In the Courts

District of Colombia

FCPA: Expensive Travel & Entertainment Results in Expensive Penalties

U.S. authorities demonstrated that travel and entertainment of foreign government officials, even under the title 'training' or 'factory visits,' will be examined, and may be enforced as FCPA violations, resulting in millions in fines and penalties. Lucent Technologies Inc. recently settled with the SEC and entered into a deferred prosecution agreement with the DOJ in connection with approximately $10 million in travel and entertainment related expense for approximately 1,000 Chinese government officials from 2000 to 2003. The SEC cited examples of 'training' and 'factory visits' that included tourist destinations and disproportionate amounts of sightseeing, entertainment and leisure, and were approved by employees in the U.S., as well as China. The final judgment permanently enjoined Lucent from future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, and resulted in a $1.5 million dollar civil penalty. The deferred prosecution agreement, the details of which are not public, cost Lucent another $1 million according to a Department press release. See SEC v. Lucent Technologies Inc., No. 1:07-cv-02301 (Dec. 21, 2007, D.D.C.), (available at http://www.sec.gov/litigation/complaints/2007/comp20414.pdf).

Illinois

1990s Waste Management Still Has Personal Consequences

James E. Koenig, former CFO of Waste Management Inc. ('WMI'), finally learned the cost of a 2006 jury verdict finding him liable for 60 securities law violations from 1992-1997. His conduct, along with that of co-defendants who had settled with the SEC, allegedly resulted in WMI's $1.7-billion restatement in February 1998. The Dec. 21, 2007 Final Judgment, based on the findings of a Dec. 3, 2007 Memorandum and Order, included a director/officer bar and enjoined the former CFO from future violations of the antifraud and securities laws. Most significantly, Koenig must pay over $4 million in disgorgement, prejudgment interest, and civil penalties. See orders by Judge Anderson dated Dec. 3 and 21, 2007, in SEC v. James E. Koenig, No. 02 C 2180 (N.D. Ill. Dec. 3, 2007)

California

FCPA Enforcement Goes Hollywood

A Hollywood film executive and his wife were charged by criminal complaint in six counts of violating the Foreign Corrupt Practice Act ('FCPA') and one count of conspiracy. The government alleges improper payments upwards of $900,000 to benefit officials of Thailand's Tourism Authority connected to obtaining contracts worth $7 million, related to the management of the Bangkok International Film Festival. According to the DOJ, the couple was arrested on Dec. 17, 2007. Compl. Dec. 7, 2007, United States v. Green, No. 2:07-MJ-02090-DUTY (C.D. Cal.)

District of Colombia

FCPA: Expensive Travel & Entertainment Results in Expensive Penalties

U.S. authorities demonstrated that travel and entertainment of foreign government officials, even under the title 'training' or 'factory visits,' will be examined, and may be enforced as FCPA violations, resulting in millions in fines and penalties. Lucent Technologies Inc. recently settled with the SEC and entered into a deferred prosecution agreement with the DOJ in connection with approximately $10 million in travel and entertainment related expense for approximately 1,000 Chinese government officials from 2000 to 2003. The SEC cited examples of 'training' and 'factory visits' that included tourist destinations and disproportionate amounts of sightseeing, entertainment and leisure, and were approved by employees in the U.S., as well as China. The final judgment permanently enjoined Lucent from future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, and resulted in a $1.5 million dollar civil penalty. The deferred prosecution agreement, the details of which are not public, cost Lucent another $1 million according to a Department press release. See SEC v. Lucent Technologies Inc., No. 1:07-cv-02301 (Dec. 21, 2007, D.D.C.), (available at http://www.sec.gov/litigation/complaints/2007/comp20414.pdf).

Illinois

1990s Waste Management Still Has Personal Consequences

James E. Koenig, former CFO of Waste Management Inc. ('WMI'), finally learned the cost of a 2006 jury verdict finding him liable for 60 securities law violations from 1992-1997. His conduct, along with that of co-defendants who had settled with the SEC, allegedly resulted in WMI's $1.7-billion restatement in February 1998. The Dec. 21, 2007 Final Judgment, based on the findings of a Dec. 3, 2007 Memorandum and Order, included a director/officer bar and enjoined the former CFO from future violations of the antifraud and securities laws. Most significantly, Koenig must pay over $4 million in disgorgement, prejudgment interest, and civil penalties. See orders by Judge Anderson dated Dec. 3 and 21, 2007, in SEC v. James E. Koenig , No. 02 C 2180 (N.D. Ill. Dec. 3, 2007)