Senior Executives of U.S. Broker-Dealer Receive Harsh

April 6, 2015
Senior Executives of U.S. Broker-Dealer Receive
Harsh Sentences for Conspiracy Violations of the
U.S. Foreign Corrupt Practices Act
Prosecutions of, and civil actions against, individuals for violating the United States
Foreign Corrupt Practices Act (“FCPA”) remain an enforcement priority for the United
States Department of Justice (the ”DOJ”) and the Securities and Exchange Commission
(the “SEC”). The recent sentencing of two senior executives of U.S. broker-dealer Direct
Access Partners LLC (“DAP”), who each received four years in prison, were fined
$40,000, and ordered to forfeit millions of dollars for conspiracy violations of the FCPA’s
anti-bribery provisions, are likely to further encourage prosecutors in their pursuit of
individual defendants. The four-year prison terms handed down by the federal judge in
the United States District Court for the Southern District of New York significantly
exceeded the longest previous prison sentence in the Southern District for violating the
FCPA – one year and a day. Beyond the significant penalties imposed on the individual
defendants, the case is notable because it highlights the DOJ’s use of conspiracy,
rather than primary, liability charges and confirms the broad reach of the FCPA’s antibribery provisions.
The two DAP executives, its former CEO and managing director, worked with others
inside and outside DAP to arrange bribe payments to an official of Venezuela’s state
economic development bank, Banco de Desarrollo Económico y Social de Venezuela
(“Bandes”). Bandes is majority owned by, and receives substantial funding from, the
Venezuelan government, and is operated under the direction of the Venezuelan
Ministry of Finance. According to the DOJ, the CEO personally signed checks for
payments to “foreign finders” that were ultimately routed to the Bandes official, and both
senior executives agreed to use DAP’s own funds to reimburse other broker-dealer
employees who had used personal funds to bribe the official. The reimbursement
payments were structured as loans from the broker-dealer to the employees. In
exchange for the payments, Bandes directed financial trading business to DAP.
Pursuant to the FCPA, U.S. persons are prohibited from paying or offering to pay
anything of value to a foreign official in order to obtain or retain business. As this case
demonstrates, “foreign official” includes not only officials of foreign government
ministries and departments, but also employees of foreign government
“instrumentalities,” such as state-owned and operated entities like Bandes.
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Contacts
Individuals may be held liable for conspiring to violate the FCPA—i.e., for agreeing
with others to commit an FCPA violation—even if they did not make bribe payments
directly. Here, the senior executives were held criminally liable for playing a part in
the bribery scheme, even though neither defendant directly made a bribe payment to
the foreign official. Indeed, conspiracy liability under the FCPA may extend even to
non-U.S. persons who agree with U.S. persons to engage in bribery in violation of the
FCPA. Accordingly, executives of non-U.S. entities located abroad are at risk of
FCPA prosecution for involvement in a bribery scheme if any U.S. person plays a
meaningful part in making or concealing improper payments.
For further information
please contact:
James Warnot
Partner
+1 (212) 903 9028
[email protected]
Paul Hessler
Partner
This case also illustrates the steep penalties that may be imposed for FCPA
violations. A single violation of the FCPA carries a potential fine of up to $250,000
and potential imprisonment of up to five years. Although the executives in this case
entered guilty pleas, they received nearly the statutory maximum penalty. Individuals
criminally liable for violating the FCPA may also be required to forfeit to the
government all personal proceeds from the bribery scheme, which, as here, could
amount to millions of dollars.
+1 (212) 903 9132
As Assistant Attorney General Leslie Caldwell remarked in connection with the
sentences, U.S. regulators “will hold individuals accountable for violations of the
FCPA and will pursue executives no matter where they are on the corporate ladder.”
[email protected]
[email protected]
Lance Croffoot-Suede
Partner
+1 (212) 903 9261
Kate Machan
U.S. Associate
+1 (212) 903 9289
[email protected]
Nathan Carle
U.S. Associate
Authors: James Warnot, Paul Hessler, Lance Croffoot-Suede, Kate Machan, Nathan Carle
+1 212 903 9340
This publication is intended merely to highlight issues and not to be comprehensive, nor to provide legal advice. Should
you have any questions on issues reported here or on other areas of law, please contact one of your regular contacts, or
contact the editors.
[email protected]
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