By Doreen Edelman and Matthew Tilghman, Baker Donelson Bearman Caldwell & Berkowitz, P.C.
In 1977 the U.S. Congress passed the Foreign Corrupt Practices Act (FCPA) to combat the bribery that was endemic in American businesses’ dealings abroad and had been revealed incidentally by the Watergate investigation. Since that time, a substantial transnational legal regime has arisen to prosecute companies and their employees for bribing officials of foreign governments and, more recently, for bribing private commercial parties.
Companies are now paying attention to the rapidly accelerating enforcement of the FCPA by the U.S. and to the passage and enforcement of similar laws abroad because of the high fines and targeted investigations even against individuals within companies. For example, Siemens is paying about $2 billion in fines, disgorgement, and investigation costs as the result of a joint American-German investigation.1 Companies can look forward to future foreign bribery investigations involving cooperating authorities and investigative or adjudicative proceedings in more than one country and enforcement actions that target a broader spectrum of conduct than in the past.
In the past year, China and Russia have both passed laws to implement the UN Convention — their own versions of the FCPA. While it remains unclear to what extent those laws will be enforced, the U.S. government and international organizations are pressuring the two developing behemoths to prosecute foreign bribery and to do so cooperatively.
If China actually enforces its foreign bribery law, it will go a long way toward accomplishing the goal of multilateral anti-bribery regimes because Chinese companies are likely the weakest link among those that compete for government contracts in the parts of the world with endemic corruption. Their principal competitors are generally subject to American, British, German, or other actively enforced prohibitions.
While the Chinese government has not yet released enforcement guidelines, which are profoundly important in Chinese law, the new foreign bribery law was the principal subject of a meeting of the China-U.S. Anticorruption Working Group that began on July 26, 2011, in Beijing.4 American officials maintained that the summit would be an exercise in information gathering for them, but David M. Luna of the State Department, the American co-chair of the working group, offered China “help to stand up enforcement and compliance programs” and in preparing for review by the UN treaty body that administers the Convention against Corruption.5
It is telling that the Australian Federal Police have 20 investigators working full-time on the banknote case. This development of specialization in foreign bribery may lead to a dedicated enforcement team of the sort that the FBI, Department of Justice, and SEC in the U.S. and Serious Fraud Office (SFO) in the UK have.
Malaysia and Vietnam have undertaken corresponding investigations of the alleged bribe recipients, consistent with their obligations under the UN Convention, which directs states parties to investigate and prosecute bribe recipients in their own countries, as well as those who bribe foreign officials. The UK’s SFO, which enforces the UK Bribery Act of 2010, Britain’s anti-corruption treaty implementing legislation, has assisted with the Australian investigation, even arresting alleged bribe-paying agents in the UK and engaging in coordinated raids of the offices of alleged wrongdoers.
While Japanese prosecutors ended up abandoning the charges under the foreign bribery law because of a lack of access to bribe recipients, the investigation revealed tax evasion and “breach of trust,” which prosecutors are pursuing. If this flexible prosecution strategy, akin to those used in the U.S., is an indicator of what is to come, Japanese companies will have strong incentives to conform to international anti-bribery norms.
As of the middle of 2010, South Korea had used its foreign bribery law to prosecute at least 13 individuals. South Korea is also one of the world's most active prosecutors of companies that bribe its own government officials.
From 2001 to 2006, Gi-Hwan Jeong, the CEO of Samsung Rental Company, bribed two officials of the U.S. Government stationed in Korea to obtain and retain contracts to provide Internet service to American military forces on the peninsula. The bribes worth almost $200,000 took the forms of cash, services of prostitutes, travel, and stock options. After one of Jeong’s former employees reported the bribery to U.S. Air Force investigators, the American and Korean governments investigated. A Korean court convicted Jeong under the foreign bribery law, fined him about $10,500, and sentenced him to time served, which was 58 days.
After submitting a request under the mutual legal assistance treaty between South Korea and the U.S. for evidence from Jeong’s prosecution, ostensibly to be used against the American bribe recipients, the U.S. induced Jeong to travel to Texas to discuss money that he claimed the U.S. government still owed his company. American authorities arrested Jeong and charged him with bribing government officials and related offenses. He entered a conditional guilty plea, and the court sentenced him to five years' imprisonment and a $50,000 fine. The Fifth Circuit upheld the conviction in October of 2010, noting, essentially, that there is no prohibition on international double jeopardy.9
While it was American authorities to whom the consortium members collectively paid more than $1.3 billion in fines, disgorgement, and other penalties between 2009 and 2011, TSKJ’s conduct was discovered by French prosecutors years earlier. In an investigation of a separate oil and gas foreign bribery scheme, a former executive of Technip, Georges Krammer, defended his conduct on behalf of another company, Elf-Aquataine, telling an investigating judge what he knew about Technip’s bribery practices in several parts of the world, including Nigeria.
The French investigation sparked not only the American investigation of all four companies for FCPA violations, but also the prosecutions in Texas and plea agreements of former KBR CEO Albert “Jack” Stanley and the British lawyer who actually made many of TSKJ’s corrupt payments, Jeffrey Tesler. Tesler was extradited to the U.S. by the UK for the trial, and the U.S. court ordered him to pay more than $150 million in disgorgement of profits.11 Stanley, also prosecuted in U.S. District Court in Houston, was sentenced to 84 months in prison and ordered to pay $10.8 million in restitution; however, the government agreed to recommend reductions in Stanley’s sentence in exchange for cooperation.12
Additionally, an investigation by the UK’s SFO was resolved when a British KBR subsidiary, M.W. Kellogg, agreed to pay a fine of
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