Quarterly FCPA Report: Second Quarter 2011Courtroom Activity Defines the Second Quarter of 2011
By The Global Compliance and Disputes Practice
The second quarter of 2011 was an action packed three months for the Foreign Corrupt Practices Act (FCPA), which included judicial opinions, jury verdicts, and a Congressional hearing. In the Control Components Inc. and Lindsey trials, defendants challenged the definition of foreign official under the FCPA, and in both cases, the governments interpretation was upheld. There were also rulings entered in the twenty-two defendant arms contract case. There, the judge ruled that no actual foreign official is necessary to establish the element of intent under the FCPA and denied defendants motion to dismiss, which had challenged the governments tactic of having an undercover FBI agent pose as an agent of an African country in order to solicit illicit payments from the defendants. Also in that case, the judge threw out one of the governments charges against U.K. citizen and defendant, Pankesh Patel, based on a lack of jurisdiction.
While the courts were active determining the perimeters of the current law, Congressional representatives held a hearing to discuss possible amendments to the FCPA. On June 14, 2011, the House Judiciary Committees Subcommittee on Crime, Terrorism and Homeland Security held a hearing on the FCPA. During this hearing, various amendments to the law were discussed, including: 1) clarifying the definition of foreign official and instrumentality, 2) creating a compliance program affirmative defense, 3) implementing changes to successor liability, 4) implementing changes to the mens rea requirement for company-defendants, and 5) creating a de minimis exception. At the end of the hearing, subcommittee Chairman James Sensenbrenner announced that the committee will be drafting a bill to amend the FCPA.
In addition to these developments on the interpretations of the law, there were numerous enforcement actions against individuals and companies. The individual actions included four guilty pleas and two guilty jury verdicts for FCPA violations, and the trial of the first four defendants in the arms contract case ended in a mistrial after the jury was unable to reach a verdict. The corporate actions included one guilty jury verdict and one deferred prosecution agreement (DPA). Also, three entities entered into settlement agreements with the Securities and Exchange Commission (SEC), two of which also entered into a DPA or non-prosecution agreement (NPA) with the Department of Justice (DOJ). A final corporate entity entered into the first ever DPA with the SEC, while also entering into an NPA with the DOJ.