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DOJ Individual Actions: The Strange Public – Private Divide

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This post highlighted certain facts and figures regarding the DOJ’s prosecution of individuals for Foreign Corrupt Practices Act offenses in 2019 and historically.

As highlighted in the prior post, DOJ FCPA individual enforcement actions are significantly skewed by a small handful of enforcement actions and the reality is, despite the DOJ’s rhetoric, approximately 80% of DOJ corporate enforcement actions since 2006 have not (at least yet) resulted in any related DOJ FCPA charges against company employees.

Another very interesting and significant picture emerges when analyzing actual DOJ individual FCPA prosecutions based on whether the individual charged was employed by or otherwise associated with an issuer or a private business organization.

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A Focus On DOJ Individual Actions

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This recent post focused on SEC individual FCPA actions in 2019 and historically. Today’s post highlights certain facts and figures concerning the DOJ’s prosecution of individuals for Foreign Corrupt Practices Act violations in 2019 and historically.

The key word above is FCPA violations.

Some in the FCPA space include enforcement actions containing non-FCPA charges (often money laundering charges against alleged “foreign officials”) related to an FCPA enforcement action as an individual FCPA enforcement action. While it is fine to track such enforcement actions, calling them FCPA enforcement actions is factually false.

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A Focus On SEC Individual Actions

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This previous post highlighted various facts and figures from 2019 SEC FCPA enforcement actions against issuers.

As highlighted in the prior post, of the 13 corporate SEC FCPA enforcement actions in 2019, 2 (15%) have involved, at present, related SEC FCPA charges or findings against company employees.

In 2019, the SEC charged or found that six individuals violated the FCPA: Gordon Coburn and Steven Schwartz and Sridhar Thiruvengadam (all associated with Cognizant); Nancy Gougarty (associated with Westport Fuels); Yanliang Li (associated with Herbalife); and Tim Leisnner (associated with Goldman Sachs).

The remainder of this post focuses on SEC FCPA individual actions historically.

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DOJ Criminally Charges Former Braskem CEO Jose Grubisich In Connection With The Same Core Conduct Alleged In The 2016 Corporate Enforcement Action

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As highlighted in this prior post, in late 2016 the DOJ and SEC brought a Foreign Corrupt Practices Act enforcement action against Odebrecht S.A. (a Brazilian holding company) and Braskem S.A. (a Brazil-based petrochemical company with shares traded on the NYSE in which Odebrecht owned a majority of voting shares).

The conduct at issue was egregious and largely centered on a business unit, the Division of Structured Operations, housed within an Odebrecht subsidiary that allegedly served as little more than a bribe-paying department for the benefit of Odebrecht and Braskem. According to the resolution documents, former senior executives authorized approximately $788 million in bribes, largely through the Division of Structured Operations, to alleged foreign officials in at least twelve countries. While the principal focus of the DOJ’s action (and the exclusive focus of the SEC action) concerned conduct in Brazil including the companies relationships with Petrobras, the DOJ action also alleges improper payments in Angola, Argentina, Brazil, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru, and Venezuela.

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Former Herbalife China Executives Criminally Charged By DOJ, SEC Also Charges Former Executive

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In 2014, Avon resolved a Foreign Corrupt Practices Act enforcement based in large part on obtaining a direct selling permit in China. (See here for the prior post).

In 2016, Nu Skin Enterprises resolved an FCPA enforcement action based in large part on obtaining a direct selling permit in China. (See here for the prior post).

In 2017, Herbalife disclosed that it was under FCPA scrutiny concerning its conduct in China. With the company’s scrutiny still pending, yesterday the DOJ announced that Yanliang Li (a citizen of China and former Managing Director of a Chinese division of Herbalife) and Hongwei Yang (a citizen of China and former head the External Affairs Department of a Chinese division of Herbalife) were criminally charged “for their roles in a scheme to violate the anti-bribery and the internal controls provisions of the FCPA.” Not surprisingly, the alleged conduct focused on obtaining a direct selling permit.

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