Tag: extortion

Compliance Into The Weeds: Congress Fills a Gap – FEPA

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Post date December 20, 2023
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The award-winning Compliance into the Weeds is the only weekly podcast that takes a deep dive into a compliance-related topic, literally going into the weeds to more fully explore a subject. Looking for some hard-hitting insights on sanctions compliance? Look no further than Compliance into the Weeds! In this episode, Tom and Matt take a deep dive into the Foreign Extortion Prevention Act (FEPA), a groundbreaking law that aims to combat corruption by criminalizing foreign government officials who solicit or accept bribes from US entities.

This law complements the Foreign Corrupt Practices Act (FCPA), which penalizes companies for offering bribes, and introduces new challenges and implications for anti-corruption measures. Tom views FEPA as a long-overdue measure that fills a gap in anti-corruption efforts. He agrees with Matt emphasizes that FEPA addresses a long-standing concern of anti-corruption advocates. Both Fox and Kelly anticipate further guidance from the Department of Justice on how this new law will interact with existing measures under the FCPA. Join Tom Fox and Matt Kelly as they delve deeper into this topic in the latest episode of the Compliance into the Weeds podcast.

Key Highlights:

Combating Foreign Corruption: FIFA’s Powerful Impact
Implications of FIFA Cooperation on FCPA Prosecution
Extradition Challenges in FIFA Corruption Cases
The Impact of the Name and Shame List

Resources:

Matt Kelly on LinkedIn

Tom

Tags compliance, corruption, DOJ, extortion, extradition, FCPA, FEPA

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Congress Fills a Corruption Hole: The Foreign Extortion Prevention Act (FEPA)

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Post date December 20, 2023
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The compliance community has long recognized the gaping hole in the Foreign Corrupt Practices Act (FCPA). As a supply side law, it criminalizes the payment of bribes, not the demand to pay a bribe or extortion. The gap was recently filled by the Foreign Extortion Prevention Act (FEPA) which extended crucial protections to Americans working abroad and provides the Department of Justice (DOJ) with a potent new tool. By criminalizing both the giving and demanding of foreign bribes, FEPA seeks to level the playing field for American workers while fostering ethical business practices globally. FEPA represents a promising solution to protect Americans working overseas, promote fair business competition, and combat corruption on a global scale. With its potential to bring about meaningful change, FEPA is a vital step in safeguarding American values and interests in the international arena. Sam Rubenfeld, cited to Scott Greytak, the director of advocacy for Transparency International US, for the following, “FEPA is a landmark, bipartisan law that holds the potential to help root out foreign corruption at its source. It is arguably the most sweeping and consequential foreign bribery law in nearly half a century.”

This legislation fills a significant gap in anti-corruption measures and raises important questions about its implications for the enforcement of the Foreign Corrupt Practices Act (FCPA) and the cooperation expected from companies involved in bribery schemes. FEPA, part of the National Defense Authorization Act (NDAA), addresses a long-standing concern among anti-corruption advocates. While the FCPA has been effective in penalizing US companies for offering bribes to foreign officials, there has been a lack of legal mechanisms to hold foreign government officials accountable for accepting these bribes. FEPA now provides prosecutors with the means to pursue such officials.

One of the key aspects of FEPA is that it criminalizes the solicitation or acceptance of bribes by foreign government officials from US entities. This complements the FCPA, which focuses on the offering of bribes by US companies. By targeting both sides of the bribery equation, FEPA aims to create a more comprehensive and effective framework for combating corruption.

However, the implementation of FEPA is not without its challenges. One of the main challenges is the extradition of foreign officials for prosecution, particularly from countries like Russia or China. Extradition processes can be complex and time-consuming, and cooperation from foreign governments may not always be forthcoming. This poses a significant hurdle in holding foreign officials accountable under FEPA.

Another notable feature of FEPA is the introduction of a “name and shame” list. This list is intended to publicly identify, and shame foreign government officials involved in bribery schemes. While this may serve as a deterrent, it could also have unintended consequences. For instance, it may impact Transparency International’s corruption perception indexes, potentially affecting the rankings of countries and their relations with the US. Additionally, it could have implications for US companies operating in those countries, potentially straining foreign relations.

The passage of FEPA raises important considerations for compliance officers and companies. They need to assess how this new law may impact their existing controls and policies. The arrival of FEPA as a tool to combat corruption is undoubtedly a positive development. However, it is crucial to carefully evaluate the potential implications for FCPA prosecutions and the cooperation expected from companies involved in bribery cases.

Compliance officers should also consider the potential changes in the calculus for prosecutors. With FEPA in place, prosecutors may now have the legal means to pursue foreign government officials complicit in bribery schemes. This raises questions about the extent to which companies will be required to assist the DOJ in pursuing FEPA cases alongside FCPA cases. Companies may need to provide testimony and cooperate in the prosecution of foreign officials, potentially impacting the resolution of FCPA violations.

Looking ahead, it is essential for the DOJ to provide clarity on how FEPA will be utilized and what expectations companies should have when caught up in FEPA-related investigations. Transparency and guidance from the Department of Justice will help companies navigate the potential challenges and ensure compliance with the law.

The bottom line is that FEPA represents a significant step in the fight against corruption. By criminalizing the solicitation or acceptance of bribes by foreign government officials from US entities, FEPA fills a crucial gap in anti-corruption measures. However, challenges remain in extraditing foreign officials for prosecution and managing the potential consequences of the “name and shame” list. Compliance officers and companies must carefully consider the implications of FEPA on their operations and update their controls and policies accordingly. With proper guidance and cooperation, FEPA can be a powerful tool in combating corruption and promoting ethical business practices.

Penalties under FEPA include (from Transparency International)

Expanding Legal Protections: FEPA amendment U.S. bribery law (18 U.S.C. § 201) to make it illegal for foreign officials to corruptly demand, seek, receive, or accept bribes under two crucial circumstances:

From U.S. individuals or companies.
From any person while within the United States, in connection with obtaining or retaining business.

Stringent Penalties: Those found guilty of violating FEPA could face severe consequences, including:

Criminal fines of up to $250,000 or three times the value of the bribe, whichever is greater.
Prison sentences of up to 15 years.

Transparency and Accountability: FEPA introduces a vital accountability mechanism by requiring the DOJ to publish an annual report. It will include the following:

It examines the scale and nature of foreign bribe demands against American companies, shedding light on the extent of the issue.
It evaluates the effectiveness of U.S. diplomatic efforts aimed at safeguarding American businesses from foreign bribe demands.
It assesses the efforts of foreign governments to prosecute individuals involved in corrupt practices against American interests.

Matt Kelly and I take a deep dive into FEPA on this week’s Compliance into the Weeds. To listen, click here.

Tags compliance, Compliance into the Weeds, corruption, DOJ, extortion, FCPA, FEPA

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Extortion Payments, Opinion Release 22-01 and the FCPA

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Post date February 7, 2022
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Last week I wrote about the first Opinion Release for 2022, appropriately named Opinion Release 22-01. Several persons emailed me about my analysis and discussion, concluding with the point that there was no need for an Opinion Release on this issue. Jon May made that same argument publicly. Their collective thoughts were that this was a straight extortion claim made against the shipping company (Relator in 22-01) and as both the liberty and health of the ship captain were in immediate danger, there was no need to obtain an Opinion Release from the Department of Justice (DOJ) as this matter fell precisely within extortion and therefore outside the Foreign Corrupt Practices Act (FCPA).
I agree with all those who contacted me or put such an opinion in print. The shipping company could have made the payment without the DOJ Opinion Release and in my opinion not run afoul of the FCPA. There is certainly nothing wrong in being cautious and obtaining an Opinion Release on this issue, particularly given the expediency of the DOJ response to the company which sought the Opinion Release, which was literally given in the time span of a few days. However, such a need for cautiousness is not mandated under the FCPA.
If your company or client is facing a situation where its employees are being held and no charges are forthcoming, their liberty is at risk, if your employees are threatened at gun point or in some other manner where the physical safety is at risk, or if your employee’s health is put at risk, and money is demanded to relieve any of these situations; then the FCPA does not apply and your organization or the employees themselves can make the payment and not face FCPA risk.
It is incumbent to remember extortion payments are not illegal under the FCPA. Extortion payments are made for any action which threatens or demands payment for life, liberty, or health. These should be exempted out from your facilitation payments and your compliance program through specific language. You need to do this for a variety of reasons. First and foremost, your employees must understand that the company will support them if they are in any way threatened with harm, arrest or physical detention and/or their health/safety is threatened. As a compliance professional, you need to make sure they understand they need to do whatever they have to do to get themselves out of such a situation.
Some of the situations your employees might face are along the lines of the following:

Employees are stopped by police, military or paramilitary personnel, or militia (uniformed or not) at designated or other checkpoints or other places and a payment is demanded as a condition of passage of persons or property.
Employees are stopped at the airport by customs or passport control personnel or military personnel and a payment is demanded for entry or exit of persons or property.
Employees are asked by persons claiming to be security personnel, immigration control, or health inspectors to pay for an allegedly required inoculation or other similar procedure.

I once had a situation in which an employee was threatened with receiving a vaccination for yellow fever when he was departing a west African country. The employee paid some $85 to get out of that situation. I instructed him to submit it as a travel expense, writing out in a four-sentence paragraph, attached to his expense report. The documentation proved that payment was not a facilitation payment. It was clearly an extortion payment.
In Opinion Release 22-01, the ship captain of the Relator in question was detained by the un-named Country A with no written documentation of the charges. Moreover, according to the Opinion Release 22-01, “Requestor has provided information and documentation showing that the captain was at that time suffering from serious medical conditions that would be significantly exacerbated by the circumstances and conditions of his detention and created a significant risk to his life and well-being.”
If your employees pull up to a roadblock and government authorities pull guns, there is a clear threat of physical safety for those employees. They should pay whatever amount they can to extricate themselves from the situation as quickly as possible.
The key though in each of these situations is that it be properly documented, even if under the first and third scenario above, such documentation could be a handwritten statement by your employees who were a part of the extortion attempt. But more than simply the documentation is that you must specifically list extortion payments in your books and records, so you will not be suspected with hiding them by describing them as something else. It is crucial to train your employees specifically on the actions to take. In your policy, you should clearly state that if there is a threat to health, safety or liberty, it is not a facilitation payment but an extortion payment. Make sure that they understand what their rights are and what their obligations are to report it when they return to their office. Always remember, an extortion payment is not a FCPA violation.
In Opinion Release 22-01, the DOJ stated, “The facts presented by Requestor demonstrate that the proposed payment would not be made with corrupt intent. Based on the information from Requestor, the primary reason for the payment was to avoid imminent and potentially serious harm to the captain and the crew of the Requestor vessel. Under the FCPA, “[a] person acts corruptly if he acts voluntarily and intentionally, with an improper motive of accomplishing either an unlawful result or a lawful result by some unlawful method or means. The term ‘corruptly’ is intended to connote that the offer, payment, and promise was intended to influence an official to misuse his official position.”” This is a correct statement of the FCPA. But it is also a correct statement to say that extortion payments are not made illegal under the FCPA.

Tags extortion, FCPA

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Creative Lawyerin’ and Opinion Release 22-01

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Post date February 3, 2022
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Yesterday, I ended my blog post with a few words about what we call in Texas Creative Lawyerin in the context of a Securities and Exchange Commission (SEC) enforcement action where there was zero fine and penalty due to the extraordinary remediation engaged in by the recalcitrant company whose Chief Executive Officer (CEO) allegedly engaged in fraudulent and illegal behavior. While the rest of the world calls this ‘Creative Lawyering’; whether you say it with a Texas drawl or not, what it means is that lawyers are at times called upon to find creative ways of working within a legal framework. According to Summize, this means, “The outcome often relies upon a lawyer’s storytelling ability – how they package an argument or a party’s point of view in a suitable and meaningful way. These abilities, in addition to critical thinking, social skills, listening and reasoning, can be particularly useful in commercial law when working with multiple stakeholders.” Another way to say it is one of my most favorite phrases about lawyering which is as a lawyer, “you are only limited by your imagination.”
Background
We saw yet another example of such creativity in the first Opinion Release of 2022, 22-01. The Opinion Release procedure allows companies (Requestor) to submit questions to the Department of Justice (DOJ) to determine if they would see any potential Foreign Corrupt Practices Act (FCPA) violations from the actions the Requestor took or anticipates taking. The facts of the matter are quite unique however the discussion and analysis provide significant guidance for FCPA aficionados and compliance practitioners going forward. Additionally, and yet again, the matter does provide a clear example of how a lawyer can be creative and achieve a superior result for their client.
Requestor was required to anchor its ship to await repairs, refit and unloading in Country B. It was directed to a location to do so. However, the location was in the territorial waters of Country A, which promptly arrested the ship’s captain and held the crew aboard the ship. The captain had a medical condition which required treatment. Country B sent a third-party intermediary (intermediary) to demand a monetary payment in the amount of $175,000 for release of the captain. Requestor brought in its own third-party representative (representative) to negotiate the release of the captain with the intermediary, requesting the “formal basis for the payment — such as an invoice or other documentation setting forth charges or an enumerated fine amount — to ensure that the payment would be made pursuant to a fine or other penalty resulting from a legal or regulatory violation, if any.” The intermediary refused to provide any such documentation.
The Requestor also sought the assistance of Country B, US embassy representatives and “sought the assistance from other agencies within the U.S. government to end the captain’s detention and permit the Requestor vessel and its crew to leave Country A expeditiously. Requestor also requested that those agencies notify relevant Country A authorities of the detention of the captain and crew, and the confiscation of the Requestor vessel.” All such avenues were unsuccessful to obtain the release of the captain.
Analysis
The DOJ analysis reminded us all that the FCPA does not prevent payment of all bribes. A predicate for FCPA liability is that the bribe must be made with corrupt intent and used to ‘obtain or retain business.’ The DOJ found neither requirement was present under this fact pattern. First, “the primary reason for the payment was to avoid imminent and potentially serious harm to the captain and the crew of the Requestor vessel.” In fact, the payment was made under duress, and that “an individual who is forced to make payment on threat of injury or death would not be liable under the FCPA.”
Significantly, the payment was not made with an eye towards ‘obtaining or retaining business.’ Requestor was trying to do business in Country B and not Country A and inadvertently strayed into the territorial waters of Country A. The Opinion Release stated, “Requestor has no ongoing or anticipated business with Country A, and the entire episode appears to be the result of an error, emanating from the incorrect advice Requestor received about where to anchor its ship while waiting for the port of Country B to carry out mandatory repairs.” Moreover, the Requestor was transparent in its request for assistance from various US government agencies and representative. The DOJ concluded, “Put simply, under the specific facts presented by Requestor, there does not appear to be a sufficient business purpose associated with the payment — and relatedly, there is a lack of a corrupt intent under the FCPA.”
Discussion

Corrupt Intent in Obtaining and Retaining Business

First and foremost is the requirement for corrupt intent in the obtaining and retaining of business. As noted, neither was present here. It certainly helped that the Requestor had no commercial business with or in Country A. If not for the delay in getting into port in Country B, the Requestor would never have been in Country A. The Requestor had no “historical, pending, ongoing, anticipated, or sought after business relationships with government actors” in Country A.
2. Extortion Payments Not Prohibited Under the FCPA
Under the FCPA, an “individual who is forced to make payment on threat of injury or death would not be liable under the FCPA. Federal criminal law provides that actions taken under duress do not ordinarily constitute crimes.” Indeed, this was noted in the FCPA Resource Guide, 2^nd edition, which was cited in this Opinion Release for the following, “Situations involving extortion or duress will not give rise to FCPA liability because a payment made in response to true extortionate demands under imminent threat of physical harm cannot be said to have been made with corrupt intent or for the purpose of obtaining or retaining business.”
3. Speed of Decision
A separate note must be made and frankly kudos to the DOJ for the speed in which it handled this most unusual request. As stated in the footnotes, the DOJ received the request on October 19 and 20, 2021. Due to the highly unusual and exigent circumstances, including the risk of imminent harm to the health and well-being of the persons involved, the DOJ provided to the Requestor a preliminary response. Additional information was provided which led to this full Opinion Release.
It is this final piece which caps off the importance of Opinion Release 22-01. Every compliance practitioner should understand that this resource is available to them. I have counseled several companies over the years to use this process and they all declined, not wanting to “open the kimono” and disclose the facts to the DOJ for fear it would result in a FCPA enforcement action. Opinion Release 22-01 shows how being creative as a lawyer can lead to a superior result for your client, especially under the FCPA.