Siemens Executives Face Parallel FCPA Proceedings
So the SEC and the Justice Department brought a big FCPA case involving Siemens AG on Tuesday. The agencies charged a total of nine former senior executives and agents of the company with a decade-long scheme to bribe Argentinian government officials to secure and implement a $1 billion contract to produce national identity cards. The actions are covered in depth here and here. We wanted to comment because we see a number of things about the case that we think are worth mentioning.
First, the case represents a significant opportunity for Justice to redeem itself after the recent dismissal of the Lindsey Manufacturing Co. indictments in the Central District of California. While reasonable people disagree about the meaning of the dismissal, and DOJ is appealing it, the general public perception likely is that prosecutors acted unethically in that case. This Siemens action will be closely scrutinized, and will offer the Justice Department another chance to get it right with no questions. Second, none of the defendants are in U.S. custody. Most of them are German, and DOJ apparently has a good working relationship with the prosecutor’s office in Munich. But extradition to the United States could become a complicating issue. It has happened before recently in the FCPA context. Finally, it will be interesting to see if the SEC’s case is stayed while the criminal case proceeds.
For years similar situations worked like this: (1) the SEC and the Justice Department filed on the same day; (2) the relevant U.S. Attorney’s Office moved (with the SEC’s consent) to stay the SEC matter to keep civil discovery from interfering with the criminal case; (3) the court granted the motion to stay; (4) the SEC waited for the convictions to roll in so it could use the res judicata effect to take care of the civil claims. It doesn’t work that way anymore. Gathering statements and documents under the Federal Rules of Civil Procedure, at their disposal in a defendant's case against the SEC, can produce a number of opportunities to undermine adversarial witnesses in a parallel criminal matter.
Defendants have recognized the great value of using civil discovery in this way, and have started to take advantage of it if they can. Government efforts to resist on the grounds that civil proceedings will interfere with a criminal matter don’t always work the way they used to. As the court said in a 2009 case, criminal discovery rules are designed to guard against perjury and witness intimidation, not “to enshrine a tactical advantage in favor of the government.” The SEC’s great tormentor, Judge Rakoff in the Southern District of New York, also balked at a motion for a stay in the recent Galleon insider trading matter, citing the “strong public interest in having cases of this kind move forward promptly.” Lanny Breuer, the head of DOJ’s criminal division, has acknowledged the new state of affairs, saying last year, “Just because there’s a civil action . . . and a parallel criminal action, the days are gone where the civil action will necessarily be stayed until the criminal action is over.” The SEC will have to be ready to go in its case against the Siemens defendants, and it probably is.