Issue link: https://digital.shearman.com/i/1389983
19 Federal prosecutors, however, opposed PetroEcuador's motion for restitution. The government argued that PetroEcuador was not a "victim" within the meaning of the Crime Victims' Rights Act because it was a state-owned instrumentality, nor did PetroEcuador establish a sufficient causal link between the harm it suffered and Ripalda's actions under the Mandatory Victim Restitution Act. Interestingly, the government also argued that PetroEcuador was complicit in the bribery and money laundering schemes which precluded it from being a victim under either statute. Although the government acknowledged that the text of either statute does not strictly exclude complicit entities, the government reasoned that policy concerns justified the denial of restitution. Otherwise, the court would be "involved in redistributing funds among wholly guilty co-conspirators, where one or more co-conspirators may have cheated their comrades." Indeed, here, PetroEcuador argued that its employees in its Division of Refining had defrauded it by accepting bribes while the entity itself was unaware. Under the government's theory, PetroEcuador was both the victim of the bribery scheme and an agent carrying it out. However, inconsistent this position may be, it seems to have found purchase in federal courts. The U.S. District Court for the Eastern District of New York recently ruled against PetroEcuador's restitution request in a related action against another participant in the bribery scheme. In that case, the court found that PetroEcuador's employees had acted in part to benefit the company by obtaining the contracts with the approval of many officials at the highest level of the company. In the Court's words, "Under these circumstances, such conduct is attributable to the company and precludes an award of restitution." In a similar case, the Venezuelan government's claim for restitution on behalf of PdVSA, of which it is the sole shareholder, against a defendant accused of bribing its officials was denied on June 18, 2021. In her decision, Judge Kathleen Williams of the Southern District of Florida stated that the state oil company was "in various ways, complicit in" bribery and money laundering schemes. As such, PdVSA was not entitled to victim status under the MVRA. The Biden Administration's recent push to fight corruption with an emphasis on targeting foreign actors who facilitate and profit from bribes signals that the DOJ will continue to pursue cases where the state is both conspirator and victim. However, the PdVSA case provides some insight as to how the government may negotiate this legal paradox. In its pleadings arguing against PdVSA's right to restitution, the DOJ argued in part that the PdVSA was not a victim because the victim of crimes like money laundering, tends to be society as a whole. This positioning rests on the idea that the victim of bribery is the public fisc or commonwealth, not the employee or SOE that may have benefitted from the bribe arrangement. IN COOPERATING WITH THE DOJ, COGNIZANT MAY HAVE IMPROPERLY INTERFERED WITH THE PROSECUTION OF ITS FORMER PRESIDENT AND CHIEF LEGAL OFFICER In the long-running FCPA action against Cognizant Technology Solutions' former officers, defendant Steven Schwartz, the former general counsel of the company, accused the government of having potentially directed, or at least reaped the benefits of, repeated, unauthorized contact with Schwartz's lead investigator by his former employer. Schwartz and his co-defendant Gordon Coburn were charged with FCPA violations for a $2 million bribe to Indian officials to secure a construction planning permit and have pleaded not guilty and are awaiting trial. The Justice Department issued a declination to Cognizant itself in 2019, but it continues to prosecute Schwartz and Coburn, who pleaded not guilty. According to Schwartz, his lead investigator shared confidential information with Cognizant and "truly act[ed] as a spy in the defense camp." Although Schwartz's allegations fall short of claiming that Cognizant shared that information with federal prosecutors, he is seeking to compel Cognizant and federal prosecutors to provide documents concerning interactions between Cognizant and the Justice Department. Schwartz highlighted the risks arising from the fact that Cognizant is cooperating with the prosecutors in the criminal case brought against him, especially the concern that the government outsourced its investigation to the company. In response, Cognizant represented to the court that its lawyers "have acted professionally and appropriately" and denied any "intrusion into the defense camp." Although neither PetroEcuador's restitution request nor Schwartz's motion to compel have led to a finding that the government engaged in inappropriate conduct, these cases emphasize the bareknuckle tactics of federal prosecutors in criminal FCPA actions. Commentators will remain observant, especially of the Schwartz allegations, of whether the government has overreached in attempting to secure convictions. RECENTLY ENACTED AND PENDING LEGISLATION NDAA EXPANDS SCOPE OF SUBPOENA POWER OF RECORDS HELD BY FOREIGN BANKS On January 1, 2021, the National Defense Authorization Act of 2021 (NDAA) became law. The NDAA includes significant anti-money laundering and Bank Secrecy Act (BSA) reforms and focuses on modernizing the current anti-money laundering regime to adapt to new and emerging threats, increase cooperation among governmental agencies, and improve the collection and reporting of beneficial ownership information. One part of the NDAA, the Anti-Money Laundering Act of 2020 (AMLA), aims to expand the scope of prosecutorial subpoena power for foreign banks that maintain correspondent accounts in the U.S. Specifically, the