This issue updates developments within the US Department of Justice (DOJ) − the agency responsible for criminal enforcement of the FCPA − that shed further light on the agency's enforcement approach under the Trump Administration, highlights recent enforcement activity relevant to companies in the A&D space, and reports on a UK High Court ruling that casts doubt on a company's ability to rely on litigation privilege protection in cross border investigations.
In this issue:
After 20 months on the job, the DOJ' s in-house compliance counsel, Hui Chen, formally resigned her position with the agency on June 23. The resignation followed a series of social media "tweets" and LinkedIn posts by Chen that began May 10, following President Trump's firing of then-FBI director James Comey. Although none directly attacked President Trump, they expressed Chen's concern about the "tone at the top," "unprincipled leadership," "improper influences" on her work, compromised investigations and diminished ethical values.
Prior to resigning, Chen had announced in May that she would be leaving DOJ at the end of her contract with the agency, which was to run through September 2017. In early June, the DOJ's website posted a job description for Chen's replacement, seeking a "highly qualified compliance attorney" to "assist the Fraud Section prosecutors with regard to compliance-related issues."
The fact that the DOJ plans to replace Hui Chen and maintain the position of Compliance Counsel appears to signal the agency's intent to stay the enforcement course set by the prior administration, including a heightened focus on enhanced compliance programs/internal controls. Chen's departure does call into question the extent to which DOJ will continue to focus on the issues highlighted in DOJ's Evaluation of Corporate Compliance Programs (Evaluation Guidance) issued in February 2017. The Evaluation Guidance was largely viewed as Chen's brainchild, as it reflected the questions that she tended to ask about the compliance programs of companies that came before the DOJ. We recommend that companies stay the course on anti-corruption compliance and continue to incorporate the Evaluation Guidance until further information is available about DOJ's focus on this issue.
On the other side of the pond, the High Court in London on 9 May 2017 sided with the Serious Fraud Office (SFO) in ruling that certain documents created by the company and its external counsel during an internal investigation were not covered by the litigation or legal advice privileges under English law. See Serious Fraud Office v. Eurasian Natural Resources Corporation (ENRC),  EWHC 1017 (QB).1 The ruling, which is currently subject to appeal, demonstrates a significant deviation from U.S. law which, under Upjohn Company v. United States, 449 U.S. 383 (1981), recognizes attorney-client privilege protection over communications between all employees and the corporation's attorneys in the investigation context.
The case turns heavily on its facts, and the history of ENRC's appearance before the SFO in this matter. Nonetheless, as a general observation, compared to the approach taken in the US, the opinion confirms that English law is more limited in its privilege protections afforded to documents produced in an internal investigation. For example, in order for a corporation to successfully assert litigation privilege over such documents, a corporation will likely need to demonstrate (e.g., through a showing of board minutes) that it reasonably contemplated criminal prosecution at the time the internal investigation was undertaken.
The ENRC case follows hot on the heels of the High Court's decision in January 2017 in the RBS Rights Issue Litigation ( EWHC 3161 (Ch)). That case addressed the applicability of legal advice privilege in interview notes produced during internal investigations. The court held, on the facts, that the legal advice privilege did not attach to the notes because the interviewees were not within the limited group of company employees that could be considered to be the 'client' for the purpose of the privilege.
These recent High Court rulings in the UK present significant ramifications for companies and their counsel engaged in cross border investigations, including those in the A&D industry. With such divergent privilege rules applied in the US and the UK (and elsewhere), it is important to seek the assistance of local counsel in all implicated jurisdictions at the outset and throughout any internal investigation, to understand which standards will apply to the particular facts and documents, and to make decisions throughout the investigation to best maintain privilege.
 May 2017 client alert addressing the ruling in Serious Fraud Office v Eurasian Natural Resources Corporation Ltd  EWHC 1017 (QB) may be accessed here.
CDM Smith Inc.
To date, the only corporate FCPA enforcement activity of the Trump Administration have been two "declinations," accompanied by disgorgement and certain admissions, under the FCPA Pilot Program. In June 2017, the DOJ awoke from its slumber on the FCPA front, announcing its first corporate resolutions in the form of agreed declination letters with disgorgement involving industrial gas supplier Linde Group and privately held engineering and construction firm CDM Smith Inc. A subsidiary acquired by Linde was alleged to have paid bribes from 2006 - 2009 to secure the purchase of certain income producing assets from a Georgian state owned entity. Employees of CDM Smith's division responsible for Indian operations and an Indian subsidiary allegedly paid bribes from 2011 to 2015 to government officials in India in exchange for design and water project contracts and highway construction supervision. In each case, the company conducted an internal investigation, remediated the conduct, voluntarily disclosed the payments to DOJ, disgorged profits/illicit gains and agreed to DOJ's statement of facts. These resolutions are similar in terms and language to declinations with disgorgement and admissions issued by the DOJ under the Obama Administration.
Atlas Electronik GmbH
In a recent case of particular relevance to the A&D industry, it was reported in early June that a German defense company, Atlas Electronik GmbH, agreed to disgorge €48 million to resolve German government allegations that an Atlas employee paid a Greek sales agent €13 million to win a contract for submarine sonar systems and that it paid a bribe through a Peruvian sales agent to win a torpedo contract for the Peruvian Navy. This case illustrates the German government's continuing strong commitment to enforcing Germany's anti-corruption law and its willingness to impose a financially significant penalty on a German defense contractor to punish alleged bribery in connection with foreign defense sales.
The following resources may be of particular interest to those companies doing business in the Aerospace and Defense Industry. These publications may be accessed either directly through the links below, or will be emailed to you upon receipt of your request through the respective links.
- Anti-Bribery Handbook Website (2017 edition)
- A dedicated website to enable our lawyers and clients to quickly access and cross-reference jurisdictions of interest.
- Global Trade Secrets Handbook
- A definitive reference that examines how trade secrets are protected, what businesses need to be aware of, the risk of employee misappropriation and cyber security breaches, and what to do if trade secrets get into the wrong hands.
- Trade Secrets Checklist
- Practical steps and best practices to enable businesses to protect their trade secrets.
- Euromoney Thought Leadership Article: "The Board Ultimatum: Protect and Preserve"
- A report examining how leaders of multinational companies view their trade secrets, whom they see as the greatest threats to these secrets, and what they do (and don't do) to protect them.