This article originally appeared on Professor Koehler’s FCPA Professor website (www.fcpaprofessor.com) and is reprinted with his permission.
A “foreign official.”
Without one, there can be no FCPA anti-bribery violation (civil or criminal). Who were the “foreign officials” of 2012 (at least from an enforcement perspective – recognizing of course that the meaning of this key FCPA element is the subject of much on-going dispute including a historic appellate court challenge – see here for links to the briefing).
This post describes the “foreign officials” from 2012 corporate DOJ and SEC FCPA enforcement actions.
There were 12 core corporate enforcement actions in 2012. Of the 12 enforcement actions, 5 (42%) involved, in whole or in part, employees of alleged state-owned or state-controlled entities (“SOEs”). These entities ranged from oil and gas companies, nuclear power plants, and airlines. In 2011, 81% of corporate enforcement actions involved, in whole or in part, employees of alleged SOEs (see here at pages 29-41). In 2010, 60% of corporate FCPA enforcement actions involved, in whole or in part, employees of alleged SOEs (see here at pages 108-119). In 2009, 66% of corporate FCPA enforcement actions involved, in whole or in part, employees of alleged SOEs (see here at pages 410-44). As to whether Congress intended employees of SOEs to be “foreign officials” under the FCPA, see here for my “foreign official” declaration.
Even though 42% of 2012 corporate enforcement actions involved, in whole or in part, employees of alleged SOEs, the bigger “foreign official” story from 2012 was the number of enforcement actions based, in whole or in part, on the enforcement theory that various foreign health care providers (such as physicians, nurses, mid-wives, lab personnel, etc.) are “foreign officials” under the FCPA. Of the 12 corporate enforcement actions in 2012, 6 (50%) involved, in whole or in part, foreign health care providers. See here for a prior post on the origins and prominence of this enforcement theory.
Combining enforcement actions that involved, in whole or in part, SOE employees with enforcement actions that involved, in whole or in part, foreign health care providers, the result is 10 of 12 enforcement actions (83%). The two exceptions are BizJet/Lufthansa and perhaps Oracle (although the SEC’s allegations as to “foreign officials” are general and vague).
The remainder of this post describes (as per DOJ/SEC allegations) the “foreign officials” of 2012. As is apparent from the specific descriptions below, in certain instances the enforcement agencies describe the “foreign official” with reasonable specificity; in other instances with virtually no specificity.
[Note: certain of the enforcement actions below technically only involved FCPA books and records and internal control charges. As most readers know, actual charges in most FCPA enforcement actions hinge on voluntary disclosure, cooperation, collateral consequences, and other non-legal issues. Thus, even if an FCPA enforcement action is resolved without FCPA anti-bribery charges, the actions remain very much about the "foreign officials" involved. As I've said before, if an employee of a U.S. company consistently entertains his brother-in-law in the corporate suite and seeks reimbursement for "client entertainment" you will not be reading about this FCPA books and records and internal controls enforcement action]
As in prior Bonny Island bribery enforcement actions, the “foreign officials” were Nigeria LNG Limited (“NLNG”) officers and employees, NLNG is majority owned by multinational oil companies and Nigerian National Petroleum Corporation (“NNPC”) owns 49% of NLNG and “through the NLNG board members appointed by NNPC, among other means, the Nigerian government exercised control over NLNG, including but not limited to the ability to block the award of EPC contracts.” In addition, the Marubeni enforcement action (like the prior enforcement actions) generically refer to the other Nigerian government officials.
Smith & Nephew
“Greece has a national healthcare system wherein most Greek hospitals are publicly owned and operated. Health care providers who work at publicly-owned hospitals (“HCPs”) are government employees, providing health care services in their officials capacities. Therefore, such HCPs in Greece are “foreign officials” as that term in defined in the FCPA …”.
“Greece has a national health care system wherein most Greek hospitals are publicly-owned and operated. Healthcare providers, including doctors, who work at publicly-owned hospitals are government employees, providing healthcare services in their official capacities. The public doctors in Greece are “foreign officials” as that term is defined in the FCPA”
BizJet / Lufthansa
Foreign government customers, including the Mexican Federal Police, the Mexican President’s Fleet [the air fleet for the President of Mexico], Sinaola [the air fleet for the Governor of the Mexican State of Sinaloa], the Panama Aviation Authority, and other customers
The foreign officials are identified as follows: Official 1 – “a Captain in the Mexican Federal Police,” Official 2 – “a Colonel in the Mexican President’s Fleet,” Official 3 – “a Captain in the Mexican President’s Fleet,” Official 4 – “employed by the Mexican President’s Fleet,” Official 5 – “a Director of Air Services at Sinaloa,” and Official 6 – “a chief mechanic at the Panama Aviation Authority.”
“Argentina has a public healthcare system wherein approximately half of hospitals are publicly owned and operated. Health care providers (“HCPs”) who work in the public sector are government employees, providing health care services in their official capacities. Therefore, such HCPs in Argentina are ‘foreign officials’ as that term is defined in the FCPA.” “Brazil has a socialized public healthcare system that provides universal health care to all Brazilian citizens, and the majority of hospitals are publicly-controlled. HCPs who work in the public sector are government employees, providing health care services in their official capacities. Therefore, such HCPs in Brazil are ‘foreign officials’ as that term is defined in the FCPA.” “China has a national healthcare system wherein most Chinese hospitals are publicly owned and operated. HCPs who work at publicly-owned hospitals are government employees, providing health care services in their official capacities.”
“public doctors employed by public hospitals and agencies in Argentina, Brazil, and China”
Data Systems and Solutions
Ignalina Nuclear Power Plant (“INPP”) is described as a “state-owned nuclear power plant in Lithuania and an ‘agency’ and ‘instrumentality’ of a foreign government
The INPP employees are described as follows. Official 1 (the Deputy Head of the Instrumentation & Controls Department at INPP with influence over the award of contracts); Official 2 (the Head of Instrumentation & Controls Department at INPP with influence over the award of contracts); Official 3 (the Director General at INPP with influence over the award of contracts); Official 4 (the Head of International Projects Department at INPP with influence over the award of contracts); and Official A (the lead software engineer at INPP with influence over the award of contracts).
“Instituto Mexicano del Seguro Social (“IMSS”) was a social-service agency of the Mexican government that provided public services to Mexican workers and their families. IMSS was created in 1943 by order of the Mexican president, who continued to select IMSS’s head, and subsequent changes to IMSS programs were made by acts of Mexico’s legislature. IMSS provided health care services to tens of millions of people, including workers, their families, and pensioners, at hospitals that IMSS owned and operated throughout Mexico. Mexico’s government funded IMSS through taxation and compulsory contributions.”
“Mexican Official 1 – a deputy administrator of Magdelena de las Salinas (a hospital in Mexico City that IMSS owned and controlled)”
“Mexican Official 2 – the purchasing director of Magdelena de las Salinas”
“Mexican Official 3 – the purchasing director of Lomas Verdes (a hospital in the State of Mexico that IMSS owned and controlled)”
“Mexican Official 4 – a sub-director of IMSS”
“IMSS hospital employees” [IMSS, the Mexican government-0wned medical care and social services provider], “certain IMSS officials”
NPA refers to “customers in China including state-owned and -controlled entities, including airlines created, controlled, and exclusively owned by the People’s Republic of China.”
“The manufacture, registration, distribution, sale, and prescription of pharmaceuticals were highly-regulated activities throughout the world. While there were multinational regulatory schemes, it was typical that each country established its own regulatory structure at a local, regional, and/or national level. These regulatory structures generally required the registration of pharmaceuticals and regulated labeling and advertising. Additionally, in certain countries, the government established lists of pharmaceuticals. that were approved for government reimbursement or otherwise determined those pharmaceuticals that might be purchased by government institutions. Moreover, countries often regulated the interactions between pharmaceutical companies and hospitals, pharmacies, and healthcare professionals. In those countries with national healthcare system, hospitals, clinics, and pharmacies were generally agencies or instrumentalities of foreign governments, and, thus, many of the healthcare professionals employed by these agencies and instrumentalities were foreign officials within the meaning of the FCPA.”
Croatian Official (a citizen of the Republic of Croatia who held official positions on government committees in Croatia and had influence over decisions concerning the registration and reimbursement of Pfizer products marketed and sold in the country).
Russian Official 1 (a citizen of the Russian Federation who was a medical doctor employed by a public hospital who had influence over the Russian government’s purchase and prescription of Pfizer products marketed and sold in the country).
Russian Official 2 (a citizen of the Russian Federation who was a high-ranking government official who held official positions on government committees in Russia and had influence over decisions concerning the reimbursement of Pfizer products marketed and sold in the country).
Russian Official 3 (a citizen of the Russian Federation who had influence over decisions concerning the treatment algorithms involving Pfizer products marketed and sold in the country).
In addition to the above “foreign officials,” the information refers to “numerous [other] government officials, including physicians, pharmacologists and senior government officials, who were employed by foreign governments or instrumentalities of foreign governments, including in Bulgaria, Croatia, Kazakhstan, and Russia.”
“foreign officials, including doctors and other healthcare professionals employed by foreign governments” in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia, and Serbia.
“foreign officials, including doctors and other healthcare professionals employed by foreign governments” in Indonesia, Pakistan, China, and Saudi Arabia.
The information alleges: that Saudi Aramco (“Aramco”) was a Saudi Arabian oil and gas company that was wholly-owned, controlled, and managed by the government, and an ”agency” and “instrumentality” of a foreign government; that Emirates National Oil Company (“ENOC”) was a state-owned entity in Dubai and an “agency” and “instrumentality” of a foreign government; that Vopak Horizon Fujairah (“Vopak”) was a subsidiary of ENOC based in the U.A.E. and an “agency” and “instrumentality” of a foreign government; and that the National Iranian Gas Company (“NIGC”) was a state-owned entity in Iran and an “agency” and “instrumentality” of a foreign government.
“employees of end-customers in Saudi Arabia, the U.A.E., and Iran, including to employees at Aramco, ENOC, Vopak, and NIGC”
General references to payments customers, including government customers, in China, India, Thailand, Laos, Indonesia, Bosnia, Croatia, Serbia, Slovenia, Slovakia, Iran, Saudia Arabia, Libya, Syria, the United Arab Emirates, Mauritania, Congo, Niger, Madagascar, and Turkey.
“designers at design institutes owned or controlled by the Chinese government”
“publicly-employed healthcare professionals” in China
“a former employee of Banjarmasin provincial level public water company (PDAM) [Indonesia] and two payments to the project manager for PDAM Banjarmasin in connection with the Banjarmasin Project”, employees of PLN [a state-owned electricity company in Indonesia],
“employees of a public utility owned by the Government of Vietnam”
“a security officer employed by a government-owned mining company in Mauritania”
publicly employed health care providers in Saudi Arabia
Similar to the DOJ’s allegations above. In addition, the SEC complaint alleges the following additional “foreign officials”
an employee of an instrumentality of the Turkish government
an employee of a government-controlled entity in Malaysia
representatives of a company majority-owned by the Egyptian government
public health care providers in Poland
General reference in the complaint to “Indian government end-users,” Indian “government customers” and a contract with India’s Ministry of Information Technology and Communication
“employees of state-owned entities in Indonesia”
Chinese ”government-employed physicians”
“government health officials in a Brazilian state”
payments to “a small charitable foundation that was founded and administered by the head of one of the regional [Poland] government health authorities”
Russia “government officials or others with influence in the government,” ”the Cypriot entities were owned by an individual associated with the distributor controlled by the member of the upper house of Russia Parliament,” “the beneficial owner of [the relevant] entity was the General Director of the government-owned distributor.”