Issue link: https://digital.shearman.com/i/1265921
UNUSUAL DEVELOPMENTS FCPA DIGEST July 2020 25 COVID-19 AND INCREASED BRIBERY RISKS COVID-19 poses various risks and challenges to FCPA enforcement, including delays in enforcement activity due to court closures and a limited ability to conduct in-person investigations. More broadly, economic instability has increased the risk of bribery and fraud, especially in the healthcare industry. Significantly, U.S. enforcement agencies have indicated that FCPA enforcement activity has remained consistent and is expected to increase in coming months. In May, Charles Cain, the SEC's FCPA Unit Chief, announced that the Unit is "still very much focused on FCPA violations." Daniel Kahn, Senior Deputy Chief of the DOJ's Fraud Section similarly expressed a commitment to continuing ongoing FCPA investigations and opening new investigations. Enforcement officials highlighted specific challenges, including constraints on business supply chains, safety protocols, and data privacy in this environment. Certain industries face particular risk. As COVID-19 has led to shortages in hospital beds, ventilators, and other hospital equipment, officials have warned of the increasing risk of bribery. Before the pandemic in 2019, bribery rates in hospitals were reported at 14% in Africa and the Middle East and 10% in Latin America and the Caribbean. 8 U.S. officials expect the pandemic could increase willingness to participate in bribery schemes such as payments to customs officials to obtain personal protective equipment. As a reminder, bribes may not be monetary in nature, but include other transfers of value like insider knowledge. Additionally, corruption and price gouging practices may increase as governments spend more on treatment and vaccine research and providers seek to profit from limited supplies. These concerns point to a need for greater transparency on public and private spending, as well as procurement processes. The DOJ and SEC have declared that they will continue to monitor businesses' compliance with internal controls and disclosure obligations, and expect internal investigations to continue, with the help of virtual platforms. Agencies will take into consideration cooperating businesses' explanations as to why they are unable to satisfy a DOJ request or pay claims. Enforcement officials have emphasized that businesses should continue as able with regular business activities while working with these new limitations. PENDING LEGISLATION: THE COUNTERING RUSSIAN AND OTHER OVERSEAS KLEPTOCRACY (CROOK) ACT On July 18, 2019, the Countering Russian and Other Overseas Kleptocracy (CROOK) Act was introduced in the U.S. House of 8 Corruption and the Coronavirus, TRANSPARENCY INT'L (Mar. 13, 2020), https://www.transparency.org/en/news/corruption-and-the-coronavirus. Representatives to establish an anti-corruption fund designed to assist foreign countries in their anti-corruption efforts. The legislation contemplated funding such efforts through a charge of 5% on each civil and criminal penalty imposed on companies that have violated the Foreign Corrupt Practices Act (FCPA). The House bill provides a preference of disbursements to countries that "are undergoing historic opportunities for democratic transition," are "important to [the U.S.'s] national interests," and where "foreign assistance could significantly increase the chance of a successful [democratic] transition." On December 11, 2019, legislation was introduced in the Senate which proposed funding a similar anti-corruption fund by charging companies facing FCPA enforcement of over $50 million in related penalties an additional $5 million. The Senate bill provides a preference for distribution of funding to countries that meet the same requirements as those set forth in the House's bill. Under the Senate's proposed bill, the limitation to enforcement actions with combined civil and criminal FCPA penalties over $50 million will result in more limited funding, whereas the House bill's application to all FCPA enforcement actions would affect a greater number of corporate actions across the board. FCPA CONVICTIONS SUCCESSFULLY CHALLENGED IN COURT: BAPTISTE, BONCY, AND HOSKINS Three defendants were offered a measure of reprieve this year as two district courts granted post-trial motions, overturning jury convictions of FCPA-related counts in the cases of United States v. Hoskins and United States v. Baptiste & Boncy. Lawrence Hoskins, the former senior vice president for the Asia region at Alstom S.A., allegedly acted as an agent of Alstom Power Inc. in furtherance of the Indonesian power project bribery scheme discussed above in the Kusunoki et al. case. Alstom S.A. settled related charges with the DOJ for $772.3 million in 2015. In November 2019, as we discuss in our previous Trends and Patterns, a jury convicted Hoskins of six counts of violating the FCPA, three counts of money laundering, and two counts of conspiracy. The focus at trial was whether Hoskins acted as an agent for Alstom's U.S. subsidiary, which the jury determined was the case. The Second Circuit had heard an interlocutory appeal by the DOJ in 2018 regarding the extent to which the government could assert jurisdiction over a foreign national. The court found that the FCPA could only reach foreign conduct by foreign nationals if they are agents, employees, officers, directors, or shareholders of an American issuer or domestic concern. As Hoskins was a U.K. national employed at a European subsidiary of Alstom and never personally took any action related to the bribery scheme in the