A BNA, INC.

WHITE COLLAR
CRIME REPORT!
VOL. 6, NO. 4 166-172 FEBRUARY 25, 2011

Reproduced with permission from White Collar Crime

Report, 6 WCR 166, 02/25/2011. Copyright 姝 2011 by
The Bureau of National Affairs, Inc. (800-372-1033)
http://www.bna.com

BRIBERY

Foreign Corrupt Practices Act Enforcement in 2010: Big, Bold, and Bizarre

BY MIKE KOEHLER n 2010, Assistant Attorney General Lanny Breuer

Mike Koehler is an assistant professor of busi-

ness law at Butler University. Koehler is the
author of the FCPA Professor Blog (http://
fcpaprofessor.blogspot.com). His FCPA exper-
tise and views are informed by a decade of
legal practice at a leading international law
firm.
I proclaimed ‘‘a new era of Foreign Corrupt Practices
Act enforcement; and we are here to stay.’’1 The first
year of this new era witnessed several developments.
This article provides an overview of the year that was
and describes the big, bold, and bizarre year in FCPA
1
Department of Justice Release, ‘‘Assistant Attorney Gen-
eral Lanny A. Breuer Speaks at the 24th National Conference
on the Foreign Corrupt Practices Act’’ (November 16, 2010).

COPYRIGHT 姝 2011 BY THE BUREAU OF NATIONAL AFFAIRS, INC. ISSN 1559-3185

2
enforcement; the increased scrutiny of the FCPA and
FCPA enforcement; and events related to the FCPA as
well as other anti-corruption laws and initiatives.
Big
Very Profitable Year. How big was FCPA enforcement
in 2010? Big—$1.4 billion big, which was the amount of
combined fines and penalties in FCPA enforcement ac-
tions. Both the Justice Department and the Securities
and Exchange Commission brought approximately 20
corporate enforcement actions, with DOJ assessing ap-
proximately $870 million in criminal fines and the SEC
assessing approximately $530 million in civil penalties
and disgorgement.2 FCPA enforcement has become so
prominent for DOJ that 50 percent of the total amount
of fines and penalties secured by DOJ’s Criminal Divi-
sion in 2010 were in FCPA enforcement actions.3 As
DOJ’s former assistant chief for FCPA enforcement
candidly stated, ‘‘The government sees a profitable pro-
gram, and it’s going to ride that horse until it can’t ride
it anymore.’’4
So big was FCPA enforcement in 2010 that eight of
the top 10 enforcement actions of all time occurred dur-
ing the year.5 In comparison, in 2000 there was one
FCPA enforcement action—by the SEC—and the total
penalty amount was $300,000. The past decade has thus
witnessed a remarkable transformation—not as to the
FCPA itself (which has not changed since 1998), but as
to FCPA enforcement and theories of prosecution.
Much of the magnitude of FCPA enforcement in 2010
was a function of foreign companies (with shares listed
on U.S. exchanges or otherwise allegedly subject to the
FCPA based on various jurisdictional theories) engag-
ing in conduct in apparent violation of the FCPA. In
fact, approximately 90 percent of 2010 FCPA fines and
penalties were paid by foreign companies. For instance,
the five largest FCPA enforcement actions in 2010 were
all against foreign companies:
s Snamprogetti Netherlands BV ($365 million in
combined fines and penalties) (5 WCR 498, 7/16/10);
s Technip SA ($338 million) (5 WCR 467, 7/2/10);
s Daimler AG ($185 million) (5 WCR 205, 3/26/10);
s Alcatel-Lucent SA ($137 million) (5 WCR 925,
12/31/10); and
s Panalpina Inc. ($81.8 million) (5 WCR 802,
11/19/10).
These enforcement actions were largely based on
conduct that occurred nearly a decade ago—a time
when compliance norms and expectations (particularly
in non-U.S. companies) were not nearly what they are
today.
2
DOJ’s figure does not include the $400 million fine paid by
BAE Systems Plc (a non-FCPA enforcement action), and the
SEC figure does not include the $50 million the commission as-
sessed, but waived, against Innospec based on its claimed in-
ability to pay.
3
DOJ press release, Department of Justice Secures More
Than $2 Billion in Judgments and Settlements as a Result of
Enforcement Actions Led by the Criminal Division (Jan. 21,
2011).
4 8
See Joseph Rosenbloom, Here Come the Payoff Police,
American Lawyer (May 17, 2010) (quoting William Jacobson).
5
See FCPA Blog, Recent Cases, Foreign Companies Domi-
nate New Top Ten (Jan. 5, 2011). This ranking includes the
BAE enforcement action.
2-25-11 COPYRIGHT 姝 2011 BY THE BUREAU OF NATIONAL AFFAIRS, INC.
Current Trend. The trend of foreign companies com-
prising a large percentage of FCPA enforcement actions
is likely to continue, albeit perhaps not at the 2010 level.
Certain of the medical device and pharmaceutical com-
panies that have disclosed FCPA issues are foreign
companies, and there is an increasing trend of China-
based companies issuing shares on U.S. exchanges,
thus making those companies subject to the FCPA.
Not only was FCPA enforcement big in 2010, but so
too were the reported fees companies paid in connec-
tion with FCPA inquiries and investigations. Avon Prod-
ucts has not yet settled an FCPA enforcement action,
yet the company has disclosed that its professional
costs in connection with its internal inquiry and investi-
gation of conduct in China and other countries is near
$100 million.6 On a much smaller—yet still
meaningful—scale, in August 2009 Team Inc. disclosed
that an internal investigation conducted by FCPA coun-
sel found evidence suggesting payments totaling
$50,000 over a five-year period in its Trinidad branch (a
branch representing approximately one-half of 1 per-
cent of the company’s overall revenue) may have vio-
lated the FCPA.7 In October, the company disclosed
that its total professional costs associated with the in-
vestigation have risen to approximately $3.2 million.8
These two examples of pre-enforcement action profes-
sional fees raise the question of whether FCPA inquir-
ies and investigations (even as to conduct limited in
scope) legitimately result in extensive professional fees
or whether, in the name of cooperation, FCPA inquiries
and internal investigations have turned into a boon-
doggle for many involved.
Big describes not only corporate FCPA enforcement
in 2010 but individual FCPA enforcement as well. While
the enforcement agencies’ FCPA programs remain
largely corporate enforcement programs, 2010 did wit-
ness the largest-ever coordinated individual enforce-
ment action in the FCPA’s history as 22 ‘‘executives and
employees of companies in the military and law en-
forcement products industry’’ were charged with en-
gaging in a scheme to ‘‘pay bribes to the minister of de-
fense for a country in Africa.’’9 The FCPA sting enforce-
ment action was not only big but bold and bizarre as
well. As to bold, the enforcement action was not the
first time DOJ had used undercover tactics in an FCPA
enforcement action, but the Africa sting case was cer-
tainly the most dramatic, with nearly all of the defen-
dants being arrested while attending a trade show in
Las Vegas after months of surveillance and monitoring
by the FBI. As to bizarre, Richard Bistrong, a person
who had already pleaded guilty to separate FCPA viola-
tions, assisted the FBI in concocting a scheme in which
FBI agents posed as representatives of an imaginary
Gabonese minister of defense whom the defendants al-
legedly intended to influence with improper payments.
The past year also witnessed a big individual sen-
tence, the longest in the FCPA’s history. While a clear
trend emerged in 2010 of sentencing judges signifi-
cantly rejecting DOJ sentencing recommendations in
6
Avon Products Inc., Form 10-Q filing (Oct. 28, 2010).
7
Team Inc. Form 8-K filing (Aug. 4, 2009).
Team Inc. Form 10-Q filing (Oct. 8, 2010).
9
See 5 WCR 62 (1/29/10); DOJ press release, Twenty-Two
Executives and Employees of Military and Law Enforcement
Products Companies Charged in Foreign Bribery Scheme (Jan.
19, 2010).
WCR ISSN 1559-3185

individual prosecutions and sentencing individual
FCPA defendants to approximately one year in prison,
Charles Jumet’s sentence was an outlier. In April, Ju-
met was sentenced to 87 months, which included 60
months on a conspiracy to violate the FCPA charge and
27 months on a false statements charge in connection
with $200,000 in improper payments to Panamanian of-
ficials to receive a lighthouse and buoy contract.10
Bold
FCPA enforcement in 2010 was also bold as the en-
forcement agencies, largely enforcing the statute
against cooperating defendants and without any mean-
ingful judicial scrutiny, continued to push the envelope
in terms of enforcement theories.
For instance, a key element of an FCPA anti-bribery
violation is the involvement of a ‘‘foreign official,’’ de-
fined as ‘‘any officer or employee of a foreign govern-
ment or any department, agency, or instrumentality
thereof.’’ The enforcement agencies continue to inter-
pret this key element, contrary to congressional intent
in enacting the FCPA, to include employees of alleged
state-owned or state-controlled enterprises (often enter-
prises with publicly traded stock, doing business all
over the world, and possessing other attributes of pri-
vate business) on the theory that the enterprise is an
‘‘instrumentality’’ of a foreign government. In 2010, ap-
proximately 60 percent of corporate FCPA enforcement
actions involved (in whole or in part) employees of
SOEs—an enforcement theory that also impacted sev-
eral related individual prosecutions in 2010.
The ownership threshold for what constitutes an SOE
in the enforcement agencies’ view dropped as well in
2010. In the Alcatel-Lucent enforcement action, the
SEC and DOJ charged that Telekom Malaysia Berhad
(TM) was a state-owned and controlled telecommunica-
tions provider because the Malaysian Ministry of Fi-
nance owned approximately 43 percent of TM’s shares,
had veto power over all major expenditures, and made
important operational decisions.11 Yet TM is one of
Asia’s leading communications companies, has ap-
proximately 25,000 employees, describes itself as pri-
vatized, and reports a shareholder base of approxi-
mately 35,000 institutional and private/retail inves-
tors.12
The enforcement agencies’ dubious legal interpreta-
tion did receive a greenhorn challenge13 in 2010, yet
this interpretation remains ripe for a sophisticated chal-
lenge, and a meaningful, merits-based judicial review is
warranted.
Agencies Continue to Stretch Boundaries. The ‘‘foreign
official’’ element is not the only key FCPA element that
was often stretched beyond congressional intent by the
enforcement agencies in 2010. Keeping with a trend
that has developed during this era of the FCPA’s resur-
10
See 5 WCR 289 (4/23/10); DOJ press release, Virginia
Resident Sentenced to 87 Months in Prison for Bribing Foreign
Government Officials (April 19, 2010).
11
United States v. Alcatel-Lucent SA, No. 1:10-cr-20906
(S.D. Fla. Dec. 27, 2010) (5 WCR 925, 12/31/10).
12
FCPA Professor, Foreign Official Limbo . . . How Low
Can it Go? (Jan. 10, 2011).
13
FCPA Professor, Judge Denies Esquenazi’s Foreign Offi-
cial Challenge (Nov. 23, 2010).
WHITE COLLAR CRIME REPORT ISSN 1559-3185
3
gence, the enforcement agencies continue to take an
expansive view of the ‘‘obtain or retain business’’ ele-
ment of the FCPA and seemingly ignore the act’s ex-
press exception for so-called facilitating or expediting
payments.
When a group of large multinational companies col-
lectively settle FCPA enforcement actions for approxi-
mately $236 million, it seems odd to ask whether the
conduct at issue even violated the FCPA. Yet this ques-
tion is warranted in the November Panalpina-related
enforcement actions, where the conduct at issue largely
involved obtaining permits and licenses from the noto-
riously corrupt Nigerian Customs Service and other
conduct, such as expedited delivery services and pay-
ments to customs, tax, and other ministerial officials in
several countries.14
While some find facilitating payments to be a corrupt
payment under a different name and while a compli-
ance trend is to prohibit such payments, the fact re-
mains that the FCPA contains an express exception for
such payments, and it is this statute that the enforce-
ment agencies are obligated to enforce. Should the
United States seek to prohibit facilitating payments (as
does the recently enacted U.K. Bribery Act), this is a de-
cision for Congress, not for the enforcement agencies
through charging decisions that corporate defendants
are, for all practical reasons, unable to challenge.
The past year witnessed several other bold enforce-
ment theories, beginning with the first enforcement ac-
tion of the year, against NATCO Group.15 In that case,
the SEC alleged that the company’s wholly owned sub-
sidiary in Kazakhstan was on the receiving end of ex-
tortionate demands by immigration officials. The com-
pany complied with the demands and made approxi-
mately $45,000 in payments to the officials. However,
the SEC alleged that the payments were not properly
recorded in the subsidiary’s books and records and,
without alleging a single fact to suggest that NATCO
was involved or had knowledge of the conduct at issue,
charged NATCO with FCPA books-and-records and
internal-control violations.
Similarly bold were certain of the SEC’s allegations
against Joe Summers, a nominal employee of Pride In-
ternational in Venezuela.16 Among other allegations
supporting the SEC’s FCPA anti-bribery charges
against Summers was that Pride was having difficulty
collecting certain bona fide receivables from Venezu-
ela’s alleged state-owned or state-controlled oil com-
pany. According to the SEC, a mid-level employee at
the oil company refused to release the funds owed to
Pride unless a $30,000 payment was made to him, and
Summers authorized the payment.
Other bold enforcement theories from 2010 included
the SEC charging a non-issuer and a company settling
an FCPA enforcement action even though the company
14
See 5 WCR 802 (11/19/10); DOJ press release, Oil Ser-
vices Company and Freight Forwarding Company Agree to
Resolve Foreign Bribery Investigations and Pay More Than
$156 Million in Criminal Penalties—SEC and Companies
Agree to Civil Disgorgement and Penalties of Approximately
$80 Million (Nov. 4, 2010).
15
SEC press release, SEC Files Settled Civil Action Charg-
ing NATCO Group Inc. with Violations of the Foreign Corrupt
Practices Act (Jan. 11, 2010).
16
SEC press release, SEC Charges Former Employee of
Pride International with Violating the Foreign Corrupt Prac-
tices Act (Aug. 5, 2010).
BNA 2-25-11
4
did nothing wrong. In November, the SEC charged Pan-
alpina, a non-issuer, with FCPA violations and collected
approximately $11.3 million in disgorgement on the ju-
risdictional theory that Panalpina acted as an agent for
certain of its issuer-customers and violated the FCPA by
masking the true nature of bribe payments in invoices
submitted to its issuer customers that allowed the cus-
tomers to then violate the FCPA.17 In August, tobacco
company Alliance One agreed to pay approximately
$9.5 million based entirely on a successor-liability
theory that it was legally responsible for the conduct of
companies it acquired.18
Bizarre
FCPA enforcement in 2010 was more than just big
and bold, it was also bizarre.
In February, DOJ alleged that BAE Systems, one of
the largest defense contractors in the world, provided
‘‘substantial benefits’’ to a Saudi public official in a po-
sition of influence regarding lucrative fighter jet con-
tracts secured by the company.19 According to DOJ,
BAE provided million in benefits, such as the purchase
of travel and accommodations, security services, real
estate, automobiles, and personal items, through vari-
ous payment mechanisms both in the territorial juris-
diction of the United States and elsewhere. Despite
these allegations, DOJ did not charge BAE with violat-
ing the FCPA, even though the company did agree to
pay a $400 million criminal fine based on a non-FCPA
charge.
The lack of FCPA charges against BAE was bizarre,
but the strangeness continued even after the enforce-
ment action. In September, BAE, after already securing
numerous multimillion-dollar U.S. government con-
tracts in the months after the enforcement action, an-
nounced that the FBI (the same government agency
that assisted in the BAE investigation giving rise to the
$400 million enforcement action) awarded the company
a $40 million information security contract.20 The final
bizarre twist in the BAE case concerned the indepen-
dent compliance required per the plea agreement,
which stated that the monitor shall have ‘‘sufficient in-
dependence from [BAE] to ensure effective and impar-
tial performance of the monitor’s duties.’’ However, the
monitor blessed by the Justice Department is a lawyer
with a U.K. law firm that has previously represented
BAE and a law firm that represented the Saudi official
who was the alleged recipient of the improper pay-
ments giving rise to the enforcement action that re-
quired the monitor in the first place.21
Bizarre also best describes the individual enforce-
ment against James Giffen—an action that mysteriously
concluded in 2010. In 2003, Giffen was criminally
17
SEC press release, SEC Charges Panalpina with Violat-
ing the Foreign Corrupt Practices Act (Nov. 4, 2010).
18
See 5 WCR 562 (8/13/10); DOJ press release, Alliance
One International and Universal Corporation Resolve Related
FCPA Matters Involving Bribes Paid to Foreign Officials (Aug.
6, 2010).
19
See 5 WCR 178 (3/12/10); DOJ press release, BAE Sys-
tems Plc Pleads Guilty and Ordered to Pay $400 Million Crimi-
nal Fine (March 1, 2010).
20
BAE press release, BAE Systems to Provide Cyber Secu-
rity to FBI in $40 Million Order (Sept. 21, 2010).
21
FCPA Professor, Is BAE’s Monitor Independent? (Sept. 2,
2010).
2-25-11 COPYRIGHT 姝 2011 BY THE BUREAU OF NATIONAL AFFAIRS, INC.
charged with FCPA violations and other offenses on the
basis of allegations that he made more than $78 million
in unlawful payments to two senior Kazakhstan offi-
cials in connection with oil transactions for major
American oil companies. The case proceeded slowly,
largely due to Giffen’s defense that his actions were
taken with the knowledge and support of the Central In-
telligence Agency, the National Security Council, the
Department of State, and the White House. In August,
the case came to an abrupt and mysterious conclusion
as Giffen pleaded guilty to a one-paragraph supersed-
ing criminal information charging a misdemeanor tax
violation.22 In November, the presiding judge stated
that Giffen was a Cold War hero and commented that
the case should have never been brought in the first
place.
Increased Scrutiny
Against the backdrop of a big, bold, and bizarre year
in FCPA enforcement, 2010 also witnessed increased
scrutiny of the FCPA and its enforcement from all direc-
tions, including judges, Congress, and other interested
individuals and organizations.
Judicial Scrutiny. While FCPA enforcement is largely
devoid of judicial scrutiny, 2010 did provide certain op-
portunities for someone other than the enforcement
agencies to make judgments about some aspect of
FCPA enforcement—even if not as to the FCPA’s core
elements. Most notably, in October, Judge Jackson L.
Kiser, of the U.S. District Court for the Western District
of Virginia, rejected DOJ’s 38-month sentencing recom-
mendation for FCPA defendant Bobby Elkin, a tobacco
company executive who previously pleaded guilty to
conspiracy to violate the FCPA for paying and authoriz-
ing payments to various Kyrgyzstan officials. In sen-
tencing Elkin to three years’ probation and allowing
him to return to Kyrgyzstan to start anew in the tobacco
industry, Kiser invoked accounts of the CIA bribing
warlords in Afghanistan as a parallel that ‘‘sort of goes
to the morality’’ of the situations commonly found in
FCPA enforcement actions.23 Kiser’s rejection of DOJ’s
sentencing recommendation was part of a noticeable
trend in 2010 in which judges significantly rejected DOJ
sentencing recommendations as to other FCPA defen-
dants as well.24 Sentencing issues are one of the few ar-
eas of FCPA enforcement in which the judiciary plays
an active role and in which an adversarial process is on
display. Thus, this sentencing trend is meaningful and
perhaps foreshadows future judicial concerns regard-
22
See 5 WCR 561 (8/13/10); DOJ press release, New York
Merchant Bank Pleads Guilty to FCPA Violation; Bank Chair-
man Pleads Guilty to Failing to Disclose Control of Foreign
Bank Account (Aug. 6, 2010).
23
See 5 WCR 561 (8/13/10); Mike Ganglof, Judge Gives To-
bacco Exec Probation, Fine for Bribery, ROANOKE TIMES (Oct. 22,
2010).
24
In December, a federal district judge in California sen-
tenced Leo Winston Smith to six months’ imprisonment, re-
jecting DOJ’s 37-month sentencing recommendation; in Sep-
tember, a federal district judge in Pennsylvania sentenced
Nam Nguyen to 16 months’ imprisonment, rejecting DOJ’s
14-17 year sentencing recommendation and also rejecting
DOJ’s recommendations as to other related defendants; and in
August, a federal district judge in California sentenced Gerald
and Patricia Green to six months’ imprisonment, rejecting
DOJ’s 10-year sentencing recommendation.
WCR ISSN 1559-3185

ing DOJ’s substantive positions in FCPA enforcement
actions—should more FCPA defendants actively mount
a legal defense.
Congressional Scrutiny. Even before the Senate’s No-
vember hearing, described below, members of Con-
gress were already asking pointed questions as to cer-
tain features of FCPA enforcement. In May, Sen. Arlen
Specter (D-Pa.) of the Senate Judiciary Committee
grilled Breuer about the lack of individual prosecutions
in the record-setting Siemens enforcement action—an
enforcement action in which the enforcement agencies
alleged that Siemens was engaged in a pattern of brib-
ery unprecedented in scale and geographic reach.25
Also in May, Rep. Edolphus Towns (D-N.Y.) released a
letter to Attorney General Eric Holder expressing the
concern of the House Committee on Oversight and Gov-
ernment Reform that settlements of certain civil and
criminal cases by DOJ, including certain FCPA enforce-
ment actions, ‘‘are being used as a shield to foreclose
other appropriate remedies, such as suspension and de-
barment, that protect the government from continuing
to do business with contractors who do not have satis-
factory records of quality performance and business
ethics.’’26
Congressional scrutiny of the FCPA reached an apex
in November when Specter (then chairman of the Sen-
ate Judiciary Committee’s Subcommittee on Crime and
Drugs) called an oversight hearing to examine enforce-
ment of the FCPA. In opening the hearing, Specter
stated that his concerns regarding certain features of
FCPA enforcement were heightened by the November
Panalpina-related enforcement actions.27 During the
hearing, several witnesses, including this author, testi-
fied:
s Greg Andres, acting deputy assistant attorney
general for DOJ’s Criminal Division, provided an over-
view of the Justice Department’s FCPA enforcement
program.
s I provided a critique of DOJ’s charging decisions
in the most egregious cases of corporate bribery as well
as DOJ’s prosecution of individuals.
s Andrew Weissmann, of Jenner & Block LLP, New
York, who appeared on behalf of the U.S. Chamber of
Commerce, suggested potential reforms to the FCPA,
including an affirmative compliance defense and clari-
fication of the ‘‘foreign official’’ element.
s Michael Volkov, of Mayer Brown, Washington,
D.C., proposed a more balanced enforcement approach
and suggested a corporate self-compliance limited am-
nesty program.
Also during the hearing, Sen. Amy Klobuchar (D-
Minn.) noted that ‘‘one of the basic principles of due
process is that people in companies have to be able to
know what the law is in order to comply with it.’’ She
stated that ‘‘many very good standing companies [in
her state of Minnesota] . . . do not always know what
behavior will trigger an enforcement action.’’ Klobu-
25
FCPA Professor, Breuer—Siemens Investigation (As to
Individuals) Remains Open (May 10, 2010). See also 5 WCR
860 (Senate hearing), and 3 WCR 858 (Siemens case).
26
FCPA Professor, Congressman Towns is Asking the
Right Questions (May 24, 2010). See also 5 WCR 400 (6/4/10).
27
FCPA Professor, Examining Enforcement of the FCPA
(Dec. 1, 2010) (containing a link to C-SPAN coverage of the
hearing and the prepared statements of witnesses). See also 5
WCR 860 (12/3/10).
WHITE COLLAR CRIME REPORT ISSN 1559-3185
5
char asked whether DOJ had planned on increasing
FCPA guidance to the business community, and Andres
responded that the department is open to having such
discussions.
Sen. Christopher Coons (D-Del.) stated that he
‘‘would welcome the opportunity’’ to work on ‘‘potential
amendments to the [FCPA] that would allow clarifica-
tion on the definition of foreign official and the creation
of a compliance defense.’’
Other Scrutiny. Scrutiny of the FCPA and its enforce-
ment in 2010 was not confined just to the judiciary and
Congress.
In July, Transparency International (TI) released its
annual Progress Report on Enforcement of the Organi-
sation for Economic Cooperation and Development
Convention.28 Without specifically mentioning the
United States, TI nevertheless called for a study ‘‘on the
use of negotiated settlements to resolve foreign bribery
cases’’ given that these agreements ‘‘could be question-
able deals between prosecutors and politically influen-
tial companies.’’ TI also called for all settlements to be
‘‘submitted to judicial review independent from the
Prosecutor’s Office.’’ In addition, TI questioned
whether the marked increase in global enforcement of
anti-bribery laws is actually making a difference, and it
stated that ‘‘while the amounts paid by companies are
rising steadily in some jurisdictions, the question re-
mains whether there is adequate deterrence.’’
In October, the OECD released its much-anticipated
‘‘Phase 3’’ report on U.S. implementation and enforce-
ment of the OECD Convention—in other words, its re-
view of U.S. FCPA enforcement efforts and policies.29
While the OECD did generally commend U.S. enforce-
ment efforts, the report contained some peculiar contra-
dictions. For instance, while loudly praising the United
States for its ‘‘high level’’ of enforcement, the OECD
quietly criticized and questioned many of the policies
and enforcement theories that yield the ‘‘high level’’ of
enforcement. The OECD noted that the FCPA’s lan-
guage ‘‘does not specifically convey’’ that cases con-
cerning ‘‘an operating license or permit to operate a
business, or a reduction in tax or import duty’’ are in
violation of the statute. Yet the previously mentioned
Panalpina-related enforcement actions were principally
based on this theory. Further, the OECD noted that
‘‘due to an absence of explicit language in the definition
of foreign official’’ it is an open question whether em-
ployees of so-called state-owned or state-controlled en-
terprises are ‘‘foreign officials’’ under the FCPA. How-
ever, approximately 60 percent of corporate FCPA en-
forcement actions in 2010 were based, in whole or in
part, on this theory. The OECD also noted that the in-
crease in deferred prosecution and nonprosecution
agreements ‘‘are one of the reasons for the impressive
FCPA enforcement record in the U.S.’’ Yet the OECD
noted that these agreements are subject to little or no
judicial scrutiny.
Finally, no discussion of FCPA scrutiny in 2010
would be complete without mentioning Forbes’s pro-
vocative article, The Bribery Racket—How Federal
28
FCPA Professor, Report Cards (Aug. 12, 2010).
29
FCPA Professor, The OECD Report—Initial Observations
(Oct. 21, 2010), available at http://fcpaprofessor.blogspot.com/
2010/10/oecd-report-initial-observations.html. See also 5 WCR
734 (10/22/10).
BNA 2-25-11
6
Crackdown on Bribery Hurts Business And Enriches In-
siders. The article took issue with several features of ‘‘a
thriving and lucrative anti-bribery complex’’ and noted,
on the basis of comments from DOJ’s former head of
FCPA enforcement in the mid-1980s, that the increase
in FCPA enforcement is ‘‘good business for law firms
. . . good business for accounting firms, it’s good busi-
ness for consulting firms, the media—and Justice De-
partment lawyers who create the marketplace and then
get [themselves] a job.’’30
Related Developments
This past year also witnessed several significant de-
velopments related, albeit indirectly, to the FCPA and
FCPA enforcement.
Debarment. One interesting, surprising, and contro-
versial aspect of FCPA enforcement is that the U.S. gov-
ernment remains a lucrative customer for many FCPA
violators, including some of the most egregious viola-
tors. In September, the House unanimously passed H.R.
5366, the Overseas Contractor Reform Act. The act gen-
erally provides that a corporation ‘‘found to be in viola-
tion of the [FCPA’s anti-bribery provisions] shall be
proposed for debarment from any contract or grant
awarded by the Federal Government within 30 days af-
ter a final judgment of such a violation.’’ However, be-
cause of the frequent use of nonprosecution agree-
ments and deferred-prosecution agreements in the
FCPA context, very few companies are actually ‘‘found
to be in violation’’ of the FCPA’s anti-bribery provi-
sions. The act’s sponsor, Rep. Peter Welch (D-Vt.), re-
mains in Congress, and it is likely that the bill will be
re-introduced in the 112th Congress. If Congress con-
cludes that imposing a debarment penalty on compa-
nies that commit FCPA anti-bribery violations repre-
sents sound public policy, which it does in egregious in-
stances of corporate bribery that satisfy the elements of
an FCPA anti-bribery violation involving high-level ex-
ecutives and/or board participation, the challenge will
be to draft a law that can be effective in the face of
largely unreviewable enforcement agency discretion.
Dodd-Frank. In July, President Obama signed the
Dodd–Frank Wall Street Reform and Consumer Protec-
tion Act. The wide-ranging act contains at least two pro-
visions that could affect FCPA enforcement.
Section 922 of Dodd-Frank amended the Securities
Exchange Act of 1934 by creating a new section, Secu-
rities Whistleblower Incentives and Protection. The new
section applies to all securities law violations, and the
FCPA is part of the Exchange Act. Under the provi-
sions, a qualifying whistleblower who voluntarily pro-
vides original information to the SEC that leads to the
successful enforcement of a covered judicial or admin-
istration action shall be entitled to an award between 10
percent and 30 percent of the recovered amount.
While the whistleblower provisions may represent
sound policy as to other securities law violations, it is
questionable whether the provisions are sound policy as
applied to FCPA enforcement. Against the backdrop of
little substantive FCPA caselaw, the FCPA is enforced
largely on dubious government enforcement agency in-
terpretations that have never been fully examined by a
30
FCPA Professor, The Bribery Racket (May 6, 2010).
2-25-11 COPYRIGHT 姝 2011 BY THE BUREAU OF NATIONAL AFFAIRS, INC.
court. Yet all FCPA enforcement actions are routinely
settled by companies via a resolution vehicle that does
not require the company to admit or deny the SEC’s al-
legations. Thus, a settled Commission FCPA enforce-
ment action does not necessarily represent the triumph
of the SEC’s legal position over the company’s; rather,
it reflects a risk-based decision primarily grounded in
issues other than facts and the law. Against this back-
drop, the wisdom of rewarding a whistleblower when
the contours of the FCPA largely remain undefined by
the courts and when companies, for reasons other than
law or fact, do not even mount a legal defense is debat-
able. In November, the SEC issued proposed rules to
govern various aspects of the whistleblower program,
and the rules are expected to be finalized in the first
quarter of 2011.31
Another Dodd-Frank provision that could affect
FCPA enforcement is Section 1504, Disclosure of Pay-
ments by Resource Extraction Issuers. This miscella-
neous provision was inserted into the act during final
congressional negotiations. Written in broad terms, the
provision would generally require ‘‘resource extraction
issuers’’ to include in their annual report information
relating to any payment made by the issuer or related
entities to a ‘‘foreign government’’ for ‘‘the purpose of
the commercial development of oil, natural gas, or min-
erals.’’ Like Dodd-Frank’s whistleblower provisions, the
SEC issued proposed rules regarding the disclosure re-
quirements, and the rules are expected to be finalized
in the first quarter of 2011.
International Developments
The United States is not the only country with an
anti-bribery law on its books, and 2010 saw certain
countries continue an escalation in enforcement while
other countries enforced their law for the first time.
The United Kingdom received much of the attention
in the past year—both in terms of enforcement of its ex-
isting law and its passage and preparation of the new
Bribery Act.32
In March, the U.K. Serious Fraud Office (SFO) (an
agency similar to DOJ) and DOJ announced a first-ever
joint enforcement action against Innospec for bribery
and corruption in Iraq and Indonesia.33 However, the
SFO’s use of a DOJ-style negotiated plea was harshly
criticized by one of the highest-ranking U.K. criminal
judges. Among other things, the justice noted that it is
for the court, not the prosecuting agency, to determine
the sanction for criminal conduct and concluded that
the ‘‘the Director of the SFO had no power to enter into
the arrangements made and no such arrangements
should be made again.’’34
The United Kingdom has long had a hodgepodge of
antiquated bribery and corruption laws. However, the
ineffectiveness of these laws has long been an issue and
was most dramatically highlighted in 2010 in relation to
the SFO’s BAE prosecution. In addition to the U.S. pros-
ecution of BAE described above, the SFO also reached
31
5 WCR 769 (11/5/10).
32
See 5 WCR 609 (8/27/10).
33
SFO press release, Innospec Limited Prosecuted for Cor-
ruption by SFO (March 18, 2010). See also 5 WCR 211
(3/26/10).
34
FCPA Professor, Lord Justice Thomas’s Innospec Sen-
tencing Remarks (April 6, 2010).
WCR ISSN 1559-3185

an agreement with BAE in which the company pleaded
guilty to the offense of ‘‘failing to keep reasonably ac-
curate accounting records in relation to its activities in
Tanzania.’’35 This narrow prosecution of BAE sparked
much controversy, as U.K. agencies were investigating
BAE for several years for conduct all over the world, in-
cluding in Saudi Arabia—a prong of the investigation
halted after pressure from the U.K. government and its
national security concerns should the investigation go
forward. In responding to judicial challenges to the BAE
plea agreement, the SFO explained, among other
things, that under existing U.K. law it encountered dif-
ficulty in proving the involvement of a ‘‘controlling
mind’’ (i.e., a board member or executive officer) in the
conduct at issue.36 As in the Innospec matter, the SFO
also received a stern rebuke from the presiding justice,
who noted that, despite the accounting-only charges, an
‘‘obvious inference’’ from the allegations was that a
‘‘bribe’’ was paid to win a lucrative contract.37 The jus-
tice called the BAE-SFO plea agreement ‘‘loosely and
hastily drafted’’ but said he could not ‘‘sentence for an
offense which the prosecution failed to charge.’’ The
SFO’s prosecution of BAE ended with BAE being fined
£500,000 ($810,850) and agreeing to pay a charitable
payment of approximately £30 million ($48.6 million)
for the benefit of Tanzania.
The past year also saw much coverage of the U.K.’s
passage and preparation of a new Bribery Act. Enacted
in April, the act—a law both more expansive than the
FCPA (given its application to commercial transactions
and its lack of a facilitating-payment exception) and
35
SFO press release, BAE Systems Plc (Feb. 5, 2010).
36
FCPA Professor, BAE . . . Inside the SFO (April 30, 2010).
37
FCPA Professor, U.K. Judge Reluctantly Accepts the
Loosely and Hastily Drafted SFO-BAE Plea Agreement (Dec.
22, 2010).
WHITE COLLAR CRIME REPORT ISSN 1559-3185
7
more narrow than the FCPA (given its adequate-
procedures defense)—was scheduled to go live in the
fall. However, in July the U.K. Ministry of Justice an-
nounced that implementation of the Bribery Act would
be delayed until April 2011. Recently, the Ministry of
Justice announced that the Bribery Act will be delayed
further and will not enter intor force until three months
after the Ministry of Justice publishes guidance as to
certain of the Act’s provisions.38 Whenever the Bribery
Act goes live, it is likely that its enforcement will be dis-
ciplined and measured, notwithstanding the numerous
doomsday predictions.
The Road Ahead
With a ‘‘new era of FCPA enforcement’’ declared, the
year ahead will likely see many of the same big, bold,
and bizarre developments of 2010. Among other inquir-
ies that may turn into enforcement actions this year are
the pharmaceutical industry sweep and further scrutiny
of the financial services industry and sovereign wealth
funds—both inquiries largely dependent on the enforce-
ment agencies’ ‘‘foreign official’’ interpretation de-
scribed above.39
At the same time, increased scrutiny of the FCPA and
FCPA enforcement is also expected to escalate in the
coming year. It is likely that additional congressional
hearings will be held on the FCPA and that FCPA re-
form bills will be introduced in Congress. This year also
presents the opportunity for much-needed judicial scru-
tiny of FCPA enforcement actions, such as the appeal
by Frederic Bourke, and the potential for certain devel-
opments that may significantly change the FCPA en-
forcement landscape.
38
See 6 WCR 113 (2/11/11).
39
See 6 WCR 70 (1/28/11).
BNA 2-25-11