On April 19, 2017, Law Bulletin hosted its 10th annual Chicago White Collar Crime & Corporate Governance Conference at the Swissotel Chicago. Attorneys from across the legal profession, as well as former U.S. Department of Justice and Securities & Exchange Commission officials, shared insights and perspectives on this year’s topic, “Implications of a Trump Administration.” As a panelist on “The Shifting Anti-Corruption Landscape,” I spoke about my experience with anti-corruption investigations and enforcement actions. The discussion touched on some key points.
On January 13, 2017, the Ministry of Justice of the United Kingdom issued a (“call for evidence,”) seeking comment on potential changes to corporate criminal liability law for economic offences, such as fraud, false accounting and money laundering. Currently, corporate criminal liability in the UK, apart from offences charged under the Bribery Act of 2010, follows the common law “identification doctrine” or “directing mind theory.” Continue Reading UK MOJ Calls for Evidence to Weigh Reform Effort Aimed at Tightening Corporate Criminal Liability
The final weeks of 2016 saw an uptick in activity in the bribery and money laundering investigations surrounding mining rights in the West African country of Guinea.
On December 13, 2016, the U.S. Department of Justice arrested and charged Guinea’s former Minister of Mines and Geology, Mahmoud Thiam, with laundering $8.5 million in bribes he allegedly received from a Chinese conglomerate in exchange for, among other things, near total control of Guinea’s mining sector. Continue Reading Allegations of Corruption Continue to Surround Guinea’s Simandou Mines
Earlier this year, the Organization for Economic Cooperation and Development (the “OECD”) launched its latest round of reviews to monitor the anti-bribery efforts of signatory countries to the OECD’s Anti-Bribery Convention (the “Convention”). The Convention, in force since 1999 and adopted by 41 countries, including all 35 OECD member states, requires signatories to criminalize the bribery of foreign public officials engaged in international business transactions. The OECD monitors each signatory’s implementation and enforcement of the Convention through a peer-review system, administered by the OECD Working Group on Bribery (the “Working Group”).
In previous monitoring rounds, the Working Group had in turn: (1) evaluated the adequacy of each country’s implementing legislation, (2) assessed policy effectiveness, and (3) tracked ongoing enforcement efforts and considered progress against earlier recommendations.
This newest round of successive monitoring (“Phase 4”) continues to focus on efforts to implement and enforce the Convention and the supplemental guidelines for combating bribery that parties to the Convention have since adopted. Additionally, Phase 4 takes a “tailored approach” to “identify the unique challenges and achievements of the evaluated country and to assist the country in addressing challenges in a way that is suitable and feasible within its legal system.” Accordingly, Phase 4 aims to highlight country-specific achievements, including practices that have proved effective in combating foreign bribery, and to flag any issues raised by changes in domestic legislation.
In a December 2016 Wall Street Journal interview, the Working Group’s executive, Patrick Moulette, offered that signatory countries have struggled most with implementing Article 2 of the Convention, which calls for imposing liability against “legal,” and not just natural, persons. “[E]nact[ing] a regime for prosecuting companies,” according to Mr. Moulette, “is very easy to say but it’s much more difficult to design in practice,” especially in civil law countries. As a result, “many countries in the [W]orking [G]roup have struggled to enact a regime for holding companies liable for foreign bribery.” The latest round of monitoring will oversee these challenges.
Each Phase 4 evaluation will proceed through a series of evaluative steps involving input from the evaluated country, at least two peer reviewer countries (also known as “lead examiner countries”), and OECD staff. To ensure fairness as well as sensible historical perspective, “[w]herever possible,” Phase 4 aspires for peer-reviews by countries with similar legal systems to and with previous experience in reviewing the evaluated country.
The process is designed to be collaborative and iterative, with ample opportunity for the evaluated country to set the record straight. During the Phase 4 review, evaluated countries will respond to general and country-specific questionnaires, host on-site visits by examiner countries and OECD staff, and submit comments in response to draft preliminary reports. Phase 4 envisions that the on-site visits will “address concrete cases that have arisen under . . . implementing legislation or any other legislation . . . with regard to the bribery of foreign public officials” and generate confidential discussions to “determine how the foreign bribery offence is being prosecuted, what investigative techniques are being utilised, and what hurdles are being faced by countries in the fight against the bribery of foreign public officials.” The latter may include, for instance, difficulties with “establish[ing] a good system to protect whistleblowers,” a “complex area,” in Mr. Moulette’s estimation.
The Phase 4 capstone is the Working Group’s evaluation report, which will set out “core recommendations” the evaluated country is expected to implement. Each country will then have up to two years to submit a responsive report explaining its implementation efforts. Failure to adequately address the Working Group’s recommendations could lead to additional reporting requirements.
The OECD conducted on-site visits in October in the United Kingdom and in Finland, the first two countries reviewed under Phase 4. The United States is not scheduled for review until 2019. The Phase 4 monitoring guide is available here. And the complete calendar of evaluations is available here.
On December 9, 2016, Assistant Attorney General of the Department of Justice’s (“DOJ”) Criminal Division Leslie R. Caldwell announced that DOJ was seeking applicants for an attorney dedicated to enhancing cooperation with the United Kingdom’s Financial Conduct Authority (“FCA”) and the Serious Fraud Office (“SFO”) in London. This initiative signals DOJ’s continued efforts to fight fraud and economic crime on a global and interconnected scale. Caldwell remarked that international crime and worldwide fraud schemes have become the “new normal,” compared to when she began working at DOJ. Continue Reading DOJ Attorney to be Assigned to Work with FCA and SFO on Fraud
In a speech delivered at The George Washington University Law School, DOJ Criminal Division Chief Leslie Caldwell reported that the one-year pilot program in the Fraud Section’s FCPA Unit (the “FCPA Pilot Program”) has resulted in an increase in companies self-reporting potential FCPA violations. Continue Reading DOJ Criminal Chief Reports the FCPA Pilot Program is Working
The UK’s Serious Fraud Office (“SFO”) Chief David Green has reported a high demand for deferred prosecution agreements (“DPAs”) by companies since the introduction of the DPA law in early 2014. Despite a low number of settlements reached by the SFO thus far, Green reports that both the SFO and courts want to make DPAs work for companies that cooperate and voluntarily self-report misconduct. Continue Reading U.K. Sees High Demand for DPAs by Companies
After an aggressive grassroots campaign, in mid-2016, the Mexican government signaled substantial progress in its fight against corruption when it adopted a new anti-corruption program. The new legislation promised increased transparency and accountability of public officials and energized the international community about Mexico’s commitment to fight its long-standing corruption problems. Since enactment, however, progress towards implementing the provisions of the new law has slowed, leaving many questions about its future unanswered.
Anti-Corruption Regime in Mexico
Mexico’s anti-corruption enforcement regime (the “National Anti-Corruption System”) was approved by President Peña Nieto on July 18, 2016. The National Anti-Corruption System, which will come into effect on July 19, 2017, provides for severe sanctions against individuals and entities that are found to have engaged in bribery, collusion, and influence peddling, among other acts. For instance, individuals face sanctions of up to twice the amount of the acquired benefits, temporary ineligibility to participate in procurement, leases, services or state-owned projects, and compensatory and/or punitive damages. Legal entities face similar sanctions—up to twice the amount of the benefit—and could be deemed ineligible to participate in the aforementioned projects for up to 10 years. Entities could also be subject to suspension of activities, partnership dissolution, and compensatory and/or punitive damages. The National Anti-Corruption System offers partial defenses, such as the existence of a current compliance or integrity program that includes effective reporting and whistleblower protection tools. Entities may also receive credit for self-reporting misconduct and collaborating with government investigations.
Along with the promulgation of stringent sanctions, the National Anti-Corruption System also created the role of independent anti-corruption prosecutor—the first of its type in Mexico’s history—to operate independently of the Mexican government. Importantly, National Anti-Corruption System is designed to enhance cooperation across federal, state, and municipal enforcement authorities and foreign authorities including the U.S. government.
Although the enforcement regime provides much needed transparency for a country riddled with corruption, we have yet to see the National Anti-Corruption System in action. Since its adoption nearly five months ago, there has been very little progress in establishing the framework needed to effectively implement the key provisions. In fact, the Mexican government has yet to even appoint the anti-corruption prosecutor. Recent developments could further exacerbate the period of stagnation.
Obstacles to Enforcement
In September 2016, President Peña Nieto’s approval rating fell to an all-time low of 22% amidst reports that citizens were unhappy with his failure to fight crime, drug trafficking, corruption, and poverty. President Peña Nieto was harshly criticized for his decision to meet with Donald Trump in the summer of 2016 due to the threats Trump made towards Mexico throughout his campaign. Without the backing of his countrymen, President Peña Nieto may lack the necessary support in the legislature to roll out an effective National Anti-Corruption System next July.
Donald Trump’s election could further complicate the potential effectiveness of the National Anti-Corruption System. As President-elect Trump’s inauguration nears, the media continues to speculate about his immediate impact. For example, Mexico’s economic outlook may turn squarely on the resolution of the North American Free Trade Agreement (“NAFTA”). Trump has publicly stated his intent to “tear up” or drastically alter the current version of NAFTA, which was signed in 1994 and permits free trade between Canada, Mexico, and the U.S. Due to the fact that 80% of Mexican exports are purchased by the U.S., any change to NAFTA will impact Mexico’s economy. Despite his many public statements about NAFTA, many believe that Trump is using the NAFTA threats to pressure Mexico into accepting tariffs on certain products to spur relocation within American borders of manufacturing facilities owned by American companies.
Practically speaking, a cooling-off period is likely to occur before any drastic measures are taken. The U.S. and Mexico share common interests in improving cross-border relations and promoting economic growth, which will require ingenuity and compromise. One step in the right direction is Mexico’s enactment of the National Anti-Corruption System. The U.S. economy will certainly share in the benefits of a less corrupt infrastructure in Mexico. Nevertheless, it will require a significant amount of resources to enforce the stringent measures detailed above. Amidst the never-ending flow of speculation, the outlook for an effective anti-corruption regime in Mexico is uncertain.
An investment bank brought a legal malpractice claim against Morrison & Foerster after the law firm failed to inform the bank that Puda Coal, Inc. was a shell company, despite receiving a report detailing that fact. A Judge of the New York Supreme Court, however, dismissed the case because the investment bank received the same report, and, as a sophisticated company, could not absolve itself of its own responsibilities. Continue Reading No malpractice claim against underwriter’s counsel for failing to inform client of information already in the client’s possession
On August 17, 2016, the English courts rejected an application by UK oil and gas exploration company Soma Oil & Gas Holdings Limited (“Soma”) to force the Serious Fraud Office (“SFO”) to expedite or discontinue its investigation of the company’s dealings in Somalia. The SFO is investigating Soma for potentially improper payments to Somali government officials in the Ministry of Petroleum in order to secure exploration rights by the Somali government. Continue Reading The English Court Rejects an Application by UK Company to End SFO Investigation