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SEC Director Of Enforcement Ceresney On …

Ceresney

Yesterday’s post highlighted comments made by Deputy Attorney General Sally Yates at a recent Foreign Corrupt Practices Act event and this post provides equal time to comments made by SEC Director of Enforcement Andrew Ceresney at the same event.

Similar to the DOJ speech, much of Ceresney’s speech represents the same old, same old something even he acknowledged during his speech.

When reading Ceresney’s comments about the importance of individual FCPA prosecutions keep in mind the following facts. In 2016 there have been 21 SEC corporate FCPA enforcement actions and 15 actions (72%) have not resulted (at least yet) in any related FCPA charges against company employees. This figure is generally consistent with the overall figure since 2008 in which approximately 80% of SEC corporate FCPA enforcement actions have not resulted in any related FCPA charges against company employees.

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In Depth Into The JP Morgan FCPA Enforcement Action

JPMorgan

Yesterday, the DOJ and SEC announced (here and here) a $202.6 million FCPA enforcement action against J.P. Morgan (and a related entity) based on its alleged improper hiring and internship practices that the U.S. government has labeled bribery and corruption.

While the enforcement action was expected to focus on alleged improper hiring and internship practices involving so-called Chinese “princelings” (family members of alleged Chinese foreign officials), a meaningful component of the DOJ’s enforcement action involves hiring and internship practices involving family members of private individuals. Specifically, the DOJ’s non-prosecution agreement highlights 5 examples of “Quid Pro Quo Hiring” and 2 examples (40%) concern private companies: “a private Chinese manufacturing company” and a “Taiwanese private financial holding company.”

Numerous ironies, contradictions, and rule of law concerns abound in the enforcement action that will be explored in more detail in future posts. (In this clip, I talk to National Public Radio about one).

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In Depth Into The Och-Ziff FCPA Enforcement Action

och ziff

Last week, the DOJ and SEC announced (here and here) a Foreign Corrupt Practices Act enforcement action against Och-Ziff Capital Management Group (and a related entity) for improper business practices in various African countries. The aggregate settlement amount was $412 million (a $213 million DOJ criminal penalty and a $199 million SEC resolution consisting of disgorgement and prejudgment interest), the 4th largest FCPA settlement amount of all-time.

As highlighted in this previous post, the SEC also found Daniel Och (CEO) and Joel Frank (CFO) culpable for certain of the improper conduct. As indicated in the post, this represents what is believed to be the first time in FCPA history that the SEC also found the current CEO and CFO of the issuer company liable, to some extent, for company FCPA violations. Moreover, the $2.2 million Och agreed to pay, without admitting or denying the SEC’s findings, is the largest settlement amount in FCPA history by an individual in an SEC action.

Whether the Och-Ziff enforcement action is the “first time a hedge fund has been held to account for violating the FCPA” (as the DOJ stated in its release) is a debatable point. (See here for the 2007 FCPA enforcement action on the DOJ’s FCPA website against hedge fund Omega Advisors).

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Two Firsts In The U.K. – First Use Of Sec. 7 Of The Bribery Act In A Foreign Bribery Action And First Use Of A DPA

Across the Pond

Earlier this week, the U.K. Serious Fraud Office announced two firsts in connection with an enforcement action against Standard Bank Plc (currently known as ICBC Standard Bank Plc):

(i) the first use of Section 7 of the Bribery Act (the so-called failure to prevent bribery offense) in a foreign bribery action; and

(ii) the first use of a deferred prosecution agreement in the U.K..

The conduct at issue focused on allegations that a former affiliate company of Standard Bank made an improper payment to a partner in Tanzania intended to induce members of the Government of Tanzania to show favor to the affiliate’s and Standard Bank’s proposal for a US$600 million private placement offering to be carried out on behalf of the Government of Tanzania.

The underlying source documents are linked below and future posts will further explore the DPA, the Sec. 7 “failure to prevent” bribery offense, and the related U.S. enforcement action against Standard Bank.

(Speaking of Sec. 7 of the Bribery Act, the SFO announced today the following: “The Serious Fraud Office can confirm that Sweett Group plc has admitted an offence under Section 7 of the Bribery Act 2010 regarding conduct in the Middle East. […] Further details will be made available when the matter comes before court, at a date still to be determined.).

Deferred Prosecution Agreement

Statement of Facts

Preliminary Judgement

Full Judgement

In this release, the SFO stated:

“The Serious Fraud Office’s first application for a Deferred Prosecution Agreement was … approved by Lord Justice Leveson at Southwark Crown Court, sitting at the Royal Courts of Justice.

The counterparty to the DPA, Standard Bank Plc (now  known as ICBC Standard Bank Plc) (“Standard Bank”), was the subject of an indictment alleging failure to prevent bribery contrary to section 7 of the Bribery Act 2010. This indictment, pursuant to DPA proceedings, was immediately suspended. This was also the first use of section 7 of the Bribery Act 2010 by any prosecutor.

As a result of the DPA, Standard Bank will pay financial orders of US$25.2 million and will be required to pay the Government of Tanzania a further US$7 million in compensation. The bank has also agreed to pay the SFO’s reasonable costs of £330,000 in relation to the investigation and subsequent resolution of the DPA.

In addition to the financial penalty that has been imposed, Standard Bank has agreed to continue to cooperate fully with the SFO and to be subject to an independent review of its existing anti-bribery and corruption controls, policies and procedures regarding compliance with the Bribery Act 2010 and other applicable anti-corruption laws. It is required to implement recommendations of the independent reviewer (Price Waterhouse Coopers LLP).

Commenting on the DPA, Director of the SFO David Green CB QC said:

“This landmark DPA will serve as a template for future agreements. The judgment from Lord Justice Leveson provides very helpful guidance to those advising corporates. It also endorses the SFO’s contention that the DPA in this case was in the interests of justice and its terms fair, reasonable and proportionate. I applaud Standard Bank for their frankness with the SFO and their prompt and early engagement with us.”

The suspended charge related to a US$6 million payment by a former sister company of Standard Bank, Stanbic Bank Tanzania, in March 2013 to a local partner in Tanzania, Enterprise Growth Market Advisors (EGMA). The SFO alleges that the payment was intended to induce members of the Government of Tanzania, to show favour to Stanbic Tanzania and Standard Bank’s proposal for a US$600 million private placement to be carried out on behalf of the Government of Tanzania. The placement generated transaction fees of US$8.4 million, shared by Stanbic Tanzania and Standard Bank.

On 18 April 2013, Standard Bank’s solicitors Jones Day reported the matter to the Serious and Organised Crime Agency and on 24 April to the SFO. It also instructed Jones Day to begin an investigation and to disclose its findings to the SFO. The resulting report was sent to the SFO on 21 July 2014.

The SFO reviewed the material obtained and conducted its own interviews. Subsequently, the Director of the SFO considered that the public interest would likely be met by a DPA with Standard Bank and negotiations were commenced accordingly.

The SFO has worked with the US Department of Justice (DoJ) and Securities and Exchange Commission (SEC) throughout this process. A penalty of $4.2m has been agreed between Standard Bank and the SEC in respect of separate related conduct.

We are very grateful to the DoJ, the SEC, the Foreign and Commonwealth Office, the Financial Conduct Authority for their assistance in resolving this investigation and deferred prosecution.”

The SFO release also provided the following information.

  • The charge against Standard Bank has been suspended for three years, after which, subject to the bank’s compliance with the terms of the DPA, the SFO will discontinue the proceedings.
  • Standard Bank’s US$25.2 million total financial penalty, which is payable to HM Treasury, consists of a US$16.8 million financial penalty and a US$8.4 million disgorgement of profits. The compensation due to the Government of Tanzania consists of US$6 million, plus interest of US$1,046,196.58.

BNY Mellon Becomes The First – Of What Is Expected To Be Several Financial Services Companies – To Pony Up Millions Based On Its Internship Practices

BNY Mellon

Congress never intended the Foreign Corrupt Practices Act to be an all-purpose corporate ethics statute.  But with increasing frequency, this is what the DOJ and SEC have converted the FCPA into based on enforcement theories that are rarely subject to judicial scrutiny.

Previously there have been FCPA enforcement actions that included allegations of improper hiring of spouses or children of alleged “foreign officials” (see here for a prior post), but until yesterday there has not been, it is believed, an enforcement action based exclusively on such a theory.

The financial industry has been under intense FCPA scrutiny the past two years (see here for a prior post) concerning its alleged hiring and internship practices. This scrutiny has generated a significant amount of critical commentary.  For instance, in this Wall Street Journal editorial former SEC Commissioner Arthur Levitt called the FCPA scrutiny of the financial industry “scurrilous and hypocritical.”  He wrote:

“If you walk the halls of any institution in the U.S.—Congress, federal courthouses, large corporations, the White House, American embassies and even the offices of the SEC—you are likely to run into friends and family members of powerful and wealthy people.”

Yesterday this scrutiny yielded the first – of what is expected to be many in coming months – enforcement action.

It was against BNY Mellon Corp. (see here for the SEC’s press release) and the action was based on findings the company provided “valuable student internships to family members of foreign government officials affiliated with a Middle Eastern sovereign wealth fund.”

Internships of course have been provided to relatives of customers so long as their have been internships.  For the U.S. government to now equate this with corrupt intent and bribery is questionable.  But then again, FCPA enforcement is not necessarily about the law, but more a game of the SEC using its leverage against risk averse corporations to extract settlement amounts.

Without admitting or denying the SEC’s findings, and based on an enforcement theory not subjected to any judicial scrutiny, BNY Mellon ponied up $14.8 million dollars rather than engage its principal government regulator in litigation.

The SEC’s administrative cease and desist order states in summary fashion:

“This matter concerns violations of the anti-bribery and internal accounting controls provisions of the Foreign Corrupt Practices Act (“FCPA”) by BNY Mellon. The violations took place during 2010 and 2011, when employees of BNY Mellon sought to corruptly influence foreign officials in order to retain and win business managing and servicing the assets of a Middle Eastern sovereign wealth fund.

These officials sought, and BNY Mellon agreed to provide, valuable internships for their family members. BNY Mellon provided the internships without following its standard hiring procedures for interns, and the interns were not qualified for BNY Mellon’s existing internship programs.

BNY Mellon failed to devise and maintain a system of internal accounting controls around its hiring practices sufficient to provide reasonable assurances that its employees were not bribing foreign officials in contravention of company policy.”

Under the heading “BNY Mellon’s Business with the Middle Eastern Sovereign Wealth Fund” the order states:

“During the relevant time period, BNY Mellon’s business in the EMEA region collected fees for services provided to the Middle Eastern Sovereign Wealth Fund. [The Middle Eastern Sovereign Wealth Fund is described as follows.  “[A] government body responsible for management and administration of assets of a Middle Eastern country, as entrusted to it by that country’s Minister of Finance. The Middle Eastern Sovereign Wealth Fund is wholly owned by that country and was created to perform the function of generating revenue for it. The Minister of Finance serves as Chairman of the Middle Eastern Sovereign Wealth Fund’s Board of Directors and its most senior members are political appointees. The Middle Eastern Sovereign Wealth Fund generally hires external managers to make day-to-day investment decisions concerning its assets.”] Those fees arose from government contracts awarded to BNY Mellon through a process requiring approval from certain foreign government officials, and also from additional assets allocated to BNY Mellon under existing contracts at the discretion of certain foreign government officials.

The Middle Eastern Sovereign Wealth Fund first became a client of BNYM Asset Servicing in 2000, when the European Office [The European Office is described as follows:  “[T]he Middle Eastern Sovereign Wealth Fund’s office in Europe. The European Office is responsible for managing a portion of the assets entrusted to the Middle Eastern Sovereign Wealth Fund. Unlike the Middle Eastern Sovereign Wealth Fund, its parent, the European Office generally uses its own inhouse investment professionals to actively manage assets for which it is responsible.”] awarded to BNY Mellon custody of certain assets. Since then, BNY Mellon has earned regular fees for the safekeeping and administration of Middle Eastern Sovereign Wealth Fund assets. According to the terms of the custody agreement, these fees are subject to increase from time to time as the European Office allocates additional assets to BNY Mellon. While the total amount of Middle Eastern Sovereign Wealth Fund assets under custody by BNY Mellon has varied over time, during the relevant time period BNY Mellon held Middle Eastern Sovereign Wealth Fund assets totaling approximately $55 billion.

BNY Mellon entered an additional agreement with the European Office in 2003 permitting BNYM Asset Servicing to loan out certain of the Middle Eastern Sovereign Wealth Fund assets under custody within set guidelines, which varied over time.

This securities lending arrangement significantly increased BNY Mellon’s revenues from its dealings with the Middle Eastern Sovereign Wealth Fund. In 2010 and 2011, BNYM Asset Servicing repeatedly sought to modify the lending guidelines, which had been significantly restricted following the 2008 economic crash, in order to bring the guidelines back to pre- 2008 levels and further grow the securities lending business with the Middle Eastern Sovereign Wealth Fund. During the relevant time period, BNYM Asset Servicing sought to increase the amount of assets under custody from the European Office.

In 2009, the Middle Eastern Sovereign Wealth Fund became a client of BNYM Asset Management when the fund entered into an investment management agreement designating the Boutique [described as a wholly owned asset management firm operating within BNYM Asset Management] to manage assets worth approximately $711 million (the “Boutique mandate”). The bulk of the assets under the investment management agreement were funded in November 2009, with an additional portion transferring to BNY Mellon in June 2010. Official X [described as a senior official with the Middle Eastern Sovereign Wealth Fund during the relevant time period] was BNYM Asset Management’s principal point of contact in connection with the Boutique mandate. According to the terms of the agreement, the amount of assets under management was subject to change, as the Middle Eastern Sovereign Wealth Fund could allocate additional assets to the Boutique mandate at any time. In June 2010, the Middle Eastern Sovereign Wealth Fund transferred an additional $689,000 to BNY Mellon under the Boutique mandate. During the relevant time period, BNY Mellon sought to increase the amount of its Middle Eastern Sovereign Wealth Fund assets under management.”

Under the heading “The Internships” the order states:

“Officials X and Y [described as was a senior official at the European Office during the relevant time period] requested that BNY Mellon provide their family members with valuable internships. Officials X and Y made numerous follow-up requests about the status, timing and other details of the internships for their relatives after the internships had been offered, and delivering the internships as requested was seen by certain relevant BNY Mellon employees as a way to influence the officials’ decisions.

In February 2010, at the conclusion of a business meeting, Official X made a personal and discreet request that BNY Mellon provide internships to two of his relatives: his son, Intern A [described as a recent college graduate], and nephew, Intern B [also described as a recent college graduate]. As a Middle Eastern Sovereign Wealth Fund department head, Official X had authority over allocations of new assets to existing managers such as the Boutique, and was viewed within BNY Mellon as a “key decision maker” at the Middle Eastern Sovereign Wealth Fund. Official X later persistently inquired of BNY Mellon employees concerning the status of his internship request, asking whether and when BNY Mellon would deliver the internships. At one point, Official X said to his primary contact at BNY Mellon that the request represented an “opportunity” for BNY Mellon, and that the official could secure internships for his family members from a competitor of BNY Mellon if it did not satisfy his personal request. The same BNY Mellon employee later wrote to a BNY Mellon colleague that Official X had become “angry” because BNY Mellon was experiencing delays in delivering the internships, and had openly questioned the employee’s job performance and professionalism because of the delays.

As reflected in contemporaneous e-mails and other documents, BNY Mellon delivered the valuable internship sought by Official X in order to assist BNY Mellon in obtaining or retaining business. For example:

A Boutique account manager wrote in a February 2010 e-mail concerning the internship request for Interns A and B that BNY Mellon was “not in a position to reject the request from a commercial point of view” even though it was a “personal request” from Official X. The employee stated: “by not allowing the internships to take place, we potentially jeopardize our mandate with [the Middle Eastern Sovereign Wealth Fund].”

In June 2010, an employee of BNY Mellon with primary responsibility for the Asset Management relationship with the Middle Eastern Sovereign Wealth Fund wrote of the internships for Interns A and B: “I want more money for this. I expect more for this. . . . We’re doing [Official X] a favor.”

In a separate e-mail to a different BNY Mellon colleague, the same employee stated “I am working on an expensive ‘favor’ for [Official X] – an internship for his son and cousin (don’t mention to him as this is not official).”

The same employee advised a colleague in human resources: “[W]e have to be careful about this. This is more of a personal request . . . [Official X] doesn’t want [the Middle Eastern Sovereign Wealth Fund] to know about it.” The same employee later directed his administrative assistant to refrain from sending e-mail correspondence concerning Official X’s internship request “because it was a personal favor.”

After granting Official X’s request to hire Interns A and B, BNY Mellon retained the Boutique mandate, and further assets were transferred to BNY Mellon by Official X’s department within a few months.

In February 2010, around the same time that Official X made his initial internship request, Official Y asked through a subordinate European Office employee that BNY Mellon provide an internship to the official’s son, Intern C [also described as a recent college graduate]. As a senior official at the European Office, Official Y had authority to make decisions directly impacting BNY Mellon’s business. Internal BNY Mellon documents reflected Official Y’s importance in this regard, stating that Official Y was “crucial to both retaining and gaining new business” for BNY Mellon. One or more European Office employees acting on Official Y’s behalf later inquired repeatedly about the status and details of the internship, including during discussions of the transfer of European Office assets to BNY Mellon. At the time of Official Y’s initial request, a number of recent client service issues had threatened to weaken the relationship between BNY Mellon and the European Office.

The BNY Mellon employee with primary responsibility for managing the custody relationship with the European Office viewed Official Y’s request as important to assist BNYM Asset Servicing in obtaining or retaining business. For example:

The BNY Mellon custody relationship manager explained to more senior officers within BNY Mellon that granting Official Y’s request was likely to “influence any future decisions taken within [the Middle Eastern Sovereign Wealth Fund].”

The same BNY Mellon relationship manager expressed to colleagues his concern that one of BNY Mellon’s competitors would agree to hire Intern C if BNY Mellon would not, and that BNY Mellon might lose market share to the competitor as a result.

The relationship manager wrote: “Its [sic] silly things like this that help influence who ends up with more assets / retaining dominant position.”

The relationship manager separately wrote that meeting Official Y’s requests was the “only way” to increase BNY Mellon’s share of business from the European Office, aside from obtaining assets in new countries.

After granting Official Y’s request to hire his son, Intern C, BNY Mellon retained its existing custody and securities lending business from the European Office, which continued to grow.

During the relevant time period, BNY Mellon had an established summer internship program for undergraduates as well as a separate summer program for postgraduates actively pursuing a Master of Business Administration (MBA) or similar degree. Admission to the BNY Mellon postgraduate internship program was highly competitive and characterized by stringent hiring standards. To recruit postgraduates, BNY Mellon had relationships with a small number of the most highly selective schools in the United States and the United Kingdom from which it sourced candidates. Successful applicants had to achieve a minimum grade point average, and had to advance through multiple rounds of interviews in addition to having relevant prior work experience and a demonstrated affinity for and interest in financial services work. BNY Mellon also placed an emphasis on relevant leadership experience.

The Interns did not meet these rigorous criteria and BNY Mellon did not evaluate or hire the Interns through its established internship programs. For example, as recent graduates not enrolled in any degree program, the Interns did not meet the basic entrance standard for a BNY Mellon postgraduate internship. Further, contrary to BNY Mellon’s goal of converting student interns to full-time hires, the Interns were to return to the Middle East at the conclusion of their internship and BNY Mellon had no plan to hire them as full-time employees. Nor did the individual Interns have the requisite academic or professional credentials for its existing internship programs.

Though they did not meet the criteria of BNY Mellon’s existing internship programs, BNY Mellon hired Interns A, B and C. Contrary to its standard practice, BNY Mellon decided to hire the Interns before even meeting or interviewing them. Indeed, the special “work experiences” sought by Officials X and Y were not regular undergraduate or graduate summer internships at all, but customized one-of-a-kind training programs. The internships were valuable work experience, and the requesting officials derived significant personal value in being able to confer this benefit on their family members. As requested by Officials X and Y, BNY Mellon designed customized work experiences for the Interns. These bespoke internships were rotational in nature, meaning that Interns A, B and C had the opportunity to work in a number of different BNY Mellon business units, enhancing the value of the work experience beyond that normally provided to BNY Mellon interns. Interns A and B were placed in Boston, Massachusetts and were employed by BNY Mellon from August 6, 2010 through February 25, 2011. Intern C was onboarded and placed in London, England and interned with BNY Mellon from July 4, 2010 through December 17, 2010. These approximately six-month internships were significantly longer than the work experiences typically afforded to BNY Mellon interns through the normal summer internship program.

The internships were neither inexpensive nor easy for BNY Mellon to structure. BNY Mellon determined, because Interns A and B had already graduated from college, that Interns A and B should be paid above the normal salary scale for BNY Mellon undergraduate interns but below the scale for postgraduate interns. Intern C was unpaid. BNY Mellon also coordinated obtaining visas for all three of the Interns so that they could travel from the Middle East to work in the countries in which they were placed. BNY Mellon paid the legal fees and filing costs related to the visas. As the BNY Mellon Asset Management employee responsible for arranging two of the three internships wrote in a contemporaneous e-mail, the internships constituted an “expensive favor” for the requesting foreign official.

BNY Mellon hired all three of the Interns, with the knowledge and approval of senior BNY Mellon employees:

According to the BNY Mellon Asset Management employee with primary responsibility for arranging the internships for Interns A and B, he had initially struggled to deliver the internships as requested by Official X until the internships had the “blessing” of a senior BNY Mellon employee, after which “it started to move.” The senior employee facilitated the internships by contacting human resources on behalf of the Interns, forwarding their resumes and stating that he “would like us to support.”

The BNY Mellon relationship manager with lead responsibility for arranging the internship for Intern C sent an e-mail to two senior BNYM Asset Servicing officers describing Official Y’s request and seeking their “support” for the internship. The same relationship manager later wrote to BNY Mellon colleagues seeking assistance in arranging the internship and stating “[p]lease know that this request has the backing of both [senior officers].”

In October 2010, Official Y made a further request that BNY Mellon modify the custom internship it had created for Intern C so that he could rotate through an additional BNY Mellon business unit. This request was also granted with the knowledge and approval of senior BNY Mellon employees.

The Interns were less than exemplary employees. On at least one occasion, Interns A and B were confronted by a BNY Mellon human resources employee concerning their repeated absences from work. A Boutique portfolio manager who worked with Intern C observed that his performance was “okay” and that “he wasn’t actually as hardworking as I would have hoped.” Despite these issues, BNY Mellon accommodated the Interns in order to favorably influence Officials X and Y.

Under the heading “BNY Mellon’s FCPA-Related Policies, Training and Internal Controls” the order states:

During the relevant time period, BNY Mellon had a code of conduct, as well as a specific FCPA policy, which prohibited BNY Mellon employees from violating the statute. While BNY Mellon’s policies stated that “any money . . . gift . . . or anything of value” provided to a foreign official might constitute a bribe, employees were provided with little additional guidance that was tailored to the types of risks related to hiring faced by BNY Mellon’s international asset servicing unit and asset management business division.

During the relevant time period, BNY Mellon provided training on employees’ obligations under the FCPA and BNY Mellon’s policies, but did not ensure that all employees took the training or understood BNY Mellon’s policies.

During the relevant time period, BNY Mellon had few specific controls relating to the hiring of customers and relatives of customers, including foreign government officials. Sales staff and client relationship managers were permitted wide discretion in making initial hiring decisions and human resources was not trained to flag hires that were potentially problematic. Senior managers were able to approve hires requested by foreign officials with no mechanism to ensure that potential hiring violations were reviewed by anyone with a legal or compliance background. BNY Mellon’s system of internal accounting controls was insufficiently tailored to the corruption risks inherent in the hiring of client referrals, and therefore inadequate to fully effectuate BNY Mellon’s policy against bribery of foreign officials.”

Based on the above, the order finds:

“BNY Mellon violated [the FCPA’s anti-bribery provisions] by corruptly providing valuable internships to relatives of foreign officials from the Middle Eastern Sovereign Wealth Fund in order to assist BNY Mellon in retaining and obtaining business. BNY Mellon also violated [the FCPA’s internal controls provisions], by failing to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that its employees were not bribing foreign officials.”

Under the heading “Commission Consideration of BNY Mellon’s Cooperation and Remedial Efforts” the order states:

“In determining to accept the Offer, the Commission considered cooperation BNY Mellon afforded to the Commission staff and the remedial acts undertaken by BNY Mellon. Prior to the investigation by the Commission of the Interns, BNY Mellon had begun a process of enhancing its anti-corruption compliance program including: making changes to the Anti-Corruption Policy to explicitly address the hiring of government officials’ relatives; requiring that every application for a full-time hire or an internship be routed through a centralized HR application process; enhancing its Code of Conduct to require that every year each employee certifies that he or she is not responsible for hiring through a non-centralized channel; and requiring as part of a centralized application process that each applicant indicate whether she or a close personal associate is or has recently been a government official, and, if so, additional review by BNY Mellon’s anti-corruption office is mandated.”

In the SEC’s press release, Andrew Ceresney (Director of the SEC Enforcement Division) stated:

“The FCPA prohibits companies from improperly influencing foreign officials with ‘anything of value,’ and therefore cash payments, gifts, internships, or anything else used in corrupt attempts to win business can expose companies to an SEC enforcement action. BNY Mellon deserved significant sanction for providing valuable student internships to family members of foreign officials to influence their actions.”

Kara Brockmeyer (Chief of the SEC’s FCPA Unit) stated:

“Financial services providers face unique corruption risks when seeking to win business in international markets, and we will continue to scrutinize industries that have not been vigilant about complying with the FCPA.”

As noted in the release:

“Without admitting or denying the findings, the company agreed to pay $8.3 million in disgorgement, $1.5 million in prejudgment interest, and a $5 million penalty.  The SEC considered the company’s remedial acts and its cooperation with the investigation when determining a settlement.”

Yesterday BNY Mellon’s share price closed up .7%.

Jay Holtmeier (Wilmer Cutler Pickering Hale and Dorr) represented the company.

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