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Continuing Legal Education Highlights, Part 2 of 3 (ABA Foreign Corrupt Practices Act – Washington, D.C.)

by merlin on September 19th, 2013
  • Sumo

A particular point of discussion that I encourage readers of this blog to comment on is the appropriateness of the US laws this relies upon as enforced on corporations acting abroad and their subsidiaries.  An example is Halliburton, or Blackwater.  This discussion fascinates me because of the propriety of US extra-territorial application of its laws and norms (especially as applied to military action abroad, such as in Syria).

Special thanks to James Klotz for his clarification of certain points regarding Canadian exercises in the international forum, reproduced below.

Please – DISCUSS!

I.                  Enforcement of FCPA – Trends and Significant Developments)


  • Charles Duross – Deputy Chief (FCPA unit – DOJ)
  • Kara Brockmeyer – Chief (FCPA unit – SEC)
  • Mark Mendelsohn – Litigation Partner (FCPA unit – Paul, Weiss, Rifkind, Wharton & Garrison, LLP)


Multi-jurisdictional cases:

  • Some things block info being released (data secrecy, State secrets, etc.)
  • SEC Outreach (working closely with DOJ and other countries’ FCPA-equivalent prosecution)
  • More than 30 countries at the training done by SEC (outreach conference)
  • Highest governmental priority is generally multi-jurisdictional cases (according to the DOJ)


DOJ Enforcement

  • There is not one consistent treaty that covers all of these types of obligations (ex. Memorandums of understanding, most often)
  • DOJ will agree to cooperation terms as long as same terms govern the foreign enforcement authorities – however, admittedly DOJ will carefully redact their info because they don’t want it provided to their targets
  • DOJ enforcement is less proactive when positive compliance programs are already in place in corporation
  • Search warrants for e-mail accounts???
  • Likely less than 50% voluntary disclosure cases
  • Blocking statutes” – situations in which a company wants to protect info and jurisdiction controlling the branch being investigated deems that to be privileged info


SEC Enforcement

  • Cooperation as long as there is active enforcement going on in home country
  • About 30%-35% of cases that they have right now are self-reporter cases (including whistleblower cases)
  • Seeing an increase in whistleblower cases (currently about 5%) – they generally are reporting internally first
  • Not as many problems with blocking statutes because of voluntary cooperation (seems to be more common with SEC than with DOJ)


Private Perspective

  • Seems to be a higher level of scrutiny on alleged offenders (self-reporting seems more risky – DOJ and SEC say otherwise, of course)
  • “Industry sweeps”:
    • SEC regularly takes such steps (proactive in nature)
    • SEC enforcement side is not as targeted (industry-wide policy changes must be discussed at the management level of the SEC with cost in mind)
    • DOJ says the same
    • Non-prosecution agreements:
      • For both SEC and DOJ (ex. Ralph Lauren or Morgan Stanley) – looking at the totality of the evidence

II.               World Bank’s Anti-Corruption Program



  • Jamieson Smith – Senior Counsel (World Bank – Office of Suspension and Debarment); former US Attorney
  • Lawrence Urgenson – World Bank IMT; Prosecution Partner (Kirkland & Ellis, LLP)
  • Greg Andres – Litigation Partner (FCPA unit – Davis Polk & Wardwell LLP; former DOJ)
  • Lucinda Low – Partner, International Group (Steptoe & Johnson, LLP)
  • Robert Delonis (World Bank – Senior Litigation Specialist)


Initial World Bank Reporting, followed by claim investigation of other sources

  • There are 6 different areas
  • Investigation facilitated because contract clause (audit rights) for banks is written in, allowing them to access internal documents (world bank providing $ to each nation, and therefore has access to the banks incorporated under the laws of that government(?)
  • They use a litigation hold letter – however, nothing they do is necessarily compulsory or involves subpoena power (but they directly communicate with enforcement agencies like DOJ and SEC in countries; again, they do not disclose all of their information with the authorities in the jurisdictions they operate in)
  • Again – they are assessing “cooperativeness” as far as whether there is a fraud investigation of not



Bank has guidelines (available on bank website) – involves set of definitions of what is sanctionable;

Has to be under one of their projects AND has to be sanctionable:


  • World Bank monitors all of the settlements with DOJ/SEC etc. – they follow up to ensure continued compliance, audit if there is no cooperation (all non-prosecution agreements involve compliance, and a failure means the DOJ and SEC are the stick again).
  • Audit rights do NOT retroactively apply to contractors with the target of investigations; do now.  The world bank does NOT outsource their investigations.
  • World Bank places the highest priority on whistleblower confidentiality (they will drop a case if it appears the confidentiality will be violated)



Handled by the Office of Suspension and Debarment

–         More of a civil standard than a criminal standard (baseline is 3 years debarment)

–         A sanction actually only prevents prospective work, and not current contracts; works down the chain (applies to subsidiaries, but not to superiors)


Appeal after 90 days (they operate de novo):

–         Not a full-tilt trial, but an opportunity to be heard

–         Public hearing; not appealable

–         Decide sanction, debarment, etc.


Level of Office of Suspension and Debarment is strictly on paper level – if appealed and different result, THAT is the stick for it.



Look at Siemens

Offer can be extended if negotiation is to be entered into; terms are constrained, though.

  • Focus is more on rehabilitation than retribution
  • Still has to be within the sanction guidelines (but they are so liberal that this rule is largely an empty formality)
  • “No admit or deny” agreements – available with DOJ and SEC; World Bank position is ???
  • Restitution – one of the available sanctions (not a fine, but it is a stick they can use)

III.           International Anti-Corruption Enforcement (other jurisdictions)


  • James Klotz – Partner (Miller Thomson LLP – Toronto, Canada)
  • Mark Henzelin – Partner (LALIVE – Geneva, Switzerland)
  • Ross Dixon –Partner (Hickman & Rose, Solicitors – London, England)
  • Frederick Davis – Partner (Debevoise & Plimpton, LLP – Paris, France)
  • Robert De Bree – Partner (Wladimiroff Advocaten N.V. – The Hague, Netherlands)



  • No deferred prosecution, no guarantee that settlement will be accepted by judge
  • Attitude taken meant that voluntary reporting was scarce – James Klotz pointed out to me that there is a large penalty affixed to these (I referred to the “attitude taken”); same effect.  This precedent was set in 2011, because of an extraordinarily harsh penalty for an adjudicated violator.
  • Present prosecution is of Lavalin (former officials of Lavalin; if Lavalin itself is charged, which has not yet occurred, because of the size of the company it may present a dilemma for imposition of the harsh penalty of debarrment)

 Once again, thank-you to James Klotz for clarification (his points have been listed in red, above).  His profile may be found on  As noted above, he spoke that at that session on the stance of Canada with regard to enforcement of international corporate corruption standards.  A portion of his bio is below:


James Klotz is a partner in the Business Law Group of Miller Thomson LLP in Toronto and Chair of the firm’s Anti-Corruption and International Governance Group. He is also Co-Chair of the firm’s International Business Transactions Group. International corporate governance and anti-corruption are his areas of speciality. Having led complex corporate and commercial transactions in more than 108 countries, Jim is widely respected for his deep knowledge and practical experience in the international business arena.


  • ICD.D, Institute of Corporate Directors, 2008
  • LL.B., Osgoode Hall Law School, York University, 1982

Professional Achievements

  • Best Lawyers in Canada – International Trade and Finance Law, 2014
  • “Leading International Finance Lawyer” – Best Lawyers in Canada (2013)
  • “Award of Excellence in International Law” – Ontario Bar Association (2012)
  • Martindale-Hubbell AV Preeminent® Rated Lawyer, 2013



They have ratified almost all international treaties about corruption.

They harbor a large portion of world assets –

  • Initial prosecution domestically is from money laundering, generally
  • “Whistleblowers” are relatively unknown – far less hurtful and more cooperative than Canadian system – failure of prosecution and defense to agree means that all prior discussion is GONE, and it is an ENTIRELY de novo investigation
  • System is, however, IMMUNE from reversal (this makes international prosecution almost impossible, however)
  • Victim is actually a party to the prosecution action (the State is often the stand-in, and they get access therefore to all files)
  • Generally, the interpretation of the Swiss is ONE prosecution for the crime (as opposed to US view – prosecution in each country the crime impacted)



  • Far more comfortable/relaxed criminal laws, and many corporations have their seats there (and are subject to THOSE criminal laws, instead)

–         In bribery cases, though, it winds up being broader because it typically expands (ex. To money laundering, to corruption, etc.)

–         The result in settlement situations (“transactions”) – resolved fast and informally, with no court involvement

–         Self-reporting is encouraged



  • I saw how widespread and harsh that is during the (amazing) lunch presentation by Keir Starmer, Queen’s Counsel (Director of Public Prosecutions, Crown Prosecution Service)
  • “Civil Recovery Orders” – Not used very much now (focus becomes more on retribution than rehabilitation)
  • They don’t have a “culture of plea bargaining”



  • Has adopted European rules on privacy, but view is that DATABASES (as such) are inherently dangerous
  • A French lawyer CANNOT participate in an investigation; attorney-client privilege cannot be waived by the client, either (a lawyer would be EXPECTED to lie for his or her client, apparently)
  • Worker’s counsel – ENORMOUSLY powerful (a strike is cataclysmic to a company there)
  • Prosecutor in France – NOT a lawyer
  • Penalties are light, and investigations take a decade


So, based on these jurisdictional views, self-reporting and voluntary internal investigations?

  • Canada says – better to report than be found out, BUT?
  • Switzerland takes the view that companies are not individuals, and without mens rea there is no good prosecution


Read the decision out of the 2nd Circuit in New York, and also SCOTUS decision, Civil laws apply elsewhere, but criminal laws should not be extraterritorial

IV.            Navigating an FCPA Media Crisis


  • Lowell Bergman – Graduate School of Journalism, University of California at Berkley
  • John Dowd –Partner (Aking Gump Strauss Hauer & Feld LLP)
  • Professor Michael Koehler – Assistant Professor of Law, Southern Illinois University School of Law – he runs a website on the FCPA (read this)
  • Lynn Neils – Partner (Covington & Burling LLP); Former federal prosecutor
  • David Barstow – Journalist, New York Times


Media involvement – initial exploration by media gives a chance to seize and shape the narrative

V.                Transparency (Economies of Scale in FCPA, Corporate Social Responsibility, and Supply Chain Compliance)


  • Richard Weidis – VP, Risk Management & Corporate Counsel (Microstrategy, Inc.)
  • Erin Kulpa –Assistant Attorney General (Virginia)
  • James Meehan – Partner, PriceWaterhouseCoopers
  • Homer Moyer, Jr. – Vice Chair, Executive Committee (Miller Chevalier)
  • Marcus Funk (Moderator) – Partner (Perkins Coie, LLP)


Corporate Social Responsibility (CSR) and the FCPA:

  • Human trafficking and public corruption closely track each other, statistically
  • California’s corporate transparency requires that businesses that operate in its jurisdiction are free of forced labor (let public make an informed decision) – disclosure must be on corporate webpage, easily understood by consumer, showing concrete internal policies and audit of suppliers (materials used in production) – CERTIFICATION!!!
  • Market forces are the stick to obtain compliance

–         Hundreds of advocacy groups target the noncompliant product

–         Ex. Boycotts

  • VA:     Companies are both publicly-traded AND have gross receipts in excess of $1 million


New law being passed by gov’t: To get a federal contract, must join anti-trafficking fight.

(Federal Acquisition Regulations – October 2013) – Requires Certification, including third-party business partners (suppliers, agents, distributors, etc.)

  • This involves mandatory self-reporting (or else NO federal contracts)


Executive Order on Trafficking in Federal Contracts:

  • Business death knell for non-compliance
  • “Knowing and willful” false certification is a crime (up to 5 years’ imprisonment and $250K fine)
  • Government Fraud (31 USC § 3729)
  • Deceptive advertising leading to FTC action
  • Hundreds of advocacy groups around the world target violators
  • Trafficking is today’s “hot topic”, so market will respond



  • Similar policies to the US initiatives above (in progress)


Anti-Bribery and CSR Compliance (Third-Party Risk):

  • Small set of third-party “bad actors” are responsible for the bulk of the compliance risks
  • Frequently, other human rights violations indicate that trafficking and bribery likely take place, as well
  • Must engage in targeted pre-deal due diligence and have a sound hotline system in place
  • “Risk based” due diligence (versus check-the-box due diligence) is ESSENTIAL.
  • DOJ and SEC credit a company for having a strong CSR program in place



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