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Friday Roundup


Scrutiny alerts and updates, civil litigation updates, SEC enforcement statistics, and for the reading stack.  It’s all here in the Friday roundup.

Scrutiny Alerts and Updates


The telecom and media company headquartered in Luxembourg with shares traded over the counter (OTC) in the U.S. recently disclosed:

“Millicom … announced that it has reported to law enforcement authorities in the United States and Sweden potential improper payments made on behalf of the company’s joint venture in Guatemala. A Special Committee of the Board of Directors made the decision in connection with an independent investigation being overseen by the Special Committee and conducted by international law firm Covington & Burling LLP, with the support of Millicom’s management team. Millicom is committed to fully cooperating with the authorities. It is not possible at this time to predict the matter’s likely duration or outcome. Millicom is committed to the highest ethical business standards and to full compliance with all applicable laws and regulations in every market in which the company operates.”


Speaking of FCPA scrutiny in Guatemala, according to this article in the Nation, Jaguar Energy Guatemala, a subsidiary of Houston-based AEI, “participated in an influence-trafficking scheme to obtain privileged information and favors from high-level Guatemalan officials. Among other things, the subsidiary is accused of paying to obtain meetings with the country’s former president Otto Pérez Molina.”

Goldman Sachs

The Wall Street Journal recently went in-depth regarding a Malaysian government investment fund,  1Malaysia Development Bhd., or 1MDB, and the role of Prime Minister Najib Razak. As noted in this article:

“[T]he fund has become the center of a political scandal that has engulfed Malaysia’s government. The fund is mired in debts of over $11 billion. It is a subject of a raft of local and international investigations, including, in Malaysia, by the central bank, auditor general, anticorruption agency and a parliament committee. It has faced accusations that billions of dollars are missing and that money was misused for political purposes or siphoned off in corruption by individuals.”

According to this article:

“Goldman Sachs Group Inc.’s role as adviser to a politically connected Malaysia development fund resulted in years of lucrative business. It also brought exposure to an expanding scandal. As part of a broad probe into allegations of money laundering and corruption investigators at the Federal Bureau of Investigation and the Justice Department have begun examining Goldman Sachs’s role in a series of transactions at 1Malaysia Development Bhd., people familiar with the matter said. The inquiries are at the information-gathering stage, and there is no suggestion of wrongdoing by the bank, the people said. Investigators “have yet to determine if the matter will become a focus of any investigations into the 1MDB scandal,” a spokeswoman for the FBI said.”


It was fairly obvious to knowledgeable observers that when the SEC brought an FCPA enforcement action against Bristol-Myers earlier this month (see here for the prior post), but the DOJ did not, that this signaled that there would not be a DOJ enforcement action as such parallel actions are almost always brought on the same day. Should there be any doubt, the company recently disclosed: “The Company has also been advised by the Department of Justice that it has closed its inquiry into this matter.”

Civil Litigation Updates

As highlighted in Foreign Corrupt Practices Act Ripples, settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall consequences that can result from FCPA scrutiny or enforcement. Among other things, FCPA scrutiny or enforcement often leads to private shareholder litigation as well as other civil claims such as wrongful termination by employees who allegedly “blew the whistle.”

Two developments from the FCPA-related civil dockets.

This recent post highlighted the civil lawsuit filed by Sanford Wadler, the former General Counsel and Secretary of Bio-Lab Laboratories, against the company and certain executive officers and board members in the aftermath of the company’s FCPA scrutiny and enforcement action. In his complaint, Wadler alleged various unfair employment practices. In this recent decision from the Northern District of California, the court largely denied the defendants’ motion to dismiss and allowed the bulk of Wadler’s claims to proceed.

It did not take long for the Ninth Circuit to affirm a lower court order dismissing derivative claims against H-P directors for, among other things, alleged breach of fiduciary duty in connection with the company’s FCPA scrutiny.  The court’s 4 page order is here.

SEC Enforcement Statistics

Although the SEC has a specialized FCPA Unit (one of only five specialized units at the SEC) and declared the FCPA to be a “vital part” of its overall enforcement program, the fact remains that FCPA enforcement is a relatively minor part of the SEC’s overall enforcement program.

Indeed, as noted in this recent SEC release:

“In the fiscal year that ended in September, the SEC filed 807 enforcement actions covering a wide range of misconduct, and obtained orders totaling approximately $4.2 billion in disgorgement and penalties.  Of the 807 enforcement actions filed in fiscal year 2015, a record 507 were independent actions for violations of the federal securities laws and 300 were either actions against issuers who were delinquent in making required filings with the SEC or administrative proceedings seeking bars against individuals based on criminal convictions, civil injunctions, or other orders.”

In the SEC’s FY 2015, there were 13 FCPA enforcement actions.

Nevertheless, the SEC’s release does mention:

Combating Foreign Corrupt Practices

Reading Stack

The most recent FCPA Update by Debevoise & Plimpton is here.

Miller & Chevalier’s Autumn FCPA Review is here.

An informative read here from Professor Peter Henning at his White Collar Crime Watch column in the New York Times titled “Reforming the SEC’s Administrative Process.”


A good weekend to all.

Development From The “Other Universe” – In Dismissing FCPA-Related Securities Fraud Claims, Judge Repudiates FCPA Enforcement Theory

parallel universe

Foreign Corrupt Practices Act issues often co-exist in two parallel universes.

One universe is ruled by all-powerful gods with big and sharp sticks  in which subjects dare challenge the gods.

Another universe consists of checks and balances in which independent actors call the balls and strikes.

The first universe refers to FCPA enforcement by the DOJ and SEC.

The second universe refers to litigation of FCPA-related claims in which judges make decisions in the context of an adversarial legal system. This second universe is often referred to as the rule of law universe.

There are several examples of theories used in the first universe that do not work in the second universe.

For instance, the FCPA enforcement agencies frequently take a seeming “if / then” position when it comes to issuer internal controls.  In other words, if some misconduct occurred somewhere within an issuer’s business organization or if some employee within that organization circumvented the issuer’s internal controls, then the issuer did not have effective internal controls.

However, when this simplistic theory is used in civil litigation, courts have routinely concluded that just because improper conduct allegedly occurred does not mean that internal controls must have been deficient.  (See e.g., Midwest Teamsters Pension v. Baker Hughes, 2009 WL 6799492 (S.D. Tex. 2009);  Freuler v. Parker Drilling 803 F.Supp.2d 630 (S.D. Tex. 2011).

This post concerns the most recent example regarding the parallel universes.

As readers likely know, a recent development in the first universe was the SEC’s enforcement theory in the BNY Mellon (“internship”) enforcement action (see here and here for prior posts) that bribery includes “things of value” provided indirectly to “foreign officials” if the thing of value is subjectively valued by the foreign official.

In the words of the SEC in BNY Mellon, ““The internships [for family members of alleged “foreign officials”] were valuable work experience[s], and the requesting officials derived significant personal value in being able to confer this benefit on their family members.”

Yet, in the other universe a federal court judge recently stated as follows.

“[The FCPA’s anti-bribery provision] does not bar a company from giving anything of value to a foreign government, as opposed to a foreign official personally, or to a third party such as a nonprofit in order to generate corporate goodwill, even if the gift indirectly influences government officials.” (emphasis added).

Those words were written by U.S. District Court Judge Melinda Harmon (S.D. Tex.) in dismissing securities fraud claims brought against Hyperdynamics Corporation in the aftermath of its FCPA scrutiny.  (See here for the opinion).

Before discussing the ruling, a bit of background.

It is often as predictable as the sun rising in the east.

When a company is the subject of FCPA scrutiny or resolves an FCPA enforcement action, plaintiff lawyers representing shareholders will emerge like bats from a cave bringing derivative actions and/or securities fraud actions against the company as well as officers and directors.  To learn more about this dynamic, see “Foreign Corrupt Practices Act Ripples.”

For instance, in September 2013 Hyperdynamics Corp. disclosed that it was the subject of FCPA scrutiny (see here for the prior post).  On the day of the disclosure, the company’s stock fell approximately 15%.  As sure as the sun rises in the east, a few days later, not one but two, plaintiffs firms issued releases (here and here) announcing an “investigation” and civil actions soon followed alleging Section 10(b) and Rule 10b-5 claims based on general risk disclosures in SEC filings referring to corruption.

As stated by Judge Harmon (certain internal citations omitted):

“Defendants issued twenty statements disclosing a risk of FCPA violations before they disclosed the FCPA subpoenas.  (“We operate in Guinea, a country where corrupt behavior exists that could impair our ability to do business in the future or result in significant fines or penalties.”). Seven of the statements further revealed Hyperdynamics had found “control deficiencies” in its accounting practices in 2009. (“Some of the identified internal control deficiencies contributing to our material weaknesses in financial reporting relate to our operations in Guinea. These material weaknesses make it more likely that [an FCPA] violation could have occurred.”). The control deficiencies are not identified in the record. Defendants state: “Hyperdynamics had historically had some difficulties—mainly during the period before the management and board were largely replaced beginning around 2009— maintaining adequate internal controls.” Four of the statements specifically deny violations of the FCPA. (“Neither the Company, nor any of its Subsidiaries, nor, to the Knowledge of the Company, any director, officer, agent, employee or other Person acting on behalf of the Company or any of its Subsidiaries, has, in the course of its actions for, or on behalf of, the Company, violated or is in violation of any provision of the [FCPA].”).

Defendants do not contend the statements above were adequate disclosures of FCPA related risks. Defendants tentatively argue: “Plaintiff never meaningfully addresses the Company’s risk disclosure language, including its disclosure beginning in 2009 that certain internal control weaknesses ‘make it more likely that a[n] [FCPA] violation could have occurred.’” Defendants maintain FCPA violations did not occur.

Plaintiffs respond that the disclosures were false or misleading by omission, because violations occurred. Plaintiffs have not, however, established that FCPA violations occurred. The only authoritative evidence in the record that FCPA violations occurred is Hyperdynamics’s disclosure of subpoena requests by the DOJ in September 2013 and the SEC in January 2014.  On March 12, 2014, Hyperdynamics’s partner Tullow Guinea Limited declared these subpoenas a force majeure event but retracted the declaration in May 2014. These disclosures do not establish that FCPA violations occurred or that Defendants knowingly omitted FCPA violations. See Konkol v. Diebold, Inc., 590 F.3d 390, 402 (6th Cir. 2009) (“The mere existence of an SEC investigation does not suggest that any of the allegedly false statements were actually false . . . [,] nor does it add an inference of scienter.” (quoting In re Hutchinson Tech., Inc. Secs. Litig., 536 F.3d 952, 962 (8th Cir. 2008))). Defendants cannot be held liable for not preempting the SEC process and issuing a public confession. See City of Pontiac Policemen’s & Firemen’s Ret. Sys. v. UBS AG, 752 F.3d 173, 184 (2d Cir. 2014) (rejecting argument that “in addition to disclosing the existence of an investigation, defendants were required to disclose that [defendant] UBS was, in fact, engaged in an ongoing tax evasion scheme,” because “disclosure is not a rite of confession”).”

Judge Harmon next stated and concluded (certain internal citations omitted):

“Plaintiffs have not alleged FCPA-related facts which would render either the sixteen risk disclosures or the four specific denials misleading by omission and which Defendants had a duty to disclose. Furthermore, Plaintiffs have failed to allege facts which would render the specific denials false or misleading.

The FCPA prohibits a company from making an “offer, gift, promise to give, or authorization of the giving of anything of value” to a “foreign official for purposes of . . . influencing any act or decision of such foreign official in his official capacity” in obtaining business. This prohibition does not bar a company from giving anything of value to a foreign government, as opposed to a foreign official personally, or to a third party such as a nonprofit in order to generate corporate goodwill, even if the gift indirectly influences government officials. Nor does it prohibit misappropriation by a foreign official without the company’s knowledge.

Here, Plaintiffs have alleged Defendants made donations to the government of Guinea during three phases of negotiations over Hyperdynamics’s concession. Plaintiffs claim these donations constituted bribery under the FCPA. The first donation occurred after Hyperdynamics received a letter in 2005 indicating the government had cancelled its concession. Defendants met with the Secretary General of Guinea at the Presidential Palace and were told the letter was a “fake” but that further review was necessary. On August 1, 2006, Defendant CEO Kent Watts founded a nonprofit organization called American Friends of Guinea for the purpose of making charitable contributions “for the welfare of the Guinean population.”  Shortly thereafter, on September 22, 2006, the government approved the first renegotiated concession.

The second instance of alleged bribery occurred during negotiations from late 2007 to 2009, after the renegotiated concession became a local news story and the government again threatened to cancel it. In September 2007, a delegation led by the Secretary General visited Hyperdynamics’s office in Houston, and vice versa. Over the next year, American Friends of Guinea “delivered and paid for antibiotics and glucose fluids for men, women, and children who were stricken with cholera and quarantined as a result thereof. AFG also planned new water well projects to get to the source of solving the problem.”  In addition, Plaintiffs cite an  investor forum,, which cites an article from a Guinean news website,, stating the Minister Secretary General “disbursed by means of [H]yperdynamics, the sum of five hundred (500) million Guinean francs, which were distributed to some of Ioubards [hooligans] Municipality of Kaloum and other districts in the capital of Guinea. Ioubards [were seen] in the streets two days before the fateful day of the strike of January 10, 2008. . . .”  Plaintiffs allege the “hooligans” supported the President and organized street protests against the Prime Minister. On February 8, 2008, according to a Wikileaks cable,Hyperdynamics CFO Briers met with the U.S. Embassy. The cable states, “Briers raised the issue of FCPA violations” by the Company during the meeting, and did so “without prompting.” Briers denied the Company paid the 500 million Guinea francs to the reported hooligans. Briers also denied Hyperdynamics had paid the Secretary General “to push through their contract.” Plaintiffs argue, “Despite Briers’ denials of specific instances of alleged bribery, his voluntary whistleblowing of FCPA violations further reinforced the Embassy’s view that Hyperdynamics was violating the act.” The cable explains the Embassy declined Brier’s request for assistance in negotiating with the government on grounds that “commercial advocacy would be very difficult, if not impossible, due to the fact that the [U.S. Government] does not recognize the military junta as a legitimate government.” According to another Wikileaks cable, Tidiane Diallo, a new employee of the Ministry of Mines who formerly worked at USAID told the Embassy, “I am sure Hyperdynamics was the minister’s ticket for his appointment.” According to the cable, Diallo based his statement on the fact that “the minister was appointed on August 27 . . . and that Hyperdynamics was at the ministry the very next day. The company’s contract was reinstated a few days later.” Diallo also claimed Hyperdynamics had offered to donate $56 million to the government to pay its annual bill for power plant fuel. The cable states: Diallo reportedly warned the minister of mines to reject the offer, pointing out that it is not clear what Hyperdynamics wants in return, and accepting a “donation” at this point would undermine the [government’s] future bargaining power. He said that the [government] has not yet decided whether or not to accept the funds, but that the ministers of mines and finance may decide to do so because of significant budgetary pressures. The embassy officer asked Diallo directly if the donation was a bribe, and Diallo responded, “yes and no.” Diallo explained, “[O]n the one hand, the offer is public and no one is trying to negotiate a deal behind closed doors. At the same time, the fact that the [government] does not know what Hyperdynamics wants in return raises questions about the company’s intent.” Again, Defendants’ negotiations bore fruit. On September 11, 2009, a Memorandum of Understanding was signed, partially affirming and modifying Hyperdynamics’s concession.  On September 29, 2009, Hyperdynamics made a donation to American Friends of Guinea of stock. On the same day, a director of Hyperdynamics resigned, following the firing of the CEO and resignation of the CFO and another director during the summer of 2009. The concession was approved by presidential decree in May 2010.

The third instance of alleged bribery occurred in 2011, after the concession was again disputed by the transitional government and modified by way of a mining code promulgated in September 2011. Plaintiffs cite testimony from confidential witness CW-1, a former Logistics Operations Manager for Hyperdynamics, alleging Hyperdynamics donated and installed $20,000 of computer equipment for the Ministry of Mines in 2011 and $8,000 to $10,000 of computer equipment for the Guinean Offshore Department of Environment, “an agency that the Company helped to create from scratch.” Plaintiffs do not specify any particular official action influenced by the computer donations. Plaintiffs also fail to plead donations to the government and the American Friends of Guinea constituted gifts to a “foreign official for purposes of . . . influencing any act or decision of such foreign official in his official capacity.”

In sum, Plaintiffs’ FCPA-related fraud claims are based on speculations of uncharged, unadjudicated FCPA violations that are not plausibly material.”

Former Bio-Rad General Counsel Brings Employment Claims Against Company And Executives In The Aftermath Of An FCPA Enforcement Action


In recent years several terminated corporate employees have alleged unfair employment practices in connection with some aspect of FCPA scrutiny or enforcement.

Indeed, in 2010 FCPA Professor coined the term “noisy exit” to describe this dynamic.

Last week, Sanford Wadler, the former General Counsel and Secretary of Bio-Lab Laboratories, filed this civil complaint in federal court (N.D. Cal.) against the company and certain executive officers and board members alleging various unfair employment practices.  In summary fashion, the complaint alleges:

“This matter presents the classic case of whistleblower retaliation. After learning of his employer Bio-Rad’s involvement in extensive bribery occurring in Russia, Thailand, and Vietnam, Wadler investigated evidence of similar violations of the Foreign Corrupt Practices Act (“FCPA”) in China, where corruption is notoriously endemic. Key Bio-Rad officers and directors wanted Wadler to turn a blind eye to this misconduct or sweep it under the rug, but he refused. Instead, and following his mandatory duties under federal securities laws as the Company’s chief legal officer, Wadler investigated this potential criminal activity and reported it up the ladder. When Wadler reasonably began to believe that the conspiracy to violate the FCPA went all the way to the top of the corporate hierarchy, he reported his concerns to the Company’s audit committee. Then, just shortly before Bio-Rad was scheduled to present to the SEC and DOJ regarding the Company’s investigation into potential FCPA violations, the Company fired Wadler precisely because he refused to be complicit in its wrongdoing. A company is not allowed to attempt to silence whistleblowers in this manner.”

Wadler’s complaint asserts various federal and state law claims.

As highlighted in this previous post, in November 2014 Bio-Rad agreed to pay approximately $55 million to resolve DOJ and SEC FCPA enforcement actions.

Wadler’s complaint contains interesting allegations as to the inner-workers of how FCPA allegations were handled at Bio-Rad as well as critical allegations concerning the law firms hired by Bio-Rad to conduct the FCPA internal investigation.

Wadler is represented by Michael Von Loewenfeldt of Kerr & Wagstaffe LLP

Texas Supreme Court Dismisses Defamation Claim Against Shell And Concludes That Providing An Internal Investigation Report To The DOJ Is “Absolutely Privileged”


Shell Oil Company v. Writt is a civil defamation case that has been closely followed by the corporate community given its impact on conducting internal investigations and cooperating with government enforcement agencies.

This recent opinion by the Texas Supreme Court will be welcome news to the corporate community because the court concluded that providing an internal investigating report to the DOJ is “absolutely privilege” under the defamation laws.

In terms of background, as stated by the Texas Supreme Court:

“Shell Oil Company and Shell International,E&P,Inc.(collectively, Shell) received an inquiry from the Department of Justice (DOJ) regarding possible violations of the Foreign Corrupt Practices Act by one of its contractors. Shell met with the DOJ, agreed to perform an internal investigation and report the results to the DOJ, and then did so. Robert Writt, who was employed by Shell until his employment was terminated following the investigation, sued Shell for wrongful termination and for defamation. Writt’s defamation claim was based on Shell’s furnishing the DOJ its report that contained allegedly defamatory statements about him. [His defamation claim was based on allegations that in the report provided to the DOJ, Shell falsely accused him of approving bribery payments and participating in illegal conduct.] Shell asserted that it was absolutely privileged to provide the report to the DOJ and moved for summary judgment. The trial court granted Shell’s motion; the court of appeals reversed.”

In the words of the Texas Supreme Court, the court of appeals:

“[H]eld that the summary judgment evidence did not conclusively establish that at the time Shell provided its report to the DOJ a criminal judicial proceeding against either Shell or Writt was ongoing, actually contemplated, or under serious consideration by either the DOJ or Shell. Therefore, the report was only conditionally, not absolutely, privileged. The court reasoned that Shell cooperated with the DOJ during an ongoing investigation and created the report as a part of its own voluntary internal investigation, but that those actions were not enough to conclusively establish that Shell provided the report under a serious threat of prosecution; nor was the fact the DOJ eventually initiated a criminal proceeding against Shell conclusive evidence that such a proceeding was actually contemplated or under serious consideration by the DOJ as of the time Shell provided the report.”

The Texas Supreme Court addressed the following question: “whether the providing of a report regarding possible criminal activity to a government agency was an absolutely privileged communication or a conditionally privileged one.”

As noted by the court, Texas recognizes two classes of privileges applicable to defamation suits: absolute privilege and conditional or qualified privilege. “An absolute privilege is more properly thought of as an immunity because it is based on the personal position or status of the actor. . . . Such immunity, however, attaches only to a limited and select number of situations which involve the administration of the functions of the branches of government, such as statements made during legislative and judicial proceedings.”

Shell argued that an absolute privilege extends to the report and the statements in it because it was furnished to the DOJ preliminary to a proposed judicial proceeding. It argues that the information contained in its report, including information about Writt, was solicited by the DOJ during an ongoing FCPA investigation; Shell compiled and provided the report under serious and good faith contemplation of a judicial proceeding; and those circumstances are sufficient for an absolute privilege to apply.

Writt did not assert that Shell’s providing the report to the DOJ was not privileged; he simply urges that the court of appeals was correct in classifying Shell’s communication as being conditionally privileged. He argued that Shell’s report was provided during an ongoing investigation, but not as a communication preliminary to a judicial proceeding or as part of a quasi-judicial proceeding

The Texas Supreme Court concluded “that Shell’s statements were made preliminary to a proposed judicial proceeding and were absolutely privileged.”

According to the Texas Supreme Court:

“The summary judgment evidence establishes that at all relevant times, Shell was a target of the DOJ’s investigation.”


“[W]hen the DOJ’s leverage over Shell vis-à-vis the FCPA and its somewhat draconian potential penalties are considered, it is manifest that Shell was, practically speaking, compelled to undertake its internal investigation and report its findings to the DOJ.”

“From the time Shell was first contacted by the DOJ to the time it provided its report to the DOJ, FCPA compliance was of great concern for U.S. businesses operating overseas and potential violations were not taken lightly. Moreover, businesses that chose not to cooperate were subjected to substantially greater punishments if a DOJ prosecution was successful.”

“In sum, the summary judgment evidence is conclusive that when Shell provided its internal investigation report to the DOJ, Shell was a target of the DOJ’s investigation and the information in the report related to the DOJ’s inquiry. The evidence is also conclusive that when it provided the report, Shell acted with serious contemplation of the possibility that it might be prosecuted.”

As noted in the Texas Supreme Court opinion:

“Six former United States Attorneys General, Michael B. Mukasey, Benjamin R. Civiletti, Edwin Meese, III, 1 Richard L. Thornburgh, William P. Barr, and Alberto R. Gonzales, submitted an amicus curiae letter in support of Shell. The Chamber of Commerce of the United States of America, the National Association of Manufacturers, and the American Petroleum Institute submitted an amicus curiae brief in support of Shell.”

See this prior post concerning the underlying 2010 FCPA enforcement action against Royal Dutch Shell.

Friday Roundup


The anti-bribery business, quotable, scrutiny alerts and updates, and for the reading stack.  It’s all here in the Friday Roundup.

“The Anti-Bribery Business”

Several articles have been written about FCPA Inc., a term I coined in April 2010 (see here), as well as the “facade of FCPA enforcement” (see here for my 2010 article of the same name).

The articles have included: “Cashing in on Corruption” (Washington Post); “The Bribery Racket” (Forbes); and “FCPA Inc. and the Business of Bribery” (Wall Street Journal).

I talked at length with The Economist about the above topics and certain of my comments are included in this recent article “The Anti-Bribery Business.”

“The huge amount of work generated for internal and external lawyers and for compliance staff is the result of firms bending over backwards to be co-operative, in the hope of negotiating reduced penalties. Some are even prepared to waive the statute of limitations for the conclusion of their cases. They want to be sure they have answered the “Where else?” question: where in the world might the firm have been engaging in similar practices?

In doing so, businesses are egged on by what Mr Koehler calls “FCPA Inc”. This is “a very aggressively marketed area of the law,” he says, “with no shortage of advisers financially incentivised to tell you the sky is falling in.” Convinced that it is, the bosses of accused companies will then agree to any measure, however excessive, to demonstrate that they have comprehensively answered the “Where else?” question. So much so that even some law enforcers have started telling them to calm down. Last year Leslie Caldwell, head of the DOJ’s criminal division, said internal investigations were sometimes needlessly broad and costly, delaying resolution of matters. “We do not expect companies to aimlessly boil the ocean,” she said.

Her words have provided scant comfort: defence lawyers say that their clients feel that if they investigate problems less exhaustively, they risk giving the impression that they are withholding information. Some say the DOJ is maddeningly ambiguous, encouraging firms to overreact when allegations surface.”


Assistant Attorney General Leslie Caldwell is spot-on in this recent Q&A in Fraud Magazine as to the importance of uniquely tailored compliance.

“I think companies have to tailor their compliance programs and their investigative mechanisms to their businesses. There’s no one-size-fits-all compliance program. Different businesses have different risks. And a company needs to do an assessment that’s very tailored to their risks and game out what could go wrong and figure out how to prevent that from happening.”

She is less than clear though when describing when the DOJ would like companies to voluntarily disclose:

“We don’t want a company to wait until they’ve completed their own investigation before they come to us. We’ll give them room to do that, but there may be investigative steps that we want to take that maybe the company is not even capable of taking. We definitely don’t want to send a message that the company should complete its own investigation and then come to us. However, we obviously don’t expect a company to report to us as soon as it receives a hotline report that it hasn’t even checked into yet.”

For your viewing pleasure, here is the video of a recent speech by Caldwell (previously highlighted here) along with Q&A.

Scrutiny Alerts and Updates


Reuters reports:

“German engineering firm Bilfinger has become the first international company to disclose to Brazil that it may have paid bribes as it seeks leniency under a new anti-corruption law, Comptroller General Valdir Simão said on Thursday. By reporting potential graft to the comptroller, known by the acronym CGU, Bilfinger hopes to continue operating in Brazil, Simão said, though it may still pay damages. “The company knows it will be punished in Brazil; it is not exempt from fines,” Simao said at a conference in Sao Paulo adding that in exchange the company could be guaranteed the right to keep operating in Brazil. Companies that are convicted for bribery could be banned from future contracts in Brazilunder the law, which took effect in January 2014. Bilfinger said in March that it may have paid 1 million euros to public officials in Brazil in connection with orders for large screens for security control centers during the 2014 soccer World Cup. It is conducting an internal investigation and collaborating with Brazilian authorities, Bilfinger said in a statement at the time. Five companies are pursuing leniency deals with the CGU, Simao said, adding that such deals are “quite new” for the country. Four are tied to a scandal at Brazil’s state-run oil firm Petroleo Brasileiro SA, he said.”

As highlighted in this previous post, in December 2013 German-based Bilfinger paid approximately $32 million to resolve an FCPA enforcement action concerning alleged conduct in Nigeria.  The enforcement action was resolved via a three-year deferred prosecution agreement.


Reuters reports:

“A Chinese regulator investigated Siemens AG last year over whether the German group’s healthcare unit and its dealers bribed hospitals to buy expensive disposable products used in some of its medical devices, three people with knowledge of the probe told Reuters. The investigation, which has not previously been reported, follows a wide-reaching probe into the pharmaceutical industry in China that last year saw GlaxoSmithKline Plc fined nearly $500 million for bribing officials to push its medicine sales. China’s State Administration for Industry and Commerce (SAIC) accused Siemens and its dealers of having violated competition law by donating medical devices in return for agreements to exclusively buy the chemical reagents needed to run the machines from Siemens, the people said.”

In 2008, Siemens paid $800 million to resolve DOJ and SEC FCPA enforcement actions that were widespread in scope.  The enforcement action remains the largest of all-time in terms of overall settlement amount.

Dun & Bradstreet

The company recently disclosed the following update regarding its FCPA scrutiny.

“On March 18, 2012, we announced we had temporarily suspended our Shanghai Roadway D&B Marketing Services Co. Ltd. (“Roadway”) operations in China, pending an investigation into allegations that its data collection practices may have violated local Chinese consumer data privacy laws. Thereafter, the Company decided to permanently cease the operations of Roadway. In addition, we have been reviewing certain allegations that we may have violated the Foreign Corrupt Practices Act and certain other laws in our China operations. As previously reported, we have voluntarily contacted the Securities and Exchange Commission (“SEC”) and the United States Department of Justice (“DOJ”) to advise both agencies of our investigation, and we are continuing to meet with representatives of both the SEC and DOJ in connection therewith. Our investigation remains ongoing and is being conducted at the direction of the Audit Committee.

During the three months ended March 31, 2015 , we incurred $0.4 million of legal and other professional fees related to matters in China, as compared to $0.3 million of legal and other professional fees related to matters in China for the three months ended March 31, 2014.

As our investigation and our discussions with both the SEC and DOJ are ongoing, we cannot yet predict the ultimate outcome of the matter or its impact on our business, financial condition or results of operations. Based on our discussions with the SEC and DOJ, including an indication from the SEC in February and March 2015 of its initial estimate of the amount of net benefit potentially earned by the Company as a result of the challenged activities, we continue to believe that it is probable that the Company will incur a loss related to the government’s investigation. We will be meeting with the Staff of the SEC to obtain and to further understand the assumptions and methodologies underlying their current estimate of net benefit and will subsequently provide a responsive position. The DOJ also advised the Company in February 2015 that they will be proposing terms of a potential settlement, but we are unable to predict the timing or terms of any such proposal. Accordingly, we are unable at this time to reasonably estimate the amount or range of any loss, although it is possible that the amount of such loss could be material.”


The company disclosed as follows concerning civil litigation filed in the aftermath of its November 2014 FCPA enforcement action (see here for the prior post).

“On January 23, 2015, the City of Riviera Beach General Employees’ Retirement System filed a new shareholder derivative lawsuit in the Superior Court of Contra Costa County against three of our current directors and one former director. We are also named as a nominal defendant. In the complaint, the plaintiff alleges that our directors breached their fiduciary duty of loyalty by failing to ensure that we had sufficient internal controls and systems for compliance with the FCPA; that we failed to provide adequate training on the FCPA; and that based on these actions, the directors have been unjustly enriched. Purportedly seeking relief on our behalf, the plaintiff seeks an award of restitution and unspecified damages, costs and expenses (including attorneys’ fees). We and the individual defendants have filed a demurrer requesting dismissal of the complaint in this case.

On January 30, 2015, we received a demand pursuant to Section 220 of the Delaware General Corporation Law from the law firm of Scott + Scott LLP on behalf of International Brotherhood of Electrical Workers Local 38 Pension Fund to inspect certain of our books and records. The alleged purpose of the demand is to investigate potential wrongdoing, mismanagement, and breach of fiduciary duties by our directors and executive officers in connection with the matters relating to our FCPA settlement with the SEC and DOJ, and alleged lack of internal controls. We objected to the demand on procedural grounds by letter. On May 1, 2015, International Brotherhood of Electrical Workers Local 38 Pension Fund filed an action against us in the Delaware Court of Chancery to compel the inspection of the requested books and records.

On March 13, 2015, we received a demand pursuant to Section 220 of the Delaware General Corporation Law from the law firm of Kirby McInerney LLP on behalf of Wayne County Employees’ Retirement System to inspect certain of our books and records. The alleged purpose of the demand is to investigate potential wrongdoing, mismanagement, and breach of fiduciary duties by our directors and executive officers in connection with the matters relating to our FCPA settlement with the SEC and DOJ, and alleged lack of internal controls. We objected to the demand on procedural grounds by letter. On April 21, 2015, Wayne County Employees’ Retirement System filed an action against us in the Delaware Court of Chancery to compel the inspection of the requested books and records.”


The company disclosed its FCPA scrutiny earlier this year and stated as follows in its recent quarterly filing:

“For the first quarter of 2015 approximately $1 million was recorded for legal and other professional services incurred related to the internal investigation of this matter. The Company expects to incur additional costs relating to the investigation of this matter throughout 2015.”

For the Reading Stack

From Global Compliance News by Baker & McKenzie titled “When a DPA is DOA:  What The Increasing Judicial Disapproval of Corporate DPAs Means for Corporate Resolutions With the U.S. Government.”

“The legal setting in which corporations are negotiating with U.S. regulators is always evolving. Federal judges’ increasing willingness to second-guess negotiated settlements between the government and corporations is likely to encourage government attorneys to seek even more onerous settlements to ensure that judges do not reject them or criticize the agency in open court. Companies and their counsel should be ready to push back, using the judicial scrutiny to their advantage where possible.”


A good weekend to all.

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