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Archive | Foreign Issuers

AstraZeneca Coughs Up $5.5 Million To Resolve FCPA Action


Say an English company has Chinese and Russian subsidiaries which, approximately 6-10 years ago, provided various things of value to physicians in those countries.

The end result?

Why of course $5.5 million to the U.S. Treasury because the English company has American Depositary Shares registered with the SEC.

The above description is not make-believe, but a summary of a Foreign Corrupt Practices Act enforcement action released yesterday by the SEC against AstraZeneca Plc (a United Kingdom biopharmaceutical company).

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In Connection With A 2006 Argentine Labor Dispute, Chilean Airline Pays U.S. Government $22 Million


Five months ago, the SEC brought a Foreign Corrupt Practices Act enforcement action against Ignacio Cueto Plaza (“Cueto”), the Chilean CEO of Santiago, Chile based LAN Airlines S.A. (“LAN”) for authorizing payments in 2006 and 2007 to a third party consultant in Argentina in connection with LAN’s attempts to settle disputes on wages and other work conditions between LAN Argentina S.A. (“LAN Argentina”), a subsidiary of LAN, and its employees.

Yesterday, the DOJ and SEC returned to the same conduct by announcing (here and here) parallel FCPA enforcement actions against LAN.

In short, the end result of an old labor dispute between a Chilean airline and Argentine workers is approximately $22 million flowing into the U.S. Treasury because LAN has shares that are traded on a U.S. exchange.

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Novartis Coughs Up $25 Million To Resolve FCPA Enforcement Action Based On Conduct Of Indirect Chinese Subsidiaries


What happens when a Swiss corporation, with over 120,000 employees, has two indirect Chinese subsidiaries and a few employees of those subsidiaries, who concealed their conduct from the parent corporation, allegedly provided various things of value (such as an excursion to Niagara falls, spa and sauna sessions, and cover charges to a strip club) to various Chinese healthcare professionals?

Why of course, $25 million to the U.S. treasury because the Swiss corporation has shares traded on the New York Stock Exchange.

Yesterday, the SEC announced this Foreign Corrupt Practices Act enforcement action against Novartis.

By my count, it is the 22nd FCPA enforcement against a healthcare related company (i.e. pharma, medical device, etc.) premised on the enforcement theory (regardless of whether the action was resolved “merely” through books and records and internal controls issues) that employees of certain foreign health care systems are “foreign officials” under the FCPA and thus occupy a status similar to Presidents and Prime Ministers and other bona fide government officials.

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Just When You Think You’ve Seen It All – Along Comes The Nordion (Canada) Inc. Enforcement Action

kidding me

There have been several Foreign Corrupt Practices Act enforcement actions in the past 30 days or so.

But, just when you think you’ve seen it all in FCPA enforcement-land, along comes the Nordion (Canada) Inc. enforcement action announced yesterday by the SEC.

The basic findings, as set forth in this administrative order, were as follows.

Approximately 16 years ago, Mikhail Gourevitch (a dual Canadian and Israeli citizen who was fired years ago by Nordion) represented to the company that “his purported childhood friend from Russia” could help the company’s business in Russia.

Gourevitch and this eventual agent “conspired to use a portion of the funds Nordion paid the Agent to bribe Russian government officials to obtain approval for TheraSphere” a liver cancer therapy.

Gourevitch also received kickbacks from the Agent and otherwise “hid the scheme from Nordion” through, among other things, misrepresentations to his employer. In the words of the SEC, through his conduct Gourevitch “secretly enrich[ed] himself” and received “at least $100,000 for his role in the arrangement which was not disclosed to Nordion.”

In August 2014, Nordion was acquired by Nordion (Canada) Inc., a privately held company. The SEC’s order finds that Nordion (not the actual Respondent in the action Nordion (Canada) Inc.) violated the FCPA’s books and records and internal controls provisions and Nordion (Canada) Inc. agreed, without admitting or denying the SEC’s findings, agreed to pay $375,000.

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How Many Foreign Companies Are Issuers Under The FCPA?

What woudl you do

The Foreign Corrupt Practices Act does not just apply to U.S. companies.

Rather, foreign companies that are listed on a U.S. stock exchange or otherwise required to file periodic reports with the SEC are “issuers” and thus subject to the FCPA’s books and records and internal controls provisions as well as the anti-bribery provisions under the dd-1 prong of the statute to the extent the “mails or any means or instrumentality of interstate commerce” are used in furtherance of a bribery scheme.

In addition, any foreign company or national can be subject to the FCPA’s anti-bribery provisions under the dd-3 prong of the statute which requires that “while in the territory of the United States” corrupt use of the mails or any means or instrumentality of interstate commerce or any other act in furtherance of a bribery scheme.

Against this backdrop, one might wonder how many foreign companies are issuers under the FCPA?

Each year, the SEC’s Division of Corporation Finance releases a chart titled “Number of Foreign Companies Registered and Reporting with the U.S. Securities and Exchange Commission.” Set forth below are the total number of foreign issuers for each of the past five years.

Total Number of Foreign Issuers

2014 – 912

2013 – 940

2012 – 946

2011 – 965

2010 – 970

As the above figures highlight, each year for the past five years there have fewer foreign issuers in the U.S.

I am not suggesting a direct casual relationship between this fact and the new era of FCPA enforcement (declared in 2010 and during which several foreign issuers have resolved FCPA enforcement actions). Indeed, a company determining where to list its securities will consider numerous factors not just whether a listing will expose the company to a certain law.

Nevertheless, it is interesting to note (as highlighted in this prior post) that certain foreign companies such as Siemens, Daimler and Magyar Telekom deslisted their U.S. securities after resolving FCPA enforcement actions.

Foreign Issuers Based on Country of Incorporation

The SEC’s data also lists foreign issuers based on the country of incorporation and for each of the past five years Canada, the Cayman Islands, and Israel have been 1, 2 and 3 in terms of the country of incorporation of foreign issuers.

The percentage of foreign issuers from Canada has ranged between 30-35% over the past five years.

The percentage of foreign issuers from the Cayman Islands has ranged between 13-14% over the past five years.

The percentage of foreign issuers from Israel has ranged between between 7-9% over the past five years.

What is interesting about these figures is that despite accounting for between 30-35% of foreign issuers in any given year, there has never been an FCPA enforcement action against an issuer from Canada. That may change in the near future as the following Canadian issuers have all disclosed FCPA scrutiny: Kinross Gold Corp, Nordion, and Brookfield Asset Management.

In terms of the Cayman Islands, the following issuers incorporated there all resolved FCPA enforcement actions in connection with the 2010 CustomsGate enforcement action concerning alleged conduct in Nigeria: Transocean, Noble Corp. and GlobalSantaFe.

In terms of Israel, there has never been an FCPA enforcement action against an issuer from Israel, but this too may change in the near future as Teva Pharmaceuticals has disclosed FCPA scrutiny.

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