Tag Archives: settlement

Whatever Happened with that Charity That the Obiang Settlement Was Supposed to Fund?

Posted on by
10

When a country seizes assets that a foreign public official stole from his or her own government, the usual next step is to return those assets to the foreign government from which they were stolen–in much the same way that if I were to steal a computer belonging to Harvard University, and the police caught me and recovered the computer, they should give it back to Harvard (assuming it wasn’t needed as evidence in my trial). But of course in the context of countries beset by systemic corruption–or outright kleptocracies–things are not so simple. Returning the money that the corrupt foreign official stole from the national treasury back to that national treasury may be tantamount to giving the money back to the person who stole it in the first place. So what to do?

One possibility, increasingly popular in some quarters, is to use the money to fund charitable activities in the country where the public funds were stolen, on the logic that doing so does return the money to the “victim country,” but does not return it to that country’s government (which is most certainly not a “victim,” whatever its formal legal claim on the assets in question). This mechanism was employed in the 2014 settlement between the U.S. Department of Justice and Teodoro Nguema Obiang Mangue, the son of Equatorial Guinea’s (extremely corrupt and dictatorial) President Teodoro Obiang Nguema Mbasogo. According to the settlement agreement, the proceeds from the sale of the illicit assets the US had seized would go to a charity that would use the funds to benefit the people of Equatorial Guinea. The charity was to be jointly selected by the US and Obiang, or, if they could not agree on a charity within 180 days of the sale of the assets, the proceeds would be controlled and disbursed by a three-person panel, rather than an existing charity. That panel would consist of one member selected by the US government, one member selected by the government of Equatorial Guinea, and a chair jointly selected by the US and Obiang. As a backstop, the settlement stated that if, 220 days after the sale of the assets, the US and Obiang could not agree on a chair, the court that approved the settlement could force the parties to enter mediation or simply appoint a panel chair itself.

My post today is not a commentary on this arrangement, but a question about it: What ever ended up happening with this? I spent a fair amount of time searching online, and I couldn’t find any information about whether a charity had been selected, or whether a panel was formed, and if so how it was formed and who was/is on it. I also can’t find any information about how the charity or panel disbursed the money from the proceeds of the sale of Obiang’s assets. It’s been over five years since the settlement, so I assume whatever was going to happen has happened already. But strangely, though there are lots of references in various recent publications and articles to the provision of the 2014 settlement that calls for the money to be used for charitable purposes in Equatorial Guinea rather than returned to the government, I can’t find any sources that discuss what actually ended up happening. This is not a trivial question, since several people (including on this blog) expressed skepticism that it was possible for a model like this to work in a country like Equatorial Guinea, where there isn’t much/any space for a genuinely independent civil society to operate.

I’m sure there’s a simple answer to my factual question, and I’m probably just not looking in the right place. So I’m hoping someone out there in reader-land can help me. What ended up happening to the proceeds recovered from the sale of Obiang’s assets? Did the parties agree on a charity? If so, which one, and what did it do with the money? Or was the three-person panel formed to handle the money? If so, how was it formed, who was on it, and what did it do with the money? Anyone have any idea?

Declinations-with-Disgorgement in FCPA Cases Don’t Worry Me: Here’s Why

Posted on by
1

Among those who follow Foreign Corrupt Practices Act (FCPA) enforcement practices, there’s been a spate of commentary on a few recent cases in which the Department of Justice (DOJ) has resolved FCPA cases with a formal decision not to prosecute (a “declination”) that includes, as one of the reasons for (and conditions of) the declination, the target company’s agreement to disgorge to the U.S. Treasury the profits associated with the (allegedly) unlawful conduct. Disgorgement is a civil remedy rather than a criminal penalty (as the U.S. Supreme Court recently emphasized); it is often employed by the Securities and Exchange Commission (SEC), which has civil FCPA enforcement authority over issuers on U.S. exchanges. Until recently, however, the DOJ – which has civil FCPA enforcement authority with respect to non-issuers, and criminal enforcement authority in all FCPA matters – had not sought disgorgement very often, and the recent “declination-with-disgorgement” resolutions appear to be something new, at least in the FCPA context.

Not everyone is happy with this development. Last week, for example, Professor Karen Woody posted an interesting commentary over at the FCPA Blog (based on a longer academic paper) on why the emergence of declinations-with-disgorgement in FCPA cases is an “alarming” development that makes her “queasy.” Professor Woody is an astute and knowledgeable FCPA commentator, and I’m hesitant to disagree with her—especially since I’m not really an FCPA specialist in the way that she is—but I’m having trouble working up a comparable level of alarm. Indeed, my knee-jerk reaction is to view the declination-with-disgorgement as a useful mechanism, one that would often be the most appropriate one to employ to resolve FCPA violations by a company that is not subject to SEC jurisdiction, and eliminating this mechanism might force the DOJ to employ a worse alternative.

Let me start by laying out the affirmative case for declinations-with-disgorgement, and then I’ll turn to Professor Woody’s concerns. Continue reading →

The Trade-Off Between Inducing Corporate Self-Disclosure and Full Cooperation

Posted on by
3

In discussions of appropriate sanctions for corporations that engage in bribery, much of the conversation focuses on the appropriate penalty reduction for firms that self-disclose violations, cooperate with authorities, or both. Self-disclosure and cooperation are often lumped together, but they’re not the same: Plenty of targets of bribery investigations, for example, did not voluntarily disclose the potential violation, but cooperated with the authorities once the investigation was underway.

This gives rise to a problem that is both serious and seemingly obvious, but that somewhat surprisingly is hardly ever discussed.

The problem goes like this: Enforcement authorities want to encourage self-disclosure, and they want to encourage full cooperation with the investigation; they would like to do so (1) by reducing the sanction for firms that voluntarily disclose relative to those that don’t, and (2) by reducing the sanction for firms that fully cooperate relative to those that don’t. But if the minimum and maximum penalties are fixed (say, by statute or department policy or other considerations), and the penalty reductions necessary to induce self-disclosure and full cooperation, respectively, are large enough (cumulatively greater than the difference between the maximum and minimum feasible sanction), then adjusting sanctions to encourage self-disclosure may discourage full cooperation, and vice versa.

It’s easiest to see this with a very simple numerical example: Continue reading →

Guest Post: Paris Court Rules That a US FCPA Guilty Plea Precludes Subsequent Prosecution in France

Posted on by
1

GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:

Overseas bribery and similar crimes can often be investigated by prosecutors in more than one country. But does (or should) the resolution of a criminal investigation in one country—say, through a negotiated resolution—bar subsequent prosecutions in other countries for the same underlying conduct? In earlier posts, I have explored some recent rulings that address aspects of this debate over so-called “international double jeopardy” (see here, here and here). A recent decision of the Paris Court of Appeals added an interesting new element to this debate. Faced with a classic situation of parallel prosecutions, the Paris Court held that an individual who had pleaded guilty in the United States for violations of the U.S. Foreign Corrupt Practices Act (FCPA) could not be prosecuted under French anti-bribery law—not because of the standard international double jeopardy principle, but rather because, according to the Paris Court, the US proceedings deprived the defendant of the right to defend himself protected by the European Convention on Human Rights (ECHR).

The facts of the case are simple: an individual entered into a written plea agreement with the U.S. Department of Justice (DOJ), in which the defendant agreed to plead guilty in a US court to FCPA charges, on which he was subsequently sentenced. He was separately bound over for trial in France under French anti-bribery laws, apparently for the same underlying conduct.  In affirming the dismissal of the French prosecution, the Paris Appellate Court’s reasoning proceeded in two steps: Continue reading →

What Might We Learn from the (Predicted) Walmart Settlement?

Posted on by
5

My post two weeks ago discussed reports that Walmart is on the verge of reaching a settlement with the U.S. government regarding allegations that several of Walmart’s foreign subsidiaries violated the Foreign Corrupt Practices Act (FCPA), and that the total penalties that Walmart would pay would be around $300 million. That may sound like a big number, but it’s much smaller than the $1 billion penalty some commentators predicted when the investigation got under way, and only half of the $600 million the U.S. government was reportedly demanding as recently as last October.

As I write this, a settlement still hasn’t been formally announced, though it’s possible it will have been by the time this post is published. (I’m traveling this week, so I wrote this post a several days in advance and wasn’t able to update it to reflect any developments that may have occurred in the last 72 hours or so.) But let’s assume for the moment that the media reports are accurate, and that sometime this year – approximately six years after Walmart first disclosed to the SEC and DOJ that it might have an FCPA problem – the case settles for around $300 million. What would we learn from that?

Or perhaps I should frame the question more starkly, at the risk of oversimplification:

  • There are a bunch of folks out there (the “FCPA Reform” crowd) who argue that the U.S. government’s approach to FCPA enforcement is out of control, with the government imposing enormous and unjustified costs on companies for relatively minor and/or unproven infractions. The government can do this, the argument goes, because the government has corporations over a barrel: most corporations can’t risk being indicted for FCPA violations, and so (the FCPA Reform crowd asserts) the government can and does extract exorbitant settlements with little regard to whether the government’s legal theories have an adequate basis in law and fact.
  • Then there are a bunch of folks (lat’s call them the “FCPA, A-OK” crowd) who think that the aforementioned concerns are grossly exaggerated, and that in fact the U.S. government’s FCPA enforcement posture is reasonable, grounded in a plausible view of the law, and that allegations of overreaching don’t withstand critical scrutiny. (And then of course there are those who think that the government isn’t nearly aggressive enough in enforcing the FCPA, and that in fact both the resources devoted to investigation and enforcement, as well as the penalties, should be increased dramatically.)

If the Walmart settlement resembles what the most recent media reports predict, I think that both the “FCPA Reform” crowd and the “FCPA, A-OK” crowd can and will find material to support their positions. Continue reading →

Wake Me Up When the Walmart Case Actually Settles

Posted on by
1

Big news in the world of Foreign Corrupt Practices Act Enforcement! According to a report earlier this month in Bloomberg, the U.S. government’s investigation into allegations that Walmart’s subsidiaries abroad (particularly in Mexico, India, Brazil, and China) engaged in extensive bribery of public officials, is about to wrap up! “People familiar with the matter” report that the settlement is nearing finalization, and that Walmart will end up paying penalties that are much smaller than the U.S. government originally sought. All of us FCPA nerds should be on pins and needles awaiting the imminent announcement of the settlement, which should come out any day now…

… or maybe not. Maybe this time the news is for real, and we’re about to see a settlement announcement, in which case there will certainly be something important to write about. But at the moment, what I find more interesting is the succession of stories, spread out over a nearly two-year period, that suggested that a Walmart settlement was just around the corner. To recap:

  • In October 2015, the Wall Street Journal reported that, according to unnamed “people familiar with the probe,” the Walmart matter was about to be wrapped up–and the fine was going to be much smaller than originally predicted, because it turned out (according to the WSJ’s sources) that the FCPA violations were not as serious or widespread as had been previously reported.
  • Almost exactly one year later, in October 2016, Bloomberg reported (on the basis of conversations with “three people familiar with the matter”) that, contrary to the previous WSJ report, although the US government encountered difficulties making out the FCPA violations in Mexico (not so much because of lack of evidence of misconduct, but rather because the most egregious conduct was outside of the statute of limitations), the government had evidence of misconduct elsewhere, and was seeking a penalty of around $600 million. According to that report, Walmart was still resisting, but the report nonetheless indicated that the administration was “working to wrap up an agreement before a new administration takes over in January [2017].”
  • Approximately nine months later, Bloomberg’s latest report states that, “according to people familiar with the matter,” Walmart is preparing to settle the case for $300 million – about half of what the government sought.

Now, though my initial reaction, given this history, is to take reports of imminent settlement with a grain of salt, I hasten to add that none of these reports are inconsistent with each other, or with the claim in the most recent report that a settlement announcement is imminent. Indeed, one could reconstruct roughly the following timeline of events, which I think is probably the best way to understand what’s going on: Continue reading →

France’s New Anticorruption Law — What Does It Change?

Posted on by
3

GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:

The ineffectiveness of French efforts to combat overseas bribery is well-known if not entirely understood. Put most simply, in the 17 years since France adopted comprehensive anti-bribery legislation, essentially similar to the U.S. Foreign Corrupt Practices Act (FCPA), France has not convicted a single corporation of classic overseas bribery under that legislation. This shortfall has been regularly documented in periodic reports by the OECD, and by NGOs such as Transparency International and others. Its causes are complex. They may include a simple deficit in willpower, but as others as well as I have pointed out, French criminal procedures, and in particular the difficulty of demonstrating corporate responsibility under French criminal law, impede effective prosecution.

Stung by the fact that four very large French companies entered into a variety of guilty pleas or deferred prosecution agreements (DPAs) with US authorities, pursuant to which these companies paid well over $2 billion in fines and other payments to the US treasury, in December 2016 the French legislature finally adopted a long-pending law, known as the Loi Sapin II, which progressively goes into effect during 2017. The law is unmistakably a reaction to US success in prosecuting French companies under the FCPA: it only applies to corporations, and only to allegations of overseas corruption or other crimes very similar to those prosecutable under the FCPA.

Several of new law’s provisions are unexceptional: it creates a new Anticorruption Agency, called the AFA, to replace an existing agency, known as the SCPC, which was widely viewed as ineffective; the law requires medium- and large-sized companies to adopt compliance programs pursuant to criteria to be developed by the AFA. (While the AFA can impose administrative sanctions for absent or deficient compliance programs, it will have no criminal investigative authority). The new law also slightly extends the territorial reach of French anti-bribery laws to make them applicable to companies that “carry out all or part of their economic activity on French territory,” and enhances whistleblower protection available under existing laws. But the Loi Sapin II’s most ambitious innovation by far is a series of amendments to the French Code of Criminal Procedure to permit negotiated outcomes generally similar to DPAs as practiced for many years in the United States, and since 2014 in the United Kingdom, that result in the payment of fines and other penalties but not in a criminal judgment. Under the new provisions, a French corporation may enter into an agreement, known as a “Judicial Convention in the Public Interest” (JCPI), under which the firm admits facts sufficient to show the commission of a relevant crime, and agrees to a fine that may be as high as 30% of the company’s annual turnover for the prior three years. The company may also agree to the imposition of a corporate monitor, to be supervised by the AFA. Continue reading →

Guest Post: Why Disclosures in Foreign Settlements Don’t Spur Domestic Prosecutions in Argentina

Posted on by
2

Natalia Volosin, a doctoral candidate at Yale Law School and clerk in the Asset Recovery Unit at Argentina’s Attorney General’s Office, contributes the following guest post (adapted and from an op-ed previously published in Spanish in the Argentine newspaper Infobae):

The so-called “Lavo Jato” investigation into bribery and money laundering at Brazil’s state-owned oil company Petrobras led to the biggest transnational bribery settlement in history: In December 2016, the Brazilian construction conglomerate Odebrecht reached a settlement with law enforcement authorities in the United States, Brazil, and Switzerland; in exchange for its guilty plea, Odebrecht and its affiliate Braskem agreed to pay the three countries a total of $3.5 billion, of which the first firm alone will pay $2.6 billion. (Odebrecht agreed that the total criminal penalty amounts to $4.5 billion, but the final number will be determined according to its ability to pay, though it will be no less than $2.6 billion.) According to the agreement, Brazil will get 80 per cent of the penalty, while the United States and Switzerland will get 10 per cent each.

Some hope that the Odebrecht settlement will provide a boost to anticorruption investigations in other countries. After all, in the settlement documents, the firm acknowledged to having made illegal payments worth $788 million between 2001 and 2016, not only in Brazil, but in a dozen countries including Angola, Argentina, Colombia, Mexico, and Venezuela. In Argentina specifically, Odebrecht admitted that between 2007 and 2014, in three separate infrastructure projects, it paid intermediaries a total of $35 million knowing that they would be partially transferred to government officials. These criminal practices earned the company a $278 million benefit—a return on “investment” of over 694% (the highest among all the recipient countries). Will these revelations have significant consequences for the prosecution of corruption cases in Argentina?

The answer is probably no, at least not in the short term. Continue reading →

Watching the Watchmen: Should the Public Have Access to Monitorship Reports in FCPA Settlements?

Posted on by
4

When the Department of Justice (DOJ) settles Foreign Corrupt Practices Act (FCPA) cases with corporate defendants, the settlement sometimes stipulates that the firm must retain a “corporate monitor” for some period of time as a condition of the DOJ’s decision not to pursue further action against the firm. The monitor, paid for by the firm, reports to the government on whether the firm is effectively cleaning up its act and improving its compliance system. While lacking direct decision-making power, the corporate monitor has broad access to internal firm information and engages directly with top-level management on issues related to the firm’s compliance. The monitor’s reports to the DOJ are (or at least are supposed to be) critically important to the government’s determination whether the firm has complied with the terms of the settlement agreement.

Recent initiatives by transparency advocates and other civil society groups have raised a question that had not previously attracted much attention: Should the public have access to these monitor reports? Consider the efforts of 100Reporters, a news organization focused on corruption issues, to obtain monitorship documents related to the 2008 FCPA settlement between Siemens and the DOJ. Back in 2008, Siemens pleaded guilty to bribery charges and agreed to pay large fines to the DOJ and SEC. As a condition of the settlement, Siemens agreed to install a corporate monitor, Dr. Theo Waigel, for four years. That monitorship ended in 2012, and the DOJ determined Siemens satisfied its obligations under the plea agreement. Shortly afterwards, 100Reporters filed a Freedom of Information Act (FOIA) request with the DOJ, seeking access to the compliance monitoring documents, including four of Dr. Waigel’s annual reports. After the DOJ denied the FOIA request, on the grounds that the documents were exempt from FOIA because they comprised part of law enforcement deliberations, 100Reporters sued.

The legal questions at issue in this and similar cases are somewhat complicated; they can involve, for example, the question whether monitoring reports are “judicial records”—a question that has caused some disagreement among U.S. courts. For this post, I will put the more technical legal issues to one side and focus on the broader policy issue: Should monitor reports be available to interested members of the public, or should the government be able to keep them confidential? The case for disclosure is straightforward: as 100Reporters argues, there is a public interest in ensuring that settlements appropriately ensure future compliance, as well as a public interest in monitoring how effectively the DOJ and SEC oversee these settlement agreements. But in resisting 100Reporters’ FOIA request, the DOJ (and Siemens and Dr. Waigel) have argued that ordering public disclosure of these documents will hurt, not help, FCPA enforcement, for two reasons:  Continue reading →

Victim-Compensation Arguments Cut Both Ways

Posted on by
2

In my last post, I imagined what a frustrated U.S. official might have to say about the ever-increasing drumbeat of demands for the United States to “return” (that is, transfer) the “proceeds of crime” (that is, the fines collected from corporate defendants in Foreign Corrupt Practices Act (FCPA) cases) to the “victim countries” (that is, the governments whose officials took the bribes that gave rise to the FCPA violations). My imaginary rant was deliberately over-the-top, intended to be provocative and to stir up some more honest debate on this topic by cutting through the circumspection and diplomatic niceties that usually accompany pushback against the “give the settlement money to the victim countries” position. In this post, I want to continue on the same general topic, and in the same provocateur’s spirit, by asking the following question:

When (or if) demand-side countries start collecting serious fines against bribe-taking public officials and/or bribe-paying companies, does the logic of compensating “victims” dictate that these countries transfer some of the money they recover to the United States?

At the risk of seeming totally bonkers, I’m going to assert that the answer might well be yes if one accepts the logic for making transfer payments in the other direction (from the U.S. government to the governments of the countries whose officials took the bribes) in FCPA cases. Here’s the argument: Continue reading →