Author: Doug Cornelius

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Placement Agents Fight Bans

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Placement agent bans were put in place at the New York State Common Retirement Fund and the New Mexico State Investment Council because of the pay-to-play scandals at those pension funds. Now the SEC has proposed a ban on using placement agents when seeking capital investments from public pension funds.

A coalition of placement agents is urging the SEC to pull the plug on its proposed rule, convinced it could put some of them out of business. Placement agents are accusing the Securities and Exchange Commission of regulatory overkill, saying the proposal would indiscriminately hammer both good and bad firms.

The coalition is offering an alternative proposal:

Placement agents would be barred from making political contributions to anyone in the decision-making chain of command for public pension fund investments. The placement agent would disclose its fee arrangement with the fund’s general partner to any potential limited investment partners. Placement agents must be registered with the SEC or the Financial Industry Regulatory Authority.

There are also a few comments already submitted on the SEC’s Proposed Rule for Political Contributions by Certain Investment Advisers.  Ted Carroll’s comment is short and straight to the point:

“Please stop all this nonsense. Placement agents provide a valuable service to small and midsized investment firms and 99.99% are honest diligent people. Its offensive to see the many large political donors involved in the recent pay to play schemes get to pay fines and adopt hollow policies to avoid real prosecution. Catch and punish the guilty, leave the innocent alone.”

The comment from Claude R. Parenteau points out that the actions that precipitated the SEC proposal were already illegal activities under current regulations.

The comments also point out that the restriction could disadvantage smaller investment advisers who use placement agents to outsource marketing and sales because they can’t afford the overhead of having their own full-time marketing and sales staff.

    References:

    Indemnification for Investment Professionals by Their Funds

    collins-aikman

    A recent case decided some issues relating to the indemnification of private equity and venture capital professionals by their affiliated funds in connection with their service as directors and officers of their portfolio companies. Stockman v. Heartland Industrial Partners, L.P., (July 14, 2009), Delaware Chancery Court.

    David A. Stockman and J. Michael Stepp were investment professionals at Heartland Industrial Partners, L.P. (“Heartland”). They also served as officers and directors of Collins & Aikman Corporation (“C&A”), and joined C&A at the direction of Heartland.

    C&A got itself into some accounting trouble. That also got Stockman and Stepp involved in civil and criminal proceedings in connection with their roles at C&A. Stockman and Stepp sought advancement of legal fees and indemnification from C&A, and when C&A’s insurance was exhausted, they sought advancement of legal fees and indemnification from Heartland. Heartland refused to advance legal expenses to Stockman or Stepp unless they agreed to additional conditions not written in the Partnership Agreement.

    Stockman and Stepp argued that both advancement and indemnification to them are mandatory under Heartland’s Partnership Agreement.

    Heartland took the position that the Partnership Agreement granted it the discretion to impose additional conditions beacuse of the requirement in the advancement provision that Heartland’s General Partner give prior approval. Heartland contended that advancement is not mandatory when its General Partner has refused to provide written approval. Also, Heartland argued that indemnification is not mandatory because Stockman and Stepp must prove that the conduct giving rise to the underlying dismissed criminal action met three requirements set forth in the Partnership Agreement. Heartland asserted that it is Stockman and Stepp’s burden to demonstrate that they i) did not breach their duties to the partnership; ii) did not knowingly violate applicable law; and iii) did not act with scienter.

    The court found in favor of Stockman and Stepp on both their advancement and indemnification claims “because the plain language of the Partnership Agreement does not unambiguously support Heartland’s reading of that document.” To the extent there is any ambiguity in the Partnership Agreement regarding advancement, that ambiguity must be resolved against the partnership in favor of the officers.

    The Partnership Agreement contains a broad indemnification provision:

    To the fullest extent permitted by law, the Partnership agrees to indemnify and save harmless each of the Indemnitees from and against any and all claims, liabilities, damages, losses, costs and expenses . . . of any nature whatsoever, known or unknown, liquidated or unliquidated, that are incurred by any Indemnitee and or to which such Indemnitee may be subject by reason of its activities on behalf of the Partnership or in furtherance of the interest of the Partnership or otherwise arising out of or in connection with the affairs of the Partnership, its Portfolio Companies or any Alternative Vehicle . . . provided, that: (i) an Indemnitee shall be entitled to indemnification hereunder only to the extent that such Indemnitee’s conduct (A) was in or was not opposed to the best interests of the Partnership, (B) in the case of a criminal action or proceeding, the Indemnitee had no reasonable cause to believe his conduct was unlawful, or (C) did not constitute fraud, bad faith, willful misconduct, gross negligence, a violation of applicable securities laws or any material breach of the Agreement or the Advisory Agreement . . .

    and advancement rights under certain conditions:

    Expenses reasonably incurred by an Indemnitee in defense or settlement of any claim that may be subject to a right of indemnification hereunder shall be advanced by the Partnership prior to the final disposition thereof upon receipt of an undertaking by or on behalf of the Indemnitee to repay such amount to the extent that it shall be determined ultimately that such Indemnitee is not entitled to be indemnified hereunder. No advances shall be made by the Partnership under this Section 4.4(b)(i) without the prior written approval of the General Partner or (ii) in connection with an action brought against an Indemnitee by a Majority in Interest of the Limited Partners.

    So, advancement of expenses to Heartland Indemnitees is mandatory under the Partnership Agreement, subject to the requirement of prior written approval from the General Partner.

    You may want to check the indemnification and advancement provisions of your partnership agreements to see how well they work on the basis of this decision.

    References:

    FCPA Opinion Procedure Release 09-01

    doj

    The Department of Justice released its latest Opinion Procedure Release under the FCPA: 09-01

    The Requestor designs and manufactures a specific type of medical device. The Requestor’s competitors already operate and sell their products to the government of a certain foreign country and the Requestor wants to enter that market.

    A senior government official laid out the foreign government’s plan to provide a specific type of medical device for patients in need in the country. The government intends to purchase the medical devices, and then subsidize the cost of such devices when it resells them to patients. The Requestor and its competitors would be allowed to participate in the program.

    To get the foreign medical centers familiar with their product, the government official suggested free samples for evaluation. The Requestor must have been nervous given that a sample size of 100 units was needed for evaluation. Since each cost $19,000, that was a $1.9 million payment involving a foreign official.

    Ten different medical centers will each get ten medical devices. The Requestor will select the centers that will participate in order to ensure that the participating centers have the requisite expertise, resources, and experience to successfully participate in the evaluation.

    The obvious comparison is to the Iowa Beef Packers request to send free samples addressed in FCPA Review Procedure Release 81-02. But that only involved 700 pounds of beef, with an estimated total value of less than $2,000.

    The key element in the DOJ’s decision in this latest release is that the devices are being provided to the foreign government, not to individual government officials. Close family members of the Government Agency’s officers or employees, working group members, or employees of the health centers are ineligible to receive a sample device except in certain, specific circumstances. Also, the names of the recipients will be published on the Government Agency’s web site for two weeks following the selection.

    There is nothing inherently wrong with giving stuff to a foreign government. You just have to make sure it does not personally benefit a government official.

    The DOJ does not presently intend to take any enforcement action with respect to the proposal described Opinion Procedure Release 09-01.

    References:

    Jefferson Case Will be Remembered for Cash in the Freezer

    jefferson-cash-freezer

    Former Congressman William Jefferson’s corruption trial will always be remembered as the one about the guy with the cash in his freezer. But Jefferson was acquitted of Count 11, violation of the Foreign Corrupt Practices Act. This was the primary crime related to the stash of $100 bills the FBI found between boxes of Boca burgers and Pillsbury pie crust in Jefferson’s Washington townhouse.

    U.S. Attorney Dana Boente said at a news conference after the verdict was announced: “$90,000 in a freezer is not a gray area. It is a violation and today a jury of the congressman’s peers held him guilty. . . .We always thought that a powerful piece of evidence was $90,000 in the freezer.”

    Jefferson was the first public official charged under the Foreign Corrupt Practices Act.

    Jefferson Convicted of Corruption Charges

    William-Jefferson-official-photo

    William Jefferson, the former nine-term congressman from Louisiana, was found guilty of 11 of 16 corruption charges on Wednesday by a federal jury.

    The Jefferson case was most famous for the discovery of $90,000 of cash stuffed in his freezer. Prosecutors said Jefferson planned to use the cash for a bribe. Jefferson’s lawyers said the cash in the freezer proved the ex-lawmaker didn’t use the money as a bribe.

    There was also a constitutional battle over the FBI’s raid of his Jefferson’s Congressional office. Ultimately, some of the information seized by the FBI was returned and not used as evidence.

    During the six-week trial, prosecutors said that from 2000 to 2005, Mr. Jefferson sought hundreds of thousands of dollars in bribes from a dozen companies involved in oil, communications, sugar and other businesses, often for projects in Africa. Mr. Jefferson used his position as a member of the House Ways and Means trade subcommittee to promote the companies’ ventures without disclosing his own financial stakes in the deals.

    The jury deliberated five days before reaching its decision.

    Guilty

    • Count 1 18 USC §371. Conspiracy to solicit bribes by a public official and deprive citizens of honest services by wire fraud and violate the Foreign Corrupt Practices Act to advance a telecommunications project sponsored by iGate Inc. of Louisville, Ky.
    • Count 2 18 USC §371. Conspiracy to solicit bribes by a public official and deprive citizens of honest services by wire fraud related to his efforts on behalf of Arkel Sugar, LETH Energy, TDC Overseas, Procura Financial Interests of South Africa and WorldSpace for projects that included a sugar refinery and fertilizer plant in Nigeria, development of marginal oil fields in Nigeria, the sale of garbage-to-energy incinerators in West African nations; the development of satellite educational programming in several West African nations; and a settlement of a dispute regarding oil development rights off the coast of Sao Tome & Principe in West Africa.
    • Count 3 18 USC §201(b)(2)(A). Solicitation of bribes by a public official related to allegations that Jefferson sought payments from iGate Inc. to a firm controlled by his wife, Andrea, in return for his help securing telecommunications projects in Nigeria and Ghana.
    • Count 4 18 USC §201(b)(2)(A). Solicitation of a bribe by a public official related to what the government contends was Jefferson demanding, seeking, receiving, accepting and agreeing to receive things of value from Lori Mody, the Virginia investor who wore a wire to record conversations with the then-congressman.
    • Count 6 18 U.S.C. §1343 and §1346. Deprive citizens of honest services by wire fraud related to a fax from Jefferson to Lori Mody establishing the percentages of ownership in Mody’s company to be given to Mody, Brett Pfeffer, iGate and a company controlled by the Jefferson family.
    • Count 7 18 U.S.C. §1343 and §1346. Deprive citizens of honest services by wire fraud related to a wire transfer of $59,300 fromMody’s bank account to an account held by the ANJ Group, headed by Jefferson’s wife, Andrea.
    • Count 10 18 U.S.C. §1343 and §1346. Deprive citizens of honest services by wire fraud related to a telephone call from Jefferson in Ghana to Vernon Jackson in Louisville, Ky., discussing the progress of meetings with Ghanaian officials.
    • Count 12 18 U.S.C. §1957. Money laundering related to the transfer of a check for $25,015 written from ANJ payable to the Jefferson Committee.
    • Count 13 18 U.S.C. §1957.Money laundering related to the wire transfer of $25,000 from ANJ to iGate.
    • Count 14 18 U.S.C. §1957.Money laundering related to the transfer of a check for $25,000 from an ANJ account made payable to Andrea Jefferson and deposited to an account held by both Andrea and William Jefferson.
    • Count 16 18 U.S.C. §1962(c). Racketeer Influenced Corrupt Organization, pattern of racketeering activity, related to what the government says was Jefferson’s use of his congressional office for illegal activities.

    Not Guilty

    • Count 5 18 U.S.C. §1343 and §1346. Deprive citizens of honest services by wire fraud related to credit card charges by Jefferson from his congressional office totaling $14,885.95 for travel from Washington to Lagos, Nigeria, with the “understanding” iGate would reimburse that charge.
    • Count 8 18 U.S.C. §1343 and §1346. Deprive citizens of honest services by wire fraud related to a fax from Jefferson to Mody attaching various documents, including a letter to then-Nigerian Vice President Atiku Abubakar promoting a telecommunications project.
    • Count 9 18 U.S.C. §1343 and §1346. Deprive citizens of honest services by wire fraud related to a fax from Jefferson to Mody with a copy of a letter from Jefferson to a high-ranking Ghanaian government official seeking a meeting.
    • Count 11 15 U.S.C. §78dd-2(a). Violation of the Foreign Corrupt Practices Act related to Jefferson’s discussion with Mody about possibly bribing Nigerian Vice President Abubakar and other Nigerian officials. Charge includes transfer from Mody of $100,000 (in FBI money) that Jefferson said was intended as a bribe to Nigerian Vice President Abubakar. All but $10,000 was later found in Jefferson’s freezer.
    • Count 15 18 U.S.C. § 15112(c)(1). Obstruction of justice related to Jefferson putting two iGate Inc. faxes into a briefcase while the FBI was searching his house on Aug. 3, 2005.

    References:

    Respondeat Superior and Compliance

    oil tanker

    Back in January, a company was found criminally liable for the action of its employees. (Second Circuit Affirms Ionia Management Case.) Under respondeat superior (Latin for “let the master answer”) a company can be held vicariously liable for crimes committed by employees acting within the scope of their employment.

    Ionia operates and manages shipping vessels which transport oil to the United States. These ships produce oil-contaminated bilge waste, which they have to store for proper disposal. The Act to Prevent Pollution from Ships, makes it a crime to knowingly dispose of this waste improperly.

    Ionia’s engine room crew, under the direction and participation of the Chief Engineers and Second Engineer, routinely discharged oily waste water into the high seas through a “magic hose” designed to bypass the vessel’s Oily Water Separator, which would have cleaned the waste to prepare it for disposal as required by law. Furthermore, the Kriton’s crew made false entries in the ORB to conceal such discharges, and obstructed a federal investigation (a) by hiding the “magic hose” from Coast Guard inspectors during a March 20, 2007, inspection and (b) by lying to Coast Guard officials.

    There was some hope that the court would alter the doctrine of respondeat superior and include a good faith defense or limit the doctrine to higher level employees. A company can be brought down by lower level employees violating company policies.

    In One Rogue Worker Can Take an Entire Company Down Stanley A. Twardy Jr. and Daniel E. Wenner wrote that “the trial court charged the jury that a corporate defendant could be held criminally responsible for the conduct of a single low-level employee, even if that employee acted in direct contravention of corporate policy and a robust compliance program.”

    I didn’t read the case as taking that position and I still don’t.

    First, there was a structural problem in the appeal. Ionia did not challenge the jury instruction at trial, so the Second Circuit was limited to a review for plain error.

    Second, Ionia took the position that corporate criminal liability can “can only stem from the actions of so-called ‘managerial’ employees.” That contention seems at odds with United States v. Twentieth Century Fox Film Corp., 882 F.2d 656, 660 (2d Cir.1989) In the Second Circuit, “[i]t is settled law that a corporation may be held criminally responsible for [criminal] violations committed by its employees or agents acting within the scope of their authority.” United States v. Twentieth Century Fox Film Corp., 882 F.2d 656, 660 (2d Cir. 1989). Regardless, evidence show that the Chief Engineers specifically directed the deck hands to commit the criminal acts.

    Third, the prosecution does not need to prove as a separate element that the corporation lacked effective policies and procedures to deter and detect criminal actions by its employees. “A corporate compliance program may be relevant to whether an employee was acting in the scope of his employment, but it is not a separate element.” The mere existence of contrary company policies is not by itself a defense to criminal liability. Whether a company has an official position on the course of conduct undertaken by its agents is merely one factor to be considered when assessing whether to impose vicarious liability.

    I think this case show the importance of a compliance program. Merely having policies in place in not enough to defend the company from criminal liability. Policies alone are not enough to cause employee behavior to conform to policy. Compliance programs need training, procedures and enforcement to be effective.

    I am sure it was Ionia’s policy to not dump the untreated bilge water in violation of the law.  They just were not doing enough to prevent it.

    References:

    Fired for Foiling a Bank Robbery

    key

    Jim Nicholson was working at a Key Bank branch when a man entered the bank and demanded money. Rather than comply with the robber’s demands, Nicholson tossed his bag to the floor, lunged at the suspect and demanded to see a weapon. The man ran, and Nicholson chased him for several blocks before knocking him down with help from a passerby. Nicholson then held the suspect, Aaron J. Sloan, 29, until police arrived.

    Two days later he was fired for violating company policy.

    Is this the wrong result?

    “Our policies and procedures are in the best interests of public safety and are consistent with industry standards. Money, which is insured, can be replaced. Lives cannot.” – Key Bank spokeswoman Anne Foster

    “It really doesn’t matter if you’re a bank teller or a citizen walking down the street. Generally speaking, it’s best to be a good witness. And quite honestly, this is also true for people who are off-duty police officers too.” – Seattle Police Sgt. Sean Whitcomb

    The policy clearly makes sense. There is no need for a bank employee to confront and chase a bank robber. Discipline was clearly the response.

    The firing does send message to the rest of the KeyBank employees. Don’t do something stupid like confronting a bank robber. Focus on good identification so the police can find the robber. Let the police do their job.

    What would have happened if the robber injured or killed Nicholson during the struggle? What is Nicholson injured or killed the robber?

    Would a warning or suspension have been a better disciplinary action? Since the bank would presumably covered by insurance, there would have been no loss to the bank. So Nicholson endangered himself for no benefit to the bank. Any action that would encourage others would be reckless and endanger lives.

    I think KeyBank did the right thing. But perhaps someone could help him find a new job.

    What do you think?

    Thanks to some Twitter followers for their thoughts:

    • @ComplianceWeek: I’d dock pay and make him employee of the month. Fired for bravery seems wrong.
    • @JennSteele: Something about the outright firing just sits wrong with me. Maybe it’s my American bent towards vigilantism
    • @Jeffrey_Brandt: Give him a reward before firing him
    • @BillWinterberg: Non-compliant bank teller could have turned out much worse. Bank policies exist for very good reasons.
    • @EthicsArbitrage: That’d be a real problem if carried out consistently. We’d run out of employees. Non-compliance=fired.
    • @DrewCollier: admire his bravery, admonish his disregard to policy. it’s a poor example to others and could get someone killed next time.

    References:

    Is the Public Company Accounting Oversight Board Unconstitutional?

    pcaob_logo

    That question is on the docket for the Supreme Court in October. The Court agreed to rule on the constitutionality of the Public Company Accounting Oversight Board in Free Enterprise Fund v. PCAOB (08-861). The Sarbanes-Oxley Act passed in 2002 created PCAOB as a new government agency to regulate firms that audit the books of publicly traded companies. The key question in the case is whether the Act violated the separation-of-powers doctrine.

    This amici brief from a group of law professors says: No, its unconstitutional.

    As law professors who have studied and written about the massive accounting and corporate governance scandals that prompted the passage of the Act, we applauded Congress’s decision to establish a new independent regulator to oversee the conduct of the auditors of public companies. We have been concerned, however, that the particular design chosen by Congress accorded the PCAOB substantial discretion and autonomy without imposing constitutionally sufficient accountability. The current economic crisis in the financial markets has raised for us another concern: that Congress may use the design of the PCAOB in creating additional independent financial regulators. Ultimately, we hope that a decision by this Court will prompt Congress to restructure the PCAOB as a regulator that is more accountable and transparent.

    The professors in the brief are: Stephen Bainbridge, Robert Bartlett, William Birdthistle, Timothy Canova, Lawrence Cunningham, James Fanto, Theresa Gabaldon, Lyman Johnson, Roberta Karmel, Donna Nagy, Lydie Pierre-Louis, Adam Pritchard, Margaret Sachs, Gordon Smith, and Kellye Testy.

    The Cato Institute and law professors Larry Ribstein and Henry Butler came to the same conclusion.

    Historically, the power to remove an official “for cause” was seen as “an impediment to, not an effective grant of, Presidential control.” Morrison v. Olson, 487 U.S. 654, 706 (1988) (Scalia, J., dissenting). But at least traditional independent agencies are subject to this control. That much is settled. Here, the Board is protected from Presidential control by two layers of “for cause” removal statutes—rendering removal effectively impossible.

    Also lining up against PCAOB are The Washington Legal Foundation, Mountain States Legal Foundation and American Civil Rights Union.

    Reference:

    Reasons Why the SEC Wants to Regulate Political Contributions

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    The SEC has proposed a New Rule on Political Contributions by Certain Investment Advisers to prevent advisers from participating in pay to play practices affecting the management of public pension plans. They had proposed a similar rule in 1999. Many of the comments to that rule said that pay to play was not a problem in the management of public funds.

    Now, the SEC thinks that pay to play is a significant problem in the management of public funds by investment advisers. In recent years, the SEC and criminal authorities have brought a number of actions charging investment advisers with participating in pay to play schemes. Here are some of the incidents they cite in the proposed pay to play rule. http://www.sec.gov/rules/proposed/2009/ia-2910.pdf

    Alabama

    • The SEC brought a case against the mayor of Birmingham and other defendants, alleging that while the mayor served as president of the County Commission of Jefferson County, he accepted undisclosed cash and benefits through a lobbyist as a conduit from the chairman of a Montgomery, Alabama-based broker-dealer, in return for awarding municipal bond business and swap transactions to the broker-dealer. See SEC v. Larry P. Langford et al., Litigation Release No. 20545 (Apr. 30, 2008).

    California

    Connecticut

    • Paul J. Silvester, the former Treasurer of the State of Connecticut, agreed to invest $200 million of state pension funds in return for the investment adviser providing consulting contracts valued at approximately $1 million each to two of his friends.SEC v. Paul J. Silvester et al., Litigation Release No. 16759 (Oct. 10, 2000); Litigation Release No. 20027 (Mar. 2, 2007); Litigation Release No. 19583 (Mar. 1, 2006); Litigation Release No. 18461 (Nov. 17, 2003); Litigation Release No. 16834 (Dec. 19, 2000);
    • Sanctions against William A. DiBella, the former Majority Leader of the Connecticut State Senate, and his consulting firm, North Cove Ventures, L.L.C. for their roles in aiding and abetting then Treasurer of the State of Connecticut, Paul J. Silvester in a fraudulent investment scheme.SEC v. William A. DiBella et al., Litigation Release No. 20498 (Mar. 14, 2008). See also
    • A judgment against Ben F. Andrews, Jr. in connection with a fraudulent scheme involving the investment of Connecticut state pension fund money. U.S.. v. Ben F. Andrews, Litigation Release No. 19566 (Feb. 15, 2006);
    • In November 1998, the then-Connecticut Treasurer invested $75 million of the Connecticut state pension fund with Thayer IV. In connection with this investment, Thayer, through Malek, agreed to hire a consultant at the Treasurer’s request. This consultant, who was paid nearly $375,000 by TC Management IV, had no previous involvement with the proposed investment and ultimately performed no meaningful work on the deal. In the Matter of Thayer Capital Partners, TC Equity Partners IV, L.L.C., TC Management Partners IV, L.L.C., and Frederick V. Malek, Investment Advisers Act Release No. 2276 (Aug. 12, 2004);
    • The principal of an investment adviser provided $2 million in consulting contracts to associates of the Connecticut State Treasurer to secure the decision to invest $200 million in state pension funds in his funds. In the Matter of Frederick W. McCarthy, Investment Advisers Act Release No. 2218 (Mar. 5, 2004);
    • An aide to the Connecticut State Treasurer received a $1 million consulting contract from an investment adviser with whom the Treasurer had invested $200 million in Connecticut state pension funds. In the Matter of Lisa A. Thiesfield, Investment Advisers Act Release No. 2186 (Oct. 29, 2003).
    • The indictment of the former mayor of Bridgeport, Connecticut, in connection with his conviction for, among other things, requiring payment from an investment adviser in return for city business. U.S. v. Joseph P. Ganim, 2007 U.S. App. LEXIS 29367 (2d Cir. 2007)

    Florida

    • A partner at Lazard Freres & Co. was found liable for conspiracy and wire fraud for fraudulently paying $40,000 through an intermediary to Fulton County’s independent financial adviser to secure an assurance that Lazard would be selected for the Fulton County underwriting contract. United States v. Poirier, 321 F.3d 1024 (11th Cir.), cert. denied sub nom., deVegter v. United States, 540 U.S. 874 (2003)

    Georgia

    • A broker-dealer, two of its officers and a city official were involved in a scheme to defraud the City of Atlanta in connection with the purchase and sale of certain securities while providing substantial, undisclosed monetary benefits to the city’s investment officer who was authorized to select a broker-dealer for the transactions. See In the Matter of Pryor, McClendon, Counts & Co., Inc. et al., Securities Act Release No. 7673 (Apr. 29, 1999); Securities Act Release No. 8062 (Feb. 6, 2002); Exchange Act Release No. 48095 (June 26, 2003); Securities Act Release No. 8245 (June 26, 2003); Securities Act Release No. 8246 (June 26, 2003).

    Illinois

    New Mexico

    • An investment adviser was barred from association with any broker, dealer or investment adviser for paying kickbacks to the Treasurer of the State of New Mexico. In the Matter of Kent D. Nelson, Investment Advisers Act Release No. 2765 (Aug. 1, 2008);  I
    • Conviction of the former treasurer of New Mexico for requiring that a friend be hired by an investment manager in return for accepting a proposal from the manager for government business.
    • Conviction for attempted extortion of the former treasurer of New Mexico’s successor for requiring that a friend be hired by an investment manager at a high salary in return for the former treasurer’s willingness to accept a proposal from the manager for government businessU.S. v. Vigil, 523 F. 3d 1258 (10th Cir. 2008)

    New York

    • The deputy comptroller and a “placement agent” engaged in corruption and securities fraud for selling access to management of public funds in return for kickbacks and other payments for personal and political gain. SEC v. Henry Morris, et al, Litigation Release No. 21036 (May 12, 2009).

    North Carolina

    • Alleged pay to play activities involving North Carolina’s state treasurer. Moore Defends Pension System, by Rick Rothacker & David Ingram for the Charlotte Observer (Feb. 25, 2007) (discussing )

    Ohio

    • Reginald Fields, Four More Convicted in Pension Case: Ex-Board Members Took Gifts from Firm, CLEVELAND PLAIN DEALER (Sept. 20, 2006) (addressing pay to play activities of members of the Ohio Teachers Retirement System).

    Pennsylvania

    That is a big list of bad behavior is short period of time.

    Maybe the SEC has a point.

    Although I am not sure if the proposed SEC rule will stop it.

    Hollywood and the FCPA

    rescue-dawn

    With the guilty verdict in the case of handbag magnate Frederic Bourke and while waiting for the verdict in the Jefferson corruption case, we can turn to Hollywood for the next FCPA trial. The U.S. Attorney’s office charged a Hollywood producer with paying bribes to a foreign official.

    Gerald and Patricia Green are accused of paying a Thai official $1.8 million between 2002 and 2006 in order to obtain $14 million worth of contracts. Prosecutors claim the couple paid off Juthamas Siriwan, the former governor of the Tourism Authority of Thailand, which puts on Bangkok’s international film festival. Gerald Green was the producer of Werner Herzog’s Resuce Dawn along with a dozen other movies.

    Richard Cassin of the FCPA Blog is providing coverage, including an insight to trial strategy:

    Prosecutors plan to introduce into evidence a Thai anti-bribery statute that applies to public officials (here). That law — even if it’s rarely enforced — probably blocks the Greens from raising the local-law affirmative defense. The FCPA allows otherwise prohibited payments if the “payment, gift, offer, or promise of anything of value that was made, was lawful under the written laws and regulations of the foreign official’s” country. 15 U.S.C. §§ 78dd-1(c)(1), 78dd-2(c)(1) and 78dd-3(c)(1). The defense is rarely available because most countries, like Thailand, have anti-corruption laws.

    The trial starts today in California. Patricia Green is represented by Marilyn Bednarski of Pasadena’s Kaye, McLane & Bednarski. Gerald Green is represented by Jerome Mooney of L.A.’s Weston, Garrou, Walters & Mooney.

    References: