The scope of the attorney-client privilege and work product doctrine for internal investigation reports has once again been clarified by the D.C. Circuit in a False Claims Act case against defense contractor KBR, Inc. In its most recent decision, the D.C. Circuit rejected whistleblower Harry Barko’s arguments that KBR’s internal investigation documents were rendered discoverable either because they had been used to prepare a 30(b)(6) witness or because KBR referred to its internal investigation in its summary judgment papers.
SEC Brings First Major Cyber Insider Trading Case Against International Hacking Ring
In an action that emphasizes the agency’s commitment to cybersecurity, the SEC recently charged 32 defendants with violations of the federal antifraud laws and corresponding SEC rules, stemming from an alleged $100 million conspiracy to steal and trade on material non-public information contained in corporate earnings announcements that were obtained by hacking into the computer networks of three newswire services.
Louis Berger International Pays $17 Million Penalty for FCPA Violation
On July 17, 2015, Louis Berger International, Inc., a New Jersey-based construction management company, entered into a deferred prosecution agreement (DPA) with the Department of Justice under which it agreed to pay a $17.1 million penalty for violating the Foreign Corrupt Practices Act (FCPA). In addition to the hefty penalty paid, the company agreed to implement rigorous internal controls, continue to cooperate fully with the department, and retain a compliance monitor for at least three years.
According to the DPA, from 1998 through 2010, the company paid approximately $3.9 million in bribes to officials in India, Indonesia, Vietnam, and Kuwait to win construction management contracts. The company concealed the crimes by recording them as “commitment fees,” “counterpart per diems,” “marketing fees,” and “field operation expenses.” Company employees and agents also submitted inflated and fictitious invoices to generate cash that was then later used for the payment of bribes through intermediaries. Two former executives of the company also pleaded guilty to conspiracy and FCPA charges in connection with the scheme.
DOJ Breaks its Silence in 2015 FCPA Enforcement
Last 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.
U.S. Supreme Court Rejects Indefinite Tolling of False Claims Act under Wartime Suspension of Limitations Act; Holds First-to-File Bar Only Applies to Pending Cases
Yesterday, in Kellogg Brown & Root Services, Inc., et al. v. United States ex rel. Carter, 575 U.S. __ (2015), the Supreme Court settled two important questions under the False Claims Act (the FCA). In a unanimous decision authored by Justice Alito, the Court held: (1) the Wartime Suspension of Limitations Act (WSLA) applies only to criminal actions, and thus the statute of limitations under the FCA is not tolled under the WSLA while the United States is at war; and (2) the FCA first-to-file bar prevents the filing of an FCA action only when a related action is pending, not when a related action has been filed but dismissed.
Texas Supreme Court: Companies Shielded from Defamation Claims for Statements in Internal Investigation Reports
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ast 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.
Head Of Criminal Division Speaks On Corporate Cooperation
Leslie Caldwell, head of the Justice Department’s Criminal Division, is, in her own words, “pounding the pavement on cooperation and transparency.” Speaking on Tuesday at the New York City Bar’s fourth annual White Collar Crime Institute in Manhattan, Caldwell took another opportunity to discuss what the government expects of companies that seek to cooperate with criminal investigations. She emphasized that companies choosing cooperation and expecting to get full credit must act with candor and give the Department all relevant information in a timely fashion. In particular, the Justice Department expects companies to learn and disclose all knowable, relevant facts and to share them, whether they be good or bad and no matter how high the rank of the individuals responsible for the misconduct.
SEC Awards Compliance Officer Whistleblower Bounty of Approximately $1.5 Million
Earlier today, the SEC announced that it would pay an unidentified compliance officer a whistleblower bounty award of between $1.4 and $1.6 million. This is the second award that the SEC has made to a whistleblower with internal audit or compliance responsibilities. According to the SEC, the recipient of the bounty award “had a reasonable basis to believe that disclosure to the SEC was necessary to prevent imminent misconduct from causing substantial financial harm to the company or investors.”