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Editors

Harry Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Richard L. Cassin Editor at Large

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


FCPA Blog Daily News

Tuesday
Dec112007

Watch That Inkblot

It's too soon to call it a pattern. But there's something new in Foreign Corrupt Practices Act enforcement. During 2007, the U.S. ramped up two investigations that covered not just individual companies but entire industries. That, we think, is worth a second look.

One industry-wide investigation involves about a dozen oil and gas services firms -- among them are Schlumberger, Tidewater, Nabors Industries, Transocean, GlobalSantaFe Corp., Noble Corp. and Global Industries. They were all customers of Swiss-based logistics firm Panalpina. It allegedly bribed customs agents and other government officials, especially in Nigeria, Saudi Arabia and Kazakhstan. The second industry-wide investigation includes the leading manufacturers of orthopedic implants. The Securities and Exchange Commission and the Department of Justice want to know whether they violated the FCPA by making payments to doctors employed by government-owned hospitals overseas. Biomet Inc., Stryker Corp., Zimmer Holdings Inc., Smith & Nephew plc and Medtronic Inc. disclosed investigations during the year and denied violating any laws.

The two investigations had very different beginnings. The one covering the oil and gas services companies germinated in 2004, when ABB Vetco Gray settled FCPA violations. Some of its offenses involved customs-clearance practices in Nigeria and other countries, where Panalpina was its clearing agent. The medical device makers' overseas practices probably came under scrutiny in early 2007. That's when Johnson & Johnson (which owns device maker Depuy) said it voluntarily disclosed to the Department of Justice and the Securities and Exchange Commission that "subsidiaries outside the United States are believed to have made improper payments in connection with the sale of medical devices in two small-market countries. "

Despite their different starts, one question about the two investigations is, why now? Why, after thirty years of FCPA history, are there two industry-wide investigations? What's changed? Here's one theory. Since the Sarbanes-Oxley Act became law on July 30, 2002, U.S. reporting companies have to investigate and self report any potential violations of U.S. law, including the FCPA. Failing to do that isn't just bad housekeeping -- it's a go-to-jail offense. So internal investigations and self-reporting practices are now more independent, robust and comprehensive. In the SOX-driven era, directors and officers have to be absolutely certain that what they disclose to regulators and prosecutors (and shareholders, of course) is the truth, the whole truth, and nothing but the truth. Coming up an inch short of the bar is not an option.

Today's performance-enhanced internal investigations -- which have multiplied, thanks in part to the SOX whistleblower provisions -- often produce credible evidence about industry-wide practices. A chapter or two about competitors is common -- and the Feds expect to read the unabridged versions. Medtronic -- a huge orthopedic device maker -- alluded to the government's expectation in its latest Form 10-Q: "The letter [from the SEC requesting information] notes that the Company is a significant participant in the medical device industry, and seeks any information concerning certain types of payments made directly or indirectly to government-employed doctors."

We can also do some speculating. Could companies that become potential targets of FCPA prosecutions bargain for leniency by implicating others? We don't know if that's happened yet. But in price fixing cases, for example, there have long been well-recognized rewards for companies that are the first to talk about their co-conspirators. Could similar behavior emerge in FCPA cases among industry peers?

As we said at the top, there's no pattern yet -- just a couple of industry-wide investigations that got rolling in the same year. But we'll keep watching.

View prior posts about the oil and gas services companies here.

View prior posts about the medical device makers here.

Sunday
Dec092007

Enforcement Sans Frontières

By most counts, U.S. authorities are now investigating between 50 and 60 companies for possible violations of the Foreign Corrupt Practices Act. That's a record number. How many of them will face enforcement actions is anyone's guess. But three investigations worth watching have this in common: the targets are industry-leading multinationals headquartered outside the United States. The U.S. government hasn't said much about the cases, but the message seems clear: if other countries won't police their corporate citizens, American authorities will do it for them -- at least when it comes to international public corruption.

Panalpina (Switzerland) -- In February 2007, the Department of Justice said in connection with the Vetco case that bribes in Nigeria "were paid through a major international freight forwarding and customs clearance company to employees of the Nigerian Customs Service . . .” Since then, about a dozen leading oil and gas services companies have announced FCPA investigations resulting from their relationship with logistics leader Panalpina. By mid year, the DOJ and the Securities and Exchange Commission had extended the investigation into Panalpina's activities in Nigeria, Kazakhstan and Saudi Arabia, and had sent letters to its customers, “asking them to detail their relationship with Panalpina . . . ." Schlumberger, Tidewater, Nabors Industries, Transocean, GlobalSantaFe Corp., Noble Corp. and Global Industries are among those involved. In September, Panalpina said it is cooperating with U.S. prosecutors and exiting the Nigeria logistics and freight forwarding market for all oil and gas services customers. With crude prices near triple digits, can the U.S. government afford to cripple output anywhere in the name of FCPA enforcement? Probably not. But the DOJ may have made special arrangements directly with the Nigerian government for customs clearance and permitting on behalf of the oil services companies. That will allow them to keep working but still comply with the FCPA. Meanwhile, the investigation of Panalpina continues. Prior posts about Panalpina are here.

Siemens (Germany) -- In early October 2007, the German engineering and industrial giant settled global corruption charges with Munich prosecutors. Siemens paid a fine of €201 million and at the time admitted to questionable payments around the globe of approximately €420 million. But the settlement didn't resolve the FCPA investigation by U.S. authorities, and Siemens later disclosed that its internal review, run by a U.S. law firm, has identified questionable payments of up to €1.3 billion. The company is also facing possible charges of public corruption in Italy, China, Hungary, Indonesia and Norway. When Siemens finally reaches a deal with U.S. prosecutors, it will likely pay the highest penalties ever for FCPA offenses. The current record of $44.1 million is held by Baker Hughes. Prior posts about Siemens are here.

BAE Systems (United Kingdom) -- The defense contractor is accused of paying £1 billion to Prince Bandar (who allegedly passed money to other officials) in return for help selling Typhoon jet fighters to the Saudi government. The Serious Fraud Office started an investigation but Prime Minister Tony Blair shut it down last year, citing national security. That darkened the OECD's tenth anniversary celebration of its Anti-Corruption Treaty, to which the United Kingdom is a signatory. Meanwhile, the U.S. Department of Justice picked up the investigation and started gathering evidence about possible FCPA violations directly from British witnesses. The U.K. government has already complained about U.S. investigative tactics. And Prince Bandar has lawyered up big time -- retaining Freeh Group International, whose partners include former FBI director Louis Freeh, former head of enforcement at the SEC Stanley Sporkin, and a retired British high court judge, Sir Stephen Mitchell. Prior posts about BAE are here.

Wednesday
Dec052007

Tough Medicine For Medical Device Makers

The Securities and Exchange Commission said in October this year it is investigating possible violations of the U.S. Foreign Corrupt Practices Act by the leading manufacturers of orthopedic implants. Biomet Inc., Stryker Corp., Zimmer Holdings Inc., Smith & Nephew plc and Medtronic Inc. all made announcements about the SEC's investigation and denied violating any laws. In September this year, four of them plus Depuy Orthopedics (part of Johnson & Johnson) paid $310 million to settle charges they paid kickbacks to induce U.S. doctors to buy their products.

Medtronic wasn't part of the domestic case. But it now confirms that the SEC and the Department of Justice are asking for information about payment practices abroad that might violate the FCPA. Medtronic -- based in Minneapolis -- does business in some 120 countries and employs more than 37,000 people worldwide. The company's latest Form 10-Q disclosed these details about the FCPA investigation:

"On September 25, 2007, the Company received a letter from the SEC requesting information relating to any potential violations of the U.S. Foreign Corrupt Practices Act in connection with the sale of medical devices in an unspecified number of foreign countries, including Greece, Poland and Germany. The letter notes that the Company is a significant participant in the medical device industry, and seeks any information concerning certain types of payments made directly or indirectly to government-employed doctors. A number of competitors have publicly disclosed receiving similar letters. On November 16, 2007, the Company received a letter from the Department of Justice requesting any information provided to the SEC. The Company intends to cooperate with both requests."

Doctors at government-owned or managed hospitals overseas are "foreign officials" for purposes of the FCPA. That means payments to them intended to obtain or retain business might violate the antibribery provisions. Application of the FCPA to overseas doctors made the headlines in 2002, when the SEC settled civil and administrative proceedings against Syncor International Corp. and the DOJ settled criminal FCPA charges against Syncor's Taiwan subsidiary. Payments to doctors have since resulted in FCPA enforcement actions against DPC (Tianjin) Co. Ltd. -- the Chinese subsidiary of Los Angeles-based Diagnostic Products Corporation -- and Micrus Corporation.

Those cases -- and the current investigation of Medtronic and its peers -- demonstrate the compliance risks involved when doing business with foreign hospitals that are owned or controlled by government authorities. The companies face a dilemma. Often the only way to promote their products is through direct contact with local physicians. Much of that contact is educational and might include, for example, sponsoring the doctors' evaluations of the companies' products and subsidizing the presentation of papers at medical seminars. The payments, however -- unless expressly permitted by the written laws or regulations of the host country -- can violate the FCPA.

The investigations of Medtronic and its peers will lead to better compliance practices by companies dealing with government-linked hospitals overseas. Another result, we suspect, will be that more countries -- with the backing of the global medical industry -- will pass laws and regulations to allow some level of financial support from foreign companies to local doctors for product evaluations and related programs.

Medtronic Inc. trades on the New York Stock Exchange under the symbol MDT.

View Medtronic's Form 10-Q (December 4, 2007) Here.

Wednesday
Dec052007

Release 07-02, Where Are You?

We noticed a week ago that U.S. Department of Justice Opinion Procedure Release No.: 07-02 (September 11, 2007) is missing. It no longer appears on the DOJ's website that indexes all FCPA Releases (here). The text of the Release is still available from the old link here, but not through the index.

Release 07-02 is one of our favorites -- as discussed here and here. It deals with a problem-filled defense written into the U.S. Foreign Corrupt Practices Act that allows payment or reimbursement of expenses of foreign officials that are directly related to “the promotion, demonstration, or explanation of products or services." 15 U.S.C. §§ 78dd-1(c)(2)(A) and 78dd-2(c)(2)(A). Release 07-02 is (or was) the latest word on the subject from the DOJ.

We're trying to find out what happened to it, so stay tuned. Or better yet, if you have some news, please drop us a line. We'll be surprised if this isn't just a glitch in the DOJ's index. But until we know more, we'll include a caveat when we use Release 07-02 to give advice.

Note to Readers -- It's back! Release 07-02 again appears on the DOJ's index of FCPA Releases. Our thanks to the web wizards at the DOJ for fixing the problem. -- The Editors / posted on 06.12.07

Tuesday
Dec042007

An Effective Compliance Program Redux

The question that lands most often in our mailbox is this: What are the elements of an effective Foreign Corrupt Practices Act compliance program? It's a great question. While proactive compliance programs reduce the chances of violations, no one can guarantee that a violation will never happen. So an "effective compliance program" (as defined by U.S. law) might be a company's last and best defense. How? By reducing the potential penalties against the company by up to 95%, according to the U.S. Sentencing Guidelines. That mitigation might just save the company, as well as the careers and enforcement records of senior executives and others. So we're always happy to talk about this subject, even if it means repeating ourselves.

In a prior post here we set out the elements of an "effective compliance program" based on the U.S. Department of Justice's Opinion Procedure Release 04-02. The Release responded to a request from a JP Morgan-led group and its investment vehicles ("Newcos"). They were acquiring companies and assets from ABB Ltd., which had already been charged with violating the FCPA in connection with the target assets. Because some of the assets were actually going concerns, JP Morgan et al wanted to make sure the businesses would have a clean slate with the DOJ going forward. To achieve that, the Newcos proposed a comprehensive compliance program. The elements of it are derived from the U.S. Sentencing Guidelines but are specific to the FCPA, making the Release the clearest statement on record from the government about what an "effective compliance program" for the FCPA should look like.

The 12 elements are:

(A) A clearly articulated corporate policy against violations of the FCPA and foreign anti-bribery laws and the establishment of compliance standards and procedures to be followed by all directors, officers, employees, and all business partners, including, but not limited to, agents, consultants, representatives, and joint venture partners and teaming partners, involved in business transactions, representation, or business development or retention in a foreign jurisdiction (respectively, "Agents"; and "Business Partners") that are reasonably capable of reducing the prospect that the FCPA or any applicable foreign anti-corruption law of Newco's Compliance Code will be violated;

(B) The assignment to one or more independent senior Newco corporate officials, who shall report directly to the Compliance Committee of the Audit Committee of the Board of Directors, of responsibility for the implementation and oversight of compliance with policies, standards, and procedures established in accordance with Newco’s Compliance Code;

(C) The effective communication to all shareholders' representatives directly involved in the oversight of Newco ("Shareholders") and to all directors, officers, employees, Agents, and Business Partners of corporate and compliance policies, standards, and procedures regarding the FCPA and applicable foreign anti-corruption laws, by requiring (i) regular training concerning the requirements of the FCPA and applicable foreign anti-corruption laws on a periodic basis to all Shareholders, directors, officers, employees, Agents, and Business Partners and (ii) annual certifications by all Shareholders, directors, officers, employees, including the head of each Newco business or division, Agents, and Business Partners certifying compliance therewith;

(D) A reporting system, including a "Helpline"; for directors, officers, employees, Agents, and Business Partners to report suspected violations of the Compliance Code or suspected criminal conduct;

(E) Appropriate disciplinary procedure to address matters involving violations or suspected violations of the FCPA, foreign anti-corruption laws, or the Compliance Code;

(F) Clearly articulated corporate procedures designed to assure that all necessary and prudent precautions are taken to cause Newco to form business relationships with reputable and qualified Business Partners;

(G) Extensive pre-retention due diligence requirements pertaining to, as well as post-retention oversight of, all Agents and Business Partners, including the maintenance of complete due diligence records at Newco;

(H) Clearly articulated corporate procedures designed to ensure that Newco exercises due care to assure that substantial discretionary authority is not delegated to individuals whom Newco knows, or should know through the exercise of due diligence, have a propensity to engage in illegal or improper activities;

(I) A committee consisting of senior Newco corporate officials to review and to record, in writing, actions relating to (i) the retention of any Agent or subagents thereof, and (ii) all contracts and payments related thereto;

(J) The inclusion in all agreements, contracts, and renewals thereof with all Agents and Business Partners of provisions: (i) setting forth anti-corruption representations and undertakings; (ii) relating to compliance with foreign anti-corruption laws and other relevant laws; (iii) allowing for internal and independent audits of the books and records of the Agent or Business Partner to ensure compliance with the foregoing; and (iv) providing for termination of the Agent or Business Partner as a result of any breach of applicable anti-corruption laws and regulations or representations and undertakings related thereto;

(K) Financial and accounting procedures designed to ensure that Newco maintains a system of internal accounting controls and makes and keeps accurate books, records, and accounts, and;

(L) Independent audits by outside counsel and auditors, at no longer that three-year intervals, to ensure that the Compliance Code, including its anti-corruption provisions, are implemented in an effective manner.

View Department of Justice Opinion Procedure Release No .: 04-02 (July 12, 2004) Here.

Sunday
Dec022007

The Empty Chair

It's official. Britain's absence from the global war on public corruption is now a full-fledged scandal. Nearly ten years after the U.K. ratified the Anti-Bribery Convention of the Organisation for Economic Co-operation and Development (OECD), there hasn't been a single British prosecution. And as England shirks, its friends are both baffled and alarmed.

The only investigation of overseas graft launched by the Serious Fraud Office involved BAE's alleged billion-pound bribe to Saudi royals. But Prime Minister Tony Blair quashed the inquiry last year, spooking the international community. As the Wall Street Journal said, "The OECD, which isn't prone to naming and shaming uncooperative member states took the unusual step of voicing 'serious concerns.' But that didn't move Mr. Blair, who warned the probe could harm relations with Saudi Arabia." The New York Times reported that during the OECD's recent tenth anniversary celebration of the Anti-Bribery Convention in Rome, its head, Angel Gurria, said "national security concerns — the reason Mr. Blair gave for terminating the BAE investigation in Britain — 'should not be used' as a reason for quashing bribery investigations. He also voiced concern that anti-corruption efforts were in danger of weakening. "

Meanwhile, the U.S. Department of Justice is finding creative ways to work around recalcitrant U.K. prosecutors. The Americans have opened their own investigation of BAE, collecting evidence by flying at least one British witness to Washington, routing him through Paris to avoid attention. When that maneuver came to light, how did Whitehall react? It protested to U.S. authorities and warned the witness to mind his manners.

What's behind Britain's bizarre behavior? We remember the Middle East in the 1980s, where the partnership between the British Foreign Office and big U.K. companies was unspoken but evident. To the envy of Americans and others, Her Majesty's Government went door-to-door with British salesmen, helping them hawk their goods and services to the region's oil-rich regimes. We thought the arrangement was a useful remnant from the days of the East India Company and the Raj. But was it less benign than we assumed?

The question has to be asked: Does the U.K. government fight overseas bribery or promote it? The answer is crucial. After all, if Britain is thumbing its nose from the sidelines, why should new recruits like South Korea and Germany stick around for the battle? What moral authority will the OECD have to lecture Nigeria or Kazakhstan about the importance of the rule of law? Why should Australia, France or China worry what their citizens do abroad, if the British government is already doing worse? And what about that level playing field American business people -- who are bound by the U.S. Foreign Corrupt Practices Act -- were promised decades ago?

In April 2005, the smart folks at the White Collar Crime Prof Blog reported the OECD's unusual criticism of the U.K.: "[The OECD's progress] report notes that 'given the size of the UK economy and its level of exports and outward FDI, along with its involvement in international business transactions in sectors and countries that are at high risk for corruption, it is surprising that no company or individual has been indicted or tried for the offence of bribing a foreign public official since the ratification of the Convention by the UK.'" [emphasis added]

Nothing has changed since those words were written. So today we're also asking: Where is Britain in the global battle against public corruption?

View the November 21, 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions Here.

View (by subscription) the November 28, 2007 Wall Street Journal Article Here.

View the November 25, 2007 New York Times Article Here.

View the April 4, 2005 White Collar Crime Prof Blog Post Here.

View the March 17, 2005 OECD Country Report on the U.K. Here.

Thursday
Nov292007

One Of Congress's Finer Moments

The Wall Street Journal has an editorial in its November 28, 2007 edition about the U.S. Foreign Corrupt Practices Act and the world-wide battle against public corruption. "Global Cleansing" is available here (but the online WSJ is still by subscription only).

Here's a sample: "Improving the rule of law in developing countries, which the EU and the U.S. ought to make a stringent condition for aid, is one of the best ways to fight corruption. But if there is a problem with culture, let's start with breaking Western corporate culture.

"That's just what prosecutors and lawmakers, spurred on by activist groups such as Transparency International, have tried to do. The U.S. took the lead in 1977 with the Foreign Corrupt Practices Act, which made it a crime for American nationals to pay off foreigners abroad in the course of business. Seen as quixotic at the time, passage of this law is now viewed as one of Congress's finer moments." [emphasis added]

Wednesday
Nov282007

"Payload" Is An FCPA Watershed

Visitors to this blog -- if they haven't done so already -- will want to read an outstanding article from the November 25, 2007 edition of the New York Times. It's called "Payload: Taking Aim at Corporate Bribery." The lengthy piece about the U.S. Foreign Corrupt Practices Act is by Nelson D. Schwartz, one of America's best business journalists, and legendary investigative producer / reporter Lowell Bergman. In the movie The Insider, Al Pacino played Mr. Bergman. That's impressive.

The article can be found here.

It's a great read and, we believe, a milestone for the FCPA. It signals a new level of interest, triggered by record-numbers of high-profile prosecutions and pending investigations. Companies involved now include Siemens, Halliburton, Schlumberger, BAE and dozens of others. The oil services-related cases have strategic implications for U.S. energy policy in Nigeria, the Middle East and the Caspian, and the BAE case could eventually test the special relationships the United States has with Britain and Saudi Arabia. At the same time, prosecutors around the globe are now cooperating more and have better resources for their fight against public corruption. Without doubt, the importance of the FCPA is set to soar.

Our favorite quote among many good ones in "Payload" is this, from Alice Fisher, the U.S. Justice Department's Assistant Attorney General of the Criminal Division: “Corruption undercuts democracy, stifles economic growth and creates an uneven playing field for U.S. companies overseas,” Ms. Fisher says. “We are facing transnational crime all over the place.”

We're grateful for the great reporting and analysis by Messrs. Schwartz and Bergman. They've given a big boost to the growing public discussion about our favorite subject.

Monday
Nov262007

Will The Local Law Defense Help BAE?

BAE Systems is being investigated by the U.S. Department of Justice for possible violations of the Foreign Corrupt Practices Act. It allegedly paid £1 billion to Saudi Prince Bandar in return for his helping BAE sell 72 Typhoon jet fighters to Saudi Arabia. Prince Bandar may have moved a lot of the money through U.S. bank accounts and -- with BAE's knowledge -- to other members of the Saudi royal family. Those relatives -- along with the prince himself -- presumably are "foreign officials" for purposes of the FCPA. That could make the payments illegal. So if BAE is prosecuted, what defenses can it raise?

One might be the rarely-spotted local law defense. The FCPA allows otherwise prohibited payments if the "payment, gift, offer, or promise of anything of value that was made, was lawful under the written laws and regulations of the foreign official’s" country. 15 U.S.C. §§ 78dd-1(c)(1), 78dd-2(c)(1) and 78dd-3(c)(1). This affirmative defense -- one of only two -- was added to the FCPA in 1988. But it only works if the payment is legal under the written laws of the country in question -- a hurdle that has rendered the defense practically useless except in industry-specific scenarios, such as drug trials paid for by foreign pharmaceuticals but managed by government-employed doctors.

The Notes to the 1988 House and Senate Conference Agreement say in relation to the local law defense: "The House receded to the Senate, with an amendment to make it an affirmative defense that a payment to a foreign official is 'lawful under the written laws and regulations of the foreign official's country.' [emphasis in original] The Conferees wish to make clear that the absence of written laws in a foreign official's country would not by itself be sufficient to satisfy this defense. In interpreting what is 'lawful under the written laws and regulations,' the Conferees intend that the normal rules of legal construction would apply."

We doubt there are any laws or regulations now on the books in Saudi Arabia that would expressly permit members of the royal family to earn a commission on arms sales to the government. But would the King issue a decree -- the country is a true monarchy, after all -- that retroactively authorizes and approves the BAE payments? We don't know the answer. But the question is sure to raise issues for Saudi Arabia and its royal family that are well above our pay grade. Meanwhile, we imagine BAE is giving this some serious attention as it plots its potential defense strategy.

View the Notes to the 1988 House and Senate Conference Agreement Here.

Sunday
Nov252007

The U.S. Is Gathering Evidence Against BAE

The U.K. and Saudi governments deny that any laws -- including the U.S. Foreign Corrupt Practices Act -- were broken. But questions persist about the £1 billion payment earlier this year by U.K. defense giant BAE Systems to Prince Bandar, the former Saudi ambassador to the U.S., for brokering his country's purchase of 72 Typhoon jet fighters.

The November 26, 2007 online edition of the Guardian newspaper now says the U.S. Department of Justice obtained documents from Swiss banking sources and more evidence from a U.K. businessman who was part of the deal. "According to US sources," the Guardian says, "businessman Peter Gardiner, who possesses boxes of invoices allegedly detailing payments made by BAE to members of the Saudi royal family, was flown by FBI agents to Washington on August 20 to give testimony there. It was arranged for him to travel via Paris to avoid British attention. Department of [J]ustice investigators are also seeking out the location of other potential witnesses from the UK. When Washington's moves came to light, US sources say that protests were made by the British, and Gardiner was warned his testimony was 'contrary to international protocols'. Gardiner refuses to comment."

The Guardian and other sources also report that Prince Bandar has retained Louis Freeh, a former head of the FBI, to represent him. “There have been no charges filed,” Freeh said in an interview with a U.S. newspaper. “The prince denies any impropriety and violating any statutes in the United Kingdom or the United States.” Some of the payments being investigated reportedly involve deposits to U.S. bank accounts controlled by Prince Bandar directly or through the Saudi embassy.

BAE Systems describes itself on its website as "the premier global defence and aerospace company . . . . With 96,000 employees worldwide, BAE Systems' sales exceeded £15 billion (US $27 billion) in 2006." It says it's the 3rd largest global defense company and that its U.S. operations make it the 6th largest defense company in the United States.

If BAE or Prince Bandar or both are charged or threatened to be charged with violating the FCPA, will they assert as an affirmative defense that "the payment . . . that was made, was lawful under the written laws and regulations" of Saudi Arabia? If they can prove that, then they're off the hook.

View the Guardian's November 26, 2007 Story Here.

Monday
Nov192007

Will Nigeria Hit The Boiling Point?

The online edition of Nigeria's Business Day newspaper carried a story on November 19, 2007 that's noteworthy. It's about how corrupt multinationals are undermining the country's economy. The story can be found here. Public corruption always involves two parties -- the crooked official and the bribe-paying privateer. Both share the blame. Still, looking at corruption through the eyes of the host country reminds us of the damage inflicted on economies and the harm done to innocent citizens.

We can't vouch for all the reporting in the Business Day story. But the writer, Martins Azukwike, compiles a roll call of companies recently linked by their home countries to corrupt payments in Nigeria or now being investigated for illegal activities there. The names include Siemens, Shell, ChevronTexaco, Willbros, Halliburton, Technip, Snamprogetti, Kellogg, Japanese Gas Corporation, Agip, TotalFina/Elf, Baker Hughes, Vetco, GlobalSantaFe, Transocean, Tidewater, Noble Corporation, Nabors Industries, Pride International Inc. and Panalpina. Mr. Azukwike could have added ABB, Bristow, Paradigm and others.

No wonder ordinary Nigerians are pointing fingers. Players in the oil patch and elsewhere should pay attention to this warning from the story: "With the gale of exposure of corporate scandals in foreign lands involving the operations of multinationals in Nigeria, opinions are already building with a call to urgently declare a force majeure on the oil companies’ operations in the country. The list of exposure of the misdeeds of these companies, which have opened the Pandora’s Box, is becoming almost endless."

The drafters of the U.S. Foreign Corrupt Practices Act knew that public bribery is not a victimless crime. Eventually, ordinary citizens whose daily lives are ruined reach their limit. That's part of what happened in Somoza's Nicaragua, the Shah's Iran, Marcos' Philippines and Suharto's Indonesia. Will Nigeria join the list?

Sunday
Nov182007

All Eyes Are On Siemens

The Big Show these days for followers of the U.S. Foreign Corrupt Practices Act is Siemens' global bribery scandal. To wit, the print and online versions of the November 16, 2007 Wall Street Journal carried a brilliantly reported Page One story based on the fact statement compiled by the Munich public prosecutor ("Ruling Details Bribery Across the Globe"). The lead says, "Scandal-scarred Siemens AG paid millions of euros in bribes to cabinet ministers and dozens of other officials in Nigeria, Russia and Libya as it sought to win lucrative contracts for telecommunications equipment, according to a court ruling that depicts a pattern of bribery by one manager. The document, viewed by The Wall Street Journal, offers the most detailed picture to date of the scandal that has ensnared one of the world's biggest conglomerates in investigations across the globe." The online story is here but is by subscription only.

Business Week's November 15, 2007 online edition questions Siemens' prospects for a quick resolution with the U.S. Department of Justice and the Securities and Exchange Commission. Siemens might be in a hurry to put alleged FCPA violations behind it, the story says, "[b]ut U.S. enforcers may be tough to placate. The bribery scandal comes in the midst of a drive by Washington to hold foreign companies to the same standards as their U.S. competitors. 'Global corruption undercuts democracy and the rule of law; it destabilizes markets; and, it creates an uneven playing field for those companies who are committed to playing by the rules,' U.S. Assistant Attorney General Alice S. Fisher told an audience of anti-corruption specialists in Alexandria (Va.) on Nov. 13, according to her prepared remarks." The story can be found here.

Lots more will be said and written about Siemens' corruption saga in the coming weeks and months.

Siemens AG's ADRs trade on the New York Stock Exchange under the symbol SI.

View Prior Posts About Siemens Here.