United States: FCPA And Jail – Are Corporate Officers Really At Risk?

On Oct. 31, James McClung, a former Louis Berger International Inc. executive, self-surrendered to the Bureau of Prisons to begin his year-and-a-day sentence for violations of the Foreign Corrupt Practices Act (FCPA). McClung, the senior vice president for the New Jersey- based construction management firm, was responsible for the company's operations in India and later in Vietnam. McClung and another former Louis Berger executive pleaded guilty in June 2015 to FCPA charges in connection with a scheme to bribe foreign officials in India and Vietnam to secure their assistance in awarding business to the company. McClung was sentenced on July 7, 2016 in New Jersey federal court by District Judge Mary L. Cooper.

McClung's prison sentence for FCPA violations cannot be described as unique, as he is in the company of a growing number of individuals – both U.S. citizens and foreign nationals – who have received prison sentences for FCPA violations in recent years. Importantly, McClung's prosecution came before the Department of Justice (DOJ) began ratcheting up its FCPA prosecution efforts over the last year, most recently with the launch of its new Pilot Program in April and the Yates Memorandum in September 2015.

With this increased focus on prosecution of FCPA violations and the DOJ's renewed commitment to bring these violations to light, a question arises as to whether individuals, separate and apart from the companies for which they work, are really at risk as targets of investigation – and the answer is plainly yes. A quick review of DOJ statistics over the last few years reveals an alarming trend of individual prosecutions of both U.S. citizens and foreign nationals, with prison sentences ranging from a few months to 15 years for FCPA violations. On Dec. 16, 2015, Vincent Eduardo Garcia, a former regional director of the technology company SAP International Inc., was sentenced to 22 months in prison for his role in a scheme to bribe Panamanian officials to secure the award of government technology contracts.

Garcia, a U.S. citizen residing in Miami, pleaded guilty to one count of conspiracy to violate the FCPA. In his plea, Garcia admitted that in late 2009, to secure a multimillion- dollar contract for SAP, he conspired with others to bribe two Panamanian government officials directly and a third through an agent, making use of sham contracts and false invoices to disguise the true nature of the bribes. Garcia's prison sentence was not his only penalty as he also paid $85,965 plus prejudgment interest in disgorgement to the Securities and Exchange Commission (SEC).

Garcia was certainly not alone in 2015. Several employees of the New York-based broker-dealer Direct Access Partners were also sentenced to prison time in 2015. Benito Chinea and Joseph DeMeneses received four-year sentences, Jose Alejandro Hurtado received a three- year sentence, and Ernesto Lujan and Tomas Alberto Clarke Bethancourt received two-year sentences, all in connection with their scheme to bribe a senior official in Venezuela's state economic development bank, Banco de Desarrollo Económico y Social de Venezuela (Bandes).

The prison sentences received by individuals in FCPA cases date back further than 2015 and extend to more than just a few years of imprisonment. In October 2011, Joel Esquenazi, former president of Terra Telecommunications Corp., was given a 15-year sentence for his role in a scheme to pay bribes to Haitian government officials at Telecommunications D'Haiti S.A.M. (Haiti Teleco), a state- owned telecommunications company. In 2010, Charles Paul Edward Jumet, former vice president of Ports Engineering Consultants Corp., was sentenced to 87 months in prison for paying bribes to former Panamanian government officials to secure maritime contracts. These prison sentences have also been imposed on foreign nationals. In 2012, Manuel Caceres, a citizen of Honduras and a lawful permanent resident of the U.S., received a 23-month sentence for bribes to government officials in Honduras in connection with his role as the vice president of business development for Miami-based telecommunications company Latin Node Inc.

The DOJ is not alone in its increased efforts to investigate and prosecute individuals for violations of the FCPA. In 2010, the SEC's Enforcement Division created a specialized unit to further enhance enforcement of the FCPA, and it has brought many enforcement actions to date, including against individual defendants. In September 2016, CEO Daniel Och of Och-Ziff Capital Management Group agreed to pay nearly $2.2 million to settle SEC charges in connection with the payment of bribes to high-level government officials in Africa. Also in 2016, Jun Ping Zhang, the former chairman/CEO of Harris Corp.'s subsidiary in China, agreed to pay a $46,000 penalty for violating the FCPA by facilitating a bribery scheme that provided illegal gifts to Chinese government officials in order to obtain business for the company. The action against Zhang is particularly notable as the SEC pursued only the individual, declining to bring an enforcement action against Harris Corporation due to the company's fulsome cooperation. And just like with DOJ prosecutions, foreign nationals find themselves as the targets of these SEC enforcement actions. Mikhail Gourevitch, a dual Canadian and Israeli citizen and a former engineer at Nordion Inc., agreed to settle FCPA charges with the SEC this year by paying $100,000 in disgorgement, $12,950 in prejudgment interest and a $66,000 penalty. In 2011, the SEC charged seven former Siemens executives for their involvement in the company's bribery scheme to retain a $1 billion government contract to produce national identity cards for Argentine citizens. Of the seven defendants, five were German citizens and two were Argentine citizens.

The DOJ and SEC have made clear that they intend to take individuals' FCPA violations more seriously, and their prosecutions and enforcement actions demonstrate that the threat is real. Clearly, the response to this threat cannot be to wait until a government investigation surfaces. Employees must be proactive and take steps to mitigate risks now, including concretely documenting the propriety of their actions, paying attention to red flags, and complying fully with the company's compliance policies. Additionally, if questions remain, the employee should insist on securing and documenting legal advice from counsel specializing in FCPA matters.

To view the original article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions