Another McFadden speech and scrutiny alerts and updates. It’s all here in the Friday roundup.
Another McFadden Speech
Obviously Acting Principal Deputy Assistant Attorney General Trevor McFadden has many job duties, but it sure seems like giving FCPA speeches is at the top of this list. This prior post highlighted McFadden’s February 16th FCPA speech and this prior post highlighted McFadden’s April 18th FCPA speech.
Yesterday, McFadden delivered yet another FCPA speech at a conference run by a for profit company. As highlighted in numerous prior posts, it is truly a disgraceful practice when for-profit companies use high-ranking DOJ officials to drive attendance to their paid events and it is likewise disgraceful that DOJ officials allow themselves to be used in this way.
In any event, McFadden’s speech was basically the same as his speech earlier this week (although a meaningful component of yesterday’s speech was devoted to other topics such as violent crime).
Regarding the FCPA, McFadden stated:
“[FCPA enforcement is] as alive as ever [and McFadden then mentioned various numerical statistics].
The Fraud Section and FCPA Unit’s aims are not to prosecute every company we can, or break our own records for the largest fines or longest prison sentences. Our aim is to motivate companies and individuals voluntarily to comply with the law. It is by working with companies transparently and in partnership that we can achieve this goal. We recognize that business organizations are our partner in the fight against corruption, because they are in the best position to detect risk, to take preventative measures and to educate those who act on its behalf on best practices. We hope that, in this cooperative effort, we can reduce corruption with effective compliance programs that prevent nefarious conduct from happening and through effective prosecutions to resolve violations in a way that punishes the conduct and deters similar future misconduct.
Today, motivated as ever by the importance of ensuring a fair playing field for honest corporations doing business abroad, the department continues to vigorously enforce the FCPA. The department is committed to enforcing the FCPA and to prosecuting fraud and corruption more generally. The department does not make the law, but it is responsible for enforcing the law, and we will continue to do so. We also continue to prioritize prosecutions of individuals who have willfully and corruptly violated the FCPA – Attorney General Sessions has stressed the importance of individual accountability for corporate misconduct. Finally, the department continues to work with business organizations and their counsel and regularly takes into consideration voluntary self-disclosures, cooperation and remedial efforts when making charging decisions.
I am glad to say that, in recent years, there has been a notable increase in international cooperation between our international partners and the Department. In the last couple of weeks alone, Attorney General Sessions and leaders from the Criminal Division have met with four different attorneys general from various partner countries. In so many of the cases we handle, and nearly all of the white collar cases, cooperation with our foreign partners has become a hallmark of our work. And of course, international cooperation is a two-way street, meaning that just as we receive significant assistance from our foreign partners in our investigations and prosecutions, so too do we provide significant assistance to them. Indeed, and especially in the area of bribery of foreign officials, countries around the world are strengthening their domestic laws, and investigating and bringing impactful cases. As part of our cooperation with our international partners, where appropriate, we seek to reach global resolutions that apportion penalties between the relevant jurisdictions so that companies seeking to accept responsibility for their prior misconduct are not unfairly penalized for the same conduct by multiple agencies.
We want to be transparent about our expectations. Transparency about our enforcement policies and practices is important. The Fraud Section’s “Pilot Program” is one example of an effort to provide more transparency and consistency for our corporate resolutions. The program began last April, and was intended to last for a year, at which point we would review the program. A year has now passed. We are now conducting a full assessment of the Pilot Program to consider how we can most effectively motivate companies and individuals to voluntarily comply with the law and how we can appropriately communicate our prosecutorial priorities and expectations to parties subject to the FCPA. The program will continue in full force as we evaluate it and until we reach a final decision regarding its permanence.”
Scrutiny Alerts and Updates
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PAR Technology Corp.
The New York-based “global leader in restaurant and retail hardware, software and services” recently disclosed
“[O]ur Audit Committee has been overseeing an internal investigation by outside counsel into import/export and sales documentation activities at our China and Singapore offices. The investigation, with its fact finding phase substantially complete, is focused on whether certain import/export and sales documentation activities at our China and Singapore offices were improper and in possible violation of the U.S. Foreign Corrupt Practices Act, or FCPA, and other applicable laws, and certain of our policies, including our Code of Business Conduct and Ethics. Based on the investigation findings to date, we discovered that certain members of our China and Singapore staff participated in or were aware of improper activities in China and Singapore, involving the improper bypassing of applicable customs laws of various countries. Those activities included the failure to properly label items for import into various non-U.S. countries, the failure to properly document the declared value of certain items exported to various non-U.S. countries, and questionable payments made to customs officials in China without sufficient documentation to evidence or confirm the legitimacy of their purpose. The investigation also revealed that certain members of upper management knew or should have known of the questionable conduct in 2015 and early 2016, but failed to take action to prevent or correct such conduct. Our management identified material weaknesses in our internal controls with respect to oversight of our operations in China and Singapore. Such material weaknesses include:
a control environment that did not effectively promote, maintain, or support the control consciousness of employees or a culture of adequate and prompt reporting of information internally;
the failure to maintain sufficient monitoring activities of consistent global practices and procedures to ensure deviations are detected and corrected on a timely basis; and
insufficient policies, procedures, and training with respect to procurement and sales activities, including insufficient documentation involving arrangements with third parties, the import/export and customs laws of international jurisdictions and the FCPA, including deficiencies in our FCPA compliance policy and training program.
During the year ended December 31, 2016, we recorded $1.3 million of expenses relating to the investigation, including expenses of outside legal counsel and forensic accountants.”
Hertz Global Holdings
Rental car company Hertz Global Holdings recently disclosed:
“In June 2014, the Company was advised by the staff of the New York Regional Office of the Securities and Exchange Commission (“SEC”) that it is investigating the events disclosed in certain of the Company’s filings with the SEC. In addition, in December 2014 a state securities regulator requested information and starting in June 2016 the Company has had communications with the United States Attorney’s Office for the District of New Jersey regarding the same or similar events. The investigations and communications generally involve the restatements included in the Old Hertz Holdings Form 10-K for the year ended December 31, 2014, as filed with the SEC on July 16, 2015 (the “Old Hertz Holdings 2014 10-K”) and related accounting for prior periods. The Company has and intends to continue to cooperate with all requests related to the foregoing. Due to the stage at which the proceedings are, Hertz is currently unable to predict the likely outcome of the proceedings or estimate the range of reasonably possible losses, which may be material. Among other matters, the restatements included in the Old Hertz Holdings 2014 Form 10-K addressed a variety of accounting matters involving the Company’s Brazil vehicle rental operations.
Additionally, the Company has identified certain activities in Brazil that raise issues under the Foreign Corrupt Practices Act and may raise issues under other federal and local laws, which the Company has self-reported to appropriate government entities and the processes with these government entities continue. The Company is continuing to investigate these issues. The Company has established a reserve relating to the activities in Brazil which is not material. However, it is possible that an adverse outcome with respect to the activities in Brazil and the other issues discussed herein could exceed the amount accrued in an amount that could be material to the Company’s consolidated financial condition, results of operations or cash flows in any particular reporting period.”
As highlighted in this report, the company and certain of its executives are parties to a recently filed shareholder derivative action claiming, among other things, that the company violated the FCPA in connection with its business operations in Indonesia.
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