SDNY Favors the SEC in Foreign Corrupt Practices Act Action Involving Novel Issues of Statutory Interpretation

by Katten Muchin Rosenman LLP
Contact

In a case addressing an issue of first impression involving the Foreign Corrupt Practices Act (FCPA), the US District Court for the Southern District of New York adopted an expansive interpretation of the statute’s interstate commerce requirement to allow the imposition of liability on foreign nationals for bribery occurring in a foreign country with only unintentional conduct in the United States. The Securities and Exchange Commission also benefited from a second ruling tolling the statute of limitations until the defendants were physically present in the United States.

This enforcement action was brought by the SEC in December 2011 against executives of a Hungarian telecommunications company (together, Defendants), alleging that in 2005 they bribed Macedonian government officials in order to gain beneficial treatment for Defendants’ company, which was SEC-registered and traded American depositary receipts on a US exchange during the relevant period. The SEC alleged that Defendants concealed their scheme and executed falsified certifications to the auditors and made false sub-representations for quarterly reports filed with the SEC.

The District Court rejected the argument that the SEC failed to allege Defendants’ “use of United States interstate commerce” in furtherance of the bribery scheme, as required by the FCPA. The only conduct alleged to reach the United States was the email transmittal of “sham” contracts used to conceal the bribes. The emails were sent between individuals outside the United States, but were allegedly routed or stored on network servers in the United States. Defendants argued that such conduct was insufficient because they did not purposely intend their emails to be routed through the United States. Conceding that the statute was ambiguous, the District Court nevertheless held, based on legislative history and interpretations of criminal statutes with similar provisions, that the FCPA does not require a showing of intent to use the means of instrumentalities, only that those instrumentalities had in fact been used.

In addition, the District Court found that the SEC’s claims were timely under the applicable five (5)-year statute of limitations contained in 28 U.S.C. § 2462. While it was undisputed that the SEC filed its complaint more than five years after both the alleged misconduct and the company’s disclosure to the SEC of an internal investigation into that conduct, the District Court agreed that, under the plain language of the limitations statute, “an offender must be physically present in the United States for the statute of limitations to run.” Despite the availability to the SEC of worldwide service of process, the District Court held that the SEC had no obligation to serve the Defendants outside of the United States as the limitations period was not running when Defendants were not within the United States.

SEC v. Straub, et al., No. 11 Civ. 9645 (RJS) (S.D.N.Y. February 8, 2013).

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Katten Muchin Rosenman LLP | Attorney Advertising

Written by:

Katten Muchin Rosenman LLP
Contact
more
less

Katten Muchin Rosenman LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.