July 26, 2007
The Foreign Corrupt Practices Act (“FCPA”) is 30 years old this year, and the anniversary is being “celebrated” with an explosion of enforcement activity by both the Securities and Exchange Commission (“SEC”) and the Department of Justice (“DOJ”). This sudden proliferation was recently punctuated by a record $44 million in combined penalties and fines levied against Baker Hughes, Inc. in April 2007 and a $26 million criminal fine imposed on three Vetco International Ltd. subsidiaries in February 2007. Moreover, the Wall Street Journal reported on July 25, 2007, that the DOJ has requested information from nearly a dozen oil and oil services companies relating primarily to the Nigerian oil services business.
The explosion in FCPA enforcement activity is best captured in the following chart, which shows how many actions were initiated in the past five years.
Gibson, Dunn & Crutcher LLP also has identified approximately 100 other companies that currently have open FCPA investigations from public disclosures, representations of corporations, and our network of relationships. This Client Alert highlights the significant FCPA enforcement activities during the first half of 2007. In preparing our analysis, we relied on, among other sources, our earlier client alerts, foreign prosecutions, due diligence articles, and DOJ/SEC charges. For a comprehensive analysis of 2006 FCPA prosecutions and enforcement actions, please see Gibson, Dunn & Crutcher LLP’s article The Foreign Corrupt Practices Act: Developments, Trends, and Guidance, Insights 2 (Feb. 2007). The article is also available at 2006 Year End FCPA Update.
THE 2007 DOCKET
Vetco International Ltd. Subsidiaries
On February 6, 2007, three wholly owned subsidiaries of Vetco International Ltd. (“Vetco”) pleaded guilty to violating the FCPA’s anti-bribery provisions. The three Vetco subsidiaries–Vetco Gray Controls, Inc., based in Houston, Texas; Vetco Gray UK Limited, based in Aberdeen, Scotland; and Vetco Gray Controls Limited, based in Nailsea, England (collectively the “Vetco Subsidiaries”)–agreed to pay criminal fines totaling $26 million. The plea agreements also required the Vetco Subsidiaries to hire an independent compliance monitor to oversee the formation and maintenance of a robust FCPA compliance program. Additionally, Aibel Group Ltd., another wholly owned subsidiary of Vetco, simultaneously entered into a deferred prosecution agreement with the DOJ based on the same underlying conduct.
As set forth in the plea agreements, the Vetco Subsidiaries engaged in a scheme to authorize corrupt payments to officials in the Nigerian Customs Service. Beginning in 2001, Vetco Gray UK provided engineering and construction services for a deepwater drilling project in Nigeria. Various other Vetco subsidiaries, including Vetco Gray Controls, Inc., Gray Controls Ltd., and Aibel Group Ltd., also participated in the project. Over a two-year period, the Vetco Subsidiaries made at least 378 corrupt payments of approximately $2.1 million to customs officials in Nigeria. These payments were made through an international freight forwarding and customs clearance company. According to the plea agreements, the purpose of the payments was to gain preferential treatment in the customs clearance process and to secure improper advantage with respect to the importation of goods and equipment into Nigeria. The charges do not allege that the payments were to “obtain or retain business.”
In announcing the guilty pleas, Deputy Attorney General Paul J. McNulty stated, “[t]his case represents the largest criminal penalty the Department of Justice has ever sought in a Foreign Corrupt Practices Act case and confirms our commitment to root out corruption.” The SEC has not instituted a related enforcement action.
GE has announced its plans to purchase the Vetco entities and thus will be bound by the requirements of the plea agreements. Both the DOJ and the SEC have emphasized the importance of acquisition due diligence. Because of the substantial civil and criminal penalties possibly imposed for violations of the FCPA, it is imperative that corporations remain focused on proper diligence before, during, and after the proposed acquisition. For a comprehensive discussion of acquisition due diligence relating to the FCPA, please see the article by F. Joseph Warin et al., Acquisition Due Diligence: A Recipe to Avoid FCPA Enforcement, Texas State Bar Oil, Gas, & Energy Resources Law Section Report 2 (June 2006).
Baker Hughes, Inc.
On April 26, 2007, the SEC and DOJ announced that they had reached settlements with Baker Hughes, Inc. (“Baker Hughes”) and its wholly owned subsidiary, Baker Hughes Services International, Inc. (“Baker Hughes Services”). The parallel settlements resolved the government’s investigations into Baker Hughes’ operations in several overseas markets, including Kazakhstan, Angola, Nigeria, Indonesia, Russia, and Uzbekistan.
The primary allegations in this case involve the improper use of agents. The SEC’s complaint alleged that Baker Hughes paid approximately $5.2 million to two agents operating in Kazakhstan, and that the company made these alleged payments with the knowledge that some or all of the money would be used to bribe officials in Kazakhstan’s state-owned oil companies. Regarding the first agent, the SEC alleged that Baker Hughes retained the agent only after Kazakhoil, the state-owned oil company, demanded that this particular agent be retained. Baker Hughes was allegedly told that unless the agent was retained, the company could “say goodbye to this and future business.” After Baker Hughes retained the agent, it was awarded a lucrative oil services contract that generated over $219 million. Although Baker Hughes (through its subsidiary Baker Hughes Services) paid the agent $4.1 million, the agent performed no identifiable services. Regarding the second agent, the SEC alleged that Baker Hughes retained the agent despite knowing that the agent’s representative was a high ranking official in KazTransOil, the state-owned oil transportation operator in Kazakhstan. Baker Hughes paid approximately $1 million to the agent’s Swiss bank account.
In the SEC action, Baker Hughes agreed to pay approximately $23 million in disgorgement and prejudgment interest. The company also agreed to a $10 million civil penalty for violating a 2001 SEC cease-and-desist order prohibiting violations of the FCPA’s books and records and internal control provisions. Under the terms of the final judgment, Baker Hughes also must retrain an independent consultant to review the company’s FCPA compliance and procedures. With regard to the DOJ action, Baker Hughes Services pleaded guilty to violating the FCPA’s anti-bribery provisions, aiding and abetting the falsification of Baker Hughes’ books and records, and conspiracy to violate the FCPA. Baker Hughes Services agreed to pay an $11 million criminal fine, and Baker Hughes entered into a deferred prosecution agreement whereby the company must retain a compliance monitor for three years. The combined $44 million in fines and penalties represents the largest sanction ever imposed in an FCPA case. Assistant Attorney General Alice Fisher noted that “[t]he record penalties leveled in this case leave no doubt that foreign bribery is bad for business.”
The Dow Chemical Company
On February 13, 2007, the SEC filed a settled FCPA civil action against The Dow Chemical Company (“Dow”), alleging violations of both Dow’s internal controls and its books and records provisions. The SEC’s complaint alleged that, from 1996 until 2001, DE-Nocil Crop Protection Ltd, (“DE-Nocil”) a Dow subsidiary, made improper payments to various Indian government officials, including payments to an official to expedite the registration of DE-Nocil’s products. The payments were made through contractors. Without admitting or denying the charges against it, Dow consented to the entry of a cease-and-desist order and agreed to pay a $325,000 civil penalty. No criminal charges have been filed by the DOJ.
El Paso Corporation
On February 7, 2007, the SEC and DOJ reached settlements with the El Paso Corporation (“El Paso”), a Houston-based energy company. The settlements were a result of allegations that El Paso and its predecessor-in-interest, The Coastal Corporation (“Coastal”), made approximately $5.5 million in illegal surcharge and kickback payments to the Iraqi government under the U.N. Oil for Food Program. Specifically, according to the SEC complaint, Coastal executives met with Iraqi officials in Baghdad and agreed to pay an illegal surcharge on all future oil contracts. After El Paso acquired Coastal, it made approximately $201,000 in illegal surcharge payments. Then, beginning in June 2001, El Paso entered into 14 third-party transactions that involved the purchase of Iraqi oil. In each of these third-party transactions, approximately 25 to 30 cents of each barrel of oil was illegally paid to the Iraqi government. In total, the scheme involved approximately $420 million in oil purchases.
The SEC complaint alleged violations of the FCPA’s internal controls and books and records provisions. El Paso consented to the entry of a final judgment permanently enjoining the company from future FCPA violations. El Paso also agreed to pay a $2.25 million civil penalty. In the DOJ action, which was based on violations of federal wire fraud statutes, El Paso entered into a deferred prosecution agreement and agreed to forfeit approximately $5.5 million to the U.S. government.
There is an inconsistency in how the DOJ and SEC describe the monetary fine. The DOJ described the $5.5 million as the benefit provided to the Iraqi government (i.e., the value of the improper payments). The SEC, conversely, described the $5.5 million both as the benefit provided to Iraq and also as the “total net profit” of the oil sales.
Charles Michael Martin
On March 6, 2007, the SEC filed a settled complaint against Charles Martin, the former Government Affairs Director for Asia for the Monsanto Company (“Monsanto”). The complaint alleged that Martin aided and abetted violations of the FCPA’s anti-bribery, internal controls, and books and records provisions. According to the complaint, Martin authorized an Indonesian consulting firm to pay a $50,000 bribe to an Indonesian government official. The payment was authorized and made for the purpose of inducing the Indonesian official to repeal certain language in a decree that was detrimental to Monsanto’s business. Despite the $50,000 payment, the unfavorable decree was not repealed or amended. Martin agreed to the entry of a final judgment permanently enjoining him from future FCPA violations, as well as to pay a $30,000 civil penalty.
This case is another example of an individual enforcement action that followed prosecution of the company. In 2005, the DOJ entered into a deferred prosecution agreement with Monsanto based largely on the same conduct described above. As part of the deferred prosecution agreement, Monsanto agreed to pay a $1 million penalty and to retain an independent compliance consultant. Monsanto also settled two SEC enforcement actions, agreeing to pay an additional $500,000 in civil penalties.
On June 7, 2007, Christian Sapsizian, a former Alcatel CIT executive, pleaded guilty to participating in the payment of over $2.5 million in bribes to senior Costa Rican government officials to obtain a mobile telephone contract from the country’s state-owned telecommunications authority, in violation of the FCPA. Sapsizian, a French citizen, pleaded guilty in the United States District Court for the Southern District of Florida to two counts, conspiracy and violating the FCPA, from a superseding indictment returned on March 20, 2007. The remaining counts will be dismissed at Sapsizian’s sentencing hearing, which is scheduled for December 20, 2007.
Before being terminated, Sapsizian was employed by Alcatel, a French telecommunications company whose ADRs were traded on the NYSE until November 30, 2006. Sapsizian served as Alcatel’s deputy vice president responsible for Costa Rica during the time corrupt payments were made. The payments, which were made from February 2000 through September 2004, were intended to cause a senior Costa Rican official and a director of Instituto Costarrisence de Electricidad, the state-owned telecommunications authority in Costa Rica, to exercise their influence to initiate a bid process that favored Alcatel’s technology and to vote to award the company a mobile telephone contract. Alcatel ultimately was awarded a $149 million mobile telephone contract in August 2001.
Alcatel is still under investigation by the DOJ and the SEC. Alcatel asserted in its SEC filings that it first learned of illicit payments in Costa Rica in early October 2004 when the Costa Rican Prosecutor’s Office and the National Congress launched investigations. Alcatel stated that it immediately initiated an internal investigation and cooperated fully with all investigating authorities. In its SEC disclosure, Alcatel stated that it remains at risk of criminal prosecution in Costa Rica, and that it may be barred from eligibility for government procurement contracts in that country.
Si Chan Wooh
On June 29, 2007, Si Chan Wooh, a former senior officer of SSI International, Inc., a wholly-owned subsidiary of Schnitzer Steel Industries Inc. until 2006, pleaded guilty to conspiracy to violate the FCPA. Wooh admitted that he conspired with, among others, Schnitzer Steel, SSI International, SSI Korea, and a former senior executive of Schnitzer Steel to violate the FCPA in connection with corrupt payments paid over approximately ten years to government officials in China. Wooh is scheduled for sentencing in September 2007.
Without admitting or denying liability, Wooh also settled related charges with the SEC. The SEC charged that Wooh violated the anti-bribery and books and records provisions of the FCPA. Wooh consented to the entry of a final judgment in the federal lawsuit requiring him to pay a $41,000 civil penalty.
In October 2006, SSI Korea pleaded guilty to conspiracy, violating the FCPA, wire fraud, and aiding and abetting the making of false entries in Schnitzer Steel’s books and records, and was sentenced to pay a $7.5 million criminal fine. Schnitzer Steel entered into a three-year deferred prosecution agreement with the DOJ regarding the same underlying activity. In the parallel SEC administrative proceeding, Schnitzer Steel consented to the entry of a cease-and-desist order and agreed to pay a $7.7 million civil penalty.
The Wooh matter continues the trend of unlinked corporate and individual actions. The parallel actions against Wooh were settled more than eight months after the corporate dispositions. Similarly, as noted above, Charles Martin settled charges with the SEC nearly two years after the dispositions of the DOJ and SEC actions against Monsanto. In the Sapsizian matter, on the other hand, there has not yet been any enforcement action against Sapsizian’s former employer, Alcatel. Similarly, in July 2007, the DOJ filed charges against Jason Steph, a former executive of a subsidiary of energy services firm Willbros Group Inc., but has not brought a case against the company. Thus, although the pattern appears to be that enforcement actions against individuals follow after there has been some corporate resolution, the Sapsizian and Steph matters may well disprove that presumption.
Frederic Bourke and David Pinkerton (the Kozeny case)
On June 21, 2007, Judge Scheindlin of the United States District Court for the Southern District of New York dismissed all FCPA criminal counts pending against Frederic Bourke and David Pinkerton on statute of limitations grounds. Along with Viktor Kozeny, Bourke and Pinkerton were indicted on May 12, 2005 by a federal grand jury for allegedly participating in a massive scheme to bribe government officials in Azerbaijan. The indictment was subsequently unsealed and made public on October 6, 2005. The three men allegedly bribed government officials to ensure that those officials would privatize Azerbaijan’s state-owned oil company, thus allowing Kozeny, Bourke, Pinkerton, and others to share in the anticipated profits arising from that privatization. Kozeny has refused to appear before the court. He was arrested in the Bahamas, and the United States is seeking his extradition. A court in the Bahamas has ordered Kozeny’s extradition and his extradition is currently pending. Kozeny was recently released from a Bahamian jail after paying $300,000 in bail.
Pinkerton and Bourke moved separately to dismiss the FCPA counts as time-barred. Kozeny did not join in that motion. The government argued that the statute of limitations should be tolled “based on the government’s official requests for foreign evidence from the Netherlands and Switzerland.” In rejecting this argument, the court did not allow the government to utilize a federal tolling statute to bring the charged conduct within the limitations period. The court explained that the majority of the conduct charged in the indictment occurred between March and July 1998; thus, the court held, the five-year limitations period in 18 U.S.C. § 3282 had run prior to the May 2005 indictment. The court added that “because the government did not move to ‘suspend the running’ of the statute of limitations until after it had expired, the government is not entitled to any tolling under section 3292.” Judge Scheindlin noted that “[s]tatute of limitations must be enforced, even when they deprive a society of its ability to prosecute otherwise viable criminal offenses; ‘that is the price we pay for repose.’” The DOJ is expected to appeal the June 21 decision.
Moreover, on July 6, 2007, following the court’s dismissal of the FCPA charges against Pinkerton and Bourke, the U.S. government announced that it would not prosecute Omega Advisors, Inc., a $6 billion hedge fund, over its role in the aforementioned scheme to bribe Azeri officials and gain control of Azerbaijan’s state oil company. Omega invested more than $100 million in the privatization program in 1998 through a co-investment agreement with two companies controlled by Kozeny. Clayton Lewis, a former Omega employee who was the hedge fund’s point of contact on the Azeri investment, has admitted that he knew about Kozeny’s alleged arrangements before he invested on Omega’s behalf. Lewis pleaded guilty in February 2004 to charges of violating the FCPA and conspiracy to violate the act.
Also on the 2007 docket are several cases that have yet to reach a resolution, including the following:
U.S. v. William J. Jefferson: On June 4, 2007, a grand jury in the Eastern District of Virginia returned a 16-count indictment against William Jefferson, a member of the U.S. House of Representatives from Louisiana. Jefferson was indicted on counts of solicitation of a bribe by a public official, wire fraud, money laundering, obstruction of justice, RICO, and violations of the FCPA’s anti-bribery provisions, among other things. The FCPA charges stemmed from Jefferson’s alleged promises to bribe a high-ranking Nigerian official. According to the indictment, Jefferson met privately with the Nigerian official and offered a “front-end payment” of $500,000. The payment was allegedly intended to induce the official to assist in obtaining commitments from NITEL, a Nigerian-owned telecommunications company, to make the necessary approvals for a joint venture between a Nigerian company and iGate, Inc., a Kentucky-based company for which Jefferson was acting as agent. Jefferson also allegedly offered the official a “back-end payment” of 50% of the joint venture’s profits. The alleged scheme was uncovered when a confidential informant tipped off the FBI. When the FBI raided Jefferson’s Washington, D.C. home, they discovered $90,000 cash in Jefferson’s freezer, which the indictment alleged was the amount to be used in partial satisfaction of the $500,000 front-end payment.
U.S. v. Leo Winston Smith: On April 25, 2007, a grand jury in the Central District of California returned an indictment against Leo Winston Smith, a former executive of the Santa Ana, California-based Pacific Consolidated Industries LP (“PCI”) for allegedly violating the FCPA as part of a conspiracy to bribe a United Kingdom Ministry of Defence official in order to obtain lucrative contracts with the U.K. Royal Air Force. The indictment alleges that Smith conspired to make over $300,000 in bribe payments for the benefit of the U.K. Ministry of Defence official in order to obtain equipment contracts for Pacific Consolidated Industries valued at over $11 million. In addition to the FCPA violations, the indictment also charges Smith with money laundering and tax offenses. Smith was arrested on June 18, 2007.
U.S. v. Edgar Valverde Acosta: On March 20, 2007, a federal grand jury in Miami returned a superseding indictment charging Christian Sapsizian and Edgar Valverde Acosta, two former Alcatel employees, with making corrupt payments to Costa Rican officials in order to obtain a mobile telephone contract from the state-owned telecommunications authority, in violation of the FCPA. Edgar Valverde Acosta was a Costa Rican national who managed the day-today affairs of Alcatel’s Costa Rican subsidiary and held the title of Senior Country Officer. On June 14, 2007, the federal district court in the Southern District of Florida transferred Mr. Acosta to fugitive status. As noted earlier, Sapsizian pleaded guilty to two counts, conspiracy and violating the FCPA.
SEC v. Steven Ott and Michael Young: On September 6, 2006, the SEC sued Steven Ott and Michael Young, both former executives of ITXC Corporation, in the U.S. District Court for the District of New Jersey. The SEC alleges that Ott and Young violated the FCPA by approving and negotiating bribes paid to foreign state-owned telecommunications carriers in various African countries. The SEC seeks injunctions, disgorgement of ill-gotten gains, and civil penalties. As of June 2007, the Court had granted a motion to intervene by the DOJ to stay discovery in this proceeding pending the outcome of the related criminal investigation that has already resulted in a guilty plea by Yaw Osei Amoako and had continued the stay for an additional 6 months.
SEC v. Yaw Osei Amoako: The SEC also has a pending civil enforcement action against another former ITXC employee, Yaw Osei Amoako, which was filed on September 1, 2005 in the U.S. District Court for the District of New Jersey. The SEC’s complaint alleges that Amoako bribed a senior official of the government-owned telephone company in Nigeria, in order to obtain a lucrative contract for ITXC. The SEC is seeking an injunction, disgorgement of ill-gotten gains, and civil penalties. This civil action has been stayed pending the DOJ’s parallel criminal prosecution. As part of that criminal prosecution, Amoako pleaded guilty in September 2006 to one-count of conspiring to violate the FCPA.
United States v. Kay and Murphy: In 2002, the Justice Department indicted David Kay and Douglas Murphy, two former employees of American Rice, Inc., for violating the FCPA by making improper payments to Haitian government officials to reduce customs and sales taxes on rice imported by American Rice. According to the indictment, Kay and Murphy bribed customs officials to understate the true amount of rice imported by American Rice, thereby subjecting American Rice to lower customs duties and sales taxes. The original issue before the court was how broadly it should interpret the FCPA’s statutory prohibition on the making of payments to foreign officials to “obtain or retain business.”
The district court dismissed the indictment, holding that the statutory language “to obtain or retain business” applied only to payments that lead directly to the obtaining of new or the retaining of old business, which, the district court held, had not occurred here. The Fifth Circuit, however, reversed the district court’s decision. Relying on the legislative history of the FCPA and its amendments, the court held that Congress intended the “obtain or retain business” language to apply to any payments to foreign officials intended to either directly or indirectly assist the payor in obtaining or retaining business. The Fifth Circuit noted that bribes to foreign officials to secure illegally reduced customs and sales taxes, if intended to assist someone in obtaining or retaining business, could fall with the FCPA’s anti-bribery provisions.
After remand, a jury found Kay and Murphy guilty of violating the anti-bribery provisions of the FCPA. In June 2005, the Court sentenced Kay to 37 months imprisonment and Murphy to 63 months imprisonment. Both defendants have appealed their convictions and sentences; the appeals are currently pending in the Fifth Circuit. One of the issues before the Fifth Circuit will be whether the district court properly instructed the jury on the mens rea element of an offense under the FCPA. The DOJ acknowledged that the district court failed to properly instruct the jury that the FCPA has both “willfulness” and “corruptly” elements. In its brief, the DOJ conceded that, “[u]pon further consideration, we now agree that willfully’ and ‘corruptly’ are distinct elements of a criminal violation of the FCPA.” Nevertheless, the parties disagree about the meaning of “willfulness” under the FCPA, and, specifically, whether the FCPA requires a showing by the government that the defendant acted with intent to violate the FCPA.
ONGOING CIVIL LIABILITY – PRIVATE LITIGANTS/SHAREHOLDERS
Although the FCPA does not grant a private right of action, 2006 and 2007 may have created a glimmer of promise for hopeful securities, class-action plaintiffs under the FCPA. Following Immucor’s announcement of a formal SEC investigation into allegations of an improper payment under the FCPA, a shareholder class filed a complaint under §§ 10-b and 20(a) of the Exchange Act. In re Immucor Inc., No. 1:05-CV-2276-WSD, 2006 WL 3000133 (N.D. Ga. Oct. 4, 2006). The suit alleged that Immucor’s statements in securities filings, two of its press releases, and an analyst teleconference — all of which tended to underplay the severity of the potential FCPA violations — constituted material misstatements and omissions. Notably, similar shareholder suits against InVision Technologies and Syncor International Corporation had been dismissed by district courts for failure to meet the pleading requirements of the Private Securities Litigation Reform Act (“PSLRA”). On October 4, 2006, the District Court for the Northern District of Georgia denied Immucor’s motion to dismiss the shareholder claim. The court found that the plaintiffs had adequately alleged false or misleading statements, and that the facts alleged regarding the various statements (notably an attribution of the payments’ costs to “bookkeeping” errors) did support the heightened pleading requirements as to scienter under the PSLRA. In other words, for the first time, a federal court held that plaintiffs had met the heightened pleading requirement for fraud under the PSLRA in an FCPA case. Nevertheless, and although it continued to deny any liability or wrongdoing, Immucor ultimately settled with its shareholders in May 2007 and agreed to settle the class action lawsuits against it for $2.5 million.
Following the Northern District of Georgia’s lead, on May 21, 2007, the District Court for the District of Utah held, in In re Nature’s Sunshine Products Securities Litigation, No. 2:06-CV-267 (D. Utah May 21, 2007), that the plaintiffs’ complaint met the heightened pleading requirements under the PSLRA. Specifically, the court determined that the plaintiffs’ claims of securities fraud, cover-up and insider trading involving Nature Sunshine Products were legally sufficient to allow the case to move forward to the discovery phase.
Although corporate defendants historically have succeeded in challenging the standing of FCPA-based shareholder actions, cases like Immucor and Nature’s Sunshine Products suggest that, especially in the current environment of heightened scrutiny, such claims may start to gain traction. Regardless of outcome, however, one thing is clear: the legal road towards resolving an FCPA violation in the U.S. now stretches far beyond achieving peace with the DOJ and SEC.
The explosion of FCPA enforcement actions has not been limited to the United States. Following Norway’s Statoil ASA’s settlements with the DOJ and SEC in October 2006, the DOJ and/or SEC are investigating numerous foreign companies to determine the nexus to the United States. Assistant Attorney General Alice Fisher has explained that the DOJ “will not hesitate to enforce the FCPA against foreign-owned companies, just as it does against American companies.”
Foreign governments, primarily in Europe, are also cracking down on corruption. Siemens AG (“Siemens”), for instance, has been the subject of several wide-ranging, multi-national bribery and corruption investigations spanning several years. The allegations include money laundering, embezzlement, Oil-for-Food Program violations, and bribery though the use of slush funds created by services contracts in which no services were performed. As part of the corruption investigations into Siemens, several Siemens executives face criminal charges of violating the public trust in Germany. Two other senior Siemens employees, including the CFO of Siemens’s Power Generation Division, were convicted of bribery and assisting bribery for their involvement in multi-million dollar payments to officials at Italian utility Enel in connection with a bid to win a series of contracts for gas turbines. The executives received suspended jail sentences, and Siemens was ordered to forfeit $51.4 million in profits from deals with Enel. Moreover, as part of a corruption investigation related to the United Nations Oil-for-Food Program, Italian authorities raided five companies in Milan, Italy, in April 2007. These matters show how seriously authorities around the world are taking the fight against corruption.
NEW DOJ ATTORNEY
On February 23, 2007, William “Billy” Jacobson started as an Assistant Chief of the DOJ’s Fraud Section. Mr. Jacobson, who is a member of Justice’s FCPA group, is a extremely talented, hard-working prosecutor who substantially increases the already strong prosecutorial bench at the Fraud Section. In addition, the DOJ FCPA group has assembled a team of dedicated FBI agents who just completed a training session on FCPA investigations. At the SEC, Richard Grime, who was a principal point person on SEC-FCPA enforcement matters, has left for the private sector.
2006 proved to be a watershed year for FCPA enforcement actions, but the trend accelerated into 2007 and may well exceed 2006 in terms of the overall number of enforcement actions and the size of penalties. There have been approximately 20 enforcement actions in the past 18 months. In 2007, we have already seen both the largest criminal fine and the largest combined sanction ever imposed for violations of the FCPA. Given the continued proliferation of FCPA enforcement activity in 2007, we expect U.S. authorities to initiate an increasing number of enforcement actions in the next few years and to seek more severe penalties for FCPA violators.
Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues. We have more than 20 attorneys with substantive FCPA expertise. Joe Warin, a former federal prosecutor, currently serves as a compliance consultant pursuant to a DOJ and SEC enforcement action. The firm has 20 former Assistant U.S. Attorneys and DOJ attorneys. Please contact the Gibson Dunn attorney with whom you work, or any of the following:
F. Joseph Warin (202-887-3609, firstname.lastname@example.org)
Daniel J. Plaine (202-955-8286, email@example.com)
Judith A. Lee (202-887-3591, firstname.lastname@example.org)
David P. Burns (202-887-3786, email@example.com)
Jim Slear (202-955-8578, firstname.lastname@example.org)
Andrew S. Boutros (202-887-3727, email@example.com)
Jeremy A. Bell (202-887-3508, firstname.lastname@example.org)
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