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Phillip Caraballo-Garrison

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Phil Caraballo is a senior associate in the Litigation Department, where he also represents the Litigation Department on the Associate Council. His practice focuses on white collar criminal defense and corporate investigations, appellate litigation, and complex civil litigation at both the state and federal levels.

As a member of the White Collar Defense & Investigations Group, Phil represents clients in prosecutions involving a broad array of federal and state crimes, including insider trading, racketeering, tax evasion, money laundering, and antitrust charges. He frequently guides corporate clients through internal investigations conducted in cooperation with law enforcement and regulatory agencies, and internal investigations and due diligence processes focused on resolving potential anti-corruption issues under the FCPA.

US DOJ sealLast week, the DOJ announced its first corporate enforcement action under the Foreign Corrupt Practice Act (“FCPA”) for 2015. IAP World Services, Inc., a Florida-based defense and government contractor, agreed to pay $7.1 million in a non-prosecution agreement (NPA) for conspiring to bribe Kuwaiti officials in exchange for a contract to build a large-scale homeland surveillance system in Kuwait. The primary employee involved, James Rama, pleaded guilty to one count of conspiracy to violate the FCPA. (see here for criminal information and here for plea agreement). Fresh off the heels of the announcement that the DOJ has declined to prosecute Petro Tiger (only the second publicly-acknowledged declination of its kind), the IAP settlement is the first significant case from the DOJ in a year where FCPA enforcement has thus far been dominated by the SEC.

According to the NPA, Kuwait’s Ministry of the Interior started a homeland security project in 2004, which was divided into two phases. Rama and others allegedly created a shell company, Ramaco, which bid on and won the Phase I contract. Rama and IAP allegedly designated half of the approximately $4 million Ramaco received from the Phase I contract to bribe Kuwaiti officials through a consultant to assist IAP in gaining the lucrative Phase II contract.

LTexas_Flag_3ast week, the Texas Supreme Court joined the majority of jurisdictions in holding that a company enjoys an absolute privilege when providing the Department of Justice (DOJ) with an internal investigation report containing statements later alleged by an employee to be defamatory. The decision in Shell Oil Co. v. Writt, __S.W.3d__ (Tex. 2015) should provide Texas companies comfort that cooperating with regulatory and law enforcement agencies will not expose them to liability for defamation.

The Writt case arose from an FCPA investigation of Panalpina, a contractor Shell employed to provide freighting and customs-clearing services for a deep-water drilling project off the coast of Nigeria. At DOJ’s request, Shell conducted an internal investigation and provided the DOJ with its confidential findings.

sentencing-commissionAs previously reported on this blog here and here, the United States Sentencing Commission has proposed amendments to the widely criticized federal sentencing guidelines for economic crimes. On April 9, 2015, after hearing extensive public comment on the proposed amendments, the Commission voted to adopt an amended version of the Sentencing Guidelines which will take effect November 1st absent objection by Congress.

The changes are significant but not sweeping. Commission Chair Judge Patti B. Saris described the revisions as addressing “some problem areas, particularly at the high end of the loss table.” Despite objections by the Department of Justice and others that some of the amendments will create unwarranted leniency in the guidelines, the final amendments largely parallel those first proposed by the Commission in January.

Meanwhile, members of the defense bar argued that the changes do not go far enough in departing from an abstract numerical approach (measured by dollars and number of victims) when attempting to gauge culpability. James Felman, a defense attorney who co-chairs the American Bar Association’s criminal justice section and testified before the Commission, characterized the amendments as a “very meager response” to the problems endemic in § 2B1.1 of the Sentencing Guidelines, promising that “[w]e’ll keep lobbying the commission to do more.”

ThinkstockPhotos-462759715As previously reported on this blog, the U.S. Sentencing Commission has proposed several amendments to the federal sentencing guidelines for economic crimes. The amendments are designed to address criticism that § 2B1.1 of the Guidelines is vague, that it treats defendants who have secondary roles with undue harshness, and that it suggests disproportionately severe sentences for first-time offenders.

On March 18, 2015, the Sentencing Commission heard commentary and reviewed letters in response to a request for public comment on the proposed amendments. The Department of Justice asserted a vigorous opposition to several of the proposals, on the ground that they would result in unwarranted leniency for white-collar offenders. The DOJ also objected to adjusting victim losses for inflation in sentencing calculations, stating that any reduction would be contrary to “overwhelming societal consensus.”

Goodyear_Tire solidFollowing recent trends, the U.S. Securities and Exchange Commission brought an administrative proceeding against a U.S. issuer for the alleged corrupt activities of its foreign subsidiaries. Earlier this week, Goodyear Tire & Rubber Company agreed to pay the SEC over $16 million to settle charges alleging that it violated the accounting provisions of the Foreign Corrupt Practices Act by failing to prevent or detect over $3 million in bribes paid by its Angolan and Kenyan subsidiaries. Goodyear also must report its compliance remediation efforts to the SEC annually for the next three years.

The SEC’s Charges

According to the SEC’s cease and desist order, between 2007 and 2011, Goodyear’s downstream subsidiaries in Kenya and Angola bribed employees of both private and government-owned companies to obtain business. The subsidiaries also bribed police, tax authorities and other local officials, though the SEC’s order did not allege the purposes of those payments. The bribes “were falsely recorded as legitimate business expenses in the books and records of the subsidiaries, which were consolidated into Goodyear’s books and records.”

Shield KeyholeOn February 3, 2015, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert that summarized its findings about cybersecurity preparedness in the securities industry.  As part of its Cyber Security Examination Initiative, the OCIE collected and analyzed information about cybersecurity practices and trends from over 100 …

In recent years, a growing chorus of federal judges and defense attorneys have protested that the Federal Sentencing Guidelines for economic crimes regularly recommend inconsistent and unjust sentences. Critics claim that § 2B1.1 of the Guidelines suffers from a lack of clarity, that it treats defendants who have secondary roles in large schemes with undue harshness, and that it produces suggested prison terms that are disproportionately severe for first-time offenders who are not likely to reoffend. There is no dearth of examples to fuel those fires, as seemingly inconsistent outcomes abound. Last year, Judge Jed S. Rakoff of the Southern District of New York stated that “[the] arithmetic behind the sentencing calculations is all hocus-pocus ­­—it’s nonsensical.”

Last week, the U.S. Sentencing Commission responded with proposed amendments to § 2B1.1 that are designed to remediate some of those shortcomings. The Sentencing Commission has also solicited input from interested parties on a broad range of associated issues. The relevant provisions up for amendment are:

Last week, the Department of Justice announced the first Foreign Corrupt Practices Act enforcement action of 2015, against Dmitrij Harder, the former owner and president of the Chestnut Consulting Group.  The allegations are premised, in part, on a seldom-used section of the FCPA: the statutory provision that prohibits bribing officials of public international organizations.

According to the indictment, Harder operated the Chestnut Consulting Group entities, which provided consulting services to companies seeking financing from multilateral development banks.  Harder and the Chestnut Consulting Group assisted two oil and gas companies obtain several hundred million dollars and euros in financing for development projects from the European Bank for Reconstruction and Development (“EBRD”).  The Chestnut Consulting Group’s services were retained “despite its relatively small size, distant location from the EBRD, and unproven track record as a financial advisor.”