IAG December 2015

Blast
from the Past
2010, two months after Mr Genuino was sacked by President Aquino
on suspicion of corruption, his successor, Cristino L. Naguiat, and
a party that included his wife, their children, the nanny and another
PAGCOR officer and his wife ran up a bill over four days at Wynn
Macau in excess of $50,000.
Mr Okada implies that Wynn was complicit in at least some of this,
contending in the Freeh report that “all his efforts in the Philippines
prior to the change of presidential administration in the summer of
2010 were undertaken on behalf of and for the benefit of Steve Wynn
and Wynn Resorts”. The company vehemently denies this.
The FCPA does not prohibit a “reasonable and bona fide
expenditure, such as travel and lodging expenses, incurred by or
on behalf of a foreign official … directly related to the promotion,
demonstration or explanation of products or services; or the
execution or performance of a contract with a foreign government or
agency thereof.”
What it does prohibit is conduct like that of a California
telecommunications company that was slapped with an enforcement
action for spending several millions of dollars over a period of years
for hundreds of customer trips arranged for the purpose of obtaining
systems contracts in China. These included visits by employees of
state-owned companies to popular US tourist destinations. The trips
were purported to be for “training,” and approximately $670,000
of the expenses was falsely recorded as such. A New Jersey-based
telecom ran into similar trouble over hundreds of trips by Chinese
government officials ostensibly for training and facility inspections
that masked holidays in New York City, Las Vegas, Hawaii, Disney
World, the Grand Canyon and Niagara Falls. The expenses were
either not recorded or falsely listed on the books as “consulting fees,”
the Justice Department says. This included cash that was handed to
some of the officials for spending money.
According to the Freeh report, everyone in Mr Naguiat’s party
received US$5,000 in credit for “shopping and gaming”. This was
granted at the request of Mr Okada’s representatives and charged to
the Universal/Aruze USA account. Another 80,000 Macau patacas
(approximately $10,000) was advanced from the cage and charged
to the Universal/Aruze account for a Chanel bag Mr Naguiat wanted
for his wife.
If it is true, as Wynn’s suit alleges, that Mr Okada’s representatives
Meet the new boss
Cristino L. Naguiat
also wanted the stay to be kept secret and instructed the hotel that
Mr Naguiat would not register as a guest (he would be listed by
VIP Services as “Incognito” followed by his name) that could prove
especially damning from the standpoint of the FCPA. The same goes
for the accusation that they wanted to conceal some of the costs by
laying them off on Wynn Macau. This included accommodations at
the “most expensive” suite at the property, the 7,000-square-foot
Villa. This was refused, according to the Freeh report.
Mr Okada denies any knowledge of or involvement in wrongdoing
at the company.
Wynn likewise maintains that it has followed the law both in letter
and spirit. In August 2011, the month the Compliance Committee
commissioned its second investigation into the Philippines, a notice
was issued to all the members of the board to report in October
for training on the Foreign Corrupt Practices Act. They also were
instructed to review the company’s “Code of Business Ethics” and
“Policy Regarding the Payment to Government Officials” and to
confirm in writing that they had read and understood them. Wynn
says every director signed this “Code of Business Conduct and Ethics
Acknowledgement” save one, Kazuo Okada. He notified the board
that he would attend the FCPA training, the company says, but the
week before it was to start he asked for the training materials to be
translated into Japanese. He also wanted the date of the training
moved. He never attended.
The lawyers at Latham & Watkins, a US-based practice specializing
in international law and regulation, say an effective compliance
program should be able to satisfy at least three basic questions:
Is the program well-designed?
Is it applied in good faith?
Does it work?
Currently, the FCPA does not provide for an affirmative
compliance defense. The US Chamber of Commerce, among others,
believes it should.
So does Mr Koehler. “What you’re dealing with is not the law,” he
says, “but the Justice Department’s and the SEC’s view of the law and
in some cases that view has been rejected by the courts.”
The chamber also wants the Act amended so that “willfulness”
has to be proved for a company to be criminally liable. (Currently,
this applies only to individuals.) They also want limitations on a
company’s liability for the acts of its subsidiaries.
For now, though, good intentions will carry only as much weight
as federal prosecutors choose to accord them.
“It’s the enforcement agencies’ view that’s important,” Mr
Koehler says. “They hold the big stick.”
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