Yesterday I participated as a panelist at a roundtable on the “Increase in the Enforcement of the Foreign Bribery Statue in Israel,” part of the Globes Newspaper’s Capital Markets Conference.
As seems to always be the case with anti-corruption matters, on the day of the conference there were new anti-corruption headlines.
Yesterday it was the sentencing of five senior officials from the Israel Electric Company (IEC) to jail terms of between 24 and 45 months for receiving bribes from Siemens in the years 2001-2002.
As background, Israel’s foreign bribery statute went into effect in July 2008. As I previously reported on the FCPA Blog, actual enforcement had consisted of one indictment and one conviction which resulted in a 4.5 million NIS fine (about $1.25 million).
And as reported by Dick Cassin, Beny Steinmetz was detained in Israel last December as part of the investigation of the BSRG matter. He’s currently released under restrictive conditions and has yet to be indicted.
Further, local newspapers have reported investigations by Israeli authorities against Teva (related to the same set of facts that the signed a DPA with the U.S. DOJ and SEC) and Safir, an Israeli publicly traded construction company (related to issues in Romania).
Together with myself the panelists yesterday included Orly Doron, from the Financial Crimes Division of the Tel Aviv prosecutor’s office (the office in charge of handling these crimes), Eitan Maoz, an Israeli White Collar lawyer who represents some of the individuals under investigation, and Rami Sasson, the Chief Compliance Officer of the Israel Discount Bank.
The main message from this panel is that Israel has turned the corner on foreign bribery enforcement and that more indictments can be expected. There was a clear call for Israeli corporations to strengthen their compliance programs to meet international accepted best practices.
Back to IEC. The sentencing yesterday closed another chapter of this long saga regarding Siemens. Previously there was the extradition of a former member of IEC’s board of directors from Peru to Israel; a fine of $43 million against Siemens AG by Israeli authorities; and the plea by these individuals that was agreed to in March of this year.
The officials that were sentence ranked from Senior VPs to department heads in the planning division of the IEC. They each received bribes ranging from $200,000 to $500,000. In addition to the prison sentences, the court imposed forfeitures and fines. The forfeitures ranged from 1.7 million NIS to 200,000 NIS, and the fines up to 450,000 NIS.
IEC is owned by the Israeli government. Therefore under Israeli law all of its employees are deemed government officials. Israel has several other large government owned companies that are part of the backbone of Israeli industry.
In addition, as I have written elsewhere, Israeli law employs a broad definition of “government official” that can also include private corporations that are deemed to perform a government function. One should be very aware of this issue when doing business in Israel.
Chaim Gelfand is a Partner at Shibolet and Co. and head of its Anti-Corruption Compliance Practice — one of the first (if not the first) dedicated anti-corruption compliance practices in any of Israel’s first tier law firms. He has been dealing with anti-corruption compliance in large multinational companies for almost a decade. He can be contacted here.