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The Hidden Employee Costs Of FCPA Scrutiny And Enforcement

fired

As highlighted in the article “FCPA Ripples,” settlement amounts in an actual Foreign Corrupt Practices Act enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement. Other ripples include, most prominently, pre-enforcement action professional fees and expenses, post-enforcement action professional fees and expenses as well as a host of other negative business consequences.

As long as there has been FCPA enforcement, it has been known that culpable employees have been terminated or disciplined in connection with FCPA investigations and enforcement actions.

Yet, as highlighted in this post, in certain recent FCPA enforcement actions (but not all – the SQM and Las Vegas Sands enforcement actions were silent on this topic) the DOJ has quantified the number of employees terminated or disciplined. According to DOJ resolution documents, in six recent enforcement actions approximately 160 employees have been terminated or disciplined. (This figure is in addition to numerous third parties terminated by companies resolving FCPA enforcement actions).

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SEC Chair Nominee Clayton – Because Of Exposure To FCPA And Related Laws “There Are Some Jurisdictions Where In The Vast Majority Of The Cases It May Make Sense Just Not To Participate”

Sullivan & Cromwell partner Jay Clayton testifies before the Senate Committee on Banking, Housing, and Urban Affairs during his confirmation hearing to become the next Chairman of the U.S. Securities and Exchange Commission in Washington.  March 23, 2017.

The flawed New Yorker article about the Trump Organization and its potential FCPA liability (see prior posts here and here as well as additional commentary here) continues to percolate.

During yesterday’s Senate Committee on Banking, Housing and Urban Affairs hearing on Jay Clayton’s nomination to head the SEC, the below exchange took place between Senator Sherrod Brown (D-Ohio) and Clayton.

It was the only Foreign Corrupt Practices Act related question posed to Clayton during the hearing. (See this prior post for coverage of a report titled“The FCPA and its Impact on International Business Transactions – Should Anything Be Done to Minimize the Consequences of the U.S.’s Unique Position on Combating Offshore Corruption?” by the Clayton-chaired International Business Transactions Committee of the Association of the Bar of the City of New York).

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Issues To Consider From The General Cable Enforcement Action

Issues

This prior post went in-depth into last week’s $75.8 million Foreign Corrupt Practices Act enforcement action against General Cable Corporation and this post continues the analysis by highlighting additional issues to consider.

Timeline

The SEC’s resolution document states that General Cable “promptly self-reported the potential FCPA violations to the Commission’s staff in January 2014.” As highlighted in this prior post, General Cable’s first mention of its FCPA scrutiny in SEC filings appears to be September 2014.

From start to finish, General Cable’s FCPA scrutiny lasted approximately three years. While three years is obviously shorter than the 4-6 years seen in certain FCPA inquiries, three years is still too long of time for FCPA scrutiny to last for a company that voluntarily disclosed and cooperated.

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Friday Roundup

Roundup

Scrutiny alerts and updates, quotable, ripple, and for the reading stack.

It’s all here in the Friday roundup.

Scrutiny Alerts and Updates

Rio Tinto

Earlier this week, the Australia-based mining company with ADR shares traded on the New York Stock Exchange issued this release.

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Cognizant Technology Solutions – An Interesting, Albeit Early, FCPA Case Study

cognizant

As highlighted in this prior post, on September 30th Cognizant Technology Solutions disclosed that it voluntarily disclosed to the DOJ and SEC “certain payments relating to facilities in India [that] were made improperly and in possible violation of the FCPA and other applicable laws.”

Even though Cognizant’s FCPA scrutiny is a mere six weeks old, it presents an interesting FCPA case study as to the FCPA’s many “ripples.” (See here for the article “FCPA Ripples“). As stated in the article: “because of the many ripples of FCPA enforcement, it is important that FCPA enforcement be subjected to meaningful judicial scrutiny and that enforcement actions represent legitimate instances of provable FCPA violations, not merely settlements entered into for reasons of risk aversion.”

On this issue, it is interesting to note that Cognizant’s FCPA scrutiny relates to permits in connection with certain facilities in India and you can read all about actual legal authority concerning this type of FCPA enforcement theory in this article.

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