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Polycom Resolves A $36.6 Million Enforcement Action – SEC Believes That The FCPA Is A Strict Liability Statute And Just What Viable Criminal Charges Did The DOJ Decline?

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Earlier this week, Polycom (up until 2016 an issuer which was then acquired by a private equity firm and is now a wholly-owned subsidiary of Plantronics) resolved a $36.6 million Foreign Corrupt Practices Act enforcement action ($16.3 million pursuant to an SEC administrative order and $20.3 million pursuant to a so-called DOJ declination with disgorgement letter).

The conduct at issue concerned a Chinese subsidiary which created “a separate, parallel sales management system outside of Polycom’s company-approved systems, which was orchestrated by Polycom’s Vice President of China” and whose employees used “non-Polycom e-mail addresses when discussing deals with Polycom’s distributor.” According to the SEC, “Polycom personnel outside China were unaware of the existence of this parallel system.”

Yet, in another example of the SEC believing that the FCPA is a strict liability statute, the SEC found that Polycom violated the FCPA’s books and records and internal controls provisions. Moreover, without highlighting any additional substantive information the DOJ “declined prosecution … despite the bribery committed by employees of the Company’s subsidiaries in China, and these subsidiaries’ knowing and willful causing of false books and records at Polycom.” However, based on the information in the public domain (that is the SEC’s order) it remains an open question just what viable criminal charges the DOJ actually declined.

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Stryker Joins The FCPA Repeat Offender Club

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The end of September is traditionally an active period for Foreign Corrupt Practices Act enforcement as the SEC’s fiscal year comes to a close.

On the heels of yesterday’s Petrobras enforcement action (see here and here for prior posts), the SEC announced a $7.8 million enforcement action against medical device company Stryker for not having internal accounting controls “sufficient to detect the risk of improper payments in sales of Stryker products in India, China, and Kuwait” and because “Stryker’s India subsidiary failed to maintain complete and accurate books and records.”

In doing so, Stryker joins the list of FCPA repeat offenders (see here). As highlighted in this prior post, in 2013 Stryker resolved a $13.2 million enforcement action based on alleged conduct in Mexico, Poland, Romania, Argentina, and Greece.

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United Technologies Corp. Resolves $13.9 Million Enforcement Action

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Yesterday, the SEC announced that United Technologies Corporation resolved a $13.9 million Foreign Corrupt Practices Act enforcement action.

The conduct at issue concerned Otis Elevator Co. (a wholly-owned subsidiary of UTC), Pratt & Whitney (an operating division of UTC), and International Aero Engines (a joint venture of five aerospace companies including Pratt & Whitney) regarding a Russian and Azerbaijani improper payment scheme, a China aviation scheme, improper payments for Otis Elevator sales in China, and leisure travel for foreign officials from several countries including China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia.

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Issues To Consider From The Sanofi Enforcement Action

Issues

This previous post highlighted the SEC’s $25.2 million FCPA enforcement action against Sanofi and this post continues the analysis by highlighting additional issues to consider.

Timeline

Sanofi’s FCPA scrutiny began in mid-2014 (see this prior post). Thus, from start to finish, its scrutiny lasted approximately 4 years.

At the risk of sounding like a broken record to regular readers … if the FCPA enforcement agencies want the public to have confidence in their FCPA enforcement programs, they must resolve instances of FCPA scrutiny much quicker. The validity and credibility of FCPA enforcement depends on this. Having FCPA scrutiny linger for over four years is inexcusable particularly since Sanofi, in the words of the SEC:

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Foreign Subsidiaries Of French Pharma Company Sanofi Allegedly Bribe Kazakh And Middle Eastern “Foreign Officials” – Uncle Sam Collects $25.2 Million

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If history is any guide, September is likely to be an active month for Foreign Corrupt Practices Act enforcement as the SEC’s fiscal year ends.

Sure enough, yesterday the SEC announced an enforcement action against Paris-based pharmaceutical company Sanofi. The conduct at issue focused on employees and agents of the company’s subsidiaries in Kazakstan and various Middle Eastern countries providing things of value to “foreign officials, including healthcare professionals, in order to improperly influence them and increase sales of Sanofi products.”

In doing so, the enforcement action once again raises the policy issue of the U.S. bringing an enforcement action against a foreign company (domiciled in a country also party to the OECD Convention) for its interaction with non-U.S. officials. (See here for a prior post).

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