FCPA Compliance How to Stay Off the Radar Presenters:

FCPA Compliance
How to Stay Off the Radar
Presenters:
Roel Campos, Michael Marinelli,
and Neal Stephens/Bill Grauer
OCTOBER 14, 2009 – PALO ALTO
OCTOBER 15, 2009 – SAN DIEGO
www.cooley.com
The Government’s Point of View
“It is the invariable habit of bureaucracies, at
all times and everywhere, to assume that
every citizen is a criminal."
-- H.L. Mencken
www.cooley.com
Agenda
X
Causes for Concern
X
Recent FCPA Prosecutions
X
The SEC Perspective
X
New Developments in Enforcement
X
Proactive Measures for Executives
X
Building an Effective FCPA Compliance Program
www.cooley.com
1
Why do I need to be concerned about the
FCPA now?
X
Current economic challenges increase the level of
competition in the market (and the risk that
employees will be too aggressive to secure
business)
X
DOJ/SEC prosecutions (and victories) on the rise
X
DOJ filed more FCPA cases in 2006-08 than it did in
the previous 28 years
X
Number of cases increases 400% from 2000 through
2008
X
110 active investigations in 2008 (25% self-reported,
75% from other sources)
X
DOJ on record saying that FCPA prosecutions are a
national priority to “level the playing field” for law
abiding U.S. companies
www.cooley.com
Why do I need to be concerned about the
FCPA now? (continued)
X
Recent cases have resulted in huge
fines/penalties
X
Siemens paid $1.6 billion in 2008 to U.S.
and German authorities
X
Haliburton paid $559 million in 2009 to
U.S. authorities
X
DOJ/SEC will continue to devote additional
resources to FCPA investigations given these
results
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2
Why do I need to be concerned about the
FCPA now? (continued)
X
Penalties can be crippling:
X
Individuals exposed to jail terms
X
Corporations exposed to huge fines
X
Corporations also face debarment on
government contracts
X
Mandatory in EU
X
Discretionary in U.S.
X
Reputation hit in the market
X
Litigation cost of conducting internal investigation and
dealing with DOJ/SEC
X
Exposure to civil litigation – competitors can bring a
civil RICO claim asserting that the bribery caused the
defendant to win foreign contracts
www.cooley.com
Recent FCPA Prosecutions
Siemens (2008)
X
4000 improper payments totaling $1.36B
to officials in Asia, Africa, Europe, the
Middle East and South America –
impacts nearly every aspect of Siemens’ business
X
Investigated by both U.S. and German authorities
X
DOJ charges with violating both the anti-bribery and
accounting provisions
X
DOJ focuses on systemic practice of using bribes for
business development
X
Siemens pled guilty and agreed to pay over $1.6B in
fines/penalties – the biggest penalty in history
www.cooley.com
3
Recent FCPA Prosecutions (continued)
X
Haliburton (2009)
X
Improper payments related primarily to natural
gas projects in Nigeria
X
Payments made through sham consulting
agreements with two shell companies based in
the UK and Japan that funneled money to Nigerian
officials
X
Lead executive for natural gas projects pled guilty and is
facing a potential 7 year sentence and owes $10.8M in
restitution
X
Haliburton pays $559M in fines/penalties to DOJ/SEC
www.cooley.com
SEC Enforcement of the FCPA
4
FCPA
X
X
Anti-bribery provision
X
Generally prohibits bribery of foreign government or political officials
X
Applies to firms operating in the U.S. or any U.S. person (officer/director,
individual, employee, agent)
Accounting provisions – focus of the SEC
X
Extends to all U.S. issuers
X
Books and Records
X
Internal Controls
www.cooley.com
Jurisdiction
X
Accounting Provisions
X
X
Anti-bribery Provisions
X
X
Do not require involvement by U.S. issuer, U.S. citizen or U.S. resident
Acts committed by U.S. individuals or entities in furtherance of making
illicit payments
Use of mail or any means or instrumentality of interstate commerce
not required for charging violation of either provision.
www.cooley.com
5
SEC Enforcement of the FCPA
X
Civil injunctive and administrative proceedings
X
Usually investigates allegations of bribery
X
May find violations of accounting provisions without finding anti-bribery
violations
www.cooley.com
SEC Perspective
X
Red flags
X
Government officials requiring use of specific intermediary or agent
X
Unwillingness of customer, intermediary or agent to provide information
about ownership or relationships
X
Large payments to intermediary for limited or no substantive work
X
Higher than usual entertainment expenses (in government business
sector)
www.cooley.com
6
SEC Perspective
X
Red flags (cont.)
X
Payments for travel expenses of government officials
X
Business contracts or dealings with state-owned entities or newly private
entities employing former government officials
X
Business in high risk countries
www.cooley.com
New Developments
X
Focus on individuals
X
2009 FCPA actions, as of October 2009 –
X Criminal charges brought against 14 executives and high-level
employees
X 8 individuals either found guilty or entered guilty plea
X
Associate Director of SEC Enforcement, Cheryl Scarboro
X “[High level employees] can’t shield themselves and expect that the
corporations alone will pay the price of their misconduct.” (WSJ, 8
October 2009)
X
Deputy Chief of DOJ, Mark Mendelsohn
X “To really achieve the kind of deterrent effect we’re shooting for, you
have to prosecute individuals.” (WSJ, 8 October 2009)
www.cooley.com
7
New Developments
X
Focus on individuals (cont.)
X
“control person liability”
X e.g. Nature’s Sunshine Products – SEC charged CEO and CFO
under Section 20(a) of the Exchange Act
X SEC alleged that both “failed to adequately supervise”
X Historically, this theory has rarely been used in FCPA cases
X
Imposing liability on executives even where they are not alleged to have
known of the misconduct
X Nature’s Sunshine Products – FCPA liability
X CSK Auto – clawbacks due to accounting restatement
www.cooley.com
New Developments
X
Uncertainties – Foreign Litigation
X
Business Nexus Requirement (i.e. U.S. v. Kay) – FCPA liability found
where officials performed acts that effectively lowered the company’s
operational costs
X
Current DOJ interpretation may include payments made by local
counsel to foreign judicial officials
X
Based on U.S. v. Kay, these payments could be seen as improving
the financial outcome and “bottom line”, and therefore obtaining or
retaining business
www.cooley.com
8
New Developments
X
Uncertainties – “Foreign Official”
X
X
Sovereign Wealth Funds (SWF) – largely construed as “foreign
officials”
X
Uncertainty remains as to how to interpret the employees of
private companies supported by governments or their agents,
such as SWFs?
X
Unintended consequence of the financial crisis – the government
investments in and support of banks and companies.
Companies should consider their risks and compliance needs based
on the nature of the foreign counterparties/agents
X
KBR/Halliburton case – involved, among various allegations, illicit
payments to the employees of company 49% owned by the
Nigerian government.
www.cooley.com
New Developments
X
International Cooperation
X
SEC has negotiated approximately 50 bi-lateral or multi-lateral
Memoranda of Understanding with foreign governments
X
“Eurojustice”
X
EU countries sharing information about how criminal behavior is
investigated and prosecuted in each jurisdiction
X
e.g. Siemens AG -- Cooperation with Greek and Swiss authorities
helped German officials
X
US$569 million fine by the Munich Prosecutors’ Office
www.cooley.com
9
Proactive Measures
X
Disclosure, or “self-reporting”
X
Companies are developing an increasing sensitivity to FCPA issues and
compliance and self-reporting to U.S. authorities
X
X
Seeking guidance from DOJ prior to transaction
Companies who self-report fare better with SEC/DOJ investigations and
face significantly reduced sanctions
X
e.g. Siemens AG – US$1.6 billion in total government fines
X
Exceedingly cooperative with U.S. and foreign authorities
www.cooley.com
Proactive Measures
X
“Investigations”
X
Ensure sufficient due diligence
X Prior to M&A
X Business with counterparties
X
Focus on Books and Records, as well as internal controls
X Regional SEC Director Robert Leach emphasized that this is his first
area of concern in investigations (July 10, 2009)
X
Serious allegations? Retain outside counsel
X Increases legitimacy of report and deters government fact
investigations
www.cooley.com
10
Proactive Measures
X
Engagement with agents
X
Agents do not have to be per se employees to implicate executives in
FCPA liability
X
Enter only into formal, written agreements
X
Ensure that management has knowledge of agent’s activities
X “Control person” liability – Nature’s Sunshine Products CEO/CFO
X
Ensure sufficient managerial control over agents’ activities
X Siemens AG and KBR executives -- FCPA liability even though
agent’s made illicit payments
www.cooley.com
Proactive Measures
X
Engagement with subsidiaries
X
Section 13(b)(6) – subsidiaries not wholly owned
X
With <50% voting power, the issuer is required only to “proceed in
good faith to use its influence, to the extent reasonable…to
cause…[the firm] to devise and maintain a system of internal
accounting controls…”
X
However, the SEC has taken action against issuers with <50% voting
power. See SEC v. Bellsouth Corp., Litigation Release No. 17310
(January 15, 2002).
X
KBR’s use of indirect control through subsidiaries only bolstered the
SEC/DOJ cases
www.cooley.com
11
Building an Effective FCPA
Compliance Program
The Voice of Experience
“Once you pay the first bribe, every crooked S.O.B. in the country
will get in line, and you’ll have to pay every one of them. If you say
no the first time, and keep saying no, they will eventually get the
message.
Will you lose some business? Sure. But in the long run it won’t cost
as much as paying off every crooked S.O.B. in the country.”
Retired Chairman and CEO
U.S. Oil and Gas Exploration Company
www.cooley.com
12
Elements of An Effective Compliance Program
X
Management involvement and support
X
Clearly communicated standards and
procedures
X
Training for management and employees
X
Diligence in engaging agents and distributors
X
Procedures for assessing business
information from the compliance perspective
X
Audit and review of operations
X
FCPA language in agreements
X
Procedures for internal reporting and
investigation of possible violations
www.cooley.com
Management Involvement
X
Management involvement and support is critical
X
Senior manager must be responsible for compliance program
X
Aggravating factors cited in Siemens
X
Management was involved in or aware of and did not correct the
ongoing practice
X
Corporate culture tolerated and rewarded bribery
X
Compliance office understaffed
X
Convicted violators given full retirement benefits
www.cooley.com
13
Clearly Communicated Standards and Policies
X
General policy statements are not enough
X
Generic procedures are unlikely to work
X
Compliance program should clearly explain
standards of conduct and procedures to be
followed
X
X
In writing
X
In language that employees can understand
Procedures should be tailored to fit the
company’s business
X
Based on an objective assessment of the
risks faced by company
X
Based on an objective assessment of the
resources available to the company
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Train Employees and Management
From the Baker Hughes Complaint:
“The District Manager…determined on his
own that the FCPA would not be violated by
making such a payment because ‘all
companies are doing the same in Nigeria.’”
X
Confusion about the FCPA is common
X
Extensive training for those directly involved
in overseas sales
X
X
Sales and marketing
X
Finance
Awareness training for others, including
management
www.cooley.com
14
Diligence in Engaging Business Partners
From the Baker Hughes Complaint
“The company conducted no due diligence
with respect to the agent until three years
after the agent had first been engaged.
When conducted, the due diligence
revealed several “red flags”… Despite such
knowledge, the company continued to
retain and pay commissions to the agent.”
www.cooley.com
Diligence in Engaging Business Partners
X
Establish in advance objective criteria to be met
X
Benchmark fees and commissions against
industry norms
X
Use public sources and government services
X
Document the selection process
X
Include compliance language in agreements
X
Act on the information obtained
X
Questions that have to be answered:
X
Who are we paying ?
X
What are we paying that person to do ?
www.cooley.com
15
Evaluating Transactions and Relationships
X
Sales organization should not be making
compliance decisions
X
Assess business information from the
compliance perspective
X
Determine in advance what actions will
require advance approval
X
Engaging agents and other third-party
representatives
X
Sponsoring travel, trips or training for
customers or prospective customers
X
Expenses over a certain limit
X
Gifts to government officials
X
Political or charitable contributions
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Audits and Reviews
From the Baker Hughes Complaint
“Baker Hughes' legal department
otherwise failed to follow up with Fearnley.
No one else at the Company verified
whether or not the revised FCPA
procedures had been followed.”
X
X
Audit and review substantive compliance
X
Financial controls
X
Suspect payments
Audit and review procedural compliance,
including
X
Due diligence
X
Training
X
Use of FCPA language in contracts
www.cooley.com
16
Prepare for Disaster
X
Procedures for internal reporting of possible
violations
X
Clear chain of reporting the problem
X
Clear chain of responsibility for responding to
the problem
X
X
Include:
X
Management
X
Legal
X
Finance
Consequences for violations (and rewards for
compliance efforts)
www.cooley.com
Recurring Themes
X
Late arriving agents
X
Agents with no experience in the industry
X
Agency agreements are backdated
X
Customer demands a bribe, often late in
the sales cycle
X
Training trips
X
“Customary” or small gifts
X
Violations rarely occur in isolation
X
Exceptions to the company’s policy
www.cooley.com
17
Outline of Basic FCPA
Provisions and Concepts
FCPA Background
X
FCPA emerged from the Watergate scandal and
subsequent investigations
X
Government discovered that over 300 issuers had set up
“slush funds”
X
SEC prosecuted issuers’ “questionable payments” based
on Section 10(b)
www.cooley.com
18
Accounting Provisions
X
Books and Records
X
Applies to all U.S. issuers
X
Strengthened by Sarbanes-Oxley, Section 404
X
Broader than anti-bribery provision
X
Extends to all payments and transactions
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Accounting Provisions
X
Books and Records (cont.)
X
Materiality and scienter not required; only “in reasonable detail”
X
X
“Reasonable” standard “would satisfy prudent officials in the conduct
of their own affairs”
Objectives of the provision
X
(a) acts of misrepresentation, etc., are unlawful
X
(b) transactions should be properly reflected
X
As to permit GAAP financial statement preparation
X
According to accepted methods of reporting
www.cooley.com
19
Accounting Provisions
X
Books and Records (cont.)
X
SEC Rules:
X
Rule 13(b)2-1 – No person shall directly or indirectly, falsify or cause
to be falsified, any book, record or account…”
X
Rule 13(b)2-2 – “No director or officer of any issuer shall, directly or
indirectly…make any false statement” to any auditor
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Accounting Provisions
X
Internal Controls
X
Bolstered by Sarbanes-Oxley Section 404
X
The SEC does not prescribe any specific method
X
Objective:
X
Ensure that issuers adopt accepted methods of recording, protecting
assets and conforming transactions to management’s authorization
X
Ensure proper financial reporting and corporate accountability
www.cooley.com
20
Accounting Provisions
X
Internal Controls (cont.)
X
SEC Rule – Section 13(b)(5)
X
“No person shall knowingly circumvent or knowingly fail to implement
a system of internal accounting controls or knowingly falsify any
book, record or account…”
www.cooley.com
Elements of the Anti-bribery Provision
X
Any U.S. person or entity
X
X
Jurisdiction means
X
X
Made use of mails or any means or instrumentality of interstate
commerce
Corruptly
X
X
X
“issuers,” “domestic concerns,” officers, directors, and agents
Quid pro quo
Intent to influence
Authorized, offered, or paid anything of value
www.cooley.com
21
Elements of the Anti-bribery Provision
X
To a foreign official
X
For the purpose of:
X
X
X
X
Payment made in furtherance of obtaining or retaining business
X
X
X
(a) influencing any act or decision of such foreign official
(b) inducing violation of lawful duty
(c) securing improper advantage
Expansive view taken by DOJ in U.S. v. Kay
Includes foreign judges – attorneys should ensure that local counsel
does not make payments to judicial officials in the course of litigation,
despite its perception as “standard business practice”
Acted willfully
www.cooley.com
Definitions
X
X
“Foreign Official”
X
Any officer or employee of a foreign government or governmental
agency
X
Any person acting in an official capacity on behalf of a government
X
Officers and employees of government-owned entities
“Knowing” Payments
X
Positive knowledge
X
Awareness of a high probability that circumstances exist
X
Willful blindness
X
Turning a “blind eye” to problems
X
Deliberately cutting off the flow of information the company would
normally obtain
www.cooley.com
22
Exception
X
Facilitating (“Grease”) Payments
X
Payments made to facilitate routine government action do not violate the
FCPA
X
Examples
X
X
Phone service
X
Trash collection
Payments for the purposes of obtaining new business are not grease
payments
www.cooley.com
Affirmative Defenses
X
X
Lawful Payments
X
Permits payments that are lawful under the “written laws and
regulations” of the official’s country
X
The fact that bribes may be common place (customary payments) is not
a defense
Bona fide and reasonable expenses
X
Incurred by or paid on behalf of the official if the payments are directly
related to:
X
Promotion or explanation of products or services; or,
X
Execution of a contract with the foreign government
www.cooley.com
23
ROEL CAMPOS
PARTNER IN CHARGE
OFFICE:
PRACTICES:
Washington, DC
777 6th Street, NW
Suite 1100
Washington, DC
20001
Commercial Litigation
National Security
Securities Litigation
T: 202/842-7825
F: 202/842-7899
E: [email protected]
Roel Campos is the partner in charge of Cooley Godward Kronish's Washington, DC office. He is a
member of the Litigation Department and joined the firm in 2007.
Mr. Campos' practice consists of advising corporate management teams and boards of directors with
respect to enforcement, internal investigations, prosecutions, securities and international regulation, and
corporate governance. Mr. Campos is a highly sought after orator and regularly serves as lead speaker for
prestigious legal and business conferences around the globe.
Mr. Campos was recently named to President Barack Obama's economic advisory board and to his
transition team. Prior to joining Cooley, Mr. Campos was a Commissioner of the Securities and Exchange
Commission. He was sworn in as a Commissioner of the SEC on August 22, 2002. On June 2, 2005, he
was nominated by President George W. Bush for a second term, and was confirmed by the United States
Senate on July 29, 2005.
Mr. Campos served for four years as the Commission's liaison to the international regulatory community.
During his time at the SEC, Commissioner Campos became one of the best known regulators in the world.
As the Vice Chair of the Technical Committee of the International Organization of Securities
Commissioners, he developed productive relationships with securities regulators in Europe, Asia, Australia,
and Latin America. Mr. Campos also facilitated the development of international auditing and accounting
standards through his work as Chair of the Monitoring Group, which oversees the setting of International
Standards of Audit.
Mr. Campos has presided over hundreds of complex enforcement cases, applying the Securities Act of
1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, and the Investment
Advisers Act of 1940. He also has extensively participated in the crafting and adoption of many of the
SEC's recent major regulatory initiatives, including: the Sarbanes-Oxley Act, mutual fund governance and
compliance rules, and the new National Market System. In addition, Mr. Campos has spoken and published
extensively in the areas of the implementation of the Sarbanes-Oxley Act, corporate governance, director
liability, corporate penalties, international accounting and auditing standards, Securities Act reform, SRO
and market reform, retirement investment protection, research analyst conflicts, and the internationalization
of the securities markets.
Prior to being nominated to the Commission, Mr. Campos was one of two principal owner-executives of El
Dorado Communications, a radio broadcasting company, at its headquarters in Houston, Texas. However,
he began his career as an officer in the U.S. Air Force. After attending Harvard Law School, he worked in
Los Angeles, California for major law firms as a corporate transactions/securities lawyer and litigator.
Beginning in 1985, Mr. Campos served as a federal prosecutor for five years in the U.S. Attorney's Office in
Los Angeles. He successfully prosecuted complex and violent narcotics cartels and, in a celebrated trial,
convicted defendants for the kidnapping and murder of a DEA Agent. He also investigated and prosecuted
major government contractors for fraudulent conduct. He then returned to private law practice for several
years before co-founding El Dorado Communications, Inc.
Mr. Campos has been recognized as one of the top Latino leaders in America. He is a founding member of
the New America Alliance, a Latino initiative for raising awareness of investment opportunities in the Latino
sector in the United States.
BILL GRAUER
PARTNER
OFFICE:
PRACTICES:
San Diego
4401 Eastgate Mall
San Diego, California
92121-1909
Commercial Class Action Litigation
Commercial Litigation
National Security
Securities Litigation
White Collar & Regulatory Defense
T: 858/550-6050
F: 858/550-6420
E: [email protected]
Bill Grauer is a partner in the Cooley Godward Kronish Litigation department. He joined the Firm in 1998,
is resident in Firm's San Diego office, and is the Co-Chair of the Firm's National Securities
Litigation practice. Mr. Grauer was recently selected by the Los Angeles Daily Journal as one of the top
100 lawyers in the state of California.
Mr. Grauer specializes in securities and health care litigations, fraud litigations, government and regulatory
investigations, internal corporate investigations, and complex commercial litigation including technology
cases. He is an experienced trial and appellate lawyer and was previously given the Outstanding Trial
Lawyer Award by the Trial Lawyers Association. Mr. Grauer is one of the very few lawyers in San Diego
who has successfully argued in the United States Supreme Court, obtaining a unanimous victory. See Oral
Argument.
Prior to joining the Firm, Mr. Grauer was a partner at Gray Cary Ware and Friedenrich. Prior to that, he was
appointed by the Attorney General of the United States to serve as an Assistant United States Attorney
handling Special Fraud Prosecutions in the U.S. District Court, Southern District of California.
As an Assistant United States Attorney, Mr. Grauer was given special achievement awards by the Attorney
General of the United States, the United States Postal Inspection Service, the Federal Bureau of
Investigation and the United States Secret Service.
In 2005, 2006, 2007, 2008 and 2009, Mr. Grauer was named to the Best Lawyers in America in the
categories of Commercial Litigation, Derivatives Law and Securities Law. In 2007, 2008 and 2009, Mr.
Grauer was named to the Southern California Super Lawyers - San Diego in the categories of (1) Top 50
Lawyers, and (2) Business Litigation. In 2006, 2007 and 2009, he was named by his peers as one of the
"Top San Diego County Attorneys" in the category of Corporate Litigation, as published by the San Diego
Daily Transcript. He was also named in 2008-09 by Lawdragon as one of "The Nation's Top Securities
Litigators."
Mr. Grauer graduated from the Cornell Law School in 1974 as the Articles Editor of the Law Review and
was elected to Order of the Coif. In 1971 he graduated from Cornell University with Honors in Government,
magna cum laude, and was awarded a degree With Distinction.
Mr. Grauer has been very active in Bar Association activities:
Chair of the Federal Court Discipline Committee for the U.S. District Court, Southern District of California,
on appointment by the Southern District Federal Judges, 1990-present
American Bar Association House of Delegates, 2008-2010 term
Lawyer Representative, 9th Circuit Judicial Conference, 2007-2010 term
Co-Chair IPO Litigation Subcommittee of the ABA Section of Litigation, 2005 - present
Former Chairman of the Ethics Committee of the San Diego County Bar Association, two terms
ƒ
Former Chairman of the Federal Court Committee of the San Diego County Bar Association
ƒ
Board of Directors of the Association of Business Trial Lawyers, 1998-1999
Mr. Grauer is a member of the State Bar of California and New York State Bar Association, the Bar of the
United States Supreme Court, the U.S. Court of Appeals, Second and Ninth Circuits and numerous Federal
District Courts.
MICHAEL MARINELLI
PARTNER
OFFICE:
PRACTICES:
Washington, DC
777 6th Street, NW
Suite 1100
Washington, DC
20001
China & Asia
Europe & U.K.
International Trade
Life Sciences
National Security
White Collar & Regulatory Defense
T: 202/842-7830
F: 202/842-7899
E: [email protected]
Michael X. Marinelli is a partner in the International Trade practice group and a member of the Cooley
Godward Kronish Business department. He joined the Firm in 2005 and is resident in the Washington
D.C. office.
Mr. Marinelli concentrates his practice in federal regulation of international trade, both outbound (export
compliance) and inbound (customs). Mr. Marinelli's practice also encompasses compliance with the
Foreign Corrupt Practices Act and USA Patriot Act. He has experience in counseling technology,
telecommunications and life sciences companies in the area of export and import transactions, the
development of trade compliance programs and representing companies involved in government audits,
investigations and enforcement proceedings.
Prior to joining Cooley, Mr. Marinelli was a partner at Gray Cary Ware & Freidenrich. Before that, he
practiced with the firm of Baker Botts for over ten years where he made partner.
Mr. Marinelli received his J.D. from Catholic University Columbus School of Law where he served as
Editor-in-Chief of the Catholic University Law Review. He received an A.B. from Brown University in 1982.
Mr. Marinelli is admitted to practice before the U.S. Court of Appeals for the Federal Circuit and U.S. Court
of International Trade and is a member of the District of Columbia Bar.
NEAL STEPHENS
PARTNER
OFFICE:
PRACTICES:
Palo Alto—Five Palo Alto Square
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California
94306-2155
Commercial Class Action Litigation
Commercial Litigation
Securities Litigation
White Collar & Regulatory Defense
T: 650/843-5442
F: 650/857-0663
E: [email protected]
Neal J. Stephens is a partner in the Litigation department at Cooley Godward Kronish, and is resident in
the Palo Alto office.
Mr. Stephens is a trial lawyer who specializes in white collar criminal defense, internal investigations and
complex civil litigation. He has handled more than 30 trials in federal and state courts during his career.
Mr. Stephens has represented officers and directors in investigations by various U.S. Attorney's Offices and
the SEC related to accounting fraud, insider trading, RICO, antitrust violations and numerous other alleged
criminal violations. Mr. Stephens has also conducted internal corporate investigations for Audit or Special
Committees of public companies related to accounting fraud allegations, including several investigations in
Asia. On civil matters, Mr. Stephens has represented clients in a wide variety of complex civil litigation,
including antitrust, securities, unfair competition and class action litigation.
Representative matters include:
Criminal/Regulatory Matters:
ƒ
Trial counsel for Kent Roberts, former general counsel of McAfee, Inc., in stock option backdating
cases brought by the DOJ and SEC. Mr. Roberts defeated both the DOJ (at trial) and the SEC
(who voluntarily dismissed prior to trial), making him the only executive in a stock option
backdating case to defeat either the DOJ or the SEC.
ƒ
Represented a software company in a SEC enforcement action regarding accounting fraud.
ƒ
Represented a microchip company in a trade secrets investigation by the DOJ.
ƒ
Represented a biotech company in an insider trading investigation by the SEC.
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Represented a telecommunications company in an insider trading investigation by the SEC.
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Represented a senior executive of a networking company in parallel investigations conducted by
the DOJ and SEC regarding alleged accounting fraud.
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Represented executives in a criminal antitrust investigation of the DRAM industry.
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Represented executives of a telecommunications company in a fraud investigation of a hedge
fund conducted by the DOJ and SEC.
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Represented a director of a software company in a criminal insider trading investigation.
Internal Investigations:
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Represented the Audit Committee of a data storage company in an internal investigation
conducted throughout Asia related to potential revenue recognition fraud.
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Represented the Audit Committee of a telecommunications company in an internal investigation
in Taiwan and China related to allegations of revenue recognition fraud.
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Represented the Audit Committee of a medical device company related to allegations of false
advertising and accounting fraud.
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Represented the Audit Committee of a software company in an internal investigation related to
FCPA and embezzlement allegations in Asia.
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Represented the Audit Committee of a software company in an internal investigation related to
potential revenue recognition fraud.
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Represented the Audit Committee of a flat panel display equipment supplier in an internal
investigation related to potential accounting fraud in Asia.
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Represented the Special Committee of the Board of Trustees at St. Mary's College in an internal
investigation related to a failed pledge exceeding $100M.
Complex Civil Litigation:
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Represented Covidien (formerly Tyco Healthcare) on several antitrust cases alleging violations of
Sections I and II of the Sherman Act, false advertising under the Lanham Act and unfair
competition under various state laws. Defended cases in federal courts in Texarkana, Los
Angeles, Boston and St. Louis.
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Represented United States Gypsum Company in several product defect cases, including an
industry wide national class action related to alleged product defects where plaintiffs
asserted violations of California's Unfair Business Practices Act, Section 17200 and California's
Consumer Legal Remedies Act ("CLRA").
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Represented Siebel Systems in shareholder litigation related to a potential merger.
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Represented several venture capital firms in FOIA litigation related to the disclosure of financial
information.
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Represented a director of a medical device company in derivative shareholder litigation.
Prior to joining Cooley in 2000, Mr. Stephens was an Assistant United States Attorney in Miami, Florida
where he served as Chief of the Major Narcotics Section. He also served as Regional Coordinator of the
Organized Crime Drug Enforcement Task Force for the Florida/Caribbean Region. Mr. Stephens ran
investigations that resulted in the extradition and prosecution of high-level Colombian traffickers, including
relatives and associates of Pablo Escobar, the former head of the Medellin cartel. He received national
awards from both the Justice Department and DEA for his work on international wiretap prosecutions. Mr.
Stephens also taught courses regarding trial advocacy, wiretaps and electronic surveillance, and the
prosecution of criminal organizations to other federal prosecutors and agents.
Mr. Stephens received his J.D. in 1990 from Harvard Law School and, after graduating, served as a law
clerk to the Honorable Alicemarie H. Stotler, United States District Judge, Central District of California. He
attended Stanford University on a soccer scholarship, graduating with distinction in 1987.
Mr. Stephens has been recognized as a Super Lawyer in Northern California since 2006. He is a member
of the American Bar Association and has served as Co-Chair of its Computer and Internet Litigation
Section. Mr. Stephens is also a member of the National Institute for Trial Advocacy ("NITA") and has taught
trial advocacy at several NITA seminars. Mr. Stephens is also a member of the State Bar of California and
the Santa Clara County Bar Association and handles pro bono matters with the Northern California
Innocence Project.