analysis of the monitor’s activities were exempted from disclosure, the court also required the DOJ to produce other portions of those materials and to reevaluate, based on the court’s decision, whether additional materials had to be disclosed. The decision, and the lengthy litigation over the application of FOIA to these materials, highlight the complexity of identifying the boundaries of the FOIA protection applicable to the typically sensitive and confidential information companies provide to compliance monitors and the risk that such information later will have to be disclosed once it is in the hands of the government. Continue Reading Recent District Court Decision on Applicability of FOIA to Siemens FCPA Monitorship Documents Provides Guidance on Scope of Possible Disclosures