Proposed Whistleblower Provision Could Dramatically Increase FCPA Risk | Sheppard Mullin Richter & Hampton LLP – JDSupra
An often-overlooked provision in the financial reform legislation now before Congress would allow employee whistleblowers to receive a reward of up to 30% of the fines collected by the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) from corporations who violate the Foreign Corrupt Practices Act (“FCPA”). We have reported in this blog on several occasions the increase in FCPA enforcement by the government in recent years. The passage of a bill containing this proposed whistleblower provision could lead to even more government enforcement, as well as multi-million dollar awards to whistleblowers.
Delaware courts evolve to meet litigants’ needs | delawareonline.com
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Last week, the state’s Superior Court system — which handles civil and criminal cases along with business lawsuits — established a division designed specifically to give corporate litigants a more focused, predictable forum.
The stakes of upholding — and when possible, improving — the nation’s perceptions of Delaware courts are huge. Yet there is some evidence that big corporate lawsuits are already going elsewhere, and that Delaware’s dominant status is slowly slipping away — possibly for good.
Without that reputation, the state is at risk of losing the big firms that incorporate here and help fuel the economy with millions in tax revenue, observers say. Others doubt Delaware is in any real peril, and have faith that the high standards of its judges and the depth of its case law will continue to outclass any other jurisdiction.
But that doesn’t mean the people who operate Delaware’s system never question the status quo.
Over the years, Delaware has repeatedly tweaked its system to keep pace with the needs of litigants — with more success in some cases than in others.
There’s a recognition here that when they’re able, big companies will “shop” for jurisdictions that offer advantages — litigants want a court that is knowledgeable, reliable, and efficient enough to avoid long, expensive proceedings.
via Delaware courts evolve to meet litigants’ needs | delawareonline.com | The News Journal.
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China Moves to Tighten Data Controls – NYTimes.com
China is on the verge of requiring telecommunications companies and Internet service providers to halt and report leaks of what the government deems to be state secrets, the latest in a series of moves intended to strengthen the government’s control over private communications.
The proposed amendment to the state secrets law, reported Tuesday by the state news media, defines a state secret broadly and loosely as information that, if disclosed, would damage China’s security or interests in political, economic, defense and other realms.
The amendment was submitted Monday to the Standing Committee of the National People’s Congress, China’s legislature, for a third reading, the final step before being signed into law. Few measures reach that point in China without being adopted.
The wording of the amendment, as cited by the state-controlled newspaper China Daily, suggested that Internet and telecommunications companies would have to take a more proactive stance in identifying leaks of state secrets and their sources. The paper said companies must detect, report and delete unauthorized disclosures.
But reports by the state-run news agency Xinhua seemed less definitive about whether the companies must independently scour online transmissions for forbidden information or simply cooperate with the authorities if they suspect transgressions.
via China Moves to Tighten Data Controls – NYTimes.com.
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The Toyota Fine: The $16M Might Not Be Toyota’s Biggest Problem – Law Blog – WSJ
The fine, announced by Transportation Secretary Ray LaHood, attached a statement that Toyota “knowingly hid” safety problems from regulators. “We now have proof that Toyota failed to live up to its legal obligations,” said LaHood on Monday. “Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families.”
According to an NLJ story out Wednesday, the findings “could bolster legal claims that the automaker committed consumer fraud and racketeering.” That could mean good news for plaintiffs lawyers, like Northeastern professor Tim Howard, who is leading a bunch of suits against Toyota.
“Factually, it validates the legitimacy of our allegations that Toyota has been misleading the federal government and consumers, as far as the severity of the problems with their sticky pedals and their whole electronic throttle control system,” said Howard to the NLJ.
Howard also said the fines also may assist suits alleging that Toyota violated the Racketeer Influenced and Corrupt Organizations Act (RICO) by conspiring to mislead consumers and the federal government about the extent of its safety problems, he said.
via The Toyota Fine: The $16M Might Not Be Toyota’s Biggest Problem – Law Blog – WSJ.
Foreign Corrupt Practices Act Cases Rise, Fines Mounting – TIME
Why must Daimler AG, the German automaker, pay big fines to the U.S. government because two of its subsidiaries, one in Germany and the other in Russia, made improper payments to government officials of countries other than the U.S., such as China, Egypt and Serbia?
Welcome to the age of the Foreign Corrupt Practices Act (FCPA), a far-reaching bit of American legislation that cracks down on corporate bribery in all its forms and is rattling the cages of corporate chiefs the world over. The Department of Justice (DOJ) has jurisdiction over all related criminal violations under the act, and the Securities and Exchange Commission (SEC) keeps tabs on the civil violations committed by U.S. companies. What’s more, the law doesn’t just mean the U.S. government is looking for past incidents of corruption; it’s also stirring the pot to see who may be corruptible in the future.
via Foreign Corrupt Practices Act Cases Rise, Fines Mounting – TIME.
Hugo Restall: The Rules in China – WSJ.com
After a Chinese court sentenced four executives of Australian mining company Rio Tinto to lengthy prison terms for bribery and stealing commercial secrets yesterday, Canberra was quick to respond. Foreign Minister Stephen Smith pointedly stated, “As China emerges into the global economy, the international business community needs to understand with certainty what the rules are in China.”
In the eight months since Australian citizen Stern Hu and his Chinese colleagues Wang Yong, Ge Minqiang and Liu Caikui were arrested, we've learned a great deal about the lack of certainty and rules not only in China, but also in the global commodities trade. Some of that is China's fault, but hardly all of it. The Australian government and Rio Tinto must share the blame for lack of transparency and failing to play by the rules.
Foreign media coverage of the arrests and trial has focused on whether the Chinese authorities pursued this case for political reasons. Remember that early last year, cash-starved Rio Tinto angered China by inviting Aluminum Corp. of China, or Chinalco, to take a $19.5 billion equity stake and then backing out of the deal under a combination of shareholder, government and public pressure. Rio was also driving a tough bargain in iron-ore price negotiations with Chinese buyers. Many observers speculated that the four executives were pawns in a high stakes game of tit-for-tat orchestrated from Beijing.
Certainly the timing of the case makes such suspicions inevitable. But the reality is probably more complicated. The Chinese justice system may be manifestly unfair, and once it gains momentum a guilty verdict is a foregone conclusion. Yet Rio itself put forces in motion that led to four men losing their freedom.
It all started with the boom in the global iron-ore market in the early 2000s. That’s when China’s steel industry embarked on a massive expansion of capacity, turning the trade in ore from a buyer’s market to a seller’s market. China’s large state-owned steelmakers bought at the benchmark price negotiated by Japanese and Korean mills, while smaller firms had to pay the higher spot price. This created an incentive for arbitrage and corruption, but unfortunately both the Chinese government and the mining companies were slow to take account of this in their internal controls.
How to Handle Hard Drives in Government Probe
Although there is plenty of guidance in case law and in the Federal Rules of Civil Procedure regarding court-supervised electronic discovery, companies responding to government requests find themselves on a journey without a road map. In the absence of court supervision or rules, and given the tendency of government investigations to change focus over time, a responding company cannot hope to identify and preserve every byte of relevant electronically stored information. There is an element of fortune-telling inherent in every preservation effort. The importance of forensic analysis in recent cases, however, suggests that preservation of hard drives should be a high priority.
The first step of a government investigation typically will be a grand jury subpoena, or a voluntary request or subpoena from a government agency, calling for the production of documents on specified topics. Because government investigations typically involve multiple subpoenas issued over time as the government’s investigation becomes more targeted or changes direction, however, companies typically try to preserve broadly in response to the initial request. This effort often includes a preservation notice issued to every employee within the company or within specific offices or departments.
In addition, companies should consider taking affirmative steps to preserve the information deemed to be most signifi cant, based on the limited information available at the outset of the investigation. This may involve running search terms on specific compilations of documents and preserving the hard drives of key employees. Doing so can minimize the negative consequences if employees fail to understand the directive or knowingly seek to destroy relevant information.
Daimler agrees to settle Justice Department charges of bribing foreign officials – washingtonpost.com
Daimler has agreed to pay $185 million in fines and penalties to the U.S. government to settle charges that it violated federal bribery laws by paying tens of millions of dollars to officials in at least 22 countries to win lucrative contracts, according to a source familiar with the deal.
The proposed settlement would end a U.S. Justice Department investigation that concluded the German automaker had violated the Foreign Corrupt Practices Act (FCPA), which prohibits companies from bribing government officials to land business or receive favorable treatment.
In a 76-page filing in federal court on Tuesday, prosecutors said that Daimler made improper payments starting in 1998 to officials in countries that included China, Russia, Egypt, Greece and Nigeria. The charges against Daimler were made in a “criminal information filing” — a document that typically precedes a plea agreement.
Swiss Government Asks UBS to Pay Legal Costs in Tax Dispute With U.S.
The U.S. may have trumped Switzerland in Olympic men’s hockey on Wednesday, but its tax battle with Switzerland continues.
Swiss news agencies reported on Wednesday that the government would ask Zurich-based banking giant UBS to reimburse it for outside legal costs stemming from the bank’s long-running legal dispute with U.S. authorities over allegations of tax evasion by U.S. citizens holding UBS accounts.
A deal to resolve that dispute by releasing the names of 4,450 U.S. citizens with UBS accounts was tentatively struck last August. UBS relied on lawyers from Wachtell, Lipton, Rosen & Katz, Cravath, Swaine & Moore and Florida’s Stearns Weaver Miller Weissler Alhadeff & Sitterson in those negotiations, while the Swiss government retained Pillsbury Winthrop Shaw Pittman international trade practice chair Stephan Becker and Palm Beach, Fla.-based attorney John Dotterrer on the matter. (UBS also paid a $780 million fine and agreed to turn over nearly 300 client names as part of a deferred prosecution agreement it struck with U.S. prosecutors in February 2009.)
According to Swiss news reports, the dispute between U.S. regulators and UBS has so far cost the Swiss government $2.3 million. UBS has agreed to reimburse the government, which hired Becker and Dotterrer to file briefs in federal court in Florida defending the bank, more than $931,000 of that $2.3 million. The Swiss could eventually incur another $34.4 million in costs as a result of helping U.S. authorities track down American tax evaders. (It's unclear at this point how much of those costs relate to legal fees paid to outside lawyers; Becker and Dotterrer did not respond to requests for comment.)
via Swiss Government Asks UBS to Pay Legal Costs in Tax Dispute With U.S..
US Likely to Broaden Anti-Bribery and Corruption Efforts | Business Ethics
Look for the U.S. government to further intensify its efforts to combat transnational bribery and corruption, broadening them to include more government agencies in addition to the Justice Department, a top government prosecutor said.
“It’s my view that the U.S. government – and not just the Justice Department, but the U.S. government more broadly – is going to focus on international corruption in a more comprehensive and even more rigorous way than it has in the past,” said Mark Mendelsohn, the Justice Department’s lead criminal prosecutor for violations of the Foreign Corrupt Practices Act (FCPA).
Speaking to an audience of corporate compliance officers at the Dow Jones Global Ethics Summit in New York City, Mendelsohn said the increased activity would reflect President Obama’s “well-known and strongly-held views about the corrosive effect of corruption on the role of development and the rule of law.”
FCPA prosecutions have exploded in the past five years, with the Department of Justice bringing a total of twenty-six enforcement actions in 2009 compared to only two in 2006. Earlier this month, British defense contractor BAE agreed to pay fines totaling almost $450 million to settle charges that it had made illegal payments to officials in various countries to obtain contracts. In late 2008, industrial giant Siemens agreed to pay more than $1.6 billion in fines and penalties to settle charges brought under the FCPA.
via US Likely to Broaden Anti-Bribery and Corruption Efforts | Business Ethics.
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