Category Archives: enforcement

Australia reconsiders the facilitation payments defence Reply

Australia, enforcement, Facilitating Payments, FCPA, Indonesia, OECD, TRACE, TRACE Partner Firms, UNCAC • Tags: , , , , , , , , , , , , , , , , , ,

By James Beaton, partner, Minter Ellison Lawyers

It is likely that Australia will eventually join the United Kingdom (UK) in outlawing facilitation payments when a review of Australia’s foreign bribery laws is completed.

Australia’s foreign bribery laws were originally modelled on the United States Foreign Corrupt Practices Act and currently provide a defence to bribing a foreign public official if the value of the benefit is of a minor nature and it is provided for the sole or dominant purpose of expediting or securing the performance of a routine government action of a minor nature.  However, global tolerance for this form of legal bribery is fast waning and the Australian Government is actively considering outlawing facilitation payments whilst it is concurrently in the process of being reviewed for its compliance with the United Nations Convention against Corruption (UNCAC), which relevantly does not recognise facilitation payments.

The primary factors driving a likely change of Australia’s laws are compliance with its international obligations under UNCAC and the OECD Convention and the recognition that international standards are changing.  In particular, the Australian Government has recognised the UK Bribery Act as a game changer because it exposes Australian businesses caught by the UK laws to the risk-management complexity posed by inconsistent legal standards.  If Australia’s laws are harmonised with international best practice then this reduces the cost and complexity of compliance systems and leaves Australian businesses in no doubt about their obligations wherever they do business.

The proposed change should not have any material impact on Australian business.  A government discussion paper notes that the extent to which Australian businesses currently claim the tax deduction available for lawful facilitation payments is relatively low.

If Australia strives to be a leader in the Asia Pacific region, then it must demonstrate a real commitment to anti-bribery best practice.  As part of its foreign aid policy Australia requires anti-corruption action plans and is currently giving priority to the establishment of plans in Indonesia, the Philippines, East Timor, Papua New Guinea, the Solomon Islands and Vanuatu.  Yet Australia also recognises that facilitation payments are generally detrimental to good governance, particularly in developing countries.  Therefore, if Australia is to demonstrate real anti-corruption leadership, it seems inevitable that it must consign facilitation payments to the past.

The review is at the consultation stage and there is currently no timetable for reform.

TRACE  works with partner law firms in over 130 countries to offer expertise in local anti-bribery laws, information on gifts and hospitality regulations, and local restrictions and requirements on the use of third party intermediaries.  Minter Ellison is TRACE’s partner firm in Australia.

Recent developments in anti-corruption enforcement Reply

Uncategorized, Africa, Asia, enforcement, FCPA, Indonesia, TRACE, TRACE Compendium, United Nations, US Government, voluntary disclosure, whistleblower, Investigations • Tags: , , , , , , , , , , , , , , , , , , , , , , , , , ,

Alstom subsidiaries debarred from development bank projects.  On 22 February 2012, a Negotiated Resolution Agreement was reached between Alstom and the World Bank.  This settlement includes (1) the debarment of Alstom Hydro France and Alstom Network Schweiz AG and their affiliates for a period of three years, and (2) payment of approximately USD 9.5 million in restitution by the two companies.  The period of debarment could be reduced to 21 months with enhanced oversight if all conditions are complied with.  Although the parent company, Alstom SA and its affiliates, are conditionally not to be debarred,  Alstom Hydro France and Alstom Network Schweiz are subject to cross-debarment by other development banks. The penalties are based on a finding that Alstom made an improper payment of a USD 145,000 (110,000 Euro) consultancy fee to an entity controlled by a former senior government official in Zambia in 2002.  Alstom did not admit the allegations.  The full Compendium summary for this case is accessible here.

No DOJ prosecution of Allianz.  On 22 February 2012, attorneys from the Department of Justice stated that the investigation into whether Allianz SE violated the FCPA or other bribery laws in Indonesia had been closed, and that the DOJ did not intend to take any enforcement action.  The investigation began when an employee alerted outside auditors of perceived corruption, precipitating disclosure by Allianz to the Frankfurt Prosecutor’s office.  Although the DOJ has closed its investigation, the SEC is still negotiating a settlement with Allianz  on other charges.  The full Compendium summary for this case is accessible here.

The TRACE Compendium is a compilation of summaries of international anti-bribery enforcement actions.  It is open to the public and free of charge.  Compendium  summaries are searchable by company name, year of enforcement action, location of company, enforcing authority, industry type, and other categories.  You can search the Compendium by clicking here.

Government moves to dismiss largest FCPA Sting prosecution Reply

Africa, Defense industry, enforcement, FCPA, Investigations, TRACE, TRACE Compendium, Uncategorized, US Government • Tags: , , , , , , , , , , , , ,

Recent Enforcement Developments

Government moves to dismiss largest FCPA Sting prosecution.  On 21 February 2012, the government filed a motion in the US District Court for the District of Columbia to dismiss with prejudice all remaining claims in the case, which began in January 2010 with the sensational arrest of twenty-two individuals.  The defendants were accused of participating in a scheme to bribe the defense minister of the African nation of Gabon, but in fact the arrangement, and the underlying contracts for the sale of police and military equipment, were fictitious. Three defendants reached plea agreements with the prosecution.  In order to ensure manageable trials for the remaining nineteen defendants, the judge in the case separated them into smaller groups.  The first trial, of four defendants, ended in mistrial in July 2011.  Charges were dismissed as against one defendant in April 2011, and two defendants in the second trial, which ended in January 2012, were acquitted.  A mistrial was declared with respect to three other defendants when the jury could not reach a verdict.  Now, less than one month before the third trial was scheduled to begin, the government has dropped the entire case, citing “the impact of certain evidentiary and other legal rulings in the first two trials” as well as cost, as its motives for seeking to close the case.  Recent reports in the press had brought to light some apparent professional missteps in the conduct of the Sting operation.  The Compendium summary may be accessed here.

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The TRACE Compendium is a compilation of summaries of international anti-bribery enforcement actions.  It is open to the public and free of charge.  Compendium  summaries are searchable by company name, year of enforcement action, location of company, enforcing authority, industry type, and other categories.  You can search the Compendium by clicking here.

TRACE Enhances Anti-Bribery Compliance by Launching its Gifts, Travel & Hospitality Tracking Software Reply

charitable contributions, commercial intermediaries, Compliance Strategies, Due diligence, enforcement, FCPA, TRACE, Training, What Works?, TASA, TRACE Partner Firms • Tags: , , , , , , , , , , , , , , , , , , , , , , ,

Last year, it became apparent that there was a strong need within our member community for a tool to make the process of tracking gifts, travel and hospitality easier.  We focused our efforts on developing cost-effective, intuitive software.  The resulting tool was launched at the end of 2011.  Julie Coleman, Director, Advisory Services, has been working with companies to train them on this online tool and they are now integrating it into their ongoing anti-bribery compliance efforts.  You can learn more by contacting Julie at coleman@TRACEinternational.org

Earlier this year, TRACE expanded the tools and services available to companies in need of cost-effective compliance tools by introducing a software solution that tracks incoming and outgoing gifts, hospitality and travel.  Companies will now have access to a tailored website which collects key information across their worldwide operations and highlights bribery risks and compliance weaknesses.  This software solution was designed by TRACE specifically for corporate legal and compliance departments concerned with effectively implementing robust anti-bribery compliance programs and continuously monitoring these programs for evolving risks.  This software is included in TRACE membership at no additional charge and can be licensed to non-member companies for $10,000.

The impetus for developing this anti-bribery software solution was twofold.  First, as with many of the tools and services TRACE offers, we listened to our members who expressed a desire for “off-the-shelf” software to track corporate gift giving.  Many of these companies were relying on reports generated from accounts payable software to flag problematic transactions.  However, accounts payable software is not designed to uncover risks specific to bribery and corruption (for example, by identifying whether a recipient is a government official).  Furthermore, these systems capture only gifts and hospitality expenditures for which reimbursement is sought, and sometimes long after the gift is made.

Second, TRACE closely monitors bribery enforcement actions and noted the heightened expectations of regulatory authorities regarding effective compliance programs.  Not long ago, “tone-at-the-top” and clear policies prohibiting bribery were the gold standard for compliance programs.  Now, enforcement actions brought for violations of the U.S. Foreign Corrupt Practices Act and other anti-bribery laws show that regulators expect to see a dynamic culture of compliance where ongoing risk assessments inform and influence anti-bribery policies and procedures.  In addition, they want to see that compliance with anti-bribery policies and procedures is the duty of individuals at all levels of the company, and that appropriate disciplinary action is taken when violations are detected.

In response to this, the TRACE Gifts, Travel & Hospitality Tracking Software enables companies to generate reports – risk assessments – that aggregate data across an enterprise to detect bribery risks, such as:

  • A concentration in gifts from or to a particular government official, government agency or customer or
  • An uptick in gift giving in connection with material corporate events, such as the closing of a public tender or  the award of a large contract

In addition, the software:

  • Detects violations of internal policies and procedures, such as failing to receive appropriate approvals for gift requests or failing to provide a legitimate business purpose for a proposed gift
  • Tracks both outgoing and incoming gifts and hospitality to address the UK Bribery Act (which prohibits both paying and receiving a bribe), as well as our members’ concerns that incoming gifts can improperly influence decision-making by their employees; and
  • Reduces the risk of bribery by reinforcing the importance of company policies and procedures to employees at all levels, reminding them that gifts, travel and hospitality is a significant risk area for bribery.

The TRACE Gifts, Travel & Hospitality Tracking Software is a practical solution that we believe sets the standard for collecting key information regarding both incoming and outgoing gifts, hospitality and travel across an enterprise.  To learn more about TRACE, please visit www.TRACEinternational.org.

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The membership fee for TRACE is US$15,000 and includes:

  • Access to our online Resource Center, which includes summaries of local anti-bribery laws in over 130 countries and other topics such as:
    • Country Bulletins answering the twenty-one questions that companies should ask before retaining an intermediary in a particular country;
    • Country-specific gifts and hospitality guidelines; and
    • Benchmarking surveys and “best practices” research.
  • Attendance at the annual TRACE Forum for in-house counsel and compliance officers.
  • Anti-bribery workshops held at locations around the world for local employees and intermediaries.
  • Access to international anti-bribery experts at designated “TRACE Firms” in over 130 countries.  In addition, we are hosting our first ever Global Anti-bribery In-house Network (GAIN) in April of this year, giving TRACE members an opportunity to meet the law firms that support TRACE worldwide and to hear about challenges specific to the over 130 countries we cover.  In turn, our partner firms will hear how they can best support TRACE members in their international operations.  Each TRACE member company may send one representative to GAIN for no fee; additional member company representatives may attend for a $1,000 fee.
  • Multilingual online anti-bribery training.
  • Access to a list of pre-vetted third party intermediaries.
  • Access to our new Gifts, Travel & Hospitality Tracking Software.

In addition to the above, through March 1, 2012, one person from each member company is eligible for complimentary enrollment in TASA, the TRACE Anti-bribery Specialist Accreditation program.  Please visit TASA- TRACE Anti-bribery Specialist Accreditation – Courses – Recorded Courses for a list of courses.

TRACE Compendium Updates Reply

commercial intermediaries, Cuba, enforcement, FCPA, Greece, Haiti, Indonesia, Iraq, Mexico, Public utilities, Telecommunications, TRACE Compendium, UK Serious Frauds Office, United Nations • Tags: , , , , , , , , , , , , , , ,

Recent Enforcement Developments

Fourth Innospec employee charged with corruption.  The UK Serious Frauds Office filed charges on filed on 10 February 2012 in Southwark Crown Court against Miltiades Papachristos, formerly the Asia-Pacific Regional Sales Director for Innospec Ltd.  Papachristos, a dual UK and Greek citizen, is charged with bribing public officials in Indonesia in order to secure or reward the grant of contracts between Innospec and the government of Indonesia.  Innospec Ltd. was charged by the SFO in February 2010 with conspiracy to corrupt Indonesian officials, and the company later pleaded guilty to charges in the U.S. regarding bribery schemes in Iraq, and violation of the U.S. embargo on Cuba. Three other individuals have been charged in the Indonesia case:  Paul Jennings, David Turner, and Dennis Kerrison.  The Compendium summary of this case can be accessed here.

Government moves to dismiss all charges against O’Shea.  On 9 February 2012, the Department of Justice filed a motion to dismiss all remaining charges against John Joseph O’Shea, who had been acquitted in January of substantive FCPA violations.  The remaining charges included conspiracy, obstruction of justice and money laundering; all of the charges had arisen from O’Shea’s alleged participation in the bribery of Mexican government officials in order to secure contracts with the Comisión Federal de Electricidad, a state-run power company, while O’Shea served as general manager of the Texas business unit of the US subsidiary of a Swiss company. The Compendium summary of this case can be accessed here.

Guilty plea from Haiti Teleco official.  On 8 February 2012, Patrick Joseph entered a plea agreement with the Department of Justice, for his role in the Haiti Teleco bribery case.  Joseph was the Director General of the state-owned Haitian telecommunications company.  The indictment accuses him of accepting bribes from two companies in exchange for granting various advantages to those companies.  The Compendium summary of this case can be accessed here.

The TRACE Compendium is a compilation of summaries of international anti-bribery enforcement actions.  It is open to the public and free of charge.  Compendium  summaries are searchable by company name, year of enforcement action, location of company, enforcing authority, industry type, and other categories.  You can search the Compendium by clicking here.

Canada and the Lack of Nationality Jurisdiction Reply

Canada, enforcement, OECD • Tags: , , , , , , , ,

James M. Klotz, Miller Thomson LLP

Canada has been criticized for a number of shortcomings in its foreign anti-corruption legislation, the Corruption of Foreign Public Officials Act (“CFPOA”).  The most glaring of these shortcomings is the lack of nationality jurisdiction.

When Canada signed the OECD Convention, it specifically excluded itself from the requirement to include nationality jurisdiction provisions in its law.  Canada is the only OECD country to have done so.  As a result, Canada must rely on territorial jurisdiction only over the foreign bribery offence.  Canada explained to the OECD that it was generally Canada’s policy to only apply extraterritorial jurisdiction where there is an express treaty obligation to do so.  In Canada’s view, the OECD Convention does not expressly require the adoption of extraterritorial jurisdiction.  It has been Canada’s position that its territorial basis for jurisdiction is sufficiently effective to combat foreign bribery.  It should be noted however, that the OECD concluded that jurisdiction in Canada is in fact much narrower than for most other Convention parties.

The Canadian test for territorial jurisdiction comes out of the case of R. v. Libman.  In Libman, the defendant used a “boiler-room” telemarketing operation in Canada to convince U.S. residents into investing in a worthless Central American mining company. He was charged with both fraud and conspiracy to commit fraud. The Court set a test for finding territorial jurisdiction under Canadian criminal law – there must be a “real and substantial link” between the offence and Canada before criminal liability will be imposed in this country.  The Court proposed a two-stage test to determine if the crime was committed in Canada:  It must take into account all relevant facts that take place in Canada that may legitimately give this country an interest in prosecuting the offence. It must then consider whether there is anything in those facts that offends international comity.  This means that a portion of the illegal activities will have to have been committed in Canada or have a real impact on Canadians.

Following Libman, the involvement of a Canadian company or wholly owned subsidiary of a Canadian company may be sufficient to trigger the application of the CFPOA.  Canadian companies may also be held liable for the acts of agents or contractors if such agent or contractor plays an important role in managing the company’s activities, or if an officer of the company knows about the agent or contractor’s conduct and does not take all reasonable measures to stop it. Unfortunately, there is room for a defense that would not exist if the legislation included a nationality clause.  The argument will be that there is no “real and substantial connection” of the crime to Canada.  While there is an excellent argument that Canada, by virtue of signing the various international conventions against bribery, intended to recognize nationality jurisdiction de facto, it remains to be seen if the courts will agree.

If Canada had wanted to be explicit, it could have made (and can still make) the appropriate statutory change to the CFPOA.  In 2010, the government introduced a Bill that would have included nationality jurisdiction, but unfortunately, for reasons unrelated to the CFPOA, the Bill died, and has not as of today, been reintroduced.  Hopefully, the fact that the Bill was introduced once, suggests that it will again return and become law.  The alternative will be that we have to wait until the Crown loses the first few cases before a legislative change occurs.

Recent Enforcement Developments Reply

enforcement, FCPA, TRACE Compendium • Tags: , , ,

Deferred Prosecution Agreement for Marubeni Corporation, with Payment of $54.6 Million to Conclude TSKJ Nigeria Case

On January 17, 2012, a criminal information was filed against the Japanese trading company, Marubeni Corporation, in the U.S. District Court for the Southern District of Texas, charging the company with conspiracy to violate the FCPA and with aiding and abetting violations of the FCPA.  Marubeni reached a two-year deferred prosecution agreement with the DOJ, and Marubeni will pay US $54.6 million to the DOJ;  if Marubeni abides by the terms of the agreement, the criminal information will be dismissed upon the expiry of the two year period.  The four-company joint venture TSKJ employed Marubeni between 1995 and 2004 to obtain contracts to build natural gas facilities in Nigeria.  The joint venture partners were Technip S.A., Snamprogetti  Netherlands B.V., Kellogg Brown & Root Inc. (KBR), and JGC Corporation. The Compendium summary about this matter may be accessed here:

https://www.traceinternational2.org/compendium/view.asp?id=381

Former ABB Manager John O’Shea Acquitted of Bribery Charges

On January 16th, 2012, the U.S. District Court for the Southern District of Texas acquitted former ABB manager John O’Shea of charges that, through a third party intermediary, he bribed Mexican officials and hid the payments. O’Shea had been accused of paying executives of Mexico’s state-owned electricity company in order to obtain lucrative contracts for ABB.  The Compendium summary about this matter may be accessed here:

https://www.traceinternational2.org/compendium/view.asp?id=164

Court Orders Payment of Investor Gains in Mabey & Johnson Case

Concluding an action brought in the High Court by the Serious Frauds Office, Mabey Engineering (Holdings) Ltd, has been ordered to pay over GBP130,000 as payment for share dividend earnings attributable to contracts obtained by the company unlawfully. The contracts were for construction projects in Iraq.  In announcing the settlement, the SFO emphasized its intention to use the civil recovery process to pursue institutional investors who have profited from illegal conduct. The Compendium summary regarding this matter may be accessed here:

https://www.traceinternational2.org/compendium/view.asp?id=98

Former Innospec Ltd Director, David Turner, Pleads Guilty to Corruption

On January 17th, 2012, former Innospec Limited Global Sales and Marketing Director, Dr David Turner, pleaded guilty to three counts of conspiracy to corrupt at the Southwark Crown Court in London. Two counts charged Turner with conspiracy to make illegal payments to government officials in Indonesia and Iraq between 2002 and 2008, in order to obtain contracts to supply the company’s products, or to reward officials for having awarded the chemical supply contracts.  Dr Turner also pleaded guilty to one charge of conspiracy to corrupt Iraqi officials by payment money to ensure that tests on a competitor’s chemical product would produce unfavorable results. The SFO investigation was assisted by the US Department of Justice, the US Securities & Exchange Commission, the City of London Police and the Cheshire Constabulary. The Compendium summary about this matter may be accessed here:

https://www.traceinternational2.org/compendium/view.asp?id=174

Aon Corporation Settles with SEC and DOJ Reply

enforcement, FCPA, Gift Hospitality & Travel, Investigations, TRACE Compendium, US Government • Tags: , , , , ,

Aon Corporation, a publicly-traded insurance brokerage firm headquartered in Chicago, has entered into a non-prosecution agreement with the Department of Justice and agreed to pay a $1.76 million penalty to resolve violations of the Foreign Corrupt Practices Act (FCPA).  Aon also reached a settlement with the SEC and agreed to pay approximately $14.5 million in disgorgement and prejudgment interest.   Aon’s United Kingdom subsidiary, Aon Limited, administered certain training and education funds in connection with its reinsurance businesses. The SEC complaint alleges that Aon made over $3.6 million in improper payments to various parties between 1983 and 2007 as a means of obtaining or retaining insurance business in several countries. Funds were used to reimburse officials for non-training related activity, including travel with spouses to overseas tourist destinations, or for uses that could not be determined from Aon’s books and records and which did not include any recorded business purpose.  The Compendium summary and government documents may be accessed here.

Siemens Executives Charged in Bribery Scheme Reply

commercial intermediaries, enforcement, FCPA, Germany, Investigations, TRACE Compendium, US Government • Tags: , , , , , , , ,

The U.S. Department of Justice has charged eight former executives and agents of Siemens AG and its subsidiaries for allegedly engaging in a decade-long scheme to bribe senior Argentine government officials to secure, implement and enforce a $1 billion contract with the Argentine government to produce national identity cards. The indictment charges the defendants and their co-conspirators with conspiracy to violate the Foreign Corrupt Practices Act (FCPA), money laundering conspiracy and wire fraud. The Securities and Exchange Commission also filed a Civil Action on related charges alleging that over $100 million in bribes were paid in connection with Siemens’ efforts to secure the contract and obtain the profits from that contract. The indictments come three years after Siemens AG, as a company, resolved FCPA-related charges with the DOJ and SEC. The Compendium Siemens summary and government documents may be accessed here.

Judge Dismisses Lindsey Case Citing Prosecutorial Misconduct Reply

enforcement, FCPA, US Government • Tags: , , , ,

On December 1, 2011, U.S. District Judge Howard Matz dismissed the indictments against Lindsey Manufacturing, Keith Lindsey and Steve Lee, citing prosecutorial misconduct. The Lindsey and Lee defendants had been convicted of FCPA violations by a jury on May 10th. Judge Matz described his decision as follows:

“In this Court’s experience, almost all of the prosecutors in the Office of the United States Attorney for this district consistently display admirable professionalism, integrity and fairness. So it is with deep regret that this Court is compelled to find that the 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 Court’s rulings, engaged in questionable behavior during closing argument and even made misrepresentations to the Court.

Consequently, the Court throws out the convictions of Defendants Lindsey Manufacturing Company, Keith E. Lindsey and Steve K. Lee and dismisses the First Superseding Indictment.”

The Compendium summary, including the full December 1st order, may be accessed here: https://www.traceinternational2.org/compendium/view.asp?id=301