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Harry Cassin
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Richard L. Cassin
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Thomas Fox
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Bill Waite
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Richard Bistrong
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Eric Carlson
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What’s the most important FCPA case ever?

Since the FCPA became law in December 1977, the DOJ has brought about 300 enforcement actions. Which one is the most important?

Telia. The biggest by our measure was this year’s action against Telia Company AB of Sweden, with global penalties amounting to $965 million. By size alone, Telia could top lots of lists.

Siemens. In 2008 it paid the DOJ and SEC $800 million to resolve FCPA offenses. The case was nearly 20 times bigger than any FCPA enforcement action that came before it. It was a stunner that shocked the market. And it became the model for all the mega-resolutions and multi-jurisdictional enforcement actions that would follow. U.S. v. Telia is a direct descendant of Siemens.

TSKJ. Four companies paid $182 million in bribes to win engineering and construction work in Nigeria. Then they collectively paid about $1.65 billion to resolve their FCPA offenses.

It looked like an industry sweep. KBR and its one-time parent Halliburton paid $579 million in 2009 to resolve criminal and civil FCPA charges. In 2010, Italy’s Snamprogetti paid $365 million to U.S. enforcement agencies, and France’s Technip paid $338 million. Then in 2011, JGC paid $218.8 million for a settlement with the DOJ.

The London lawyer who helped deliver the TSKJ partners’ bribes, Jeffrey Tesler, forfeited $149 million, still the biggest FCPA forfeiture by an individual. He was also sentenced to 21 months in federal prison.

Jack Stanley, KBR’s former CEO, was sentenced to 30-months in prison and paid restitution of nearly $11 million.

We’ve called TSKJ the FCPA’s whale. But it isn’t one FCPA enforcement action. It’s more than a half dozen actions, related to the same underlying facts but brought separately against the defendants.

The Africa Sting. It deserves consideration because of the extreme tactics the feds used, and because of the scope of the indictment. Twenty-two individuals were arrested, the biggest group to ever face FCPA charges.

There was a sting and a big takedown in Las Vegas. More than a hundred fifty FBI agents executed fourteen search warrants in locations across the United States, the DOJ said.

The FBI’s release in January 2010 said the defendants tried to sell “body armor and bullet-proof vests . . .  carbine rifles, tear gas grenades, and armored vehicles — by bribing overseas officials.”

But there were no foreign officials. Only undercover agents posing as them.

The FBI stoked the drama. It said:

[T]he ruse played out with all the intrigue of a spy novel. According to the indictment, the subjects in the case met with our undercover agent in luxury hotels and fancy restaurants in the nation’s capital and elsewhere. They e-mailed inflated price quotes to our agent and wired bribe money to his bank account. They drafted and mailed corrupt purchase agreements. They even sent their products for shipment to the African nation.

The government’s evidence included more than 5,000 taped phone calls, more than 800 hours of video and audio recordings, and 231 recordings of meetings between undercover agents and the defendants.

Despite all that, the DOJ secured no convictions after two separate jury trials of ten defendants. It was finally forced to dismiss all 22 indictments, even for three defendants who had pleaded guilty.

The DOJ had said the defendants were all part of a huge conspiracy to violate the FCPA. But Judge Richard Leon in DC said there couldn’t have been a conspiracy. Most of the defendants didn’t know each other and hadn’t talked about the phony Gabon deal. That ruling gutted the DOJ’s case.

The Africa Sting showed how far the feds would go to make a splashy FCPA case. But the final lesson was that using a big sting to concoct a supposed industry-wide conspiracy was a bad idea. The judge didn’t buy it, and neither did a couple of juries.

U.S. v. Kay. Its impact on FCPA enforcement is still profound. And the case stands as a warning to FCPA hairsplitters.

In 2005, two former executives of American Rice, Inc. were convicted of bribing Haitian officials to reduce their company’s taxes.

David Kay and Douglas Murphy said the FCPA didn’t apply to bribes to reduce taxes because that’s not “obtaining or retaining” business. Even if the FCPA did apply to those bribes, they argued, the “obtaining or retaining” language in the FCPA (the “business nexus” element) is so ambiguous that enforcement would be unfair.

Kay and Murphy lost that argument at their trial, then in the Fifth Circuit Court of Appeal, and finally in the U.S. Supreme Court, sort of.

The Supremes rejected their petition for review in 2008 and let the lower court decisions stand. Kay had to serve his 37-month prison sentence, and Murphy his 63-month sentence.

The case judicially expanded the business nexus element way beyond the typical bribes-for-business scenario. The Fifth Circuit said any payments to foreign officials that might assist in obtaining or retaining business by lowering the costs of operations can fall within the FCPA.

Enforcing the statute against Kay and Murphy wouldn’t be unfair, the court said, even if the business nexus element is a bit ambiguous:

“A man of common intelligence, would have understood that . . . in bribing foreign officials, [Kay and Murphy were] treading close to a reasonably-defined line of illegality. . . . Defendants took this risk, and splitting hairs . . . does not allow them to argue successfully that the FCPA’s standards were vague.” (emphasis added)

Finally, the court said the government can satisfy the “knowing” element of an FCPA offense by showing merely that the defendants understood that their actions were illegal. No specific knowledge about the FCPA and its prohibitions is required.

*     *     *

Any of those cases could be deemed the most important FCPA enforcement action ever, all for different but valid reasons.

If there are other cases you thnk should be on this list, let us know.


Richard L. Cassin is the publisher and editor of the FCPA Blog.

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  1. Odebrecht?

  2. I would argue Esquinazi as, I believe, it is still the only appellate case that discusses the foreign official question.

  3. It is often overlooked that Siemens' payments to the Munich Public Prosecutor's Office to resolve two separate investigations exceeded the payments to the DOJ and the SEC ($856 million vs. $800 million as per the DOJ's Press release issued on December 15, 2008).

    This goes to show that there is enforcement of the laws on foreign bribery outside of the US. Indeed, according to Transparency International's 2015 Progress Report on the enforcement of the OECD Convention, the countries with active enforcement include, in addition to the United States, Germany, Switzerland and the UK.

    Odebrecht's plea agreement to pay $ 4.5 billion (subject to its ability to pay) dwarfs any other foreign bribery case and stands a good chance to stay on top of the list of these cases for a long time. However, most of the payments will go to Brazil (80%) with only 10% going to each of the US and Switzerland.

  4. A little bit of a quibble on Kay. Hair-splitting or no, this review neglects to note that the trial judge initially dismissed the case based on those arguments and, as I recall being there at the time, there was a strong expressed belief from both sides that the Fifth Circuit panel might agree with that reasoning. In fact, the Fifth Circuit noted in that first 2004 opinion that while the indictment was sufficient to proceed such payments were not necessarily within the statute.

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