FCPAméricas Blog

Reflections on BizJet: When Shoes Keep Dropping

Author: Matthew Fowler

Today’s guest post is from anti-corruption attorney Matthew Fowler who formerly worked as a compliance officer at a multinational defense company.

In April, two executives of BizJet pled guilty to FCPA violations related to bribing foreign officials in Mexico, Panama, and Brazil.  BizJet is an aircraft maintenance, repair, and overhaul company based in Tulsa, Oklahoma. The DOJ also made public charges against two other BizJet executives who, according to the DOJ press release, are “believed to remain abroad.” (FCPAméricas has previously discussed the BizJet action here. Ed.)

FCPA enforcement actions against executives are always eye-catching. But, in this case, the charges were actually the second shoe to drop. The first fell in March 2012, when the DOJ announced that it had entered into agreements halting FCPA prosecutions against BizJet and its corporate parent, Lufthansa Technick AG. An additional (third?) shoe dropped in the form of an enforcement action against the NORDAM Group, an unrelated aircraft maintenance, repair and overhaul company also based in Tulsa.  There may be more developments to come.

The First Shoe, Corporate Cooperation: In 2012, BizJet resolved a criminal information through a deferred prosecution agreement, and payment of an $11.8 million criminal penalty. On the same day, BizJet’s German parent company, Lufthansa Technik AG, resolved its potential FCPA liability through a non-prosecution agreement. In their agreements with the DOJ, both BizJet and Lufthansa Technik AG agreed to cooperate with the DOJ’s ongoing investigations, as well as implement enhanced compliance programs and robust internal controls.

But both companies had already been cooperating – the DOJ press release noted that the FCPA violations had been voluntarily disclosed, and that both companies had provided “extraordinary cooperation.” That cooperation included conducting an extensive internal investigation, making available documents and employees, and taking remedial steps that included terminating the officers and employees responsible for the violations.

The fruit of this cooperation can be seen in the significantly reduced penalties for BizJet. The fine range for BizJet without cooperation was from $17.1 million and $34.2 million. But its “extraordinary cooperation”, voluntary disclosure and extensive remediation resulted in a fine of $11.8 million.

The Second Shoe, Individual Cooperation: It is evident from the April announcement that individuals have also cooperated with the DOJ. As reported by the FCPA Professor, this cooperation included working undercover and secretly recording conversations with former BizJet executives and other subjects of the DOJ’s investigation.

This cooperation again resulted in reduced penalties. While significant jail time was possible for the crimes admitted by the two executives, they were not sentenced to any.

It is interesting that the DOJ included conspiracy among the reduced charges. This may have been to lay the groundwork for conspiracy charges against the remaining executives – admissions by two conspirators will be significant evidence against the other conspirators. (FCPAméricas has discussed conspiracy here. Ed.)

A Third Shoe? The cooperation of BizJet executives resulted in a separate FCPA prosecution against NORDAM Group. As reported by the FCPA Professor, the 2012 FCPA enforcement action against that company “had its origins in the BizJet enforcement action.”

Anything else to come? Is there more to come from this investigation? There might be several possibilities:

– Industry sweep? Given the prosecutions of two companies in the same industry, this might expand to a broader sweep of the industry – particularly given the cooperation provided by both companies and individuals.

– Travel Act violations? The 2012 criminal information suggests that commercial bribes were also paid. Those bribes were apparently wired via a dummy account in California, which prohibits commercial bribery. This raises the question: why were no charges brought for Travel Act violations? (FCPAméricas discussed here how the Travel Act “federalizes” state commercial bribery laws. Ed.

– Extradition proceedings? The two executives who did not plead guilty – Bernd Kowalewski and Jald Jensen – are not under arrest, and are presumed by the DOJ to be out of the country. Mr. Kowalewski, however, appears to be working in Germany. Will the DOJ consider these two to be fugitives and seek their extradition?

The evolution of the BizJet matter is interesting, but what can we learn it? First, corporations have much to gain from cooperating with authorities. Second, individuals also have a lot to gain from cooperation, though recording conversations with friends and colleagues and then testifying against them sounds like a terrible experience. Third, individuals who engaged in a conspiracy have a motive to come forward early – before the others do.

Finally, the slow evolution of this matter is a lesson in itself. When companies and individuals cooperate with an investigation, it makes it much more likely that the investigation will spread to other individuals and companies.

The FCPAméricas blog is not intended to provide legal advice to its readers. The blog entries and posts include only the thoughts, ideas, and impressions of its authors and contributors, and should be considered general information only about the Americas, anti-corruption laws including the U.S. Foreign Corrupt Practices Act, issues related to anti-corruption compliance, and any other matters addressed. Nothing in this publication should be interpreted to constitute legal advice or services of any kind. Furthermore, information found on this blog should not be used as the basis for decisions or actions that may affect your business; instead, companies and businesspeople should seek legal counsel from qualified lawyers regarding anti-corruption laws or any other legal issue. The Editor and the contributors to this blog shall not be responsible for any losses incurred by a reader or a company as a result of information provided in this publication. For more information, please contact Info@MattesonEllisLaw.com.

The author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author.

© 2013 Matteson Ellis Law, PLLC

Matthew Fowler

Post authored by Matthew Fowler, FCPAméricas Contributor

Categories: Brazil, Enforcement, FCPA, Mexico, Panama, The FCPA Professor

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