Rich Dean of Baker & McKenzie’s Washington, DC, office spoke recently at the TRACE Forum. Rich rose to the substantial challenge of making RICO claims and 10b-5 actions entertaining and has summarized his presentation for us, below.
“The FCPA does not provide for a private right of action so that private plaintiffs, which allege damages as a result of bribery, have no remedies under the FCPA. Efforts to argue that the FCPA includes such a right implicitly have failed. However, there are a number of ways plaintiffs are seeking to pursue claims to establish, in effect, a basis for civil liability. Some of these legal theories are innovative; others are based on well-established approaches that seek to bootstrap FCPA violations to support civil remedies. Recent history indicates that public disclosure of a potential FCPA violation is followed rapidly by shareholder or competitor lawsuits and the trend is likely to continue.
Potential FCPA violations create the possibility for civil liability to private plaintiffs in three general areas: (a) state unfair competition laws and common law tort theories; (b) certain Federal statutory claims under RICO and antitrust laws; and (c) shareholder actions based on Rule 10b-5 securities fraud or breaches of fiduciary duty by boards of directors. Theories of breach of fiduciary duty include, for example (i) failure to develop and implement compliance policies sufficient to minimize the likelihood of FCPA violations; and (ii) failure to investigate potential FCPA violations promptly and properly.
The settlement of the civil cases may involve higher amounts than the fines and penalties paid under the FCPA in settlements with DOJ and the SEC. For example, Faro Technologies (settled shareholder claims for $6.875 million; FCPA fines and penalties totaled $1.1 million) and Titan Corporation (settled shareholder claims for $61.5 million; FCPA fines and penalties totaled $28.5 million).
An additional risk of potential civil liability to private claimants arises out of the internationalization of the FCPA through international conventions and treaties, most notably the OECD Convention on Combating Foreign Bribery of Public Officials and the UN Convention Against Corruption. The UN Convention expressly provides for a private right of action for those who have suffered damage as a result of corruption.”
At the 57th Annual Attorney General’s Awards Ceremony in Washington, DC, yesterday, US Attorney General Eric Holder presented eight recipients with the Attorney General’s Award for Distinguished Service in recognition of their work on the Siemens investigation:
In his opening remarks, Holder said: “These are people who, quite frankly, make me feel like a bit of an underachiever.”
John D. Griffith
Assistant U.S. Attorney
District of Columbia
Mark F. Mendelsohn
Lori A. Weinstein
Brian J. Smith and Paula L. Ebersole
Washington Field Office
Federal Bureau of Investigation
Troy Burrus and Howard Smith
U.S. Internal Revenue Service
U.S. Department of Treasury
We hear anecdotes about employees involved in bribery schemes who also embezzle from their companies. Once they have figured out how to work the books to generate cash for bribes, keeping some of it themselves is simple enough. Or we hear stories of sales agents who work out arrangements whereby the employee championing the agent proposes a higher commission in return for a kick-back. That scheme is almost impossible to uncover, especially when the employee is posted far from headquarters in the country in which the agent is operating. While neither of these schemes implicates the FCPA, they both illustrate the slippery slope into criminality that keeps many of us up at night.
An article in the New York Times today describes the arrest of Richard Lopez Razo, of the US Department of State. Prior to joining the State Department, while employed by Innovative Technical Solutions, Inc., Razo is alleged to have accepted bribes paid to get an Iraqi – Hayder Al Batat – hired as a subcontractor. After joining the State Department, Razo is alleged to have hit up Al Batat’s brother for additional payments in exchange for business in Iraq.
Setting aside the abuse of office by this US government official in an environment as sensitive as Iraq and setting aside the discomfort that Innovative Technical Solutions Inc. must be experiencing right now, one other point leaps off the page: Razo couldn’t get Al Batat to pay up. It is not clear how much Razo ever collected from the alleged bribery scheme. The article refers to “dozens” of emails demanding payment. I’d like to see those emails. Sadly, it’s just not that difficult for most of us to imagine a bribe-demanding government official, stiffed for the bribes he was promised, puffed-up with indignation and livid about the injustice of it all.
Yesterday, the Mo Ibrahim Foundation announced that it would not award this year’s Ibrahim Prize for Achievement in African Leadership. The $5 million prize is given to a former head of state in Africa who has left office in the past three years. “The Foundation was established to stimulate debate around, and improve the quality of, African governance.” There are 53 African continental and island states. The selection committee, chaired by Kofi Annan, was unable to identify a suitable candidate amongst the former leaders of these states.