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The 27-page criminal complaint unsealed in New York in April against James Giffen has the elements of a spy novel: Swiss bank accounts, Central Asian power brokers, and millions of dollars funneled through shell corporations. And at the center of the drama, another shadowy character: the Foreign Corrupt Practices Act. Giffen, chief executive of the Mercator Corp., a New York-based mercantile bank, was indicted on April 1 on charges of conspiring to violate, and actually violating, the act. At his arraignment in U.S. District Court for Southern District of New York, federal prosecutors alleged a scheme where Giffen steered millions of dollars from U.S. oil companies, including Mobil Oil, into the hands of top officials in the Republic of Kazakhstan. In exchange, the indictment stated, the Kazakh government gave Mobil and other oil companies contracts to its lucrative Tenzig oil field. Two days later, U.S. Attorney James Comey indicted a second man for tax fraud in connection with the case: Bryan Williams, a retired Mobil Oil executive. One day after that, on April 4, Assistant U.S. Attorney Peter Neiman said the investigation was continuing and that the target is none other than Mobil Oil itself. Neiman declined further comment on the case, as did spokesmen for Comey and the Department of Justice. But white-collar defense and corporate law specialists suspect the feds want to indict the company to send a stern message to corporate America. “That makes a statement to the industry” that overseas bribery will not be tolerated by U.S. law enforcement, says Rebekah Poston, a partner at Miami-based Steel Hector & Davis. The simplest way to prompt businesses to comply with the law, she says, is to deliver a loud wake-up call such as a corporate indictment to scare executives straight. NEW PARTNERS AGAINST CRIME The Foreign Corrupt Practices Act bars corporations and their executives from bribing foreign government officials to win business, even when such bribery is standard procedure in the host nation. For most of the law’s 26-year history, cases have been difficult to prove because other nations didn’t bother to cooperate with U.S. authorities. That attitude changed in 1998, when the United States finally persuaded 33 of its closest trading partners to adopt similar anti-bribery statutes. Now, lawyers say, investigations like the one against Giffen and Williams are on the rise — especially after corporate governance came to the fore last year with the Sarbanes-Oxley Act, and after the USA Patriot Act in 2001 gave sweeping new powers to federal investigators. INVESTIGATIONS MULTIPLY “There’s every reason to believe the trend in recent years toward more activity will continue,” says Lucinda Low, a partner at D.C.’s Miller & Chevalier. Low says that 10 to 15 years ago, most of her Corrupt Practices Act work involved crafting policies to help corporate clients avoid violating the law. Today, the job is mostly dealing with government investigations and enforcement actions after a violation might have occurred. Her firm has four partners who focus on the work, and she says they have seen a “huge” increase in business in the last two years or so. Low says she is always representing several clients who face a Corrupt Practices Act investigation. The Giffen indictment illustrates the act’s evolution. The feds were first tipped off about suspicious activity by Swiss banking authorities in 2000; that spurred a three-year investigation tracing tens of millions of dollars through shell corporations scattered throughout Europe and the Caribbean. According to the criminal complaint, Giffen funneled $20 million through those accounts to two top Kazakh officials. The indictment does not name the officials explicitly, but Giffen allegedly had close ties throughout the 1990s to the country’s president, Nursultan Nazarbayev. The Kazakh officials allegedly used the money for personal expenses. In exchange, the indictment states, Mobil Oil won a 25 percent stake in the Tenzig oil field — a deal worth $1.05 billion. Spokesmen for ExxonMobil, of which Mobil Oil is now a part, did not return calls seeking comment. But the company has repeatedly denied any wrongdoing in the case. William Schwartz, a lawyer at Kronish Lieb Weiner & Hellman in New York who represents Giffen, declined to comment, except to say that Giffen denies the charges and plans to defend himself vigorously. David Schertler of Coburn & Schertler in Washington, who is representing Mobil’s Williams, could not be reached for comment. FAIR WARNING Before international anti-bribery statutes were standardized in 1998, a prosecution like this might never have happened at all. But Poston recalls a seminar last year that featured Peter Clark of the Justice Department’s Criminal Division, who is the government’s enforcement chief on all Foreign Corrupt Practices Act matters. “He told us then to expect more of these investigations in the future,” she says. Reached by phone, Clark declined to comment. His office must approve all investigations under the act and indictments sought by U.S. attorneys. Joel Cohen, a former federal prosecutor and now a shareholder at Greenberg Traurig, gives the example of a European company he represents that had done business with a U.S. company now under investigation for a possible violation. Federal prosecutors were first alerted to possible corruption by the World Bank, he says, and the probe now stretches from Great Britain to Sweden to Uganda, and then back to Virginia. Five or six years ago, he says, only Great Britain would have bothered to cooperate with prosecutors. Now, more nations are willing to do so, he says. Low notes that in the Giffen case, almost all the transactions in question happened outside the United States — and Swiss banking authorities were the first to tip off U.S. investigators that something might be amiss. She contrasts that with a prosecution against the General Electric Co. in the early 1990s when federal officials wrangled with the Swiss for years to get evidence. GE ultimately paid a $69 million fine. For their part, corporate executives are acutely aware of the risks of the law. Nobody wants to be the government’s next poster child for bad behavior. “You can have a company do everything right, and one guy still goes off and causes problems,” says Stuart Deming, a partner at D.C.’s Inman Deming. “It just heightens the pressure on corporations. . . . They’re under a lot of pressure to disclose.” U.S. District Judge Harold Baer has set a tentative trial date of June 23 for Giffen and Williams. This article was distributed by the American Lawyer Media News Service. Matt Kelly is a Massachusetts-based free-lance writer for The National Law Journal.

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