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Westport Fuel Systems Resolves $4 Million FCPA Enforcement Action Based On Transfer Of Shares To A Private Equity Fund In Which A Chinese Official Held An Interest – Former CEO Also Resolves Action

Westport

In the third corporate Foreign Corrupt Practices Act is less than 24 hours, the SEC announced this afternoon that Westport Fuel Systems (a Canadian company with shares traded on NASDAQ) agreed to pay approximately $4 million for “paying bribes to a foreign government official in China.”

In addition, in connection with the same core conduct, Nancy Gougarty (a U.S. citizen who previously served as Chief Operating Officer and from mid-2016 until early 2019 as the CEO and member of the board of directors) agreed to pay a $120,000 civil penalty.

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SEC Brings Another Enforcement Action Against A Former Cognizant Executive

Thiruvengadam

Approximately 90% of SEC corporate FCPA enforcement actions in recent years have lacked any related charges against company employees.

A bit unusual then that the February 2019 enforcement action against Cognizant Technology Solutions (see here) has resulted in not one, not two, but three individual enforcement actions as last Friday the SEC announced an administrative action against Sridhar Thiruvengadam (pictured – an Indian national and resident who previously served as Cognizant’s Chief Operating Officer).

Unlike the two prior individuals charged by the SEC and DOJ (Gordon Coburn and Steven Schwartz) who appear to be putting the government to its burden of proof, Thiruvengadam, without admitting or denying the SEC’s findings, agreed to pay a $50,000 civil penalty in an enforcement action that lacked any U.S. jurisdictional allegation other than that Thiruvengadam participated in a video conference from India with certain executives who participated in the video conference from the U.S.

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Former Cognizant Technology Solutions Executives Criminally And Civilly Charged In Connection With Indian Planning Permit – Company Resolves $25 Million SEC Enforcement Action

coburnschwartz

In this 2016 post highlighting Cognizant Technology Solutions’s disclosure of Foreign Corrupt Practices Act scrutiny it was also noted that Gordon Coburn resigned from his position as President of Cognizant Technology Solutions. This follow-up post noted that the two disclosures were likely related.

Sure enough as today the DOJ announced that Coburn and Steven Schwartz (Executive Vice President, Chief Legal and Corporate Affairs Officer) were criminally charged with FCPA violations. If the defendants choose to put the DOJ/SEC to its burden of proof, disputed issues will likely focus on corrupt intent, obtain or retain business and the facilitating payments exception.

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SEC Finds That Former Panasonic Executive Authorized Conduct Causing Company’s FCPA Violations, Another Former Executive Found To Engage In Improper Revenue Recognition Practices

Margis

As highlighted in prior posts (here, here and here) in April 2018 the DOJ and SEC announced a $280 million Foreign Corrupt Practices Act enforcement action against Japan-based Panasonic Corp.  and a U.S. subsidiary Panasonic Avionics Corp. (PAC).

In the words of the government “between 2007 and 2013, PAC employees, including senior executives, engaged in a scheme to retain consultants for improper purposes other than for providing actual consulting services.”

Earlier this week, the SEC returned to the same core conduct to bring administrative actions (here and here) against Paul Margis (pictured – a former President and CEO of PAC) and Takeshi Uonaga (PAC’s former CFO). The Margis action finds that he authorized various conduct giving rise to the company’s FCPA liability, whereas the Uonaga matter is materially different in that it is a revenue recognition matter.

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So Much For That Tone At The Top Thing As SEC Returns To Bring Enforcement Action Against SQM’s Former CEO

gonzelez

Foreign Corrupt Practices Act enforcement often seems more robust than it actually is because, in the relatively rare instances in which there is an individual prosecution in connection with a corporate action, the individual action often (but not always) occurs long before or long after the corporate action. Many FCPA Inc. participants, who have a vested interest in portraying more not less FCPA enforcement, count these occurrences as multiple enforcement actions when in reality they are the same core enforcement action. (This article highlights this dynamic as well as other dubious and haphazard FCPA Inc. counting methods).

Reflective of the above dynamic, as highlighted in prior posts here and here in January 2017 the DOJ and SEC announced a $30.5 million enforcement action against Sociedad Quimica y Minera de Chile S.A. (SQM), a chemical and mining company based in Chile, in relation to its interactions with Chilean officials. The bulk of the enforcement action involved use of the CEO’s “discretionary fund to direct payments to Chilean politicians, political candidates, and individuals connected to them “many of which violated Chilean tax law and/or campaign finance limits” and falsely recording such payments in SQM’s books and records.

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