Confronting Percoco and Full Play: The Limitations of Honest Services Fraud and the Travel Act as an Alternative Source of Liability for Commercial Bribery

by Hector Correa Gaviria and Berke Gursoy

Left to Right: Hector Correa Gaviria and Berke Gursoy (photos courtesy of authors)

On September 1st, 2023, District Court Judge Pamela Chen delivered a startling decision, overturning the honest services fraud convictions of Hernán Lopez, former Fox executive, and FullPlay Group, S.A., an Argentine sports marketing company. Lopez and FullPlay were convicted of federal wire fraud for bribing employees of the Fédération Internationale de Football Association (FIFA) and CONMEBOL (the South American soccer federation under the umbrella of FIFA) to secure lucrative broadcasting contracts for some of Latin America’s most prestigious soccer tournaments and World Cup qualifying matches.

In United States v. Full Play,[1] a federal jury found that Lopez and FullPlay used U.S. wires to defraud FIFA by depriving the international soccer organization of the right to its employees’ faithful and honest services in violation of 18 U.S.C. §§ 1343 and 1346 (jointly referred to as honest services wire fraud “HSF”). However, soon after this conviction, the Supreme Court in Percoco v. United States limited the scope of HSF.[2] They did so by restricting the sources of fiduciary duty that can support an HSF conviction, holding that a limited number of on-point pre-McNally cases was insufficient to sustain an HSF conviction.[3] Through this ruling, Percoco essentially established a limiting principle for HSF; however, it did not articulate a test for when an actionable fiduciary duty under HSF could be found.[4]

In the wake of Percoco, the defendants in Full Play filed a motion for acquittal on their honest services charges. They argued that under Percoco, honest services fraud does not cover foreign commercial bribery because the statute requires defendants to induce a violation of the bribe-recipient’s fiduciary duty to the victim organization and because the type of fiduciary duty alleged in this case, a duty owed by foreign employees to a foreign employer, is not cognizable under §1346. Judge Chen agreed, holding that there was not “even a smattering” of pre-McNally cases to support the defendants’ HSF convictions.[5]

Though this case is under appeal, the judge’s ruling represents the difficulties of post-Percoco commercial bribery prosecutions through § 1346.[6] This article will argue that the Travel Act, 18 USC § 1952, represents an effective substitute for § 1346 that allows federal prosecution of commercial bribery through both HSF and state-level commercial bribery statutes.

Continue reading →

EU Court Upholds Commission’s Power To Demand Data Held by Foreign Companies

by Bill Batchelor, Ryan D. Junck, David A. Simon, Nicola Kerr-Shaw, Bora P. Rawcliffe, and Margot Seve

Top left to right: Bill Batchelor, Ryan D. Junck, and David A. Simon. Bottom left to right: Nicola Kerr-Shaw, Bora P. Rawcliffe, and Margot Seve (Photos courtesy of authors)

Summary

In Nuctech Warsaw (T-284/24), the EU Court of Justice held that EU subsidiaries can lawfully be required to provide access to email accounts and data held by their overseas parent company. The ruling involved the following framing:

Broad reach of EU extraterritorial investigative powers: The order interprets the European Commission’s (EC’s) investigative powers broadly. EU law applies to conduct with significant effects in the EU, even if the conduct occurs outside the EU. Consequently, the EC may request information from non-EU companies to assess potential EU law violations.
Implications for other EU enforcement regimes: The investigation was carried out under the EU Foreign Subsidies Regulation (FSR), but the ruling has implications for the EC’s powers under general antitrust rules and other regulations such as the Digital Markets Act or the Digital Services Act. The judgment follows divergent rulings in the UK that limited the extraterritorial reach of UK regulators’ enforcement powers in fraud and antitrust cases. (See our February 2021 alert “English Supreme Court Limits Serious Fraud Office’s Extraterritorial Reach” for more details.)
Siloing access to data within a corporate organization: The ruling held that there was no evidence local subsidiaries could not access China-held data, or that compliance with the EC’s inspection decision would compel the applicants and the group to infringe Chinese law, including criminal law. Therefore, companies should consider:
- If their IT environment and procedures can be siloed to enable the company to demonstrate that accessing parent company data from the EU is not technically feasible without cooperation from the non-EU entities.
- Whether law and regulation applicable to a company would prevent it from sharing this data with an EU regulator. If so, this should be well-documented in advance, potentially with external legal counsel validation, so that any refusal to comply with a request for data could be quickly substantiated with specific reference to other applicable laws.

Continue reading →

It May Not Be Worth the Paper (or Pixel) It’s Written On (Part 2): A Fresh Look at Common Responses to Bolster Export Controls Compliance Programs as BIS Primes the Corporate Enforcement Engine

by Brent Carlson and Michael Huneke

Brent Carlson and Michael Huneke (photos courtesy of authors)

Amid reports of continued export controls diversion[1] to entities in locations including China, Russia, Iran, and North Korea, the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) has been priming the corporate enforcement engine.[2] This dynamic increases challenges for in-house legal and compliance teams to respond to BIS’ latest moves and bolster compliance program effectiveness. In this new environment, the greatest compliance risks revolve around explaining and defending relationships with distributors and resellers in the face of allegations and reports of product diversion or other “red flags” indicating the same—a task made more nuanced under the “high probability” standard of “knowledge” recently highlighted by BIS in new guidance issued on July 10, 2024 (the “July 10 BIS Guidance”).[3]

In Part 1 we previously discussed the practice of using letters of assurance—and the problems of relying solely upon them without resolving related red flags—to bolster export controls compliance programs in response to the new BIS enforcement playbook.[4] In Part 2 we now examine other common responses based on legacy approaches to export controls and why they are ineffective—and even detrimental—in today’s new and evolving enforcement environment.

Continue reading →

CFTC Begins Its Enforcement of NDA Rule with Action Against Trafigura

by Benjamin Calitri

Photo courtesy of the author

On June 17, 2024, Trafigura Trading LLC (“Trafigura”) agreed to pay $55 million to settle charges brought by the Commodity Futures Trading Commission (“CFTC”) that they “traded gasoline while in knowing possession of material nonpublic information, . . . manipulated a fuel oil benchmark to benefit its futures and swaps positions,” and notably that they violated CFTC Regulation 165.19(b) by “requir[ing] its employees to sign employment agreements, and request[ing] that former employees sign separation agreements containing non-disclosure provisions prohibiting them from disclosing company information, with no exception for law enforcement agencies or regulators.” This is the CFTC’s first enforcement of Regulation 165.19(b).

Continue reading →

Shining a Light on the Shadows: A Data-Driven Look at Global Anti-Corruption Efforts

by Leonardo Borlini

Photo courtesy of the author

Corruption has been the target of significant international efforts in recent decades. A complex web of international treaties and monitoring mechanisms has emerged, aiming to curb this global scourge. But how effective are these efforts? Are countries truly implementing and complying with their international anti-corruption commitments?

In my recent study, Compliance Mechanisms as a Diagnostic and Prognostic Tool for the Evolution of the International Anti-Corruption Cooperation: A Data-Driven Study, forthcoming in 22(2) International Constitutional Law Journal (2024), I try to shed light on these questions. Using innovative text-as-data analysis, the study delves into the vast trove of evaluation and compliance reports produced by the monitoring mechanisms established by the main international anti-corruption. The findings offer a comprehensive assessment of the successes, failures, and enduring challenges in global anti-corruption cooperation.

Continue reading →

Dutch Data Protection Authority Imposes a Fine of 290 Million Euros on Uber

by Sarah Pearce and Ashley Webber

Left to right: Sarah Pearce and Ashley Webber (Photos courtesy of the Hunton Andrews Kurth LLP)

On August 26, 2024, the Dutch Data Protection Authority (the “Dutch DPA”), as lead supervisory authority, announced that it had imposed a fine of 290 million euros ($324 million) on Uber. The fine related to violations of the international transfer requirements under the EU General Data Protection Regulation (the “GDPR”).

The Dutch DPA launched an investigation into Uber following complaints from more than 170 French Uber drivers to the French human rights interest group the Ligue des droits de l’Homme, which subsequently submitted a complaint to the French Data Protection Authority (the “CNIL”). The CNIL then forwarded the complaints to the Dutch DPA as lead supervisory authority for Uber.

Continue reading →

DOD’s CMMC 2.0 Program Takes Step Forward with Release of Contract Rule Proposal

by Beth Burgin Waller and Patrick J. Austin

Beth Burgin Waller and Patrick J. Austin (photos courtesy of Woods Rogers Vandeventer Black PLC)

The United States Department of Defense (DoD) took another big step on the path to instituting its highly anticipated Cybersecurity Maturity Model Certification 2.0 program (CMMC 2.0). Once finalized, CMMC 2.0 will establish and govern cybersecurity standards for defense contractors and subcontractors.

On August 15, 2024, DoD submitted a proposed rule that would implement CMMC 2.0 in the Defense Federal Acquisition Regulation Supplement (DFARS). The proposed DFARS rule effectively supplements DoD’s proposed rule published in December 2023 by providing guidance to contracting officers, setting forth a standard contract clause to be used in all contracts covered by the CMMC 2.0 program, DFARS 252.204-7021, and setting forth a standard solicitation provision that must be used solicitations for contracts covered by the CMMC 2.0 program, DFARS 252.204-7YYY (number to be added when the rule is finalized).

There is a 60-day comment period for the DFARS proposed rule, meaning individuals have until October 15, 2024, to provide public feedback on the proposal.

Continue reading →

Steering the AI Ship: Is Your Board Ready to Navigate Complexity in a Dynamic Regulatory Environment?

by Meghan Anzelc, Ph.D., Christina Fernandes-D’Souza, and Avril Ussery Sisk

Left to right: Meghan Anzelc, Ph.D., Christina Fernandes-D’Souza, Avril Ussery Sisk (Photos courtesy of authors)

Artificial intelligence (AI) has rapidly leapt to application in an ever-broadening range of human endeavors. We are in a very dynamic era, and as AI becomes more ubiquitous, there is a great deal of on-going discussion about how it will be harnessed for advancement across all aspects of our lives. Coupled with society’s understanding of exciting AI possibilities, there are growing calls for caution, and a reticence regarding placement of trust in private entities to protect the community from threats and potential misuse. There is also the increasing perception of weakness in the governance of AI by the private entities promoting the benefits and rapidly adopting the technology.

Continue reading →

Consumer Financial Protection Bureau Stands Up to Protect Whistleblowers from Overly Broad NDAs

by Benjamin Calitri

Photo courtesy of author

Protections for whistleblowers from overly expansive non-disclosure agreements (NDAs) aimed at preventing whistleblowers from providing information to law enforcement and regulators have been expanding exponentially in the past year. The Securities and Exchange Commission’s (SEC) enforcement of Rule 21F-17(a) has gained teeth by increasing the monetary sanctions for enforcement. The Commodity Futures Trading Commission (CFTC) took its first enforcement of Regulation 165.19(b) against Trafigura for the use of NDAs meant to silence whistleblowers. The latest agency to take action against overly expansive NDAs is the Consumer Financial Protection Bureau (CFPB), which has announced that their employee protection regulation applies to NDAs that seek to silence whistleblowers.

Continue reading →

PCCE to Host Senior DOJ Officials on September 17th to Discuss Newly-Announced Whistleblower Program

Photos of speakers

On September 17th, 2024, the Program on Corporate Compliance and Enforcement will host U.S. Department of Justice officials Nicole Argentieri and Brent Wible as well as other experts for a discussion on the Department of Justice’s newly-announced whistleblower pilot program.

After PDAAG Argentieri’s remarks, Brent Wible will engage in a moderated fireside chat and will be taking questions from the audience.

Following remarks and the fireside chat, there will be a moderated panel discussion by a panel of experts in corporate enforcement, compliance, and whistleblower programs from both the private sector and government. Panelists include:

Jane Norberg, Partner, Arnold & Porter LLP
Preston Pugh, Partner, Crowell & Moring LLP
Daniel Richman, Paul J. Kellner Professor of Law, Columbia Law School
Max Rodriquez, Principal and Founder, Law Office of Max Rodriguez
Andrew Weissman, Professor of Practice, NYU School of Law

The event will be in-person only at NYU School of Law. Check-in will open at 5:30 pm. The program will begin 6 PM in Lipton Hall at 108 W 3rd Street, Lower Level, New York NY 10012. There will be a reception following the event from 8:00 – 8:30 PM.

Pre-registration is required to attend. Click here to register. We expect that 2 credits of NY CLE will be offered for attendees who sign in and out at the venue.

We look forward to seeing you!