Limiting the FCPA’s Reach

You can always count on the FCPA paparazzi.  When things are quiet in the FCPA world, they will take a mountain and turn it into a molehill.  They have nothing better to write about; they have nothing better to focus on then two recent district court decisions addressing the issue of jurisdiction over foreign individuals.

The following originally appeared in Michael Volkov’s Corruption Crime & Compliance blog and is reprinted here with permission.

The headlines reported that the government had suffered a major setback in its assertion of personal jurisdiction over one defendant.  A closer look at the cases reveals a fact-intensive ruling which appears to reflect the court’s consideration of the defendant’s personal circumstances.

While the two cases reached different results, the principle inquiry in both centered on the defendants’ respective roles in the review and filing of false reports with the SEC.  For FCPA practitioners, the cases represent an important area to develop facts and legal arguments when defending a foreign individual.

In SEC v. Straub, Judge Richard Sullivan denied defendants’ motions to dismiss on personal jurisdiction grounds, finding that the two officers from Magyar Telekom, PLC allegedly directed bribes to Macedonian government officials and made false representations and filings with the SEC.  Judge Sullivan relied on the fact that the Magyar officers made false and misleading statements to the auditors in the preparation of the company’s financial statements.  Specifically, the officers signed management representation letters affirming that Magyar’s books and records were accurate.  Judge Sullivan ruled that the SEC had met its burden of establishing that the exercise of jurisdiction met constitutional due process standards since the defendants’ engaged in conduct designed to violate US securities regulations.

In SEC v. Steffen, Judge Shira Scheindlin granted a motion to dismiss one of the former Siemens officers from the pending case for alleged bribes in Argentina.  Judge Scheindlin noted there was no evidence that the defendant participated directly in the review or preparation of false filings made by Siemens to the SEC.

According to the SEC, Steffen violated the FCPA by pressuring another Siemens employee in Argentina to authorize the payment of bribes, resulting in falsified quarterly and annual filings with the SEC.  in rejecting the SEC’s position, Judge Scheindlin noted that Steffen did not authorize the bribes, did not direct a cover-up, or played any role in the false filings.

Judge Scheindlin also cited several other consideration which supported the court’s decision to dismiss, including the defendant’s age (74), his lack of ties to the US, and his lack of language proficiency.  These real-life factors may have been at the bottom of the court’s rationale for dismissing the case.

The impact of these cases is likely to be limited.  Of course, some commentators are arguing that Judge Scheindlin’s ruling is a significant limitation on the government’s civil enforcement authority.  Such a view ignores the facts underlying the decision, and the numerous decision upholding the government’s broad enforcement powers.

The government continues to exercise broad criminal authority and there is nothing to suggest that FCPA enforcement will be limited by this decision.

About the Author

Michael Volkov

Michael-Volkov-leclairryanMichael Volkov is the CEO of The Volkov Law Group LLC, where he provides compliance, internal investigation and white collar defense services.  He can be reached at mvolkov@volkovlaw.com.  His practice focuses on white collar defense, corporate compliance, internal investigations, and regulatory enforcement matters. He is a former federal prosecutor with almost 30 years of experience in a variety of government positions and private practice. Michael maintains a well-known blog: Corruption Crime & Compliance which is frequently cited by anti-corruption professionals and professionals in the compliance industry.Michael has extensive experience representing clients on matters involving the Foreign Corrupt Practices Act, the UK Bribery Act, money laundering, Office of Foreign Asset Control (OFAC), export controls, sanctions and International Traffic in Arms, False Claims Act, Congressional investigations, online gambling and regulatory enforcement issues. Michael has assisted clients with design and implementation of compliance programs to reduce risk and respond to global and US enforcement programs. Michael has built a strong reputation for his practical and comprehensive compliance strategies.Michael served for more than 17 years as a federal prosecutor in the U.S. Attorney’s Office in the District of Columbia; for 5 years as the Chief Crime and Terrorism Counsel for the Senate Judiciary Committee, and Chief Crime, Terrorism and Homeland Security Counsel for the Senate and House Judiciary Committees; and as a Trial Attorney in the Antitrust Division of the U.S. Department of Justice. Michael also has extensive trial experience and has been lead attorney in more than 75 jury trials, including some lasting more than six months. His clients have included corporations, officers, directors and professionals in, internal investigations and criminal and civil trials. He has handled a number of high-profile criminal cases involving a wide‐range of issues, including the FCPA and compliance matters, environmental crimes, and antitrust cartel investigations in countries all around the world. Representative Engagements

  • Successfully represented three officers of a multinational company in two separate criminal antitrust investigations involving a criminal antitrust investigation in the District of Columbia and the Southern District of New York.
  • Defended pharmaceutical company before the Food and Drug Administration and Senate Finance Committee relating to application for approval of generic drug.
  • Conducted internal investigation which exonerated company against allegations of false statements in submissions to the FDA and against improper conduct alleged by Senate Finance Committee.
  • Represented company before the US State Department on alleged violations of ITAR which lead to voluntary disclosure and imposition of no civil or criminal penalties.
  • Advised several multinational companies on compliance with anti‐corruption laws, and design and implementation of anti‐corruption and anti‐money laundering compliance programs.
  • Advised hospitals, pharmaceutical companies and medical device companies on compliance issues relating to Stark law and Anti‐Kickback law and regulations.
  • Conducted due diligence investigations for large multinational companies for anti‐corruption compliance of: potential third party agents, joint venture partners and acquisition targets in Europe, Africa, Asia and Latin America.
  • Represented individual in white collar fraud case in Alexandria, Virginia and secured dismissal of criminal charges and expungement of criminal record.
  • Represented company before Congress and Executive Branch in effort to modify Justice Department regulations concerning use of federal funds.
  • Advised and assisted World Bank in review of global corruption policies, enforcement programs and corruption investigations and prosecutions.