We Repeat, It's The Travel Act

CCI did it. So did Nexus Technologies, Nam Nguyen, Kim Nguyen, and An Nguyen. And now Flavio Ricotti has done it too.

They've all pleaded guilty in FCPA cases to violating or conspiring to violate the Travel Act.

And let's not forget Fredrick Bourke. A federal jury convicted him of conspiring to violate both the FCPA and the Travel Act.

The what? We've talked about the Travel Act before. But because it's now a big deal in FCPA-related cases, let's have another go.

As the name suggests, the Travel Act (18 U.S. C. §1952) prohibits traveling between states or countries or using an interstate facility in aid of any crime, and carries a 5-year jail sentence for most offenses. The underlying crime doesn't have to be a federal offense, such as an FCPA violation. Traveling around or using the mails to violate a state law can also trigger a Travel Act violation.

State law? Right. Which means the Travel Act can be used, as it was in the CCI cases, to prosecute companies and individuals for bribing private parties. The FCPA only applies to bribes to foreign officals. But some state laws prohibit bribery to private parties. And that's also enough to support a Travel Act charge in a federal prosecution.

For example, in the cases of CCI and some of its ex-employees, the federal government alleged they violated or conspired to violate California's anti-bribery law (California Penal Code section 641.3). It bans corrupt payments anywhere of more than $1,000 between any two persons, including private commercial parties. In their federal indictments, the Travel Act charges alleged violations of California's anti-corruption law, including bribes paid overseas to private parties.

This wasn't a brand new approach by the DOJ. But until the past couple of years, there wasn't much history of Travel Act charges in FCPA cases.

In 2004, two former Health South executives, Robert Thompson and James Reilly, were indicted for Travel Act and FCPA books and records violations. The next year, a jury acquitted them of all charges.

And according to the FCPA Digest, the Travel Act was mentioned in a couple of cases in the 1990s as a predicate act in RICO cases that also involved FCPA violations. The cases involved Young & Rubicam and Ashland Oil.

But now, with the Travel Act popping up in more FCPA-related cases, those responsbile for compliance might want to check their programs, looking out not only for the FCPA but also applicable state anti-corruption laws, including those that might apply to private overseas bribery.

Fox's Favorites For 2010

Attorney Thomas Fox looks back on 2010's most memorable enforcement actionsBy Thomas Fox

As December is a time for reflection on the past twelve months, I have been considering the FCPA year. I submit for your consideration my Top 10 Favorite FCPA Enforcement Actions for 2010. Happy Holidays to all!

1. Alliance One/Universal Corp.-the DPAs list the specific steps that a company can take during the pendency of a FCPA investigation to reduce the overall fines and penalties.

2. Daimler-a company can receive credit for self-disclosure under the sentencing guidelines even if it does not self report a possible FCPA violation. The DOJ investigation was started by a whistleblower report to the DOJ but Daimler nevertheless received a two-point reduction in its culpability. 

3. NATCO-if a company pays money that is an extortion payment, it must accurately report such payments on its books and records. Otherwise such payments violate the books and records component of the FCPA. 

4. Nexus Technologies, Inc.-demonstrates the differences viewed by the courts and DOJ regarding sentencing of FPCA defendants. The sentencing recommendations by DOJ and sentences passed down by court were as follows:

•  Nam Nguyen-DOJ recommended-14 to 17 years. Sentenced-16 months.
•  An Nguyen-DOJ recommended-7 to 9 years. Sentenced-9 months.
•  Kim Nguyen-DOJ recommended-6 to 7 years. Sentenced-Probation.
•  Joseph Lukas-DOJ recommended 3 to 4 years. Sentenced-Probation

5. Nigerian Bribery Case-the conclusion of enforcement actions against Technip ($338 million) and Snamprogetti and ENI ($365 million) bring the total fines and penalties paid by companies involved in this matter approximately $1.28 billion to-date. Additionally, this month, one UK citizen, Wojciech Chodan was extradited from the UK, brought to the US and has now pled guilty to violation of the FCPA. Another UK citizen, Jeffery Tesler, has appealed his UK extradition order. In an interesting development, the country of Nigeria charged former Halliburton CEO Dick Chaney regarding the bribery payments and such charges were dropped for payment of a (reported) $250 million fine. 

6. Panalpina Settlements-the largest one-day settlement of FCPA enforcement actions, which included Panalpina, Shell, Transocean, Pride, GlobalSantaFe [now owned by Transocean], Tidewater and Noble who received a NPA. In Appendix C to each DPA, (Appendix B to Noble's NPA) is the DOJ’s most current views on the minimum best practices of a FCPA compliance program.

7. RAE Systems, Inc.-companies are fully liable for their joint ventures actions and that even with actual knowledge of FCPA violations, conduct during the DOJ investigation can result in a Non-Prosecution Agreement. Appendix B of the DPA provides additional guidance on due diligence to be performed on JVs prior to purchase of any ownership interest. 

8. Gerald and Patricia Green-two individuals convicted of FCPA violations at trial in July, 2009. The DOJ had originally sought a sentence of 25 years for Gerald Green (later reduced to requesting 10 years) and a ten year sentence for Patricia Green. U.S. District Judge George Wu sentenced the couple to six months each. While this sentence reduction may result in more personal freedom, the DOJ has obtained such complete forfeiture of the couples’ assets such that they have filed in forma pauperis appeals. 

9. Haitian Telecom-foreign governmental official who was the recipient of an bribe (which is not illegal under the FCPA) was sentenced to four years in prison under U.S. Anti-Money Laundering laws. 

10. Innospec-the company had its agreed to fines and penalties of $60 million for its FCPA violations reduced to approximately $11.2 million based upon the company’s inability to pay. 

Thomas Fox is an attorney in Houston, Texas, specializing in FCPA compliance, risk management and international transactions. His blog can be found here and he can be reached at tfox@tfoxlaw.com.

A Missing Cornerstone Of Enforcement?

Professor Mike KoehlerIn a post  a few months ago, we looked at some of the biggest cases in recent years. Then we asked whether FCPA-related mega settlements are replacing individual prosecutions.

That subject popped up at Tuesday's hearing about FCPA enforcement, when Senator Specter asked Mike Koehler about the DOJ's tally of individual prosecutions.

With Mike's permission, we reprint below some of his comments:

________________________

In his November 2010 speech, Assistant Attorney General Breuer provided the following statistics as to individual FCPA prosecutions: In 2004 the DOJ charged two individuals under the FCPA; in 2005 the DOJ charged five individuals; and last year and this year combined the DOJ has charged over 50 individuals. 

However, an analysis of these figures reveals interesting results. The approximately 50 individuals charged in recent FCPA cases break down as follows:

Twenty-two individuals have been in one case, the so-called Africa Sting case, in which FBI agents (posing as representatives of the President of Gabon with the assistance of an individual who had already pleaded guilty to unrelated FCPA violations) facilitated fictitious business transactions largely involving owners and employees of military and law enforcement products companies; and

Twenty-four individuals are or were in cases where the recipient of the alleged payments was not a bona fide foreign government official.  

Rather the DOJ’s theory of prosecution was or is based on the above-mentioned theory that employees of alleged [state-owned enterprises] are “foreign officials” under the FCPA –- an interpretation that is contrary to Congressional intent. (These prosecutions are: Control Components Inc. employees/agents (8 individuals); Haiti Teleco related cases (6 individuals); Mexico Comisión Federal de Electricidad related-cases (6 individuals); and Nexus Technology employees/agents (4 individuals).

Prosecuting individuals is a key to achieving deterrence in the FCPA context and should thus be a “cornerstone” of the DOJ’s FCPA enforcement program. However, the answer is not to manufacture cases or to prosecute individuals based on legal interpretations contrary to the intent of Congress in enacting the FCPA while at the same time failing to prosecute individuals in connection with the most egregious cases of corporate bribery.

________________________

Professor Koehler's prepared statement from Tuesday's hearing "Examining Enforcement of the FCPA" before the Senate Subcommittee on Crime and Drugs chaired by Senator Specter can be viewed here.

Four Sentenced For Vietnam Graft

The DOJ said today that three siblings who were former employees of Nexus Technologies Inc., and a former partner in the Philadelphia-based company, were sentenced late yesterday for their roles in a conspiracy to bribe Vietnamese government officials.

The president and owner of the company, Nam Nguyen, was sentenced to 16 months in prison and ordered to serve two years of supervised release following the prison term. His brother, An Nguyen, was sentenced to nine months in prison, followed by three years of supervised release. His sister, Kim Nguyen, was sentenced to two years of probation and ordered to pay a $20,000 fine.

Joseph Lukas, a former partner with Nexus, also was sentenced to two years of probation and ordered to pay a $1,000 fine. He pleaded guilty in June 2009 to conspiracy and to violating the FCPA and agreed to cooperate with the DOJ.

Nexus, Nam Nguyen, 54, of Houston and Vietnam, Kim Nguyen, 41, of Philadelphia, and An Nguyen, 34, of Philadelphia, were charged in a superseding indictment in October 2009 with conspiracy, violations of the FCPA, violations of the Travel Act in connection with commercial bribes, and money laundering.

Nexus pleaded guilty in March to all the charges filed against the company in the superseding indictment, and agreed to cease operations and dissolve.

Nexus and the Nguyens admitted that from 1999 to 2008 they paid bribes of more than $250,000 to Vietnamese government officials in exchange for contracts. Privately-held Nexus sold third-party underwater mapping and bomb containment equipment, helicopter parts, chemical detectors, satellite communication parts and air tracking systems.

In March this year, Nam and An Nguyen pleaded guilty to conspiracy, substantive FCPA violations, violating the Travel Act and money laundering, and Kim Nguyen pleaded guilty to conspiracy, substantive FCPA violations, and money laundering.

The Enforcement Rap Sheet

If the DOJ and SEC are prosecuting corporations instead of individuals for FCPA violations -- an idea raised in another post -- the numbers should show it. So let's take a look.

We'll use figures from Shearman & Sterling's latest FCPA Digest to compare prosecutions from 2005 through 2009. For 2010, we'll use our own numbers.

For all the years examined, a joint enforcement action by the DOJ and SEC against a corporate defendant and any its subsidiaries, or any one individual, is counted one time. For each year, only newly initiated enforcement actions are counted.

In 2005, there were eight corporate enforcement actions and eight individual prosecutions.

In 2006, there were eight corporate and nine individual prosecutions.

In 2007, the start of the modern FCPA era, there were 25 corporate and 17 individual enforcement actions.

In 2008, there were 16 corporate and 18 individual actions.

In 2009, there were 15 new corporate actions and 42 individuals charged, including the 22 shot-show defendants indicted in December 2009.

So far in 2010, our count is 13 new corporate actions and 12 individuals charged.

The combined numbers for 2005 through today show 84 corporate actions and 105 individuals charged.

What does that mean? There's a rough equivalency between corporate and individual actions. In most years the ratio is nearly one-to-one if the 22 shot-show defendants aren't counted. If the shot-show defendants are counted, there are five individual actions for every four corporate actions. And the ratio for each of the years, except the shot-show year of 2009, holds quite steady. The raw numbers, then, don't support the idea that corporate enforcement is gaining the upper hand over individual actions.

But the raw numbers don't tell a crucial fact -- who the individual defendants worked for. If a significant number of them worked for companies that weren't charged, or if multiple defendants worked for the same company, that would mean for many corporate enforcement actions, no individuals from those companies faced FCPA prosecutions.

Here's what we know. There are several cases where two or more individual defendants worked for the same company that was itself an FCPA defendant. Examples would be the eight defendants from Control Components Inc., four from Nexus Technologies, four from Alliance One, and three from Willbros. And there are many cases where the employers of individual defendants weren't charged. Included would be Ports Engineering Consultants Corporation, employer of Charles Jumet and John Warwick, AMAC International, employer of Shu Quan-Sheng, and JD Locator Services, employer of Juan Diaz. That leaves lots of corporate enforcement actions since 2005 where no individuals from those companies have been charged.

Which brings us back to the earlier question: Are corporate settlements replacing the prosecution of individuals from the companies involved in the settlements?

Coming up: A look at the enforcement record in a new way.