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DOJ Enforcement Of The FCPA – Year In Review

Yesterday’s post (here) highlighted facts and figures from the SEC’s enforcement of the FCPA in 2012.

In this post, I highlight facts and figures from the DOJ’s FCPA enforcement program in 2012.  (See here for a similar post from 2011 and here from 2010).

In 2012, the DOJ brought 9 corporate FCPA enforcement actions. By comparison, in 2011 the DOJ brought 11 corporate enforcement actions and in 2010, the DOJ brought 18 corporate enforcement actions (including the FCPA-related enforcement action against BAE).

Fine Amounts

In the 9 corporate FCPA enforcement actions from 2012, the DOJ collected approximately $142 million in criminal fines.  By comparison, in 2011, the DOJ collected approximately $355 million in corporate criminal fines ($504 million including the $149 million forfeiture in the Jeffrey Tesler individual enforcement action) and in 2010, the DOJ collected approximately $870 million ($1.27 billion including the $400 million FCPA-related enforcement action against BAE).

DOJ FCPA enforcement in 2012 ranged from $54.6 million in criminal fines (Marubeni Corp.) to $2 million in criminal fines (NORDAM Group).  Four FCPA enforcement actions in 2012 were DOJ only (Marubeni, BizJet/Lufthansa, Data System and Solution, and NORDAM Group).

Of the $142 million the DOJ collected in 2012 corporate FCPA enforcement actions, approximately $55 million (38%) was in one enforcement action (Marubeni).  Of the $142 million, approximately $65 million (46%) were in enforcement actions against pharmaceutical or other health care related companies.  All of these enforcement actions were based, in whole or in part, on the enforcement theory that employees of various foreign health care systems (such as physicians, nurses, mid-wives, lab personnel, etc.) are “foreign officials” under the FCPA.  See this prior post which traced the origins and prominence of this enforcement theory.

In 5 of the 7 corporate FCPA enforcement actions where an analysis was possible, the DOJ agreed to a criminal fine below the minimum range suggested by the sentencing guidelines.  In these 5 actions, the average was approximately 27% below the minimum guidelines range and the distribution range was 34% below the minimum guidelines range (Pfizer ) to 20% below the minimum guidelines range (Biomet and Smith & Nephew).  In 2 corporate FCPA enforcement action in 2012 (Orthofix and Marubeni) the company paid a criminal fine within the guidelines range – in both cases the minimum amount suggested by the guidelines.

[Note – why are only 7 of the 9 corporate enforcement actions included in the above analysis? 2 corporate enforcement actions involved an NPA and the DOJ  did not set forth a guidelines range in the agreement or related documents]

By way of comparison, in 2011 the average DOJ criminal fine in an FCPA enforcement action was approximately 28% below the minimum guidelines range and the distribution range was 55% below the minimum guidelines range to 18% below the minimum guidelines range.  In 2010, the average was approximately 25% below the minimum guidelines range and the distribution range was 55% below the minimum guidelines range and 5% below the minimum guidelines range.

Corporate vs. Individual Prosecutions

How many corporate FCPA enforcement actions in 2012 have involved related individual prosecutions of company employees by the DOJ (recognizing that such prosecutions may be forthcoming in the future)?  Of the 9 corporate DOJ enforcement actions in 2012, 0 (0%) have involved any related DOJ prosecutions of company employees.  In 2011, 27% of corporate DOJ enforcement actions involved related DOJ prosecutions of company employees and in 2010, 30% of corporate DOJ enforcement actions involved related DOJ prosecutions of company employees.  In short, since 2010 approximately 22% of corporate DOJ enforcement actions have involved related DOJ prosecutions of company employees.

NPAs / DPAs

What about non-prosecution and deferred prosecution agreements vs. old fashioned law enforcement (i.e., if a company committed a crime the DOJ charged it and if the company did not commit a crime the DOJ did not charge it)?  In 2012, 100% of corporate DOJ enforcement actions involved either an NPA (Nordam Group) or a DPA (Marubeni, Smith & Nephew, Biomet, Data Systems and Solution, Orthofix, Pfizer).  [Note, the BizJet/Lufthansa enforcement action involved both an NPA (Lufthansa) and a DPA (BizJet).  Note, the Tyco enforcement action involved a plea agreement as to a subsidiary and an NPA with Tyco.]  In 2011, 82% of corporate DOJ enforcement actions were resolved via an NPA or DPA and in 2010, 94% of corporate DOJ enforcement actions were resolved via such agreements.  In short, since 2010, 92% of corporate DOJ enforcement actions have been resolved via NPAs or DPAs.

Voluntary Disclosures

Of the 9 corporate DOJ FCPA enforcement actions in 2012, 5 enforcement actions (56%) (Tyco, Pfizer, NORDAM Group, Orthofix, and BizJet) were the result of corporate voluntary disclosures.  2 enforcement actions (22%) (Smith & Nephew and Biomet) appear to have been based on corporate disclosures following an industry sweep (a sweep that may have been prompted by Johnson & Johnson’s voluntary disclosure – see here for the prior post).  1 enforcement action (Marubeni) was based on a previous foreign law enforcement investigation and 1 enforcement action (Data Systems and Solutions) appears to have been based on a DOJ subpoena.

Monitors

Of the 9 corporate DOJ FCPA enforcement actions in 2012, 3 enforcement actions (33%) (Biomet, Smith & Nephew, and Marubeni) involved a monitor.  The monitor term ranged from 18 months (Biomet and Smith & Nephew) to 2 years (Marubeni).

This remainder of this post provides an overview of corporate DOJ FCPA enforcement in 2012.

Tyco International (September 24th)

See here for the prior post.

Charges:  Tyco Valves & Controls Middle East Inc. – conspiracy to violate the FCPA’s anti-bribery provisions, Tyco International – none.

Resolution Vehicle: Criminal information against Tyco Valves & Controls Middle East Inc. resolved through a plea agreement and a non-prosecution agreement (three year term) as to Tyco International.

Guidelines Range:  As to Tyco Valves & Controls $2.1 million – $4.2 million.  As to Tyco International, not set forth in the NPA.

Penalty:  Tyco agreed to pay a $13.68 million penalty (the $2.1 million penalty Tyco Valves & Controls agreed to pay pursuant to the plea agreement is included in this figure).

Disclosure:  Voluntary disclosure.

Monitor: No.

Individuals Charged: No.

Pfizer (August 7th)

See here for the prior post.

Charges:  Conspiracy to violate the FCPA’s anti-bribery and books and records provisions and a substantive FCPA anti-bribery violation.

Resolution Vehicle: Criminal information against Pfizer HCP resolved through a deferred prosecution agreement (two year term).

Guidelines Range: $22.8 – $45.6 million.

Penalty: $15 million (34% below the minimum amount suggested by the Guidelines).

Disclosure: Voluntary disclosure.

Monitor: No.

Individuals Charged: No.

NORDAM Group (July 17th)

See here for the prior post.

Charges: None.

Resolution Vehicle: Non-prosecution agreement (three year term).

Guidelines Range: Not set forth in the NPA.

Penalty: $2 million.

Disclosure: Voluntary disclosure.

Monitor: No.

Individuals Charged: No.

Orthofix International (July 10th)

See here for the prior post.

Charges: FCPA internal controls violation.

Resolution Vehicle: Criminal information resolved through a deferred prosecution agreement (three year term).

Guidelines Range: $2.22 – $4.44 million.

Penalty: $2.2 million.

Disclosure: Voluntary disclosure.

Monitor: No.

Individuals Charged: No.

Data Systems & Solutions (June 18th)

See here for the prior post.

Charges:  Conspiracy to violate the FCPA’s anti-bribery provisions and one substantive FCPA anti-bribery violation.

Resolution Vehicle: Criminal information resolved via a DPA (term 2 years).

Guidelines Range: $12.6 – $25.2 million

Penalty: $8.8 million (30% below the minimum amount suggested by the Guidelines).

Disclosure: DPA states as follows:  “following the receipt of subpoenas in connection with the government’s investigation, DS&S initiated an internal investigation and provided real-time reports and updates of its investigation into the conduct described in the Information”

Monitor: No.

Individuals Charged: No.

Biomet (March 26th)

See here for the prior post.

Charges:  Conspiracy to violate the FCPA, three substantive FCPA anti-bribery violations, and FCPA books and records violation.

Resolution Vehicle: Criminal information resolved via a DPA (term 3 years).

Guidelines Range: $21.6 – $43.2 million.

Penalty: $17.3 million (20% below the minimum amount suggested by the Guidelines).

Disclosure: Industry sweep inquiry followed by disclosure of misconduct at issue, including a portion of which that was voluntarily disclosed.

Monitor: Yes (18 month term).

Individuals Charged: No.

BizJet International  / Lufthansa Technik (March 14th)

See here for the prior post.

Charges: BizJet – conspiracy to violate the FCPA; Lufthansa – no charges.

Resolution Vehicle:  BizJet – criminal information resolved via a DPA (term 3 years); Lufthansa – NPA (term 3 years).

Guidelines Range:  $17.1 – $34.2 million.

Penalty: $11.8 million (30% below the minimum amount suggested by the Guidelines).

Disclosure: Voluntary disclosure.

Monitor: No.

Individuals Charged: No.

Smith & Nephew (Feb. 6th)

See here for the prior post.

Charges: Conspiracy to violate the FCPA, FCPA’s anti-bribery violation, and FCPA books and records violation.

Resolution Vehicle: Criminal information resolved via a DPA (term 3 years).

Guidelines Range: $21 – $42 million.

Penalty: $16.8 million (20% below the minimum amount suggested by the Guidelines).

Disclosure: Industry sweep inquiry followed by disclosure of misconduct at issue.

Monitor: Yes (term 18 months).

Individuals Charged: No.

Marubeni (Jan. 17th)

See here for the prior post.

Charges: Conspiracy to violate the FCPA, and aiding and abetting FCPA anti-bribery violations.

Resolution Vehicle: Criminal information resolved via DPA (term 2 years).

Guidelines Range: $54.6 – $109.2 million.

Penalty: $54.6 million.

Disclosure: Enforcement action based on a previous foreign law enforcement investigation.

Monitor: Yes (2 year term).

Individuals Charged: No.

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