Those who were predicting that FCPA enforcement would wane in a Trump administration were encouraged to take a deep breath. (See here for the prior post). Among other things, it was noted that “if you believe that FCPA enforcement will decline in a Trump administration then you presumably must think that the DOJ and the SEC will start refusing to “process” corporate voluntary disclosures” (the single largest source of corporate FCPA enforcement actions).
Here is a fact to contemplate. The number of DOJ corporate FCPA enforcement actions in the first five months of the Trump administration (2 – both originating from corporate voluntary disclosures) equals the number of DOJ corporate FCPA enforcement actions in 2015 (2).
Yesterday, the DOJ once again quietly updated its FCPA Pilot Program “declinations” page to release this June 21st letter agreement addressed to Nathaniel Edmonds (Paul Hastings) counsel for CDM Smith Inc. (“CDM Smith”), a privately held engineering and construction firm incorporated and headquartered in Boston, Massachusetts.
The letter begins:
“Consistent with the FCPA Pilot Program announced April 5, 2016, the Department of Justice, Criminal Division, Fraud Section (the “Department”) is closing its investigation of your client, CDM Smith Inc. (“CDM Smith”), a privately held engineering and construction firm incorporated and headquartered in Boston, Massachusetts, concerning violations of the Foreign Corrupt Practices Act (the “FCPA”), 15 U.S.C. § 78dd-2.
The Department’s investigation found that CDM Smith, through its employees and agents, and those of its wholly owned subsidiary in India (“CDM India”), paid approximately $1.18 million in bribes to government officials in India in exchange for highway construction supervision and design contracts and a water project contract resulting in approximately $4 million in net profits.
From approximately 2011 until approximately 2015, employees of CDM Smith’s division responsible for India operations and CDM India illegally paid bribes to officials in the National Highways Authority of India (“NHAI”), India’s state-owned highway management agency and an “instrumentality” under the FCPA, in order to receive contracts from NHAI. The bribes generally were 2-4% of the contract price and paid through fraudulent subcontractors, who provided no actual services and understood that payments were meant to solely benefit the officials. In addition, CDM Smith’s division responsible for India and CDM India paid $25,000 to local officials in the Indian state of Goa in relation to a water project contract. All senior management at CDM India (who also acted as employees and agents of CDM Smith and signed contracts on behalf of CDM Smith, including CDM India’s country manager) were aware of the bribes for CDM Smith and CDM India contracts, and approved or participated in the misconduct.”
Thereafter, the letter states in pertinent part:
“The Department’s decision to close its investigation of this matter is based on a number of factors, including but not limited to: (1) CDM Smith’s timely, voluntary self-disclosure of the matters described above; (2) CDM Smith’s thorough and comprehensive investigation; (3) CDM Smith’s full cooperation in this matter (including its provision of all known relevant facts about the individuals involved in or responsible for the misconduct); (4) CDM Smith’s agreement to disgorge to the Department all profits it made from the illegal conduct; (5) the steps CDM Smith has taken and continues to take to enhance its compliance program and its internal accounting controls; and (6) CDM Smith’s full remediation, including but not limited to terminating all the executives and employees who were involved in or directed the misconduct.
Pursuant to this letter agreement, CDM Smith agrees to disgorge $4,037,138 (the “Disgorgement Amount”), which represents the profits to CDM Smith from the illegally obtained contracts in India.”
In this release, CDM Smith states:
“CDM Smith announced today that it has reached agreements with the U.S. Department of Justice (DOJ) and the World Bank Group (WBG) for self-reported improper business activities conducted by a few individuals in the firm’s India and Vietnam operations. The employees associated with these improper business activities were separated from the company following the early findings of CDM Smith’s internal investigations.
The company self-discovered and self-reported potential infractions to DOJ and the World Bank, and has been working with both organizations to resolve these issues. Following an investigation into the disclosed business practices, DOJ has declined to take further action against CDM Smith. In connection with WBG’s review of these matters, CDM Smith will be conditionally non-debarred as a result of their cooperation, during which time the firm will continue to cooperate with WBG.
“CDM Smith has a clear Code of Ethics and core values that drive our behavior every day,” said Stephen J. Hickox, CDM Smith Chairman and Chief Executive Officer. “Any breach of these values or improper business activities is counter to our culture and will not be tolerated.”
DOJ and WBG noted the full cooperation CDM Smith provided during the investigation and the remedial actions the company has taken to enhance its compliance program. CDM Smith has expanded its Ethics and Compliance program, including appointing its first Chief Compliance Officer, to ensure all employees fully understand their role in compliance, and has established channels for reporting any compliance-related concerns.”
FCPA Institute - Minneapolis (June 20-21, 2019)
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