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Deceived By Its Indirect Chinese Subsidiary, Johnson Controls Agrees To Pay $14.4 Million To Resolve SEC FCPA Enforcement Action, DOJ Markets Another “Declination”

johnson controls

According to the SEC, “several members” of Johnson Controls indirect Chinese subsidiary “colluded with each other and circumvented and manipulated JCI’s internal and financial controls …”.

The end result was this SEC administrative order released yesterday in which the SEC found that Johnson Controls (JCI) violated the books and records and internal controls provisions of the Foreign Corrupt Practices Act. Without admitting or denying the SEC’s findings, JCI agreed to pay approximately $14.4 million.

Also yesterday, the DOJ released this June 21st letter to JCI’s counsel stating that it has closed its inquiry “concerning possible violation of the FCPA … despite the bribery by employees of JCI’s subsidiary in China.” The DOJ’s letter is the focus of a separate post today.

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Danish Subsidiary Exposes Analogic To $14.9 Million Enforcement Action

analogic

Yesterday the DOJ and SEC announced (see here and here) a parallel Foreign Corrupt Practices Act enforcement action against medical device manufacturer Analogic Corp. and BK Medical ApS (Analogic’s Danish subsidiary) in which the entities agreed to pay approximately $14.9 million.

The conduct at issue involved alleged improper payments by BK Medical, primarily in Russia through distributors, and the government alleged that BK Medical took various steps to conceal its conduct from Analogic.

The enforcement action involved a DOJ non-prosecution agreement with BK Medical in which the company agreed to pay a $3.4 million criminal penalty and an SEC administrative order against Analogic in which the company agreed to pay approximately $11.5 million in disgorgement and prejudgment interest. In connection with the same administrative order, the SEC also announced that “Lars Frost, BK Medical’s former Chief Financial Officer, agreed to pay a $20,000 civil penalty to settle charges that he knowingly circumvented the internal controls in place at BK Medical and falsified its books and records.

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Two For Tuesday In FCPA Enforcement Land – Akamai Technologies

akami

Just when you think you’ve seen all possible combinations of Foreign Corrupt Practices Act enforcement, along comes yesterday’s “two for Tuesday” in which the SEC announced in the same press release two non-prosecution agreements against two separate companies and the DOJ simultaneously released two so-called “declination” letters against the same two companies.

This post highlights the enforcement action against Akamai Technologies and today’s first post highlights the enforcement action against Nortek Inc.. From there future posts will highlight issues to consider from the enforcement actions (and there are many including the question of just what charges – based on the SEC’s statement of facts – did the DOJ actually decline?”).

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Whistled For A Foul: Las Vegas Sands Agrees To Pay $9 Million To Resolve Books And Records And Internal Controls Action

CBA

The Foreign Corrupt Practices Act has always been a law much broader than its name suggests.

In addition to anti-bribery provisions, the FCPA also contains more generic books and records and internal controls provisions. While there are a few sentences in this 15 page administrative order released yesterday against Las Vegas Sands (LVS) that touch upon issues relevant to the anti-bribery provisions, the enforcement action was on balance a pure books and records and internal controls action.

Among other things, the SEC found that LVS lacked supporting documentation or appropriate authorization concerning the company’s involvement with a Chinese basketball team, the purchase of a building, a high-speed ferry service, and other aspects of its casino business in Macau.

The substance of yesterday’s enforcement action has been in the public domain for years. (See this 2012 New York Times article and this 2012 Wall Street Journal article). Indeed, FCPA Professor has been following LVS’s scrutiny since November 2010 upon the “noisy exist” of Steven Jacobs (the former President of Macau Operations) from the company. (See here for the original post).

In summary fashion, the order states:

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Novartis Coughs Up $25 Million To Resolve FCPA Enforcement Action Based On Conduct Of Indirect Chinese Subsidiaries

Novartis

What happens when a Swiss corporation, with over 120,000 employees, has two indirect Chinese subsidiaries and a few employees of those subsidiaries, who concealed their conduct from the parent corporation, allegedly provided various things of value (such as an excursion to Niagara falls, spa and sauna sessions, and cover charges to a strip club) to various Chinese healthcare professionals?

Why of course, $25 million to the U.S. treasury because the Swiss corporation has shares traded on the New York Stock Exchange.

Yesterday, the SEC announced this Foreign Corrupt Practices Act enforcement action against Novartis.

By my count, it is the 22nd FCPA enforcement against a healthcare related company (i.e. pharma, medical device, etc.) premised on the enforcement theory (regardless of whether the action was resolved “merely” through books and records and internal controls issues) that employees of certain foreign health care systems are “foreign officials” under the FCPA and thus occupy a status similar to Presidents and Prime Ministers and other bona fide government officials.

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