Two recent enforcement actions by the U.S. Department of Justice (“DOJ”) reflect the government’s continuing interest in holding corporate officers and other responsible individuals liable for FCPA violations. Each of these cases follows related enforcement actions separately brought against corporate or other individual defendants.
Former CEO of Titan Africa Pleads Guilty to FCPA Violation
Steven Head, the former CEO of Titan Africa, pled guilty last week to one count of falsifying the books and records of an issuer under the FCPA. In January 2001, Head, in his position at Titan, allegedly authorized the payment of $2 million in “advanced social fees” to the President of Benin’s reelection campaign in return for a higher management fee on a wireless telephone contract in Benin. The wireless contract had called for Titan to pay certain “social fees” to develop “sectors” in Benin, but those fees were not yet due and the plea agreement states that Head was aware that these payments would not be used for the purposes identified by the contract. The agreement states that Head then submitted an invoice to Titan for these payments that falsely stated that they were for “consulting services.” Head’s guilty plea follows the resolution of SEC and DOJ FCPA actions against Titan in 2005 that obligated Titan to pay a disgorgement of $15 million along with a $13 million criminal penalty for a total fine of over $28 million to satisfy the civil and criminal actions.
The DOJ accepted a plea on just one count against Head stemming from this incident and recommended a lower sentence in return for Head’s “substantial” assistance in the “investigation and prosecution of others.” This suggests that there are more individual prosecutions of Titan employees yet to come.
Extradition for FCPA Violation
In another recent matter, Viktor Kozeny, a Czech-born financier, faces imminent extradition from the Bahamas on FCPA charges stemming from an oil privatization scheme in Azerbaijan. A Magistrate in the Bahamas ruled last Friday that, based on the evidence, a case against Kozeny had been made, and, unless he can prove the evidence “worthless” at a hearing next month, he will be extradited to the United States.
The DOJ indicted Kozeny last October for allegedly bribing several Azeri officials charged with privatizing the Azeri state oil company, SOCAR. Kozeny allegedly promised clients, who invested millions in his venture, a lucrative stake in SOCAR. According to the indictment, in an attempt to gain control over SOCAR, Kozeny paid these officials so they would allow his clients to participate in the privatization and acquire a controlling stake in SOCAR.
Two former Kozeny associates, Thomas Farrell and Hans Bodmer, have pled guilty to crimes related to these alleged FCPA violations. Both are cooperating with the DOJ and may testify against Kozeny should he be tried.
These matters follow the recent prosecution of two other individuals (including a Titan employee for activity unrelated to the Benin activity) earlier this year as reported in our April 20, 2006 Alert. On March 21, Richard Novak pled guilty to conspiracy and violating the FCPA for payments to Liberian diplomats to obtain “accreditations” from Liberia’s Board of Education for use in the selling of fake diplomas. On March 24, the DOJ announced that Faheem Salam, a Titan employee working in Iraq, had been arrested in the United States and charged with violating the FCPA for offering to bribe an Iraqi police official in connection with personal business not involving Titan.
The DOJ has prosecuted many cases against individuals in the past; however, the last two years reflect an uptick in cases against individuals, as well as cases overall. Enforcement officials have acknowledged that there is a significant backlog of pending cases, including some potentially large corporate investigations that have been reported in the press or disclosed in SEC filings. Some of the recent cases against individuals suggest that enforcement officials may be using individual actions to help build cases against companies, and vice versa. Although many cases have been moving slowly, the last four months show increased enforcement activity.
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