Doug Cornelius on compliance for private equity real estate
U.S. v. King (.pdf) was a FCPA case that came out of the Eight Circuit Court of Appeals on appeal from the USDC for the Western District of Missouri. The defendant was convicted of violating the Foreign Corrupt Practices Act in connection with a scheme to bribe Costa Rican officials for valuable land concessions to develop a port in Limon.
Like most FCPA cases, there is little discussion of the FCPA itself.
Section 3.400 of the Federal Acquistion Regulations limit the ability of the federal governmen to enter into contingent fee arrangements. Federal contracts require the insertion of the Covenant Against Contingent Fees:
(a) The Contractor warrants that no person or agency has been employed or retained to solicit or obtain this contract upon an agreement or understanding for a contingent fee, except a bona fide employee or agency. For breach or violation of this warranty, the Government shall have the right to annul this contract without liability or, in its discretion, to deduct from the contract price or consideration, or otherwise recover, the full amount of the contingent fee.
(b) “Bona fide agency,” as used in this clause, means an established commercial or selling agency, maintained by a contractor for the purpose of securing business, that neither exerts nor proposes to exert improper influence to solicit or obtain Government contracts nor holds itself out as being able to obtain any Government contract or contracts through improper influence.
“Bona fide employee,” as used in this clause, means a person, employed by a contractor and subject to the contractor’s supervision and control as to time, place, and manner of performance, who neither exerts nor proposes to exert improper influence to solicit or obtain Government contracts nor holds out as being able to obtain any Government contract or contracts through improper influence.
“Contingent fee,” as used in this clause, means any commission, percentage, brokerage, or other fee that is contingent upon the success that a person or concern has in securing a Government contract.
“Improper influence,” as used in this clause, means any influence that induces or tends to induce a Government employee or officer to give consideration or to act regarding a Government contract on any basis other than the merits of the matter.
The Anti-Kickback Act of 1986, 41 U.S.C. § 51 et seq., modernized and closed the loopholes of previous statutes applying to government contractors. The 1986 law attempts to make the anti-kickback statute a more useful prosecutorial tool by expanding the definition of prohibited conduct and by making the statute applicable to a broader range of persons involved in government subcontracting. Prosecutions under these statutes must establish the following:
Section 3.201 of the Federal Acquisition Regulations requires the Gratuities Clause in all federal government contracts:
(a) The right of the Contractor to proceed may be terminated by written notice if, after notice and hearing, the agency head or a designee determines that the Contractor, its agent, or another representative—
(1) Offered or gave a gratuity (e.g., an entertainment or gift) to an officer, official, or employee of the Government; and
(2) Intended, by the gratuity, to obtain a contract or favorable treatment under a contract.
(b) The facts supporting this determination may be reviewed by any court having lawful jurisdiction.
(c) If this contract is terminated under paragraph (a) of this clause, the Government is entitled—
(1) To pursue the same remedies as in a breach of the contract; and
(2) In addition to any other damages provided by law, to exemplary damages of not less than 3 nor more than 10 times the cost incurred by the Contractor in giving gratuities to the person concerned, as determined by the agency head or a designee. (This paragraph (c)(2) is applicable only if this contract uses money appropriated to the Department of Defense.)
(d) The rights and remedies of the Government provided in this clause shall not be exclusive and are in addition to any other rights and remedies provided by law or under this contract.
The Federal Acquisition Regulations can also be found in the 48 CFR Chapter 1.
18 U.S.C. § 201 prohibits the bribery of public officials.
“Public Officials” means “Member of Congress, Delegate, or Resident Commissioner, either before or after such official has qualified, or an officer or employee or person acting for or on behalf of the United States, or any department, agency or branch of Government thereof, including the District of Columbia, in any official function, under or by authority of any such department, agency, or branch of Government, or a juror” 18 U.S.C. § 201(a)(1).
Scott Mitchell, Chairman and of the Open Compliance & Ethics Group, and Brett Curran, Director of GRC and Privacy at Axentis, conducted a webinar on the Code of Conduct. The powerpoint slides are free, but the webinar itself requires a premium membership.
These are some metrics they propose for measuring the performance of a Code of Conduct:
Avon, the beauty products seller, announced that is voluntarily conducting an investigation of its China Operations, focusing on compliance with the Foreign Corrupt Practices Act.
“The Company, under the oversight of the Audit Committee, commenced in June 2008 an internal investigation after it received an allegation that certain travel, entertainment and other expenses may have been improperly incurred in connection with the Company’s China operations. The company has voluntarily contacted the Securities and Exchange Commission and the United States Department of Justice to advise both agencies that an internal investigation is underway. The internal investigation is in its early stage and no conclusion can be drawn at this time as to its outcome.”
Richard L. Cassin, on The FCPA Blog, notes that China forced Avon to market its products through shops and boutiques and restricted direct selling. But two years ago, Avon convinced regulators to allow door-to-door sales.
James H. Fries, Jr., the Director of Financial Crimes Enforcement Network at the U.S. Department of Treasury spoke about The Objectives and Conduct of Bank Secrecy Act Enforcement at the ABA/ABA Money Laundering Enforcement Conference in Washington D.C. on October 20, 2008.
“An essential principle of FinCEN’s enforcement program is to uphold the public policy choice made by the Congress when it enacted the BSA in 1970, and expanded it with the passage of Annunzio-Wylie Anti-Money Laundering Act of 1992, The Money Laundering Suppression Act of 1994, and the USA PATRIOT Act of 2001.”
Goodwin Procter LLP published a summary of the New Massachusetts Regulations to Mandate Comprehensive Information Security Requirements.
The regulations have broad coverage, applying to all entities that own, license, store or maintain personal information about residents of the Commonwealth of Massachusetts, regardless of whether or not the entity has operations in the Commonwealth. Federally regulated financial and other entities are not exempt from the Massachusetts regulations, raising the question of whether entities that are in compliance with Gramm-Leach-Bliley, HIPAA and/or SEC information security requirements will be considered to meet the new Massachusetts requirements. Significantly, “personal information” has a somewhat limited scope, and is defined as a resident’s first and last name or first initial and last name in combination with a Social Security number, driver’s license number or financial account number. The regulations impose two principal requirements: (i) the duty to develop, implement and maintain a very comprehensive written information security program that meets very specific requirements; and (ii) the obligation to meet specific computer information security requirements.
Cynthia Larose, Elissa Flynn-Poppey and Julia M. Siripurapu of Mintz Levin Put together an alert with a a summary of the new Massachusetts Data Security Regulations: Privacy and Security Alert: Massachusetts New Data Security Regulations Effective January 1, 2009.
The alert has a summary of some of the changes to the changes to the regulations since comments were made in january 2008.