Foreign Corrupt Practices Act (FCPA) Business Guide 2015 CHICAGO | LOS ANGELES | NEW YORK | WASHINGTON, DC | JENNER.COM We are pleased to present the 2015 edition of Jenner & Block’s Foreign Corrupt Practices Act (FCPA) Business Guide. This Guide provides the most current guidance on how best to confront the reality of corruption in the world’s marketplaces with practical tips for addressing FCPA issues both before and after the government is involved, if that occurs. If you have any questions about this Guide, or the FCPA in general, please contact any of the attorneys listed in the Practice Member Listing at the back of this publication. In addition, we would like to thank the following individuals for their invaluable contributions to this year’s Guide: Nicholas R. Barnaby, Larry P. Ellsworth, Michael W. Khoo, Jessie K. Liu, Michael K. Lowman, and William C. Pericak. ©2015 Jenner & Block LLP. Jenner & Block is an Illinois Limited Liability Partnership including professional corporations. This publication is not intended to provide legal advice but to provide information on legal matters. Transmission is not intended to create and receipt does not establish an attorney- client relationship. Readers should seek specific legal advice before taking any action with respect to matters mentioned in this publication. The attorney responsible for this publication is Jessie K. Liu. ATTORNEY ADVERTISING. PRIOR RESULTS DO NOT GUARANTEE A SIMILAR OUTCOME. Table of Contents Introduction to the Guide ............................................................................ 1 Recent Developments and Trends ............................................................. 2 Countries Involved in 2014 FCPA Enforcement Activity .......................... 8 2014 FCPA Enforcement Activity ............................................................... 9 2014 DOJ Opinion Releases ..................................................................... 23 2014 FCPA-Related Private Litigation ...................................................... 24 2014 International Anti-Corruption Developments .................................. 27 The Statutory Framework ......................................................................... 30 Consequences of FCPA Violations .......................................................... 37 Frequently Asked Questions .................................................................... 38 Map Of Our FCPA Representations .......................................................... 48 Jenner & Block’s FCPA Experience ......................................................... 49 Practice Member Listing ........................................................................... 50 Introduction to the Guide Both the Department of Justice (DOJ) and the Securities cooperation, though cases that came to the and Exchange Commission (SEC) were quick out of the government’s attention in other ways seem to be gate to act in 2014: barely a week into the new year, a increasing, and companies appear to be going to greater subsidiary of aluminum company Alcoa Inc. (Alcoa) lengths than ever to obtain cooperation credit. The DOJ pleaded guilty to FCPA charges and agreed to pay $223 and the SEC also showed renewed emphasis on million in criminal fines and forfeiture. Alcoa also enforcement against individuals, with the DOJ bringing reached a civil settlement with the SEC in which it 12 new enforcement actions against individuals and agreed to pay another $161 million in disgorgement. obtaining guilty pleas from three individuals who were The total $384 million price tag makes the Alcoa matter indicted in a prior year. For its part, the SEC reached a the sixth costliest FCPA resolution to date. civil settlement, on the eve of a much-anticipated trial, with two executives first charged in 2012. The DOJ and the SEC also closed the year with a bang. In mid-December, they resolved the long-running As with past versions, the 2015 edition of Jenner & investigation of cosmetics company Avon Products, Inc. Block’s FCPA Business Guide describes and analyzes (Avon), with a guilty plea by Avon’s Chinese subsidiary the latest developments in FCPA enforcement and and a deferred prosecution agreement and civil provides practical guidance. We also provide an settlement for the parent company that carried a total of overview of the statute and address typical questions $135 million in penalties, disgorgement, and that a company operating in the international prejudgment interest. Five days later, French power marketplace may have about how to avoid running afoul company Alstom S.A. (Alstom) and its Swiss subsidiary of that law. Naturally, the information presented herein is pleaded guilty to FCPA violations, and two U.S. not intended to be legal advice in any specific situation. subsidiaries entered into deferred prosecution Such advice could be provided only after a full agreements. Alstom’s $772 million penalty is the evaluation of all of the facts and circumstances of a second-largest FCPA resolution ever, behind only the particular matter. $800 million Siemens matter in 2008. In between, the DOJ brought a total of 25 new FCPA- related criminal actions, and the SEC brought or settled 11 new FCPA-related civil enforcement actions.1 Both agencies continued to credit self-disclosure and 1 This figure counts several enforcement actions against affiliated defendants as separate actions, even where those defendants were charged with participation in the same scheme. It does not include actions initiated in prior years that were resolved in 2014, unless the action was announced for the first time that year, or actions brought in 2014 that, at the time of publication, had not yet been announced. It includes investigations that resulted in non- prosecution agreements. 1 Recent Developments and Trends Eleventh Circuit Holds that FCPA Covers Bribes to authority to appoint and remove the entity’s principals; Employees of State-Owned Enterprises (4) the extent to which the entity’s profits are returned to the public treasury; (5) whether the government supports On May 16, 2014, the U.S. Court of Appeals for the an entity that is otherwise performing at a loss; and Eleventh Circuit handed down a long-awaited decision in (6) the length of time these indicia have existed. United States v. Esquenazi concerning the FCPA's scope, becoming the first federal appellate court to hold As with control, the Eleventh Circuit also provided a list that the phrase “foreign government . instrumentality” of potential factors to weigh in determining whether a is broad enough to include state-owned enterprises that state-owned enterprise performs a public function: provide commercial services as part of a public function. (1) whether the entity has a monopoly over its functions; The court largely approved the government’s reading of (2) whether the government subsidizes the entity; the statute while rejecting the arguments of two (3) whether the entity performs services for the public at defendants convicted for bribing officials of Haiti’s large; and (4) whether the public and the government government-owned telecommunications company. On generally perceive the entity to be performing a October 6, 2014, the U.S. Supreme Court denied the governmental function. certiorari petitions of Joel Esquenazi and co-appellant Carlos Rodriguez. The DOJ and the SEC have long taken the position that DOJ and SEC Continue to Reward Self-Disclosure the term “instrumentality” covers state-owned and Cooperation enterprises. The Eleventh Circuit’s opinion confirms that position and paves the way for future enforcement Although the DOJ has touted its increasing ability to actions concerning corrupt payments to officials at a investigate and prosecute FCPA cases in the absence of wide array of state-owned entities, which could include a voluntary disclosure and several major enforcement utilities, air carriers, hospitals, and resource extraction actions, such as Alcoa, Alstom, and Marubeni companies. Corporation (Marubeni), apparently did not originate with such a disclosure, many of last year’s enforcement The Eleventh Circuit held that “[a]n ‘instrumentality’ actions involved self-reporting and subsequent under . the FCPA is an entity controlled by the cooperation with the government’s investigation. government of a foreign country that performs a function According to the SEC, Smith & Wesson Holding the controlling government treats as its own.” According Company (Smith & Wesson), Layne Christensen to this formulation, there are two critical components of Company (Layne Christensen), and Bruker Corporation an “instrumentality”: government control and public (Bruker) all voluntarily disclosed their conduct. function. Additionally, both the DOJ and the SEC stated publicly that Avon and Bio-Rad Laboratories (Bio-Rad) each had The Court held that assessing control is a fact-bound self-reported. inquiry. But it set forth a non-exhaustive list of factors to guide the analysis: (1) the foreign government’s formal Many companies may be thinking that self-reporting is in designation of the entity; (2) whether the government their best interests, as both the DOJ and the SEC, has a majority ownership interest; (3) the government’s consistent with their public statements, appear to have 2 rewarded disclosure and cooperation with lighter whistleblower informed its CEO of potentially improper penalties. As in prior years, companies that self- payments (albeit several years after its legal and internal disclosed