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FCPA Flash – A Conversation With Andrew Levine Regarding Nu Skin, Charitable Donations, And Strict Liability Enforcement

FCPA Flash

The FCPA Flash podcast provides in an audio format the same fresh, candid, and informed commentary about the Foreign Corrupt Practices Act and related topics as readers have come to expect from the written posts on FCPA Professor.

This FCPA Flash episode is a conversation with Andrew Levine (Debevoise & Plimpton). Levine is a primary author of the always informative Debevoise & Plimpton FCPA Update and a recent update included an article about the recent Nu Skin FCPA enforcement action that caught my eye.

As highlighted in this prior post, the SEC found that Nu-Skin violated the FCPA’s books and records and internal controls provisions based on a single charitable donation that its Chinese subsidiary made under circumstances in which subsidiary employees concealed relevant information from the parent company and otherwise acted inconsistent with parent company instructions. While the $765,000 settlement amount was not notable, often less high-profile FCPA enforcement actions present the most interesting and troubling issues.

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United Airlines Resolves Books And Records And Internal Controls Action Based On Domestic Bribery And The SEC’s Inconsistencies Are Once Again Highlighted

united

If the above headline is confusing, you’ve forgotten (as it seems some commentators have) that the Foreign Corrupt Practices Act is a law much broader than its name suggests.

Because of the FCPA’s generic books and records and internal controls provisions, most FCPA enforcement actions (as a technical matter) do not involve any allegations or findings regarding foreign bribery. (This dynamic – termed non-FCPA FCPA enforcement actions for lack of a better term – has been highlighted in prior posts here, here and here).

Case in point is last week’s SEC enforcement action against United Continental Holdings Inc., the parent company of United Airlines Inc.

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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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Company Under FCPA Scrutiny, Resolves Separate FCPA Enforcement Action

FMC

The above headline may be a bit confusing, but it is instructive as to the basic point that the Foreign Corrupt Practices Act has always been a law much broader than its name suggests because of its books and records and internal controls provisions.

These provisions, applicable to issuers, are among the most generic substantive legal provisions one can find and the fact is most FCPA enforcement actions (using that term in the most technical sense) do not even involve foreign bribery.

Case in point is yesterday’s  SEC enforcement action finding that FMC Technologies violated the FCPA’s books and records and internal controls provisions when it overstated profits in one of its business segments.

The name of this company might ring a bell because earlier this year FMC Technologies disclosed FCPA scrutiny of the more traditional type.

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