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240 Certifications and Inspections

Why do FCPA violations occur?

Do companies subject to the FCPA do business in foreign markets: (i) intent on engaging in bribery as a business strategy and without a committment to FCPA compliance; or (ii) with a committment to FCPA compliance, yet subject to difficult business conditions in foreign markets.

In this prior guest post, Joseph Covington (a former DOJ FCPA Unit Chief who favors an FCPA compliance defense) said that he has “rarely seen American companies affirmatively offering bribes in the first instance.”  Rather, Covington observed that companies doing business in international markets are “reacting to a world not of their making” and that “as the world shrinks companies who seek to do the right thing can’t help but confront corrupt officials – as customers, regulator and adjudicators – and confront them often.”

Covington’s observation is included in my article “Revisiting a Foreign Corrupt Practices Act Compliance Defense” (here) in which I highlight specific reasons warranting an FCPA compliance defense including various barriers and other conditions that serve as breeding grounds for harassment bribes to flourish in foreign countries.

Barriers include arcane and complex licensing, certification and inspection requirements which often funnel companies seeking to do business in a foreign country into an arbitrary world of low-paying civil servants who frequently supplement their meager salaries through payments condoned in the host country.

I was reminded on this dynamic by this recent NPR’s story “From Iowa To Russia, Tractors Build Economic Bridge.”  The story begins by noting that “Russia is one of the 10 biggest economies in the world, but it isn’t even among the U.S.’s top 30 trading partners.”  The story then profiles a new John Deere factory near Moscow.  According to general director of John Deere Russia, the company had “more than 240 certifications and inspections that we had to go through to build” the factory.

Think about it. 

This is 240 separate and distinct points of contact with Russian “foreign officials” that the current enforcement agencies  view (notwithstanding Congressional intent that payments seeking to induce foreign officials to do ministerial and clerical acts are exempted from the law) as implicating the FCPA.  Not because the company is seeking to obtain or retain business with any foreign government, but just because the company is seeking to do business in the general sense in Russia.

Indeed, the article then states as follows.  “Many Russians might say officials here are most effective at padding meager state salaries with bribes. John Deere is the subject of an SEC investigation for allegedly violating the Foreign Corrupt Practices Act in Russia and neighboring countries.”

Friday Roundup

Shining a light on monitor reports, the Wal-Mart effect, when the dust settles, and Alberto Gonzalez joins the club, it’s all here in the Friday roundup.

Shining A Light on Monitor Reports

As Willkie Farr & Gallagher notes in this recent client alert, although the imposition of compliance monitors in FCPA enforcement actions is less frequent than it used to be, “companies that do receive monitors must now be concerned that their reports may be publicly disclosed.”  This is due to a recent decision (here) in SEC v. American International Group. Inc. (D.D.C.) in which Judge Gladys Kessler granted journalist Sue Reisigner’s Motion for Leave to Intervene and for Access to Monitor’s Reports.

In 2004, the SEC filed a complaint against AIG alleging violations of the federal securities laws.  Under the terms of the settlement consent order, AIG, among other things, agreed to retain an independent consultant, selected by the Fraud Section of the DOJ and acceptable to the SEC to review various AIG transactions.  At the conclusion of the consultant’s review, the consultant was required  to provide copies of reports of his or her findings to the SEC and DOJ.  Thereafter, the SEC and AIG filed a joint motion for clarification stating that it was not the intent of the parties that information provided by AIG to the independent consultant be disseminated or available to anyone outside of the entities identified in the consent order.  The court granted the motion.

Enter Sue Reisinger who filed Freedom of Information Act requests requesting disclosure of the consultant reports.  Her requests were denied citing the court’s order restricting dissemination of the reports.  Thereafter, Reisinger filed a Motion to Intervene and for Access to Monitor’s Reports.  The SEC and AIG filed a joint opposition.  Reisinger argued that “the Court should order the SEC to make the IC Reports publicly available on two grounds:  (1) a First Amendment right to access to judicial proceedings and (2) a common law right of access to judicial records.

As to the second issue, the key issues were whether the IC reports are a “judicial record” and if so, competing interests in publicity and secrecy.  Judge Kessler concluded that the IC reports “are relevant to the judicial function and therefore are properly considered judicial records.”  Judge Kessler stated as follows.  “The Reports may provide information leading the SEC to return to this Court to secure further relief.  In other words, the Consent Order empowers the Court to retain jurisdiction for the purposes of enforcing the Consent Order, including compliance with the IC Reports.”  In addition, Judge Kessler concluded that “the central role the IC Reports play in the operation of the Consent Order makes them precisely the kind of documents that must be open to the public in order for the federal courts ‘to have a measure of accountability and for the public to have confidence in the administration of justice.'”  As to the balancing of interests, Judge Kessler stated that the public’s interest in favor of disclosure of the IC Reports “is overwhelming” and that “there is no question that the public interest far outweighs AIG’s or the SEC’s interest in confidentiality …”.

As to the first issue, Judge Kessler concluded that there is no First Amendment right of access to the IC Reports because the SEC “brought a civil, not criminal, action against AIG” and “Reisinger has not even attempted to make the requisite showing that ‘such access has historically been available.”   As the Willkie client alert notes however, given that Judge Kessler’s analysis as to this first issue focused on the civil nature of the proceedings, it leaves “the door open for an additional argument that the First Amendment would mandate public disclosure of corporate monitor reports in the context of a criminal settlement.”

As to monitors, Professor Brandon Garrett (University of Virginia Law School) and the Corporate Crime Reporter are seeking information on certain corporate monitors in the FCPA context and otherwise – see here.

The Wal-Mart Effect

Wal-Mart is clearly not the only company subject to the FCPA that needs licenses, permits and the like when doing business in Mexico.  It is likely that Wal-Mart’s potential FCPA exposure has caused sleepless nights for many company executives doing business in Mexico and the general region.

The FCPA is also on the minds of investors of other companies doing business in Mexico – such as Kimco Realty Corporation (here).

In a recent earnings call, a UBS analyst asked the following question.  “I hate to even ask this question. But I’m wondering if you have any comments on the Wal-Mart allegations down in Mexico and if Kimco had conducted any reviews, maybe not so much of your local Mexico employees. Maybe my concern is more toward JV partners to make sure that they’re operating to the same high ethical standards that Kimco has already operated toward.”

David Henry (Kimco Realty Corporation – Vice Chairman, President, CEO) answered as follows.  “Obviously, we anticipated this question, so permit me to be very, very specific in a response, and I’d like to make the following points.  One, the extent of what we know about the Wal-Mart actions is what we read in the New York Times article, the same way you did. We are not aware of any Wal-Mart improprieties with respect to any of our Mexican properties or any of our Mexican operating partners. The acquisitions and development of the Wal-Mart projects in our portfolio occurred in 2005 or later, and this is a year after the activities that were described in the article occurred.  With respect to all of our Wal-Mart projects, the developer obtained the building permit, not Wal-Mart. We employ a third-party consultant to oversee the construction process. There’s a construction manager in many cases right on site that reviews and approves every payment we make on these development projects. We also have our own Kimco employees provide asset management and oversee the project construction and approve the individual payments. As part of our normal operating procedures, all of our local Mexican development partners execute letters certifying to us they are not aware of any kind of improper payments. We have a very comprehensive FCPA policy, foreign corrupt practices act policy, at Kimco that includes extensive training for all of our employees that are directly or indirectly involved with any international projects. The training includes members of senior management and our Board are taken through this training on an annual basis.  And then I just have to zoom up to the highest level. From the very beginning, when we went to both Canada and Mexico and then South America, we really tried to set the right tone because we’ve always emphasized that we are a public company and as a public company we adhere to the highest ethical standards and we expect that all of our local operating partners to also meet those standards. So that gives you the highest level of flavor I can give you at this point.”

When the Dust Settles

In 2010, Daimler (and certain of its subsidiaries) resolved a wide-ranging FCPA enforcement – see here for the prior post.

As to conduct in Russia, the DOJ also filed a two count criminal information against DaimlerChrysler Automotive Russia SAO (“DCAR”), a “Moscow-based, wholly-owned subsidiary of Daimler” that “sold Daimler spare parts, assisted with the sale of vehicles from various Daimler divisions in Germany, including in particular its overseas sales division (“DCOS”), to government customers in [Russia], and also imported Daimler passenger and commercial vehicles into Russia for sale to customers and distributors.”

The charged conduct focused on Daimler’s, DCAR’s and DCOS’s relationships with: “the Russian Ministry of Internal Affairs (“MVD”) a department and agency of the Russian government principally responsible for police, militia, immigration and other functions” including supervising the “Russian traffic police; “the Special Purpose Garage (“SPG”) an ‘instrumenality’ of the Russian government” whose employees were “foreign officials” under the FCPA; “Machinoimport a Russian government-owned and controlled purchasing agent for the City of Moscow,” an “instrumentality of the Russian government” whose employees were “foreign officials” under the FCPA; and “Dorinvest a Russian government-owned and controlled purchasing agent for the City of Moscow,” an “instrumentality of the Russian government” whose employees were “foreign officials” under the FCPA.

The information charged that “Daimler, through DCAR, made improper payments at the request of Russian government officials or their designess in order to secure business from Russian government customers.”  Among other things, the information charges that: “between 2000 and 2005″ Daimler’s sale of vehicles to Russian government customers was approximately “€64,660,000″ and that “in connection with these vehicle sales, DCAR and Daimler made over €3 million in improper payments to Russian government officials employed at their Russian governmental customers, their designess, or to third-party shell companies that provided no legitimate services to Daimler or DCAR with the understanding that the funds would be passed on, in whole or in part, to Russian government officials.”

In this recent article, The Moscow Times reports that Russian “investigators have reportedly dropped inquiries against military officials and employees of four companies implicated in a 2010 corruption case involving kickbacks for state purchases of Mercedes automobiles.”

For more on the dynamic of what I’ve called “when the dust settles” – see this prior post.

Alberto Gonzalez Joins the Club

What club you ask?

The former Attorney General who has taken a great interest in the FCPA club.  Former Attorney General Michael Mukasey’s FCPA reform activities are well known, this prior post discussed a recent FCPA speech by former Attorney General John Ashcroft, and in this recent article in Corporate Counsel, Gonzalez and his co-authors forecast the future of FCPA enforcement.


A good weekend to all.

Bribery Perceptions

Last week Transparency International (“TI”) released its Bribe Payers Index (see here).  The index “ranks 28 of the world’s largest economies according to perceived likelihood of companies from these countries to pay bribe’s abroad.”   TI’s data is derived from a survey of approximately 3,000 business executives worldwide.  The executives were asked for each of the 28 countries with which they have a business relationship with (for example as supplier, client, partner or competitor) “how often do firms headquartered in that country engage in bribery in this country.”  

Among the key findings in the index are that “companies from China and Russia were viewed as the most likely to pay bribes” and that “perceptions of the frequency of foreign bribery by country and business sector have on average seen no improvement since the last Bribe Payers Index published in 2008.”

As to China and Russia, the TI report states “it is of particular concern that China and Russia are at the bottom of the index.”  The report states as follows.  “Given the increasing global presence of businesses from these countries, bribery and corruption are likely to have a substantial impact on the societies in which they operate and on the ability of companies to compete fairly in these markets.”

As noted in this prior post, China recently passed an “FCPA-like” law, as did Russia as noted in this post.

In terms of perception of bribery by companies, the U.S. ranked a rather dismal 10th, behind Netherlands, Switzerland, Belgium, Germany, Japan, Australia, Canada, Singapore and the United Kingdom.  Even though the U.S. clearly leads the world in enforcement of its anti-bribery law, the survey seems to suggest that ad hoc enforcement action of the FCPA is not having – at least in the minds of the survey participants – a meaningful deterrent effect in reducing instances of improper payments.

Recent Disclosures Raise Many Questions

Deere & Co., Goldman, Pfizer, News Corp, Parametric Technology, Bruker, Diebold, Watts Water Technologies, 3M Corp. The flurry of public company disclosures of FCPA inquiries (some new, some merely updates) in recent days raise many questions.

Has the increase in FCPA enforcement done anything to deter future FCPA violations?

Why in this era of increased FCPA compliance does there seem to be more, not less, FCPA inquiries?  Does effective compliance reduce FCPA scrutiny or does effective compliance uncover more FCPA issues?  If the latter, does that argue in favor of a compliance defense?

If every company hired FCPA counsel to do a thorough review of its world-wide operations would – given the enforcement agencies theories of interpretation – 50% of companies find technical FCPA violations?  75%?  95%?  If the answer is any one of these numbers is that evidence of how corrupt business has become or is that evidence of how unhinged FCPA enforcement theories have become?

Other than plaintiffs’ firms representing certain investors in (some would say opportunistic) securities class actions or derivative claims, do investors even care about these disclosures?

What do these recent disclosures – involving companies in diverse industries operating in diverse countries – say about the FCPA itself?  Is it working?  Does it need reform?

Ponder these questions while browsing the latest disclosures.


From the company’s August 9th 10-Q:

“[The company] and certain of its affiliates are subject to a number of investigations and reviews, certain of which are industry-wide, by various governmental and regulatory bodies and self-regulatory organizations relating to the sales, trading and clearance of corporate and government securities and other financial products, including compliance with the SEC’s short sale rule, algorithmic and quantitative trading, futures trading, securities lending practices, trading and clearance of credit derivative instruments, commodities trading, private placement practices, compliance with the U.S. Foreign Corrupt Practices Act and the effectiveness of insider trading controls and internal information barriers.”

As noted in this prior post, Goldman’s FCPA scrutiny relates to its relationship with Libya’s sovereign wealth fund.


The company stated as follows in its August 11th 1o-Q:

“The Company has voluntarily provided the DOJ and the U.S. Securities and Exchange Commission (SEC) with information concerning potentially improper payments made by Pfizer and by Wyeth in connection with certain sales activities outside the U.S. We are in discussions with the DOJ and SEC regarding a resolution of these matters. In addition, certain potentially improper payments and other matters are the subject of investigations by government authorities in certain foreign countries, including a civil and criminal investigation in Germany with respect to certain tax matters relating to a wholly owned subsidiary of Pfizer.”

News Corp.

News Corp.’s  FCPA exposure has been detailed in several prior posts (see here for instance) and in the company’s August 10th  8-K it stated as follows.

“In July 2011, the Company announced that it would close its publication, News of the World, after allegations of phone hacking and payments to police. As a result of these allegations, the Company is subject to several ongoing investigations by U.K. and U.S. regulators and governmental authorities, including investigations into whether similar conduct may have occurred at the Company’s subsidiaries outside of the U.K. The Company is fully cooperating with these investigations. In addition, the Company has admitted liability in a number of civil cases related to the phone hacking allegations and has settled a number of cases. The Company has taken steps to solve the problems relating to News of the World including the creation and establishment of an independent Management & Standards Committee, which will have oversight of, and take responsibility for, all matters in relation to the News of the World phone hacking case, police payments and all other connected issues at News International Group Limited (“News International”), including as they may relate to other News International publications.”

Parametric Technology Corp.

In a new disclosure, the company stated as follows in its August 10th 10-Q:

“In the third quarter of 2011, we identified certain payments by certain business partners in China that raised questions of compliance with laws, including the Foreign Corrupt Practices Act, and/or compliance with our business policies. We are conducting an internal investigation and have voluntarily disclosed this matter to the United States Department of Justice and the Securities and Exchange Commission. We are unable to estimate the potential penalties and/or sanctions, if any, that might be assessed in connection with this matter. If we determine that the replacement of certain employees and/or business partners is necessary, it could have an impact on our level of sales in China until such replacements are in place and productive. Revenue from China has historically represented 6% to 7% of our total revenue.”

Bruker Corp.

In a new disclosure, the company stated as follows in its August 9th 10-Q:

“The Company has received certain anonymous communications alleging improper conduct in connection with the China operations of its Bruker Optics subsidiary. In response, the Audit Committee of the Company’s Board of Directors initiated an investigation of those allegations, with the assistance of independent outside counsel and an independent forensic consulting firm. The investigation is ongoing and includes a review of compliance by Bruker Optics and its employees in China with the requirements of the Foreign Corrupt Practices Act (“FCPA”) and other applicable laws and regulations. To date, the investigation has found evidence indicating that payments were made that improperly benefit employees or agents of government-owned enterprises in China. The Company voluntarily contacted the United States Securities and Exchange Commission and the United States Department of Justice to advise both agencies that an internal investigation is underway. It is the intent of the Audit Committee and the Company to cooperate with both agencies in connection with any investigation that may be conducted in this matter. In 2010, the China operations of Bruker Optics accounted for less than 2.5 percent of the Company’s consolidated net sales and less than 1.0 percent of its consolidated total assets. The internal investigation being conducted by the Audit Committee is ongoing and no conclusions can be drawn at this time as to its outcome; however, the FCPA and related statutes and regulations do provide for potential monetary penalties as well as criminal and civil sanctions in connection with FCPA violations. It is possible that monetary penalties and other sanctions could be assessed by the Federal government in connection with this matter. The nature and amount of any monetary penalty or other sanctions cannot reasonably be estimated. We have not recorded any provision for monetary penalties related to criminal and civil sanctions at this time.”

Diebold Inc.

In its August 8th 10-Q the company stated as follows.

“The Company’s global Foreign Corrupt Practices Act (FCPA) review remains on schedule with no material developments during the three months ended June 30, 2011:  During the second quarter of 2010, while conducting due diligence in connection with a potential acquisition in Russia, the Company identified certain transactions and payments by its subsidiary in Russia (primarily during 2005 to 2008) that potentially implicate the FCPA, particularly the books and records provisions of the FCPA. As a result, the Company is conducting an internal review and collecting information related to its global FCPA compliance. In the fourth quarter of 2010, the Company identified certain transactions within its Asia Pacific operation over the past several years which may also potentially implicate the FCPA. The Company’s current assessment indicates that the transactions and payments in question to date do not materially impact or alter the Company’s consolidated financial statements in any year or in the aggregate. The Company’s internal review is ongoing, and accordingly, there can be no assurance that this review will not find evidence of additional transactions that potentially implicate the FCPA. The Company has voluntarily self-reported its findings to the SEC and the DOJ and is cooperating with these agencies in their review. The Company was previously informed that the SEC’s inquiry has been converted to a formal, non-public investigation. The Company also received a subpoena for documents from the SEC and a voluntary request for documents from the DOJ in connection with the investigation. The Company expects to complete its internal review of these matters by the end of 2011. Once the Company completes its internal review, it will begin discussions with the SEC and the DOJ to resolve this matter. At this time, the Company cannot predict the results of the government investigations and therefore cannot estimate the potential loss or range of loss it may incur with respect to these investigations or their potential impact on the consolidated financial statements. Future resolution of these matters with the DOJ and SEC could result in a material impact to the Company’s consolidated financial statements.”

Watts Water Technologies Inc.

In an August 3rd 8-K filing, the company provided this update:

“In the second quarter of 2011, the Company recorded income of $0.05 per share in discontinued operations related to a reserve adjustment for the previously disclosed FCPA investigation. The adjustment reflects management’s best estimate of a possible charge in connection with this matter based on ongoing discussions with SEC staff. There is no definitive agreement for resolution of this matter at this time.”

3M Company

In an August 4th 10-Q filing, the company provided this update:

“On November 12, 2009, the Company contacted the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) to voluntarily disclose that the Company was conducting an internal investigation as a result of reports it received about its subsidiary in Turkey, alleging bid rigging and bribery and other inappropriate conduct in connection with the supply of certain reflective and other materials and related services to Turkish government entities. The Company also contacted certain affected government agencies in Turkey. The Company retained outside counsel to conduct an assessment of its policies, practices, and controls and to evaluate its overall compliance with the Foreign Corrupt Practices Act, including an ongoing review of our practices in certain other countries and acquired entities. The Company continues to cooperate with the DOJ and SEC and government agencies in Turkey in the Company’s ongoing investigation of this matter. The Company cannot predict at this time the outcome of its investigation or what regulatory actions may be taken or what other consequences may result.”

Deere & Co.

In addition to the above disclosures, the Wall Street Journal Corruption Currents, among others, reported this week that Deere & Co.  “received an inquiry from regulators last month regarding payments made in Russia and nearby countries.”  In a statement, Deere stated as follows.  “On July 25, 2011, Deere received a request from the SEC that it voluntarily produce documents relating to Deere’s activities, and those of third parties, in certain foreign countries. Deere is cooperating with the SEC’s requests.”

Foreign Enforcement Action Roundup

The U.S., of course, is not the only country with an FCPA-like law. Canada’s version is the Corruption of Foreign Public Officials Act (“CFPOA”).  Australia’s version is part of its general Criminal Code.

For years, Canada and Australia have been hammered by various civil society organizations for its general lack of enforcement. For instance, Transparency International’s recent Annual Progress Report of the OECD Anti-Bribery Convention (here) noted that “Canada is the only G7 country in the little or no enforcement category, and [it] has been in this category since the first edition of [TI’s] report in 2005.”  Australia likewise was in the little to no enforcement category and TI stated as follows.  “The continued absence of prosecution for the past decade under the Criminal Code, as well as the absence of cases reported under the taxation law for this type of bribery offence, makes it difficult to demonstrate that successful prosecution is feasible under the present system.”

Against this backdrop, it was noteworthy that Canada and Australia authorities recently brought enforcement actions.  This post summarizes the enforcement actions as well as recent developments in the U.K.


Niko Resources

On June 24th, it was announced that Niko Resources (an oil and natural gas exploration and production company headquartered in Calgary) agreed to resolve a CFPOA enforcement action.

The Agreed Statement of Facts (here) states that Niko “did, in order to obtain or retain an advantage in the course of business provide goods and services to a person for the benefit of Foreign Public Officials to induce the officials to use their position to influence any acts or decisions of the foreign state for which the official performs duties or functions, contrary” to the CFPOA. 

The conduct at issue focused on Bangladesh and Niko Resources (Bangladesh) Limited (an indirectly wholly owned subsidiary) and specifically how Niko Bangladesh “provided the use of a vehicle [a Toyota Land Cruiser] costing [$190,984 Canadian dollars] to AKM Mosharraf Hossain, the Bangladeshi State Minister for Energy and Mineral Resources in order to influence the Minister in dealings with Niko Bangladesh within the context of ongoing business dealings.”  In addition, the Statement of Facts states that “Niko paid the travel and accommodation expenses for Minister AKM Mosharraf Hossain to travel from Bangladesh to Calgary to attend GO EXPO oil and gas exploration, and onward to New York and Chicago, so that the Minister could visit his family who lived there, the cost being approximately $5000.”

According to the Statement of Facts, Canada’s investigation began after news stories surfaced concerning a possible violation of the CFPOA by Niko.

The total fine imposed on Niko was $8,260,000 plus a 15% Victim Fine Surcharge for a total of $9,499,000 (all Canadian dollars).  This would seem to be a very aggressive fine amount for providing a Toyota Land Cruiser to a Bangladeshi Minister and paying $5,000 of non-business travel expenses to the official.  The Statement of Facts states that the “fine reflects that Niko made these payments in order to persuade the Bangladeshi Energy Minister to exercise his influence to ensure that Niko was able to secure a gas purchase and sales agreement acceptable to Niko, as well as to ensure the company was dealt with fairly in relation to claims for compensation for the blowouts, which represented potentially very large amounts of money.”  The Statement of Facts further state that Canadian authorities were “unable to prove that any influence was obtained as a result of providing the benefits to the Minister.”

The Probation Order (here) in the case reads very much like a U.S. style plea agreement or NPA/DPA in the FCPA context.  Among other things, Niko agreed to continue its cooperation in the investigation, to implement a series of compliance undertakings, and to report to relevant Canadian authorities concerning its compliance and remediation.

In this Bulletin, Mark Morrision and Michael Dixon of Blake, Cassels & Graydon LLP noted that “a particularly significant aspect of this case is the amount and nature of the penalty imposed upon Niko” given that the only prior conviction under the CFPOA – in 2005 against Hydro Kleen – resulted in a $25,000 fine. The Bulletin notes that “the sentencing precedents submitted by the Prosecutor were U.S.Foreign Corrupt Practices Act (FCPA) cases and the authors state that “the court’s willingness to accept these precedents and impose a fine of this amount now sets the benchmark for CFPOA fines in Canada.”

For additional coverage of the Niko enforcement action, see here from The Globe and Mail. For a related development connected to the Niko enforcement action involving a former member of Canada’s Parliament, see here from The Globe and Mail.

In a press release (here), Niko Chairman and CEO Ed Sampson stated as follows. “What happened was wrong. We acknowledge this. We accept responsibility, and we appreciate the seriousness of the actions. As a result of these events we have taken extensive steps in all aspects of our organization. One such step is the creation of the position of Chief Compliance Officer who reports directly to our Board, to ensure that something like this doesn’t happen again.” Niko’s release notes that since 2009 it has “adopted a full anti-corruption compliance program, training program and processes for risk assessment due diligence and compliance monitoring and reporting around the world.”


Securency International, et al

For years there has been news of an investigation of Securency International and certain of its executives for alleged breaches of Australia’s criminal code which prohibit payments to foreign government officials to obtain a business advantage.  See here and here for the prior posts.

On July 1st, the Australian Federal Police commenced prosecutions against Securency International (“Securency”), Note Printing Australia Ltd (“NPA”) and a number of senior executives of those companies for criminal offences concerning the bribery and corrupting of various foreign public officials.  Criminal charging documents are not publicly available in Australia, but Robert Wyld of  Johnson Winter & Slattery (see here) provides this overview based on press reports.

“The event generated considerable publicity and banner headlines in Victoria where The Age has been prominent in investigating and following the story. The Federal Police commander, Chris McDevitt was quoted by The Age as saying that the case should send “a very clear message to corporate Australia” about avoiding bribery overseas.

The Securency allegations might be summarised as follows, taken from the news coverage of the events, noting that all corporations and individuals charged are innocent until proven guilty.

Securency and NPA have each been charged with criminal offences.  The CEO (Myles Curtis), the CFO (Mitchell Anderson) and a Sales Executive (Ron Marchant) of Securency together with the CEO (John Leckenby), the CFO (Peter Hutchinson) and a Sales Executive (Barry Brady) of NPA and each been charged with bribery offences contrary to sections11.5(1) and 70.2 of the Criminal Code.  The offences are alleged to have taken place between 1999 and 2005 and involved payments totalling nearly $10 million.  The conduct in question involved activity in Malaysia, Indonesia and Vietnam concerning the payment of moneys to consultants or others characterised as public officials in circumstances which resulted in the  award of contracts to Securency and NPA for the printing of foreign currency polymer banknotes.  Specifically,  in Malaysia, Securency and NPA secured a contract to print the 5 ringgit polymer banknotes through the services of an arms broker and a United Malays National Organisation MP and official and a former Malay central bank assistant governor has been charged with bribery by Malaysian authorities.  In Indonesia, Securency and NPA secured a contract to print 500 million 100,000 rupiah polymer banknotes through the services of a consultant, Radius Christanto who received nearly US$4.9 million in commissions.  In Vietnam, Securency secured a contract to print all Vietnamese currency on polymer banknotes, through the services of a local agent Anh Ngoc Luong (said to be a colonel in the Vietnam internal spy agency) and his company CFTD (whose directors were said to be relatives of Communist Party officials).  In  addition, in Nigeria, investigations are ongoing concerning up to $20 million that may have been paid to intermediaries to secure contracts.  Further investigations are ongoing in Europe, the UK and in the US involving the identified conduct and potentially, conduct in other countries.

To the extent that any offences result in convictions, the applicable penalties will be determined under the old Criminal Code regime which existed (and was heavily criticised by the OECD and by Transparency International) before the penalties were substantially amended in February 2010.”


Macmillan Publishers

On July 22nd, the Serious Fraud Office (“SFO”) announced (here)  that an Order was made under the Proceeds of Crime Act  for Macmillan Publishers Limited (“MPL”)  “to pay in excess of  £11 million in recognition of sums it received which were generated through unlawful conduct related to its Education Division in East and West Africa. ”  As noted in the SFO release, “the initial enquiry commenced following a report from the World Bank” (see here for a prior post discussing the World Bank debarment proceeding of the MPL.)   The SFO release goes into detail regarding the ” procedure based on the guidance contained within [the SFO’s] published protocol document” that the SFO required MPL to follow and the release also sets forth  “a number of relevant features, which have informed the resolution” of the matter.   This SFO guidance will be of interest to those following SFO expectations in this Bribery Act era.  For more on the MPL enforcement action see here from Field Fisher Waterhouse.

Willis Limited 

On July 21st, the U.K. Financial Services Authority announced (here) a £6.895 million fine against Willis Limited for “failings in its anti-bribery and corruption systems and controls.”  The FSA release states as follows.  “Between January 2005 and December 2009, Willis Limited made payments to overseas third parties who assisted it in winning and retaining business from overseas clients, particularly in high risk jurisdictions. These payments totalled £27 million. The FSA investigation found that, up until August 2008, Willis Limited failed to: ensure that it established and recorded an adequate commercial rationale to support its payments to overseas third parties; ensure that adequate due diligence was carried out on overseas third parties to evaluate the risk involved in doing business with them; and adequately review its relationships on a regular basis to confirm whether it was still necessary and appropriate for Willis Limited to continue with the relationship.  These failures contributed to a weak control environment surrounding payments to overseas third parties and gave rise to an unacceptable risk that these payments could be used for corrupt purposes, including paying bribes. In addition, between January 2005 and May 2009, Willis Limited failed to adequately monitor its staff to ensure that each time it engaged an overseas third party, an adequate commercial rationale had been recorded and that sufficient due diligence had been carried out. Although Willis Limited improved its policies in August 2008, it failed to ensure that its staff were adequately implementing them. Lastly, throughout the period, Willis Limited’s senior management did not receive sufficient information about the performance of Willis Limited’s relevant policies to allow them to assess whether bribery and corruption risks were being mitigated effectively. During the FSA investigation, Willis Limited identified as suspicious a number of payments totalling $227,000 which it made to two overseas third parties in respect of business carried out in Egypt and Russia.”

According to the FSA,  Willis’s “failings created an unacceptable risk that payments made by Willis Limited to overseas third parties could be used for corrupt purposes.”  The FSA release states that the fine is the  largest “in relation to financial crime systems and controls to date.”  For more on the Willis Limited enforcement action see here from Adam Greaves of McGuireWoods.  The FSA’s Willis Limited enforcement action is similar to a January 2009 enforcement action against Aon Limited (see here).

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