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Friday Roundup

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Save the date, scrutiny updates, coming attraction, job alert, and for the reading stack. It’s all here in the Friday roundup.

Save the Date

An event notice for East Coast readers.

On Friday, March 6th, the Fordham Law Review is hosting a free symposium opened to the public titled “Fighting Corruption in American and Abroad.”

To learn more about the event click here.

Preet Bharara (U.S. Attorney for the Southern District of New York) will be delivering a keynote address and symposium panels will explore the following topics.

(i) What is Corruption?—How Should We Define It, and Why Is It Bad?

(ii) Landmark Domestic Bribery Prosecutions

(iii) Corruption Regulation in Practice via the Foreign Corrupt Practices Act; and

(iv) The Political Economy of Global Corruption Regulation

I will be appearing on the third panel along with: Lanny Breuer (Partner, Covington & Burling LLP);  Jay Holtmeier (Partner, Wilmer Cutler Pickering Hale and Dorr LLP); and Lucinda Low (Partner, Steptoe & Johnson LLP).

I have previously written about FCPA enforcement during Mr. Breuer’s tenure as Assistant Chief of the DOJ Criminal Division, but my panel presentation will concern a different topic – my forthcoming article:  “The Uncomfortable Truths and Double Standards of Bribery Enforcement.”  The article explores how the U.S. crusade against bribery suffers from several uncomfortable truths, including a double standard regarding corporate interaction with “foreign officials” under the Foreign Corrupt Practices Act and corporate interaction with U.S. officials under the U.S. laws.

Scrutiny Updates

General Cable Corp.

The company initially disclosed FCPA scrutiny in September 2014 and recently disclosed:

“As we previously reported, we have been reviewing, with the assistance of external counsel, certain commission payments involving sales to customers of our subsidiary in Angola. The review has focused upon payment practices with respect to employees of public utility companies, use of agents in connection with such payment practices, and the manner in which the payments were reflected in our books and records. We have determined at this time that certain employees in our Portugal and Angola subsidiaries directly and indirectly made or directed payments at various times from 2002 through 2013 to officials of Angola government-owned public utilities that raise concerns under the Foreign Corrupt Practices Act and possibly under the laws of other jurisdictions.

On February 20, 2015, based on the analysis completed at that time with the assistance of our external counsel and forensic accountants, we concluded that we were able to reasonably estimate the amount of profit derived from sales made to the Angolan government-owned public utilities in connection with the payments described above, which we believe are likely to ultimately be disgorged. As a result, we have recorded an estimated charge in the amount of $24 million as an accrual as of December 31, 2014. The accrued amount reflects only an estimate of the Angola-related profits reasonably likely to be disgorged, and does not include provision for any fines, civil or criminal penalties, or other relief, any or all of which could be substantial.”

Cobalt

As highlighted in this prior post, the company recently prevailed over the SEC regarding the company’s FCPA scrutiny.  Set forth below is what Cobalt’s CEO (Joe Bryant) said during a recent investor conference call.

ANALYST: [J]ust one additional question for you. Back in January, you mentioned or had a press release that the SEC terminated its investigation; but the Department of Justice was still going forward with its parallel investigation into activities in Angola. Where does that stand now, Joe?

JOE BRYANT: Darn it […]. I was hoping to get through this conference without anybody bringing up any FCPA questions.

ANALYST: Sorry about that.

JOE BRYANT: No, I would — it’s pretty simple, really. Our focus in the past several years has obviously been with the SEC; and we brought the DOJ into the investigation early on to make sure that they could run a parallel investigation, if that was what they wanted. By the way, I will say that throughout this entire period, I can’t say enough about the working relationship we developed with the SEC and trying to make sure they understood what we did and they had everything we had in terms of the issue at question.

So we got the SEC out of the way. The DOJ is an independent agency, and it will run its process according to its measures. But I do think that we consider this issue largely behind us.”

Juniper Networks

The company disclosed FCPA scrutiny in August 2013 (albeit in short fashion – see here) and recently disclosed as follows.

“The U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ) are conducting investigations into possible violations by the Company of the U.S. Foreign Corrupt Practices Act (FCPA). The Company is cooperating with these agencies regarding these matters. The Company’s Audit Committee, with the assistance of independent advisors, has been investigating and conducting a thorough review of possible violations of the FCPA, and has made recommendations for remedial measures, including employee disciplinary actions in foreign jurisdictions, which the Company has implemented and continues to implement. The Company is unable to predict the duration, scope or outcome of the SEC and DOJ investigations, but believes that an adverse outcome is reasonably possible. However, the Company is not able to estimate a reasonable range of possible loss. The SEC and/or DOJ could take action against us or we could agree to settle. In such event, we could be required to pay substantial fines and sanctions and/or implement additional remedial measures; in addition, it may be determined that we violated the FCPA.”

Mondelez International

Kraft Foods long ago disclosed FCPA scrutiny resulting from its acquisition of Cadbury (see here).  Kraft, currently known as Mondelēz International, Inc., recently disclosed as follows.

“[A]fter we acquired Cadbury in February 2010 we began reviewing and adjusting, as needed, Cadbury’s operations in light of applicable standards as well as our policies and practices. We initially focused on such high priority areas as food safety, the Foreign Corrupt Practices Act (“FCPA”) and antitrust. Based upon Cadbury’s pre-acquisition policies and compliance programs and our post-acquisition reviews, our preliminary findings indicated that Cadbury’s overall state of compliance was sound. Nonetheless, through our reviews, we determined that in certain jurisdictions, including India, there appeared to be facts and circumstances warranting further investigation. We are continuing our investigations in certain jurisdictions, including in India, and we continue to cooperate with governmental authorities.

As we previously disclosed, on February 1, 2011, we received a subpoena from the SEC in connection with an investigation under the FCPA, primarily related to a facility in India that we acquired in the Cadbury acquisition. The subpoena primarily requests information regarding dealings with Indian governmental agencies and officials to obtain approvals related to the operation of that facility. We are continuing to cooperate with the U.S. and Indian governments in their investigations of these matters, including through ongoing meetings with the U.S. government to discuss potential conclusion of the U.S. government investigation.”

Coming Attraction

This recent post highlighted judicial rejection of a deferred prosecution between the DOJ and Fokker Services.

Fokker recently announced:

“After careful review of the Court’s decision, Fokker Services decided to file a Notice of Appeal. Fokker Services has noticed recent press articles which contain highly speculative assumptions and amounts, not based on facts. Fokker cannot run ahead of the outcome of its appeal and will make further announcement only if and when applicable.”

While the case is outside the FCPA context, this appeal will certainly be one to follow as DPAs (as well as NPAs) are a prominent feature of FCPA enforcement.

Job Alert

Avon Calling!  Avon Colombia S.A.S., a subsidiary of Avon Products, Inc., based in Medellin, Colombia, is looking for an attorney to join the Ethics & Compliance team.  The Compliance Counsel has day-to-day operational responsibility for managing the compliance program in the Andean Cluster (Colombia, Ecuador, Peru, and Venezuela).  The program seeks to minimize risk exposure of corporate and regulatory law through company guidance and controls.  A primary activity of the Compliance Counsel is to provide operational advice and interpretation of company policies and procedures, including but not limited to the company’s anti-corruption policy.  As part of the program, the Compliance Counsel supports corporate, regional and local governance, monitoring, auditing, training and communication initiatives.  A primary goal for the Compliance Counsel is to enhance the culture of awareness and adherence to company policies.  Prospective candidates should apply via the Avon website.

Reading Stack

Third parties are not just a corruption risk in the global marketplace, but the domestic marketplace as well.  See here for the New York Daily News article about so-called “expediters” who assist developers navigate bureaucracy “to speed their projects to approval — getting permits faster, addressing violations and filling out key paperwork. It’s an arrangement critics have long slammed as corrupt.”

The most recent edition of the always information Debevoise & Plimpton FCPA Update is here.  Regarding the recent rejection of a DPA in the Fokker Services action (see here) the Update states:

“In the FCPA context and beyond, the Fokker Services decision is a reminder that increased judicial scrutiny of proposed settlement agreements with law enforcement agencies may be the “new normal.” Although the outcome of Fokker Services’ appeal remains to be seen, Judge Leon’s decision may entice prosecutors in future cases to seek harsher terms in DPAs out of concern for heightened judicial scrutiny of proposed DPAs, or instead shy away from DPAs entirely and attempt to achieve sufficient punishment and deterrence through Non-Prosecution Agreements (“NPAs”). In addition, Judge Leon’s concern that no individuals were charged in Fokker Services may further embolden prosecutors to demand individual accountability as part of proposed settlements or in the lead-up to such settlements.”

Some are still drinking the Kool-Aid regarding Morgan Stanley’s so-called declination.  (See here – “A robust compliance program spared Morgan Stanley from prosecution under the FCPA”).  Just goes to show that once a narrative is cast, nothing else seems to matter.

A recent Q&A in the Wall Street Journal’s Risk & Compliance Journal with Pascale Hélène Dubois (the World Bank’s chief suspension and debarment officer).

*****

A good weekend to all.

Friday Roundup

Wal-Mart’s FCPA expenes continue to grow, scrutiny alerts and updates, in the blink of an eye, and for the reading stack.  It’s all here in the Friday roundup.

Wal-Mart’s FCPA Expenses

As highlighted in this previous post, last FY Wal-Mart’s FCPA professional fees and expenses were approximately $604,000 per working day.  As highlighted in this previous post, for Q1 of this FY Wal-Mart’s FCPA professional fees and expenses were approximately $1.16 million per working day.

Yesterday, in a Q2 earnings conference call, Wal-Mart executives stated:

“Expenses related to FCPA and compliance matters were approximately $82 million, which was above our forecasted range of $65 to $70 million. Approximately $48 million of these expenses represented costs incurred for the ongoing inquiries and investigations. Approximately $34 million is related to global compliance programs and organizational enhancements.”

Doing the math, Wal-Mart’s second quarter FCPA-related professional fees and expenses equal approximately $1.26 million per working day.

In this release, Wal-Mart stated:

“We believe expenses for FCPA matters and compliance programs will be between $75 and $80 million for both the third and fourth quarters.”

The question again ought to be asked – does it really need to cost this much or has FCPA scrutiny turned into a boondoggle for many involved?  For more on this issue, see my article “Big, Bold, and Bizarre: The Foreign Corrupt Practices Act Enters a New Era.

Scrutiny Alerts and Updates

BHP Billiton

The company issued the following release.

“As previously disclosed BHP Billiton received a request for information in August 2009 from the US Securities and Exchange Commission (SEC). As a result the Group commenced an internal investigation and disclosed to relevant authorities including the U.S. Department of Justice (DOJ) evidence that it uncovered regarding possible violations of applicable anti-corruption laws involving interactions with foreign government officials. As has been publicly reported, the Australian Federal Police has indicated that it has commenced an investigation. The Group is fully cooperating with the relevant authorities as it has since the US investigations commenced. As a part of the US process, the SEC and DOJ have recently notified the Group of the issues they consider could form the basis of enforcement actions and discussions are continuing. The issues relate primarily to matters in connection with previously terminated exploration and development efforts, as well as hospitality provided as part of the Company’s sponsorship of the 2008 Beijing Olympics. In light of the continuing nature of the investigations it is not appropriate at this stage for BHP Billiton to comment further or to predict outcomes. BHP Billiton is fully committed to operating with integrity and the Group’s policies specifically prohibit engaging in unethical conduct. BHP Billiton has what it considers to be a world class anti-corruption compliance program.”

For more, see here from The Australian.

Novartis

Add Novartis to the list of pharma companies under scrutiny by Chinese law enforcement for business practices in China.  This Wall Street Journal article states:

“Novartis AG has opened an investigation into possible misconduct at its Chinese operations after a former employee filed a complaint about the Swiss pharmaceutical company’s business practices with labor authorities in China.  Basel-Switzerland based Novartis said … its Business Practices Office, which looks into reported misconduct, is in charge of the investigation. The company said the former employee had asked for 5 million yuan (approximately $800,000) in compensation after resigning but declined to comment further.”

Allied Defense Group

Allied Defense Group (“ADG”) employed Mark Frederick Morales, one of the individuals charged in the failed Africa Sting enforcement action.  As noted in this previous post, in August 2012, the ADG disclosed:

“In February and March, 2012, the DOJ dismissed charges against all individuals indicted in the FCPA sting operation, including the former employee of MECAR USA [an operating business of ADG]. Since this time, the Company’s FCPA counsel has had several discussions with the DOJ and SEC regarding the agencies’ respective inquiries. Based upon these discussions, it appears likely that resolution of these inquiries will involve a payment by the Company to at least one of these government agencies in connection with at least one transaction involving the former employee of Mecar USA. At this point, the amount of this payment is undeterminable.”

ADG recently disclosed:

“In late 2012, the SEC advised that it will not pursue an enforcement action against the Company and in early August 2013, the DOJ advised that it has decided to close its inquiry into this matter.”

In The Blink Of An Eye

As highlighted last week in the Friday Roundup, last week Juniper Networks disclosed:

“The U.S. Securities and Exchange Commission and the U.S. Department of Justice are conducting investigations into possible violations by the Company of the U.S. Foreign Corrupt Practices Act. The Company is cooperating with these agencies regarding these matters. The Company is unable to predict the duration, scope or outcome of these investigations.”

Whether because of three sentences or other information in the company’s quarterly filing, the company’s stock dropped approximately 5.5% last Friday.

72 hours later?

Why of course a securities fraud class action complaint.

This beats the 100 hour threshold highlighted in this previous blink of an eye post.

Reading Stack

A revealing Op-Ed from a member of the Indian Administrative Services in the Times of India which “looks at the games lower bureaucracy plays — sometimes on its own, at other times in collusion with the top — which kill  entrepreneurship and capitalism in India” and which also provide breeding grounds in which harassment bribery flourishes.

An FCPA Mid-Year Update from BakerHostetler.

*****

A good  weekend to all.

Friday Roundup

Future enforcement actions and scrutiny alerts, in the interest of completeness, and for the reading stack.  It’s all here in the Friday Roundup.

Future Enforcement Actions and Scrutiny Alerts

Stay tuned for future FCPA enforcement actions against Diebold and ADM in the approximate $50 million range.

Diebold

Diebold recently stated as follows in this filing.

“Diebold continues to monitor its compliance with the FCPA. It also is continuing its cooperation with the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) in their ongoing inquiries, and is making continued progress toward a timely resolution of this matter. The company has agreed in principle with the DOJ and the SEC to the terms of a proposed settlement of their inquiries, which terms remain subject to final approval by all parties. These proposed settlement terms include combined payments to the U.S. government of approximately $48.0 million in disgorgement, penalties and prejudgment interest, and the appointment of an independent compliance monitor for a minimum period of 18 months.”

ADM

Archer Daniels Midland Company recently stated as follows in this release.

“ADM has been in discussions with the U.S. Department of Justice and the U.S. Securities and Exchange Commission regarding a previously disclosed FCPA matter dating back to 2008 and earlier. Based upon recent progress in these discussions, ADM believes it is appropriate to increase its provision to $54 million, a $29 million increase over the $25 million established in the first quarter.”
Juniper Networks
Some FCPA disclosures are detailed some are not.  Juniper Networks recent disclosure certainly falls into the latter category.  The company disclosed as follows.
“The U.S. Securities and Exchange Commission and the U.S. Department of Justice are conducting investigations into possible violations by the Company of the U.S. Foreign Corrupt Practices Act. The Company is cooperating with these agencies regarding these matters. The Company is unable to predict the duration, scope or outcome of these investigations.”
Sanofi
According to this report in China Daily:

“French pharmaceutical company Sanofi AG said on Aug 8 it is taking a bribery allegation in China very seriously and is reviewing and addressing the issue.  Chinese newspaper 21st Century Business Herald reported that Sanofi staff bribed more than 500 doctors at 79 hospitals in China with 1.7 million yuan ($277,800). The company said in a statement: ‘Sanofi takes any allegation very seriously and has established processes in place for reviewing and addressing such issues in a manner that is consistent with our legal and ethical obligations. At this time, it would be premature to comment on events that may have occurred in 2007.’  […]  Sanofi said in its statement it is confident about its business operations in China and committed to conducting its global business with integrity.  ‘We have zero tolerance to any unethical practice,’ the company said. ‘We are determined to respect the ethical principles governing our activities and are committed to abiding by the laws and regulations that apply in each country where we operate.’  This month, Sanofi’s office in Shenyang, Liaoning province, was visited by the Chinese authorities amid a wave of crackdowns on bribery and corruption in the country’s pharmaceutical sector.”

In the Interest of Completeness

This recent post generically referred to the SEC’s case against Fabrice Tourre.  In the interest of completeness, the Wall Street Journal also stated as follows.

“For a chance, SEC attorneys went to trial against a real-live person and allowed a jury to decide whether he had violated the law.  This is progress, and a welcome departure from the SEC’s custom of charging institutions and then demanding money paid by shareholders to settle case without having to go to court.  And despite his loss, kudos to Mr. Tourre for manfully seeking to clear his name while accepting the risk of trial.  (Here).

I also liked this recent editorial from the Wall Street Journal concerning the Tourre case.

“The Securities and Exchange Commission is doing a victory lap over last week’s verdict against former Goldman Sachs trader Fabrice Tourre, but its spin is revealing about the political motivation behind the case. Lead SEC prosecutor Matthew Martens keeps saying again and again that the case was ‘about Wall Street greed.’ Last time we checked, greed is not a crime under the securities laws or any other statutes in the federal code. […] Greed has existed since man committed original sin, and no doubt it has always existed on Wall Street and most other places. Greed in moderation might even be  called ambition. While the media most often attribute it to bonus-seeking  traders on Wall Street, greed can exist in other locations, too. Perhaps you  have noticed how frequently prosecutors leave their government jobs for higher  pay as corporate attorneys. Mr. Martens may eventually be one of them.”

Speaking of which, this previous Friday roundup highlighted former SEC Enforcement Director of Enforcement Robert Khuzami’s new position at Kirkland & Ellis.  This Bloomberg column states:

“The appalling — yet hardly surprising — news that Robert Khuzami, the former enforcement director at the Securities and Exchange Commission, has cashed in his four-year stint for a $5 million-plus salary at Kirkland & Ellis, a prominent Wall Street law firm, is the latest example of the corrupt relationship between money and power in the U.S.”

Speaking of which, in this post on his Corruption Crime and Compliance site, Michael Volkov states: “I am sure Justice Department and Securities and Exchange Commission lawyers sometimes sit back and marvel at the world they have helped create …”.

Indeed, this is why I have long argued that the unique attributes of FCPA enforcement and the special government policies that impact enforcement, and thus make it a highly niched area of law, warrant special solutions. As to DOJ and SEC FCPA enforcement attorneys who have supervisory and discretionary positions and articulate government FCPA policies, it is in the public interest that such individuals be prohibited, when leaving government service, from providing FCPA defense or compliance services in the private sector for a five-year period.

For the Reading Stack

See here for an article in the New York Times regarding fake receipts in China.  Among other things, the article states:

“[The use of fake receipts] is so pervasive that auditors at multinational corporations are also being duped. The British pharmaceutical company GlaxoSmithKline is still trying to figure out how four senior executives at its China operation were able to submit fake receipts to embezzle millions of dollars over the last six years. Police officials say that some of the cash was used to create a slush fund to bribe doctors, hospitals and government officials. […]  China’s fapiao system took root in the late 1980s and early 1990s, when the government began requiring companies to use official receipts issued by the tax authorities for every business transaction. The receipts usually come with a number and government seal.  But the tax receipt system was quickly exploited. Gangs began producing high-quality imitations of the official invoices using specially designed printers with markings that bore a striking likeness to red government seals.  And at many companies, rogue employees started colluding with advertising, consulting and travel agencies to forge or falsify receipts for the purpose of embezzling corporate funds.”

Looking for a good slide show to spice up FCPA training?  See here from the Huffington Post regarding companies that recently resolved FCPA enforcement actions.

This article is titled “False Claims Act Settlements Often are Business Deals” and states:

“But for contractors, the decision on whether to settle a case or to fight accusations and go to trial can have less to do with guilt or innocence and more to do with practical business considerations. ‘Often, it’s really just a cost-benefit analysis,’ said Jonathan Cone, counsel at the Crowell & Moring LLP law firm. ‘In some cases, it’s actually more cost-effective to settle a case rather than risk losing business with the federal government.'”

Spot-on and the logic is even more compelling the bigger and sharper the DOJ’s stick becomes (i.e. a criminal FCPA enforcement action vs. a civil False Claims Act action).

*****

A good weekend to all.

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