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This Week On FCPA Professor

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FCPA Professor has been described as “the Wall Street Journal concerning all things FCPA-related,” and “the most authoritative source for those seeking to understand and apply the FCPA.”

Set forth below are the topics discussed this week on FCPA Professor.

As highlighted here, Novartis joined the repeat offender club – this time paying approximately $347 million to resolve an FCPA enforcement action concerning subsidiary conduct in Greece, Vietnam and South Korea.

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Novartis Joins The Repeat Offender Club – This Time Paying Approximately $347 Million To Resolve An FCPA Enforcement Action

Novartis

What happens when the Greek, Swiss, and South Korean subsidiaries of a Swiss company engage in improper conduct in Greece, Vietnam and South Korea? Why of course, approximately $345 million flows into the U.S. treasury.

Yesterday, Novartis joined the long and growing list of FCPA repeat offenders as the DOJ and SEC announced (see here and here) a combined approximate $347 million enforcement action. (As highlighted in this prior post, in 2016 Swiss pharmaceutical company Novartis coughed up $25 million to resolve a SEC FCPA enforcement action focused on the conduct of its indirect Chinese subsidiaries).

Yesterday’s enforcement action included a DOJ component (in which the company agreed to pay approximately $234 million) and a SEC component (in which the company agreed to pay approximately $113 million).

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The Return Of Fokker

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The 2016 D.C. Circuit opinion in U.S. v. Fokker Services was not a Foreign Corrupt Practices Act enforcement action, but was nevertheless highlighted on these pages because it involved the authority of a trial court judge regarding deferred prosecution agreements (which are frequently used to resolve FCPA enforcement actions).

As highlighted in this post, the D.C. Circuit held that trial court judges lack authority to reject DOJ DPAs because the charging authority of the Executive branch (the DOJ) “embraces decisions about whether to initiate charges, whom to prosecute, which charges to bring, and whether to dismiss charges once brought.”

This prior post highlighted the DOJ’s May 2020 decision to dismiss criminal charges against Michael Flynn (President Trump former National Security Advisor) even though Flynn previously pleaded guilty to a single count of making false statements to FBI investigators. Although not an FCPA matter, it was highlighted on these pages because there was previously an FCPA parallel when the DOJ dropped FCPA charges against a defendant that previously pleaded guilty.

Yesterday, the D.C. Circuit returned to Fokker in holding that the trial court judge in the Flynn matter has no authority other than to dismiss the criminal case against Flynn.

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Justice Thomas Provides A Disgorgement History Lesson And Asks An Important Question

justicethomas

Yesterday’s post highlighted the Supreme Court’s decision in Liu v. SEC in which the court held that for purposes of 15 USC 78u(d)(5) (concerning SEC actions in federal court) that “a disgorgement award that does not exceed a wrongdoer’s net profits and is awarded for victims is equitable relief permissible” under 78u(d)(5).

The decision was 8-1 as Justice Clarence Thomas dissented.

As discussed below, in his dissent Justice Thomas provided a disgorgement history lesson and asked an important question with Foreign Corrupt Practices Act implications.

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Supreme Court Decides SEC Disgorgement Case

supremecourt

Yesterday, the Supreme Court issued this opinion in Liu v. SEC.

At issue was 15 USC 78u(d)(5) which states in pertinent part that “in any action or proceeding brought or instituted by the Commission under any provision of the securities laws … any Federal court may grant .. any equitable relief that may be appropriate or necessary for the benefit of investors.” The specific question presented was whether the Securities and Exchange Commission may seek and obtain disgorgement from a court as ‘equitable relief’ for a securities law violation.

In addition to punishing securities law violations through civil proceedings in federal court, the SEC also uses administrative proceedings and 15 USC 77h-1(e) states that “in any cease-and-desist proceeding … the Commission may enter an order requiring accounting and disgorgement, including reasonable interest.” This provision was not before the Court in Liu and this is important to understand as approximately 90% – 100% of SEC FCPA enforcement actions against issuers in the modern era are administrative actions.

Thus, when the FCPA Blog states in this post that the decision in Liu will make “a significant change to how corporate FCPA settlements will be reached with” the SEC – this is not accurate as very few modern SEC enforcement actions against issuers result in federal court actions and the specific statute at issue in Liu.

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