The Foreign Corrupt Practices Act (“FCPA”), codified in 15 U.S.C. §§ 78dd-1, et. seq., prohibits certain classes of persons and entities from paying foreign government officials to assist in obtaining or retaining business. Specifically, persons and entities may not corruptly use any means of instrumentality of interstate commerce in furtherance of any offer or payment of money or thing of value to any person, while knowing that the money offered is meant to influence a foreign official in his or her official capacity.
Recently, the FCPA made headlines through its involvement in the prosecution of a bribery and money laundering scheme. Two Columbian businessmen – Alex Nain Saab Moran and Alvaro Pulido Vargas – allegedly bribed Venezuelan officials between 2011 and 2015 with payment for fake shipments of construction materials that were never sent to the country after securing a contract to build low-income housing. Funds exceeding $350 million travelled from Venezuela through the U.S. correspondent banking system, and Florida bank accounts collected approximately one half million dollars in tainted funds.
Because money laundering statutes prohibit the use of the U.S. banking system for transactions involving funds from specified unlawful activity, the government claimed jurisdiction over the case. Included within the money laundering statutes, according to the government’s indictment, are crimes against foreign governments and violations of the FCPA. Specific FCPA provisions criminalize actions taken in the U.S. to promote foreign bribery schemes. Thus, although Department of Justice (“DOJ”) prosecutors did not accuse Moran and Vargas of coming to the United States, their supposed involvement in a conspiracy with three other unnamed people – two of whom they allegedly conspired with in Miami during a meeting – subjected them to FCPA prosecution. Furthermore, prosecutors believe that these two individuals reimbursed another co-conspirator for “expenses” related to the scheme by wiring money to his Florida account.
Prosecutors charged Moran and Vargas with one count of conspiracy and seven counts of money laundering. The Treasury’s Office of Foreign Assets Control (“OFAC”) also sanctioned them and several of their companies, contending that these men bribed their way into various other government contracts, including providing food for the country’s nutritional relief program. Moran and Vargas then allegedly inflated invoices to maximize profit, used payments for bribes, and imported food of poor quality for the program. OFAC sanctions also included eight other individuals, including Moran and Vargas family members, three stepsons of Venezuelan President Nicolas Maduro, and José Gregorio Vielma Mora, the former governor of the Venezuelan state of Táchira.
Ultimately, the prosecution of Moran and Vargas demonstrates the virtually unlimited ability of the United States government to reach beyond its borders in prosecuting FCPA matters. With that in mind, DOJ prosecutors will likely continue casting a wide net over potential violators – even those who have never set foot on American soil.
United States v. Alex Nain Saab Moran and Alvaro Pulido Vargas Indictment
Posted On Friday, June 28, 2019
Corporations engaged in civil litigation or government investigations often need to address public relations resulting from their legal involvement, commonly referred to as “crisis communications.” Outside and in-house legal counsel and the corporate officers involved have always had to exercise considerable care to avoid potential waiver of attorney-client and attorney work product privileges. In a recent Opinion, the Pennsylvania Supreme Court provides important insights on these points. See Bousamra, M.D. v. Excela Health, et al., J-80-2018, 5 WAP 2018 Supreme Court of Pennsylvania Western District, (June 18, 2019).
What Happened
In brief, Excela Health determined, with help from outside consultants, that a certain physician appeared to be performing medically unnecessary cardiac procedures. Excela retained outside counsel to assist with this investigation and to advise it on how to proceed. Excela also hired a public relations firm to assist it in disclosing any findings. Outside counsel provided legal advice by email to Excela’s General Counsel as to whether it was legally appropriate to disclose the physician’s name in a press release, among other things. Excela’s General Counsel forwarded the outside counsel’s email to the owner of the public relations firm, who in turn forwarded that email to her employees assisting in the Excela work. Excela ultimately released the physician’s name as part of its press strategy and the physician sued Excela for, among other things, defamation. The legal issue at the center of the Supreme Court’s Opinion is whether Excela waived the attorney-client and attorney work product privileges when its General Counsel forwarded the outside counsel’s email to the public relations firm.
The Result
Attorney-Client Privilege – waived.
The Pennsylvania Supreme Court determined that the attorney-client privilege over the email was waived when General Counsel forwarded it to the public relations firm. The Court acknowledged that in the modern practice of law, lawyers – particularly litigators – are involved in managing and utilizing media relations. Accordingly, the Court recognized that certain situations may arise where public relations firms are necessary to provide insight, advice, or opinion on legal advice, but cautioned that the scope of those situations must remain “narrowly tailored.” The Court also cautioned that, in cases where the privilege has been found to apply when third parties were privy to attorney-client communications, the “third party’s receipt of confidential information was either solicited by the attorney, or necessary for the attorney to give legal advice.” Id. at 29.The Supreme Court determined that the attorney-client privilege here was waived because:
- the owner of the public relations firm was not capable of acting on Excela’s behalf, as she was not an officer, executive or director of Excela; and
- the forwarding of the email by Excela’s General Counsel to the public relations firm was not done to facilitate a lawyer’s ability to give legal advice to Excela. Id.
Work Product Privilege – Remanded for further findings by the trial court.Excela also asserted the work product privilege over the email. The Supreme Court definitively determined that the content of the email was work product of outside counsel. The Court then engaged in an analysis to determine whether the disclosure of the work product email to Excela’s public relations firm effected a waiver of the work product privilege. After extensive analysis, the Court concluded that the disclosure of the email to a third party outside the attorney-client relationship did not waive the attorney work product privilege. The Court determined that the purpose of the attorney work product privilege was to protect the attorney’s work product from adversaries or potential adversaries in the litigation, and held that the work product privilege is “waived when work product is shared with an adversary or disclosed [to a third party] in a manner which significantly increases the likelihood that an adversary or anticipated adversary will obtain it.” Id. at 16. The Court recognized that this determination required extensive factual findings and remanded the matter to the trial court. Id. at 19.
The Take Away
- The Court reaffirmed that the attorney-client privilege is generally waived when a communication is shared with a third party;
- If an attorney needs the involvement of third party to facilitate legal advice to the client, then the attorney including that third party in the attorney-client communication would not constitute a waiver of the attorney-client privilege;
- The Court recognized that attorneys – particularly litigators – often need to seek the advice of public relations consultants [or other third parties] to advise their clients;
- The attorney and client should both be cautious when sharing attorney-client communications with public relations consultants, as the Supreme Court has made it clear that the scope of disclosure of attorney-client communications to such a third party must be narrowly tailored;
- To best protect the attorney client privilege, the attorney should request the involvement of the third party and make it clear that it is to assist the attorney in providing legal advice, before sharing privileged material;
- The attorney work product privilege will not be waived if the work product is shared with a third party, so long as all parties are cautious to ensure that an adversary or potential adversary would not obtain access to that work product.
- When securing the services of public relations consultants or other third parties, the client and/or attorney should make it clear in writing that the attorney work product being shared is confidential and cannot be shared with any other third party;
- Entities should put in place a crisis communications plan to ensure that only certain people within the organization are authorized to provide information to third parties, and that those people are trained when and how to do so;
- In-house legal departments at corporate entities should facilitate training for all their attorneys on the nuances of both the attorney-client and attorney work product privileges.
This outline has been provided by Kevin E. Raphael who is a Partner at the Pietragallo Gordon Alfano Bosick & Raspanti, LLP Law Firm. Mr. Raphael works in the Philadelphia office of Pietragallo and travels all over the United States to assist clients in government investigations, responding to allegations of sexual misconduct, and other matters including business incidences that fall under the need for Crisis Communications. For more information, we invite you to reach out to Mr. Raphael direct.
