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Richard L. Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Elizabeth K. Spahn Editor Emeritus

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor


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FCPA Blog Daily News

Thursday
Aug092007

Question: Why Do Bribes to Reduce Foreign Taxes Violate the FCPA?

The answer, from the United States Court of Appeals for the Fifth Circuit, is this:

[T]he concern of Congress with the immorality, inefficiency, and unethical character of bribery presumably does not vanish simply because the tainted payments are intended to secure a favorable decision less significant than winning a contract bid. Obviously, a commercial concern that bribes a foreign government official to award a construction, supply, or services contract violates the statute. Yet, there is little difference between this example and that of a corporation’s lawfully obtaining a contract from an honest official or agency by submitting the lowest bid, and —— either before or after doing so —— bribing a different government official to reduce taxes and thereby ensure that the under-bid venture is nevertheless profitable. Avoiding or lowering taxes reduces operating costs and thus increases profit margins, thereby freeing up funds that the business is otherwise legally obligated to expend. And this, in turn, enables it to take any number of actions to the disadvantage of competitors. Bribing foreign officials to lower taxes and customs duties certainly can provide an unfair advantage over competitors and thereby be of assistance to the payor in obtaining or retaining business.

From U.S. v. David Kay and Douglas Murphy (February 4, 2004) at page 21.


View the Fifth Circuit's Opinion here.

Wednesday
Aug082007

U.S. Anticorruption Laws Reach Everywhere

SINGAPORE--LAWFUEL - The Law Newswire – August 2, 2007 – Companies located anywhere in the world whose shares are traded on a U.S. stock exchange are subject to the United States Foreign Corrupt Practices Act. The FCPA, as it is known, makes it illegal to bribe foreign public officials in order to obtain or retain business or gain any unfair advantage.

“Most business people are shocked by the reach of the FCPA,” said Richard L. Cassin, an American lawyer with the Singapore-based international law firm, Cassin Law LLC. “The FCPA even criminalizes behavior between two non-U.S. persons who are acting entirely outside the borders of the United States. That’s unusual and alarming by any standard.”

For example, explains Cassin, the FCPA applies directly to more than 440 non-U.S. companies whose shares are registered on either the New York Stock Exchange or the NASDAQ. Another 600 or so have shares registered on the OTC and may be subject to the FCPA.

An FCPA offense can inflict permanent reputational damage and lead to fines of tens of millions of dollars. Shareholders, directors, officers, employees and agents who violate the FCPA face up to five years in prison.

View the News Release Here.

Tuesday
Aug072007

Nigerian Problems Trigger Another FCPA Investigation

The Houston Chronicle reports that Nabors Industries is conducting an internal investigation in response to a federal investigation into possible violations of the Foreign Corrupt Practices Act. The article says,

The Justice Department is investigating alleged Foreign Corrupt Practices Act violations by oil-service companies that used Panalpina [a Swiss based freight forwarder] and other brokers in Nigeria and other parts of the world, the company said.

In addition to Nabors, similar investigations into Nigerian operations have been announced by Transocean, GlobalSantaFe Corp., Noble Corp., Tidewater and Global Industries, among others.


View the Houston Chronicle Article here.

Tuesday
Aug072007

Fallout Continues From Schnitzer Steel Industries' FCPA Violations

The Securities and Exchange Commission announced in late June 2007 that it charged a former executive of Portland, Oregon-based Schnitzer Steel Industries, Inc. with violating the anti-bribery provisions of the FCPA. Si Chan Wooh of Tacoma, Washington, the former Executive Vice President and head of a Schnitzer subsidiary, agreed to pay approximately $40,000 in disgorgement, interest and penalties.

The complaint alleged that from at least 1999 through 2004, Wooh paid over $200,000 in cash bribes and other gifts to managers of government-owned steel mills in China to induce them to purchase scrap metal from Schnitzer. Schnitzer realized over $6.2 million in profits from sales to customers procured through these illicit payments. During the same period, Wooh made or authorized similar payments totaling over $1.7 million to managers of privately owned steel mills in both China and South Korea.

Without admitting or denying the charges, Wooh agreed to disgorge $14,819.38 in bonuses plus prejudgment interest of $1,312.52, to pay a $25,000 civil penalty, and to an order enjoining him from violations of the FCPA in the future.

In October 2006, Schnitzer settled related charges by the Commission by paying $7.7 million in disgorgement. Schnitzer also paid $7.5 million in penalties to settle related criminal charges brought by the U.S. Department of Justice.

View the SEC's Press Release here.

View the SEC's Complaint here.

View the October 2006 Schnitzer Cease and Desist here.

Tuesday
Aug072007

Former Willbros Executive Charged with FCPA Violations

The U.S. Department of Justice announced on July 23, 2007 the indictment in Houston of a former executive of a subsidiary of Houston-based Willbros Group Inc. He is charged with conspiring to make corrupt payments to Nigerian officials in violation of the Foreign Corrupt Practices Act.

Jason Edward Steph, 37, a U.S. citizen residing in Kazakhstan, is charged with conspiring to make over $6 million in bribe payments to Nigerian officials in order to obtain and retain gas pipeline construction business from a joint venture majority-owned and controlled by the Nigerian state oil company. He was also charged with money laundering based upon the international transfer of some of the bribe money.

[Added August 9, 2007] Reuters reports that Nigeria's anti-corruption police are trying to determine who allegedly received $6 million in bribes from Steph.

View the Justice Department Press Release here.

View the Reuters Report here.

Tuesday
Aug072007

Guidelines for Promotional Expenses Under FCPA Affirmative Defense

In its first Opinion Procedure Release of 2007, the Department of Justice said it would take no action against a requestor proposing to cover some expenses for a U.S. trip by six officials of an Asian government. The DOJ based its opinion on the requestor's representations, consistent with the FCPA's promotional expenses affirmative defense, that the expenses contemplated are reasonable under the circumstances and directly relate to "the promotion, demonstration, or explanation of [the requestor's] products or services." 15 U.S.C. §§ 78dd-1(c)(2)(A) and 78dd-2(c)(2)(A). The requestor's representations set out in the Release reflect the now familiar guidelines for the promotional expenses affirmative defense as developed in prior Opinion Procedure Releases.


View Opinion Procedure Release No.: 07-01 here.

Tuesday
Aug072007

Delta & Pine Land Company Settles FCPA Charges

 FCPA Violations Disclosed During Monsanto's Pre-Acquisition Due Diligence

July 26, 2007 -- The Securities and Exchange Commission has settled Foreign Corrupt Practices Act enforcement actions against Delta & Pine Land Company, a Mississippi-based cottonseed producer, and its 100% owned subsidiary, Turk Deltapine, Inc. From 2001 to 2006, Turk Deltapine made payments of approximately $43,000 to officials of the Turkish Ministry of Agricultural and Rural Affairs in order to obtain various governmental reports and certifications that were necessary for Turk Deltapine to obtain, retain and operate its business in Turkey.

The improper payments were first discovered by U.S. officers of Delta & Pine in 2004. Instead of stopping the payments, Delta & Pine made arrangements to fund them through a third party supplier in Turkey. The payments violated both the antibribery provisions and the accounting standards. Delta & Pine and Turk Deltapine jointly agreed to pay a $300,000 civil penalty and engage an independent compliance consultant.

Monsanto Company acquired Delta & Pine on June 1, 2007. The payments came to light in connection with Monsanto's pre-acquisition due diligence and were then reported to the SEC. The Department of Justice has not yet indicated whether it will seek criminal enforcement action against Delta & Pine, Turk Deltapine, or any of their respective directors, officers, employees and agents.

View the SEC's Complaint here.

View the Cease and Desist Order here.

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