On July 17, the Department of Justice (“DOJ”) announced a settlement of FCPA allegations against Louis Berger International, Inc. (“LBI”), a privately-held consulting firm that provides engineering, architecture, program, and construction management services.1 In connection with alleged bribery-related misconduct in India, Indonesia, Kuwait, and Vietnam, the DOJ and LBI agreed to a three-year Deferred Prosecution Agreement (“DPA”) containing conditions that include 1. United States v. Louis Berger International, Inc., No. 15-3624 (MF), Complaint (D.N.J. filed July 7, 2015); Order for Continuance, id. (D.N.J. July 7, 2015). Continued on page 2 Also in this issue: 7 “Logrolling” and Corruption: What the McDonnell and Blagojevich Decisions Say About U.S. Anti-Bribery Law Click here for an index of all FCPA Update articles If there are additional individuals within your organization who would like to receive FCPA Update, please email firstname.lastname@example.org or email@example.com www.debevoise.com FCPA Update 2 July 2015 Volume 6 Number 12 the appointment of a compliance monitor. As part of resolving FCPA conspiracy charges, the company also agreed to pay a $17.1 million penalty.2 Several factors, including LBI’s self-reporting, cooperation, and remediation, were cited by the DOJ as reasons for entering into a DPA instead of a plea agreement, and to provide the presumptively maximum five-point reduction to LBI’s culpability score for purposes of calculating the financial penalty portion of the settlement. The resolution follows a previous settlement with the U.S. government for alleged improper billing, and LBI’s one-year conditional debarment by the World Bank in February 2015.3 The same day the LBI DPA was announced, the DOJ also announced that two former LBI Senior Vice Presidents had each pleaded guilty to one count of conspiring to violate and one substantive count of violating the FCPA’s anti-bribery provisions.4 And even beyond its debarment and future obligations to its monitor, LBI’s difficulties may be far from over. In particular, the case raises important and interesting questions regarding enforcement of the recently-enacted Justice for Victims of Trafficking Act of 2015 (the “JVTA”),5 which altered the United States District Courts’ procedures for handling DPAs. Under the JVTA, as of May 29, 2015, the Crime Victims Rights Act (codified at 18 U.S.C. §§ 3771 et seq.) has been amended to establish for each “crime victim” “[t]he right to be informed in a timely manner of any plea bargain or deferred prosecution agreement,” thus facilitating any “crime victim’s” “right to full and timely restitution as provided in law,”6 providing, in addition, for appellate review of any denial of restitution by a trial court under “ordinary standards of appellate review.”7 The Latest FCPA Deferred Prosecution Agreement: Will Congress’s New DPA Procedures Reach FCPA DPAs, and Will Non-U.S. Governments Sue as “Crime Victims” Under the CVRA? Continued from page 1 2. DOJ Press Rel. 15902, Louis Berger International Resolves Foreign Bribery Charges (July 17, 2015), http://www.justice.gov/opa/pr/louisberger-international-resolves-foreign-bribery-charges. 3. See id.; see also World Bank IBRD Press Rel., World Bank Group Debars Louis Berger Group (Feb. 4, 2015), http://www.worldbank.org/en/ news/press-release/2015/02/04/world-bank-group-debars-louis-berger-group. 4. See DOJ Press Rel. 15902. 5. Pub. L. 114-22 (May 29, 2015). 6. Id. 7. Id. These provisions, while worded generally, were intended to encourage crime victims to come forward and be heard. See 161 Cong. Rec. S1467 (2015) (remarks of Sen. Hoeven); id. S1653 (2015) (remarks of Sen. Klobuchar). The amendment’s author in the House of Representatives stated that the amendment’s purpose was to ensure that crime victims’ rights were respected throughout the criminal investigation process, rather than only at the trial stage. See “Franks’ Crime Victims Amendment Passes House as Part of Justice for Victims of Trafficking Act,” (May 20, 2014), https://franks.house.gov/press-release/franks-crime-victims-amendment-passes-house-partjustice-victims-trafficking-act (last visited July 21, 2015). Furthermore, the amendment is intended to ensure that victims are notified of the resolution of cases even when no formal criminal charges are filed, as is the case when a DPA is pursued. Id. Continued on page 3 www.debevoise.com FCPA Update 3 July 2015 Volume 6 Number 12 The Latest FCPA Deferred Prosecution Agreement: Will Congress’s New DPA Procedures Reach FCPA DPAs, and Will Non-U.S. Governments Sue as “Crime Victims” Under the CVRA? Continued from page 2 The fact that the LBI DPA did not provide for restitution to any of the governments involved in LBI’s alleged bribery raises the question of whether the DPA, which was approved promptly after it was submitted to the District Court for the District of New Jersey, will withstand challenge should restitution be sought by any of the governments involved. That question turns, in part, on whether foreign governments may ever seek restitution under the CVRA, an issue that remains open in the federal courts of appeals, and also whether foreign governments have standing to seek restitution in circumstances in which the DOJ resolves a criminal matter by a DPA rather than by plea. Below, we review these issues in light of the history of non-U.S. government efforts to seek restitution in FCPA cases, and risks the JVTA poses for FCPA and other white collar settlements in which non-U.S. governments may be interested as “victims.” Past Foreign Government Restitution Claims and Implications Under the JVTA Despite the U.S. government’s repeated statements that foreign bribery deprives the citizens of foreign countries of the value of the honest services of their own officials, driving up costs of public procurement overseas, the DOJ’s record in supporting foreign government efforts to obtain restitution for the losses they have suffered by reason of conduct that violates U.S. law is far more mixed. In the principal case to have been decided in connection with FCPA-related claims for restitution, the United States District Court for the Southern District of Florida and the United States Court of Appeals for the Eleventh Circuit each rejected, at DOJ’s urging, claims by Costa Rican public power company Instituto Costarricense de Electricidad (“ICE”) that it had been a victim of FCPA bribery offenses committed by the French telecom company Alcatel Lucent SA.8 “Despite the U.S. government’s repeated statements that foreign bribery deprives the citizens of foreign countries of the value of the honest services of their own officials, driving up costs of public procurement overseas, the DOJ’s record in supporting foreign government efforts to obtain restitution for the losses they have suffered by reason of conduct that violates U.S. law is far more mixed.” 8. Bruce E. Yannett, Philip Rohlik, and David M. Fuhr, “Victim or Villain: A Costa Rican State Entity’s Claim for Restitution from Alcatel,” FCPA Update Vol. 2, No. 11 (June 2011), http://www.debevoise.com/insights/publications/2011/06/fcpa-update. Continued on page 4 www.debevoise.com FCPA Update 4 July 2015 Volume 6 Number 12 9. Id. (citations omitted). 10. 18 U.S.C. §§ 3663A et seq. 11. Id. § 3663A(a)(2). 12. In re Her Majesty the Queen in Right of Canada, 785 F.3d 1273, 1276 (9th Cir. 2015). 13. See United States v. Zhang, No. 14-1382, 2015 WL 3652602, at *2 (1st Cir. June 15, 2015) (citing cases). Applying the deferential standard applicable to petitions for mandamus, the Eleventh Circuit let stand the District Court’s conclusion that ICE’s management had been so thoroughly involved in the corruption that it would be improper to award ICE restitution, and, in addition, computing the appropriate restitutionary amount would be unduly complex in that ICE had received at least some value for the goods sold to it.9 The Eleventh Circuit’s decision did not address even more basic questions of whether non-U.S. governments may seek restitution at all under the CVRA and its sister statute, the Mandatory Victims Restitution Act (“MVRA”),10 which requires restitution for any “offense against property” under Title 18, to any “victim,” defined as “a person directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered including, in the case of an offense that involves as an element a scheme, conspiracy, or pattern of criminal activity, any person directly harmed by the defendant’s criminal conduct in the course of the scheme, conspiracy, or pattern.”11 In May of this year, the United States Court of Appeals for the Ninth Circuit avoided that question, rejecting a claim by Canada for restitution following a conviction of an individual for fraudulent schemes involving renewable fuel credits, holding that “Canada’s claim for restitution is based on events that are insufficiently related to the schemes set forth in the indictment and the facts supporting [defendant’s] guilty plea.”12 Yet only a few weeks later, the United States Court of Appeals for the First Circuit joined five sister courts of appeals in holding that the United States may be a “victim” under the CVRA and MVRA, notwithstanding the general rule that the word “person” does not include the sovereign, suggesting that, in the appropriate circumstances, there may well be non-U.S. governments able to invoke the same logic to secure restitution in the FCPA context.13 Even so, foreign governments seeking restitution will continue to face obstacles. FCPA conspiracy charges should, all else being equal, trigger a right to mandatory restitution because they constitute “an offense against property under this title,” i.e., Title 18 of the United States Code, obviating the need to shoehorn FCPA The Latest FCPA Deferred Prosecution Agreement: Will Congress’s New DPA Procedures Reach FCPA DPAs, and Will Non-U.S. Governments Sue as “Crime Victims” Under the CVRA? Continued from page 3 Continued on page 5 www.debevoise.com FCPA Update 5 July 2015 Volume 6 Number 12 14. 18 U.S.C. § 3663A(a). 15. In the past, some courts held that foreign sovereigns were “persons” within the meaning of the Fifth Amendment, applying the “minimum contacts” analysis for personal jurisdiction. See Altmann v. Republic of Austria, 142 F. Supp. 2d 1187, 1207 (C.D. Cal. 2001). More recently, courts have held that sovereigns are not “persons” in that context and that certain enterprises that are wholly-owned by foreign states are foreign instrumentalities that are not entitled to constitutional due process protections. See Howe v. Embassy of Italy, 68 F. Supp. 3d 26, 32 (D.D.C. 2014); see also Frontera Resources Azerbijan Corp. v. State Oil Co. of Azerbijan Republic, 582 F.3d 393, 399 (2d Cir. 2009); GSS Group Ltd. v. National Port Authority, 680 F.3d 805, 814 (D.C. Cir. 2012) (foreign state-owned corporations that are sufficiently independent so as not to be “agencies or instrumentalities” still able to constitutionally challenge the assertion of personal jurisdiction). It is not entirely clear that this analysis of the due process rights of foreign states and state-owned entities would govern CVRA/MVRA issues. offenses into a category that would otherwise trigger the restitution provisions of federal law. But, issues of complicity on the part of foreign governments in bribery scenarios as well as the complexity of calculating restitution, as in the ICE matter, will undoubtedly haunt foreign government restitution claims in such cases. In DPA cases such as LBI, an even more serious obstacle lies in the fact that, absent a guilty plea or conviction after trial, there is no apparent right to restitution, which the MVRA renders contingent upon a District Court’s action in “sentencing a defendant convicted of an [applicable] offense.”14 In sum, while the JVTA potentially grants victims of bribery, including, possibly foreign governments, “the right to be informed in a timely manner” of any DPA that the United States is considering seeking to have approved, the question whether any breach of this mandate is subject to redress remains to be litigated. Foreign sovereigns seeking restitution orders in a context in which the DOJ wishes to simply settle and end an investigation likely would face significant opposition arguing that they lack a protectable property interest in a restitution award.15 In this context, it is hardly surprising that the LBI DPA was approved with little fanfare, and, to date, there have been no filings by foreign governments seeking to upset it. Foreign governments could still potentially seek to undo the DPA on the ground that they had, at a minimum, a statutory right to be heard before the Court approved the DPA, a point that appears possibly to have been overlooked by the DOJ, at least based on the public record of communications as evidenced on the Court’s docket. Unless a collateral challenge is made to the DPA, however, it will be difficult to know what actions the DOJ took, if any, to comply with the provisions of the JVTA, or whether DOJ believes that there is some other basis upon which the JVTA’s DPAnotice obligations are inapt. For now, it seems that the larger risks to DPAs and other forms of settlement of FCPA criminal proceedings are those arising from the views of district judges who oversee their entry and the sense of those judges that particular DPAs are fair and just. As the United States Court of Appeals for the D.C. Circuit weighs whether to uphold a District Court’s decision to reject The Latest FCPA Deferred Prosecution Agreement: Will Congress’s New DPA Procedures Reach FCPA DPAs, and Will Non-U.S. Governments Sue as “Crime Victims” Under the CVRA? Continued from page 4 Continued on page 6 www.debevoise.com FCPA Update 6 July 2015 Volume 6 Number 12 a DPA in the Fokker Services BV sanctions matter, it seems more likely that judicial independence, rather than additional claims by foreign nations, will upset the prevailing modes of resolving corporate FCPA matters through settlements.