A New York federal district court judge has dismissed a Foreign Corrupt Practices Act (“FCPA”) claim against a former executive of Siemens, S.A. Argentina and Siemens Transportation Systems for lack of personal jurisdiction. The U.S. Securities and Exchange Commission (“SEC”) brought the civil FCPA enforcement action against Herbert Steffen for his role in an alleged scheme by which Siemens paid bribes to top government officials in Argentina to secure a project to create national identity cards.
Siemens settled related FCPA charges with the SEC and the U.S. Department of Justice (“DOJ”) in December 2008 for $800 million – the largest ever FCPA settlement (at least so far). The SEC then brought civil charges against Steffen and six of his colleagues in December 2011. And a year later, the DOJ brought criminal charges against Steffen and seven other former Siemens executives. All of the defendants named in the civil and criminal cases are non-U.S. citizens living outside the United States, a fact that led the DOJ to put its criminal case on hold just one day after the defendants’ arraignment.
At least one of Steffen’s co-defendants has settled with the SEC, and another is reportedly close to doing so. But Steffen fought the SEC’s claim, in part on the grounds that the court lacked personal jurisdiction over him. In his motion to dismiss, he pointed out that he had never been employed in the United States or traveled there on Siemens’ business during the period alleged in the complaint. The court agreed, holding that the SEC had failed to meet the Constitutional requirements of demonstrating that Steffen had sufficient minimum contacts with the United States or that asserting personal jurisdiction would be reasonable.
With regard to minimum contacts, the court pointed out that, even if Steffens’s actions were the proximate cause of Siemen’s falsified SEC filings, he did not actually authorize the bribes or direct, order, or know about the alleged cover-up. To find personal jurisdiction under such circumstances, said the court, would subject to the jurisdiction of U.S. courts “every participant in illegal action taken by a foreign company subject to U.S. securities laws.” Such an outcome would, according to the court, apply an inappropriate tort-like foreseeability standard to the FCPA.
The court also held that personal jurisdiction was unreasonable, given Steffen’s lack of geographic ties to the United States, his poor proficiency in English, and the court’s limited interest in adjudicating the matter. In so holding, the court noted that the SEC and DOJ had already obtained comprehensive remedies against Siemens, and Germany had resolved an action against Steffen individually.
While the outcome in this case makes sense, it may have come as quite a shock to the SEC which, only a few months ago, asserted personal jurisdiction under the FCPA based on accomplice liability alone. As we discussed at the time, that broad basis for personal jurisdiction asserted in the FCPA Resource Guide lacked any real legal support. With Steffen, it seems the SEC tried this theory of personal jurisdiction and lost. Whether the court would have found personal jurisdiction in a criminal case – which would presumably focus on the alleged bribery, not the falsification of financial documents – is a different matter. In such a case, a court might find sufficient minimum contacts with the United States with regard to executing the bribery scheme to assert personal jurisdiction.
Whether the court would have found personal jurisdiction in a criminal case – which would presumably focus on the alleged bribery, not the falsification of financial documents – is a different matter. In such a case, a court might find sufficient minimum contacts with the United States with regard to executing the bribery scheme to assert personal jurisdiction.
As with other assertions in the FCPA Resource Guide, it is clear that additional case law is necessary to test the scope of personal jurisdiction. But the Steffen case is illuminating: it suggests that the government’s sweeping claims of power under the FCPA may not go unchecked by the courts.