Here are a number of items regarding key FCPA developments in the past few weeks...
Corporate Counsel had an interesting article about the SEC's and DOJ's enforcement action against Smith and Wesson. The lesson? No case is too small for the DOJ and SEC. They went after Smith and Wesson for allegedly engaging in a systematic pattern of bribery from 2007 to early 2010 in order to get contracts to sell firearms to foreign military and law enforcement in countries such as Indonesia, Turkey and Pakistan. In the Pakistan incident, the only transaction that Smith & Wesson actually profited from before the investigation, the company authorized a third-party agent in the country to provide more than $11,000 worth of firearms plus cash payments to a Pakistani police department in order to obtain a contract. While Smith & Wesson got the contract and earned $107,852, they agreed to pay the SEC this amount in disgorgement as part of the settlement. The Corporate Counsel article quoted Bill Michael, cochairman of Mayer Brown’s global anticorruption and FCPA practice, for the proposition that the fact that the SEC was willing to go after a company that only profited by a little more than $100,000 from allegedly illegal actions should be a lesson and warning to those who would skirt antibribery law. This case corrects the misperception that the government is only looking for big-ticket FCPA violations and underscores the need for all companies to develop FCPA compliance programs, especially in regard to its third party vendors.
As reported in Whistleblower Today, the Second Circuit Court of Appeals dismissed a lawsuit by a former Siemens compliance officer in China who alleged that the company retaliated against him after he internally reported FCPA violations. The Second Circuit held that the anti-retaliation provision of the Dodd-Frank whistleblower provision does not apply to acts outside the United States. The Second Circuit then held that it need not rule on a key issue advanced by the SEC in an amicus brief: that employees who only report offenses internally should be protected in the same manner as those who report directly to the SEC. As the Whistleblower Today article opines, this "decision is likely to put pressure on Congress to explicitly extend Dodd-Frank anti-retaliation protections to SEC whistleblowers who act outside the United States." It also leaves open the issue of whether whistleblowers must report directly to the SEC to gain whistleblower protection under Dodd-Frank, or whether internal reporting is sufficient. Stay tuned, as the district and circuit courts are sure to weigh in on this issue in the near future.
The FCPA Blog reported that Joel Esquinazi and Carlos Rodriguez petitioned the U.S. Supreme Court Thursday to review their convictions on FCPA-related charges for a scheme to bribe officials at Haiti’s state-owned telecom company. In recently affirming their convictions, the Eleventh Circuit Court of Appeals gave the feds a sweeping victory, approving the feds' argument that their broad definition of "instrumentality" for purposes of the FCPA is in fact "an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own." In their Supreme Court cert, Esquinazi and Rodriguez asked the Supreme Court to consider the following issue: "Whether the Eleventh Circuit’s definition of 'instrumentality' under the FCPA as 'an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own' (1) fails to satisfy the constitutional requirement of adequate notice of what specific conduct violates the FCPA, and (2) is erroneously derived from commentary to an unrelated treaty [the OECD anti-bribery convention] that postdates the FCPA’s enactment." Esquinazi and Rodriguez have argued throughout this case that Haiti Teleco was not an "instrumentality" under the FCPA and that its directors, officers, and employees therefore were not "foreign officials." As a result, they reasoned, bribes paid to anyone at Haiti Teleco couldn’t violate the FCPA. If the Supreme Court accepts the petition, the decision will without doubt be a landmark case in the developing landscape of FCPA law.