Category Archives: TRACE Compendium

Opinion Procedure Release: U.S. adoption agencies may bring foreign officials to the U.S. without violating the FCPA Reply

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Recent Enforcement Developments

Opinion Procedure Release regarding gifts and hospitality issued by the DOJ. On 18 October, the Department of Justice issued OPR 12-02 in response to a query posed by 19 adoption agencies based in the U.S. The agencies asked whether sponsoring a trip to the United States for 18 foreign officials would violate the Foreign Corrupt Practices Act. The foreign officials are members of the legislature and the judiciary in their country, as well as representatives of the office of the head of government and the ministry in charge of overseas adoptions. The DOJ concluded that under the circumstances given, where the travel has an educational purpose directly related to the requestors’ business, the travel would be limited in scope and duration, expenses would be paid directly to providers, and the requestors would have no say in the selection of the travelers, the DOJ would not take enforcement action. In this case, the hospitality would fall within the FCPA’s affirmative defense allowing for reasonable and bona fide expenditures. The complete Opinion Procedure Release is available here.

France Gets a Mediocre Report Card from the OECD Reply

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Today the OECD issued its Phase 3 Report on Implementing the OECD Anti-Bribery Convention in France.  The report, adopted by the Working Group on 12 October, is sharply critical of anti-bribery efforts in France.  It opens with the words, “the Working Group is seriously concerned that despite the very significant role of French companies in the international economy, only 33 foreign bribery proceedings have been initiated and five convictions – of which only one, not yet final, concerns a legal person – have been handed down since France became a party to the Convention in 2000.”

The report goes on to describe deficiencies in French law, which limits standing for victims of foreign bribery, does not provide adequate measures for confiscation of the fruits of illegal activity.  The French authorities have not made sufficient use of available penalties such as debarment from eligibility to bid on public contracts.  The Working Group admonishes French law enforcement for not acting more aggressively in foreign bribery cases, and suggests that French prosecutors are too highly influenced by political considerations.

Although France signed the OECD Convention in 2000, it took until 2008 for any foreign bribery convictions to result.  Altogether four individuals have been convicted, and one company (after the April 2012 site visit which produced the report).  French companies, on the other hand, have found themselves the subject of prosecution for foreign bribery offenses outside of France (see Alstom, Areva, Alcatel, and Safran, a few of at least twelve companies headquartered in France and summarized in the TRACE Compendium).

The OECD examiners used relatively strong language to urge France to clarify the definition of foreign public official, which “must be interpreted in a sufficiently flexible and broad manner to enable the criminalisation of the full range of acts and situations referred to in Article 1 of the Convention…and… in particular…to eliminate as soon as possible, in relation to bribery of foreign public officials committed by French nationals outside French territory, the dual criminality requirement.”  Dual criminality refers to the requirement, under French law, that foreign bribery offenses also be punishable by the law of the country where the acts are committed.   The examiners were also concerned that, while French law does not specifically allow a facilitation payment defense, prosecutors may be declining to prosecute cases where they deem payments to foreign officials to have constituted facilitation payments.

Although France received poor marks overall, this OECD report card comes with clear guidelines for improving the nation’s performance in the future.

Vietnam strengthens its resolve to address corruption 1

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It appears as if Vietnam is strengthening its resolve to address corruption.

Less than a week ago,  Nguyen Phu Trong, General Secretary of the Communist Party, admitted that the country’s leadership has “made some big mistakes, especially having not prevented and remedied corruption…”  Trong added that “some senior officials…have occasionally not been morally good role models.”  Around the same time, the Chief Government and Economic Inspector was busy addressing the annual meeting of the steering committee of the anti-corruption initiative of the Asian Development Bank and the Organization for Economic Cooperation and Development (ABD/OECD).  The Chief Inspector, Huynh Phong Tranh, was sanguine about Vietnam’s progress toward eradicating corruption, but noted that corrupt schemes have become more sophisticated and difficult to catch.  As the current session of the National Assembly gets underway, Chief Inspector Tranh plans to report on anti-corruption efforts during 2012, and will present the draft of a new law aimed at preventing and combating corruption.  In addition, a new whistleblower law came into effect on 1 July 2012. Unfortunately, however, the whistleblower protections do not appear to extend to anti-corruption bloggers, who are regularly jailed for speaking out against the government.

The United States is Vietnam’s largest trading partner for exported goods.  A number of prosecutions under the Foreign Corrupt Practices Act and the anti-corruption laws of other countries have involved bribery in Vietnam which is a signatory to the United Nations Convention Against Corruption.

In light of the country’s recent focus on corruption, companies with operations in Vietnam may want to revisit how their compliance programs are being implemented in-country and refresh anti-bribery compliance training for local employees and key third party intermediaries.  To be sure, those who follow alerts from the TRACE Compendium will know that enforcement authorities have not been shy about prosecuting multinational corporations for allegedly bribing government officials in Vietnam (see, eg. Aon, Daimler, Nexus, Note Printing Australia, Securency, Pacific Consultants, Siemens and Veraz Networks).  Whether Vietnam exercises the same enforcement muscle remains to be seen.

Bribery found by Intelligence Committee in Investigation of Two Chinese Telecoms Reply

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Photo: Julien Min Gong

The Permanent Select Committee on Intelligence issued a report on Monday, 8 October, about two Chinese telecommunications companies, Huawei Technologies and ZTE.  The purpose of the Committee’s work was to assess the national security threat posed by these companies to important U.S. interests.  In particular, the Committee examined the structure of the companies and their relationship to the government and military of the People’s Republic of China, and whether the ties between these entities, and the practices of the two companies in the U.S. and around the world, could pose a threat.

The answer, published by the Committee in the form of an investigative report, is a resounding “yes.”

The investigation involved both a review of open source and classified information. The Committee remained unsatisfied after these reviews, stating, among other criticism, that “neither company was forthcoming with detailed information about its formal relationships or regulatory interaction with Chinese authorities…[or] the price role of each company’s Chinese Communist Party Committee.”  Likewise, Huawei in particular, “failed to provide thorough information about its corporate structure, history, ownership, operations, financial arrangements or management,” and that “most importantly, neither company provided sufficient internal documentation or other evidence to support the limited answers they did provide to Committee investigators.”  The Committee also found that both ZTE and Huawei may be implicated in sanctions and export control violations involving Iran.

But from an anti-bribery standpoint, the most troubling finding rests on evidence introduced to the committee by current and former Huawei employees, who provided “credible reports…of several potential violations by Huawei officials,” including bribery and corruption.  The report provides no specifics – only that employees “have alleged instances [sic] fraud and bribery when seeking contracts in the United States.”  The Committee intends to refer these allegations to the Department of Justice.

Huawei released a statement critical of the report’s methodology and conclusions.  So did ZTE.

Recent enforcement activity outside of the United States may provide some insight into Huawei’s operations.  On 6 June 2012, employees of both Hawei and ZTE were convicted by an Algerian court of bribery related to telephone company contracts in that country.  Both companies have been debarred from bidding on public contracts in Algeria for two years.  In  May 2012, the Zambian government paid for a trip to China by the Zambian Minister of Information and Broadcasting.  But media reports allege that Huawei and ZTE also paid for the trip. The media have also reported that Nigerian legislators are investigating irregularities in tender awards to ZTE.

The TRACE Compendium contains summaries of enforcement action against both ZTE and Huawei.