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Friday Roundup

Roundup

Assistant Attorney General Leslie Caldwell on the DOJ’s FCPA Pilot Program, scrutiny alerts and updates, quotable and for the reading stack. It’s all here in the Friday roundup.

Caldwell on the FCPA Pilot Program

This article contains a recent Q&A with Assistant Attorney General Leslie Caldwell about the DOJ’s FCPA Pilot Program.

After reading the below excerpts, you might also want to read the article “Grading the DOJ’s FCPA Pilot Program.”

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Friday Roundup

Roundup

DOJ seeks legislative changes, a focus on FCPA Inc., credit ratings, across the pond, scrutiny update, and for the reading stack.

It’s all here in the Friday Roundup

DOJ Seeks Legislative Changes

The DOJ’s efforts to eradicate corruption and bribery is broader than just Foreign Corrupt Practices Act enforcement and includes: “public integrity prosecutions, bribery prosecutions, prosecutions of taxpayers who seek to conceal foreign accounts, money laundering prosecutions, [and its] Kleptocracy Initiative.”

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Potpourri

Potpourri

Disgraceful, scrutiny alerts, resource alert, for the reading stack, and for your consideration.  It’s all here in a potpourri edition of FCPA Professor.

Disgraceful

It’s a disgraceful practice.

A for-profit business invites a high-ranking DOJ official to its private event in which people have to pay to hear the public official speak.

It’s a disgraceful practice.

The for-profit company treats the DOJ official’s comments as if they own his words and then put the words behind a paywall.

Andrew Weissmann, the DOJ’s fraud section chief, recently spoke at GIR Live, an event hosted by a private for-profit company. According to this teaser post Weissmann spoke about issues of public concern including “how the department will factor in compliance, how it intends to reward those that self-report, and how it aims to increase transparency around resolutions and declinations.”

I requested a transcript of Mr. Weissmann’s remarks from the DOJ press office and was told: “[Mr. Weissmann] did not prepare formal remarks but spoke from notes, so I don’t have anything to provide. You’re welcome to check with the event organizers to see if they have a recording of it.”

Thankfully, Carlos Ayres was at the event and publicly posted a summary of Mr. Weisssmann’s remarks on the FCPAmericas website. According to his post:

“Weissmann said that the DOJ will publish in the next weeks a list of questions that companies can expect to be asked when being assessed by the DOJ’s new compliance consultant.”

“Weissmann said that the DOJ will shed more light on declination decisions in the short term, publishing related data with aggregate information.”

“Weissmann stated that DOJ will make an effort to complete cases for companies that self-report within one year.”

Thank you Mr. Ayres for your public service in sharing the comments of a high-ranking DOJ official on matters of public concern.

Scrutiny Alerts

HSBC Holdings

The company recently disclosed:

“Hiring practices investigation

The US Securities and Exchange Commission (the ‘SEC’) is investigating multiple financial institutions, including HSBC, in relation to hiring practices of candidates referred by or related to government officials or employees of state-owned enterprises in AsiaPacific. HSBC has received various requests for information and is cooperating with the SEC’s investigation. Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of this matter, including the timing or any possible impact on HSBC, which could be significant.”

Novartis

The Swiss company, which qualifies as an issuer under the FCPA, was recently the focus of news reports. According to this article:

“South Korean authorities raided Novartis offices in search of evidence the company provided bribes to local doctors, according to media reports. The Seoul Western District Prosecutors’ Office confiscated various documents, including account books, in order to determine whether rebates the drug maker offered physicians may have actually been bribes.”

Mondelēz International, Inc.

Approximately five years ago (see here for the prior post), Kraft Foods disclosed FCPA scrutiny resulting from its acquisition of Cadbury in connection with a manufacturing facility in India.  Kraft, now known as Mondelēz International, Inc., recently disclosed:

“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. On February 11, 2016, we received a “Wells” notice from the SEC indicating that the staff has made a preliminary determination to recommend that the SEC file an enforcement action against us for violations of the books and records and internal controls provisions of the Exchange Act in connection with the investigation. We intend to make a submission to the staff of the SEC in response to the notice.”

So-called Wells Notices are rare in the FCPA context for the simple reason that few issuers actually publicly push back against the SEC.  See here for an example of a company that prevailed against the SEC after receiving a Wells Notice.

Key Energy Services

The company has been under FCPA scrutiny since Spring 2014 and continues to bleed cash in connection with its scrutiny. In this recent filing, the company disclosed $2.7 million “related to” its FCPA scrutiny.

Sweet Group

The U.K. Serious Fraud Office recently announced:

“Construction and professional services company Sweett Group PLC was … sentenced and ordered to pay £2.25 million as a result of a conviction arising from a Serious Fraud Office investigation into its activities in the United Arab Emirates. The company pleaded guilty in December 2015 to a charge of failing to prevent an act of bribery intended to secure and retain a contract with Al Ain Ahlia Insurance Company (AAAI), contrary to Section 7(1)(b) of the Bribery Act 2010. The relevant conduct occurred between 1 December 2012 and 1 December 2015.”

In the release, David Green (Director of the SFO) stated:

“Acts of bribery by UK companies significantly damage this country’s commercial reputation. This conviction and punishment, the SFO’s first under section 7 of the Bribery Act, sends a strong message that UK companies must take full responsibility for the actions of their employees and in their commercial activities act in accordance with the law.”

As further noted in the release:

“His Honour Judge Beddoe described the offence as a system failure and said that the offending was patently committed over a period of time. Referring to Section 7 of the Bribery Act 2010 and to Sweett’s ignorance of its subsidiary’s actions , HHJ Bedoe said:

The whole point of section 7 is to impose a duty on those running such companies throughout the world properly to supervise them. Rogue elements can only operate in this way – and operate for so long – because of a failure properly to supervise what they are doing and the way they are doing it.

The SFO’s investigation into Sweett Group PLC, which commenced on 14 July 2014, uncovered that its subsidiary company, Cyril Sweett International Limited had made corrupt payments to Khaled Al Badie, the Vice Chairman of the Board and Chairman of the Real Estate and Investment Committee of AAAI to secure the award of a contract with AAAI for the building of the Rotana Hotel in Abu Dhabi. The amount is broken down as £1.4m in fine, £851,152.23 in confiscation. Additionally, £95,031.97 in costs were awarded to the SFO.”

Maxwell Technologies

In 2011, Maxwell Technologies (a California-based manufacturer of energy storage and power delivery products) resolved parallel DOJ and SEC FCPA enforcement actions concerning alleged business conduct in China by agreeing to pay approximately $14 million. The company recently disclosed:

“In January 2011, we reached settlements with the SEC and the U.S. Department of Justice (“DOJ”) with respect to charges asserted by the SEC and DOJ relating to the anti-bribery, books and records, internal controls, and disclosure provisions of the U.S. Foreign Corrupt Practices Act (“FCPA”) and other securities laws violations. We paid the monetary penalties under these settlements in installments such that all monetary penalties were paid in full by January 2013. With respect to the DOJ charges, a judgment of dismissal was issued in the U.S. District Court for the Southern District of California on March 28, 2014.

On October 15, 2013, we received an informal notice from the DOJ that an indictment against the former Senior Vice President and General Manager of our Swiss subsidiary had been filed in the United States District Court for the Southern District of California. The indictment is against the individual, a former officer, and not against the Company and we do not foresee that further penalties or fines could be assessed against us as a corporate entity for this matter. However, we may be required throughout the term of the action to advance the legal fees and costs incurred by the individual defendant and to incur other financial obligations. While we maintain directors’ and officers’ insurance policies which are intended to cover legal expenses related to our indemnification obligations in situations such as these, we cannot determine if and to what extent the insurance policy will cover the legal fees for this matter. Accordingly, the legal fees that may be incurred by us in defending this former officer could have a material impact on our financial condition and results of operation.

Swiss Bribery Matter

In August 2013, our Swiss subsidiary was served with a search warrant from the Swiss federal prosecutor’s office. At the end of the search, the Swiss federal prosecutor presented us with a listing of the materials gathered by the representatives and then removed the materials from our premises for keeping at the prosecutor’s office. Based upon the our exposure to the case, we believe this action to be related to the same or similar facts and circumstances as the FCPA action previously settled with the SEC and the DOJ. During initial discussions, the Swiss prosecutor has acknowledged both the existence of our deferred prosecution agreement (“DPA”) with the DOJ and our cooperation efforts thereunder, both of which should have a positive impact on discussions going forward. Additionally, other than the activities previously reviewed in conjunction with the SEC and DOJ matters under the FCPA, we have no reason to believe that additional facts or circumstances are under review by the Swiss authorities. In late March 2015, we were informed that the Swiss prosecutor intended to inform the parties in April 2015 as to whether the prosecutor’s office would bring charges or abandon the proceedings. However, to date, the Swiss prosecutor has not issued its formal decision. At this stage in the investigation, we are currently unable to determine the extent to which we will be subject to fines in accordance with Swiss bribery laws and what additional expenses will be incurred in order to defend this matter. As such, we cannot determine whether there is a reasonable possibility that a loss will be incurred nor can we estimate the range of any such potential loss. Accordingly, we have not accrued an amount for any potential loss associated with this action, but an adverse result could have a material adverse impact on our financial condition and results of operation.”

As noted here by Wall Street Journal – Risk & Compliance Journal, in the same disclosure Maxwell disclosed approximately $2.4 million in FCPA professional fees and expenses in 2015.

Resource Alert

As highlighted here, Stanford Law School and Sullivan & Cromwell recently announced the launch of an FCPA clearinghouse –  “a public database that aggregates and curates source documents and provides analytic tools related to enforcement of the Foreign Corrupt Practices Act (FCPA).”

For the Reading Stack

An informative read here in Bloomberg Law from John Cunningham and Geoff Martin (both of Baker & McKenzie) titled “Casting a Wider Net: Conspiracy Charges in FCPA Cases.”

Another informative read here in the New York Times regarding the DOJ’s Kleptocracy Asset Recovery Initiative.

For Your Consideration

Did U.S. involvement in Afghanistan result in more corruption? Did the U.S. fail to conduct adequate due diligence on intermediaries (a frequent FCPA enforcement theory against companies)? NPR explores the issue here.

Potpourri

Potpourri

Individual FCPA Charges

Reuters reports:

“Two men including an oil equipment supply firm executive have been arrested on charges related to an alleged scheme to corruptly secure energy contracts from Venezuela’s state-owned energy company, the U.S. Justice Department said Sunday. Roberto Rincon, the president of Texas-based Tradequip Services & Marine, was arrested on Wednesday in Houston on charges including that he violated the Foreign Corrupt Practices Act and engaged in money laundering, a Justice Department spokesman said. A second defendant, Abraham Jose Shiera Bastidas of Coral Gables, Florida, was arrested on Wednesday in Miami on the same charges plus one count, said the Justice Department spokesman, Peter Carr. The charges relate to what the Justice Department called a fraudulent and corrupt scheme to secure energy contracts from Petroleos de Venezuela S.A. (PDVSA), Venezuela’s state-owned energy company. Lawyers for Rincon, 55, and Shiera, 52, could not be identified on Sunday. Further details on the case were not immediately available. No charging documents have been made public yet. It was also not clear if case related to Tradequip, which describes itself as an oil field supply company. The firm on its website lists PDVSA as a client, and it is registered on Venezuela’s national contractors registry. Tradequip did not respond to a call and email seeking comment. PDVSA did not respond to a request for comment.”

See here for the criminal indictment.

Sweet Group

A follow-up to a U.K. SFO enforcement action previously announced in early December (see here).

Last Friday, the SFO announced:

“Sweett Group PLC has … pleaded guilty at Southwark Crown Court to an offence under Section 7 of the Bribery Act 2010 regarding conduct in the Middle East. The Serious Fraud Office charged Sweett Group PLC earlier this month, having opened an investigation on 14th July 2014 into the company in relation to its activities in the UAE and elsewhere. Sweett Group PLC will be sentenced on 12th February 2016 at Southwark Crown Court.”

The only publicly available document at this point states:

“Between 1 December 2012 and 1 December 2015 Sweet Group PLC, being a relevant commercial organisation, failed to prevent the bribing of Khaled Al Badie by an associated person, namely Cyril Sweet International Limited, their servants and agents, which said bribing was intended to obtain or retain business, and/or an advantage in the conduct of business, for Sweet Group PLC, namely securing and retaining a contract with Al Ain Ahia Insurance Company for project management and cost consulting services in relation to the building of a hotel in Dubai, contrary to Section 7(1) of the Bribery Act 2010.”

The Sweet Group action closely follows the Standard Bank failure to prevent bribery enforcement action (see here for prior posts) and represents the second instance under the Bribery Act of a business organization being held accountable for “failure to prevent”foreign bribery.

Global Fraud Survey

According to Kroll’s annual Global Fraud survey (a survey of 768 senior executives worldwide from a broad range of industries and functions from January through March 2015):

11% of companies have been affected by corruption and bribery during the past 12 months (the 6th highest type of fraud on the list) and 40% of companies describe themselves as highly or moderately vulnerable to this type of fraud (the 5th highest on the list).

Corruption and bribery were the highest among companies in India, Russia and China.

A Closer Look At The U.K.’s First Deferred Prosecution Agreement

Closer Look

As highlighted in this post, there were two firsts in last week’s U.K. Serious Fraud Office enforcement action against Standard Bank Plc (currently known as ICBC Standard Bank Plc): (i) the first use of Section 7 of the Bribery Act (the so-called failure to prevent bribery offense) in a foreign bribery action; and (ii) the first use of a deferred prosecution agreement in the U.K.

This prior post analyzed “what” was resolved (an alleged violation of Sec. 7 of the Bribery Act for failure to prevent bribery).

This post continues the analysis by highlighting “how” the enforcement action was resolved (through a deferred prosecution agreement).

That the U.K’s first DPA was used to resolve a Bribery Act offense is perhaps fitting as U.K. anti-corruption enforcement officials have long expressed a fondness for U.S. alternative resolution vehicles used to resolve alleges instances of FCPA violations. Such fondness was widely seen as a significant driver for the U.K. to adopt DPAs (as highlighted in this prior post, the U.K. rejected NPAs) although DPA’s are authorized to resolve other alleged instances of financial crime as well.

Knowledgeable observers already know that U.K. style DPAs are significantly different than U.S. style DPAs, but in analyzing the U.K.’s first DPA, this fact bears repeating.

Sir Brian Leveson’s Approved Judgment and Preliminary Judgment provide a detailed overview of the U.K’s process for DPAs, including the judicial review aspect of the process, and should be required reading for anyone trying to better understand the DPA process in the U.K.. (This aspect is largely absent in U.S. style NPAs and DPAs – indeed the DOJ has argued on several occasions that the judiciary has no substantive role to play in the DPA process – an issue that is currently before the D.C. Circiut in Fokker Services).

If a nation is to have DPAs, the U.K. model is far more sound than the U.S. model and an initial observation from the U.K.’s first DPA is that it was incredibly refreshing to read a document relevant to an alleged bribery offense drafted by someone other than the prosecuting authority.

The Standard Bank (SB) DPA is similar in many respects to DPAs used to resolve alleged FCPA violations. For starters, the term of the DPA is three years (the typical term of U.S. DPAs tends to be from 18 months to three years).

In the DPA, SB accepted responsibility for the alleged conduct at issue, agreed to on-going cooperation with the SFO and other law enforcement agencies, and agreed to pay the components of the settlement amount. In the DPA, SB also agreed to post-enforcement action compliance reviews and enhancements, including the engagement of PwC to conduct an independent review of the company’s progress.

Similar to U.S. DPAs, the SB DPA also contains a so-called “muzzle clause” in which:

“Standard Bank agrees that it shall not make, and it shall not authorise its present or future lawyers, officers, directors, employees, agents, its parent company, sister companies, subsidiaries or shareholders or any other person authorised to speak on Standard Bank’s behalf to make any public statement contradicting the matters described in the Statement of Facts.”

That the U.K.’s first DPA contains a “muzzle clause” is interesting given that, as discussed in this previous post, Lord Justice Thomas was critical of the SFO’s attempt to insert a “muzzle clause” into the Innospec resolution documents.  Lord Justice Thomas stated: “It would be inconceivable for a prosecutor to approve a press statement to be made by a person convicted of burglary or rape; companies who are guilty of corruption should be treated no differently to others who commit serious crimes.”

Despite the similarities between the SB DPA and U.S. style DPA’s, there are key differences.

For instance, in U.S. DPAs the DOJ claims unilateral power to declare a breach of the agreement (a contractual term many have criticized see here). The SB DPA states, under the heading “Breach of Agreement,” as follows.

“If, during the Term of this Agreement, the SFO believes that Standard Bank has failed to comply with any of the terms of this Agreement, the SFO may make a breach application to the Court. In the event that the Court terminates the Agreement the SFO may make an application for the lifting of the suspension of indictment associated with the DPA and thereby reinstitute criminal proceedings.

In the event that the SFO believes that Standard Bank has failed to comply with any of the terms of this Agreement the SFO agrees to provide Standard Bank with written notice of such alleged failure prior to commencing proceedings resulting from such failure. Standard Bank shall, within 14 days of receiving such notice, have the opportunity to respond to the SFO in writing to explain the nature and circumstances of the failure, as well as the actions Standard Bank has taken to address and remedy the situation. The SFO will consider the explanation in deciding whether to make an application to the Court.”

Another difference, albeit rather minor, concerns the time period to resolve the action. The SFO’s release states that SB’s counsel made the voluntary disclosure in late April 2013. Thus, the time period from start to finish was a relatively swift 2.5 years (at least compared to the typical time frame in the U.S.).

Other interesting aspects of the U.K’s first DPA are as follows.

Regarding SB’s voluntary disclosure and cooperation, Sir Leveson stated:

“Standard Bank immediately reported itself to the authorities and adopted a genuinely proactive approach to the matter […] In this regard, the promptness of the self-report and the extent to which the prosecutor has been involved are to be taken into account […] In this case, the disclosure was within days of the suspicions coming to the Bank’s attention, and before its solicitors had commenced (let alone completed) its own investigation.

Credit must also be given for self-reporting which might otherwise have remained unknown to the prosecutor. […] In this regard, the trigger for the disclosure was incidents that occurred overseas which were reported by Stanbic’s employees to Standard Bank Group. Were it not for the internal escalation and proactive approach of Standard Bank and Standard Bank Group that led to self-disclosure, the conduct at issue may not otherwise have come to the attention of the SFO.

[…]

Standard Bank fully cooperated with the SFO from the earliest possible date by, among other things, providing a summary of first accounts of interviewees, facilitating the interviews of current employees, providing timely and complete responses to requests for information and material and providing access to its document review platform. The Bank has agreed to continue to cooperate fully and truthfully with the SFO and any other agency or authority, domestic or foreign, as directed by the SFO, in any and all matters relating to the conduct which is the subject matter of the present DPA. Suffice to say, this self-reporting and cooperation militates very much in favour of finding that a DPA is likely to be in the interests of justice.”

Regarding “Compensation,” Sir Levenson stated in pertinent part:

“A DPA may impose on an organisation the requirement to compensate victims of the alleged offence and to disgorge profits made from the alleged offence.”

[…]

In the present DPA, Standard Bank would be required to pay the Government of Tanzania the amount of US $6 million plus interest of US $1,153,125. This sum represents the additional fee of 1% of the proceeds of the private placement, paid to EGMA the local partner engaged by Stanbic and very swiftly withdrawn in cash. The fee was paid from the US $600 million capital raised by the placement and the consequence was that the Government of Tanzania received US $6 million less than it would have received but for that payment. The interest figure of US $1,153,125 is calculated by reference to interest paid on the loan and, by the time of repayment, will amount to US $1,153,125.”

That the Government of Tanzania was a victim is speculative and an open to question.

The private placement bond offering SB facilitated was unrated (and thus risky) and represented, according to SB, the first ever benchmark-sized private placement by a sub-Saharan sovereign. According to SB, “the transaction was privately placed with 116 investors with a wide geographic mix of accounts and resulted in the government raising substantial funds for infrastructural investment in a most efficient and cost-effective manner.”

To properly analyze whether the Government of Tanzania was a “victim” of SB’s conduct, two factors would have to be analyzed: (i) did the government have other options in the transaction or was SB the only investment bank willing to facilitate the transaction given its risky nature?; and (ii) if there were other options, what was the fee structure for the other options – more specifically did other investment banks offer to structure the transaction for less than 2.4% of the proceeds (representing the original 1.4% fee plus the additional 1% fee at issue in the enforcement action)? In this regard, it must be noted, as the SEC found in its related enforcement action, that the Government of Tanzania “had been unsuccessful in obtaining a credit rating, making a EuroBond offering unfeasible.”

Regarding disgorgement, Sir Levenson stated:

“The legislation specifically identifies disgorgement of profit as a legitimate requirement of a DPA. […] The provision is clearly underpinned by public policy which properly favours the removal of benefit in such circumstances. In this case, no allowance has been made for the costs incurred by Standard Bank (to such extent as they can be put into money terms) and the proposal is that it should disgorge the fee which Standard Bank and Stanbic received as joint lead managers in relation to this transaction, namely 1.4% or US $8.4 million. Again, there is no suggestion that Standard Bank does not have the means and ability to disgorge this sum.”

The above logic is simplistic – as it often is in many FCPA enforcement actions – and ignores basic causation issues. (See prior posts hereherehere, and here). Moreover, the disgorgement in the SB action follows the oft criticized “no-charged bribery disgorgement” approach often used in the U.S.

Regarding the financial penalty, Sir Levenson stated:

“[F]or offences of bribery, the appropriate figure will normally be the gross profit from the contract obtained, retained or sought as a result of the offending. As has been discussed in regard to appropriate disgorgement of profits, in this case, it has been taken as the total fee retained in respect of the transaction by Standard Bank and Stanbic as the Joint Lead Managers, that is to say, the sum of US $8.4 million. The Sentencing Council Guideline identifies the starting point for a medium level of culpability as 200% of the ‘harm’ i.e. gross profit, with a range of 100% to 300% (cf. a starting point of 300% with a category range of 250-400% for high culpability).

It is then necessary to fix the level by reference to factors which increase and reduce the seriousness of the offending. As regards aggravation, although not an offence of bribery, there were serious failings on the part of Standard Bank in regard to the conduct at issue at a time when the Bank was well aware that further regulatory enforcement measures were in train: these led to a fine by the FCA for failings in internal controls relating to anti-money laundering. Further, in this context, it must be underlined that the predicate offending by Stanbic resulted in substantial harm to the public and, in particular, the loss of US$ 6m. from the money being borrowed by the Government of Tanzania for much needed public infrastructure projects.

On the other side of the coin, the mitigating features include the fact that Standard Bank (a company without previous convictions) volunteered to self-report promptly and both facilitated and fully cooperated with the investigation which the SFO conducted. Further, there is no evidence that the failure to raise concerns about antibribery and corruption risks (as opposed to money laundering concerns which led to the FCA regulatory action) was more widespread within the organisation. Finally, the transaction took place when the Bank was differently owned and, additionally, the business unit that carried it out is no longer owned by Standard Bank.

In the circumstances, I consider it appropriate that the provisional agreement is to take a multiplier of 300% which is the upper end of medium culpability and the starting point of higher culpability. This leads to a figure of US $25.2 million before the court must (following Step 5 of the Sentencing Council Guideline) ‘step back’ and consider the overall effect of its orders such that the combination achieves “removal of all gain, appropriate additional punishment and deterrence”. Bearing in mind, inter alia, the value, worth or available means of the offender and the impact of the financial penalties including on employment of staff, service users, customers and local economy (but not shareholders), the guideline is clear that: “The fine must be substantial enough “to have a real economic impact which will bring home to both management and shareholders the need to operate within the law”.

In assessing the financial penalty, Sir Levenson found comfort as follows.

“Bearing in mind the observations of Thomas LJ in Innospec Ltd [see here for the prior post], a useful check is to be obtained by considering the approach that would have been adopted by the US authorities had the Department of Justice taken the lead in the investigation and pursuit of this wrongdoing. Suffice to say that the American authorities have been concerned with the circumstances and have been conducting an inquiry in connection with possible violations of the Foreign Corrupt Practices Act, 15 USC para. 78dd-1. Noting the co-operation of Standard Bank and Stanbic with them, the Department of Justice has confirmed that the financial penalty is comparable to the penalty that would have been imposed had the matter been dealt with in the United States and has intimated that if the matter is resolved in the UK, it will close its inquiry. In the circumstances, there is nothing to cast doubt on the extent to which these aspects of the proposed approach are fair, reasonable and proportionate.”

In  conclusion, Sir Levenson stated:

“It is obviously in the interests of justice that the SFO has been able to investigate the circumstances in which a UK registered bank acquiesced in an arrangement (however unwittingly) which had many hallmarks of bribery on a large scale and which both could and should have been prevented. Neither should it be thought that, in the hope of getting away with it, Standard Bank would have been better served by taking a course which did not involve self report, investigation and provisional agreement to a DPA with the substantial compliance requirements and financial implications that follow. For my part, I have no doubt that Standard Bank has far better served its shareholders, its customers and its employees (as well as all those with whom it deals) by demonstrating its recognition of its serious failings and its determination in the future to adhere to the highest standards of banking. Such an approach can itself go a long way to repairing and, ultimately, enhancing its reputation and, in consequence, its business. It can also serve to underline the enormous importance which is rightly attached to the culture of compliance with the highest ethical standards that is so essential to banking in this country.”

That SB “far better served its shareholders” and other stakeholders by voluntarily disclosing is of course an opinion.

In this regard, it bears repeating that SB voluntarily disclosed “within days of the suspicions coming to the Bank’s attention, and before its solicitors had commenced (let alone completed) its own investigation.” In the minds of many, SB’s disclosure is likely to be viewed as premature, careless and indeed reckless.

As it turned out – as further explored in yesterday’s post – the conduct at issue in the SB enforcement action involved just one transaction, against the backdrop of SB having various policies and procedures designed to minimize the same conduct giving rising to the enforcement action, and against the further backdrop of – in the words of the judge – “Standard Bank [having] no previous convictions for bribery and corruption nor has it been the subject of any other criminal investigations by the SFO” and “there is no evidence that the failure to raise concerns about anti-bribery and corruption risks … was more widespread within the organization.”

Given these circumstances, an alternative to voluntary disclosure – and an approach that would have likely better served SB’s shareholders – would have been, after a thorough investigation, promptly implementing remedial measures, and effectively revising and enhancing compliance policies and procedures – all internally and without disclosing to the SFO or other law enforcement agencies.

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