- FCPA Professor - http://fcpaprofessor.com -

Friday Roundup

Scrutiny alerts and updates, ripple, didn’t fit the narrative, too far into the weeds, the emerging global facade of enforcement and for the reading stack. It’s all here in the Friday roundup.

Scrutiny Alerts and Updates

Amway

Multilevel marketing companies Avon and Nu Skin Enterprises previously resolved FCPA enforcement actions concerning conduct in China. (See here [1], here [2], here [3], here [4] and here [5] for prior posts). Multilevel marketing companies USANA and Herbalife are currently under FCPA scrutiny for its business practices in China.

This recent New York Times article [6] focuses on Amway, another multilevel marketing company doing business in China. The article notes that Amway, a privately-held company, “has not disclosed any inquiries by American regulators,” but highlights the scrutiny of the company (and the entire industry) by Chinese regulators.

Chemring Group

The U.K. Serious Fraud office recently announced [7]:

“SFO opens investigation into Chemring Group PLC and its subsidiary, Chemring Technology Solutions Limited (“CTSL”) following a self-report made by CTSL. The SFO confirms it has opened a criminal investigation into bribery, corruption and money laundering arising from the conduct of business by Chemring Group plc and CTSL including any officers, employees, agents and persons associated with them.”

See here [8] for a prior 2010 post about Chemring Group and how its planned acquisition of a company was scuttled because of the target’s company FCPA scrutiny.

[9]

Ripple

As highlighted in the article “FCPA Ripples [10],” settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement in this new era.

Among the “ripple” effects of FCPA scrutiny and enforcement are existing or potential customers, suppliers or vendors might be skittish about doing business with a company under FCPA scrutiny.

As highlighted here [11]:

“Coca-Cola Co.’s South African units and oil and gas company Sasol Ltd. aren’t awarding new business to McKinsey & Co. pending the outcome of corruption probes into the U.S. consultancy’s work involving the politically connected Gupta family. The U.S. soft drinks giant and its South African bottling operation have awarded contracts to McKinsey in the past but have no historic work ongoing, a spokesman said in emailed comments on Thursday. Sasol, the world’s largest maker of fuel from coal, has two long-term projects with the consultancy but isn’t awarding new business for now, a spokeswoman said. McKinsey said in October it had made “several errors of judgment” while working with South African state power provider Eskom Holdings SOC Ltd. and pledged to review its practices in the country. The company is accused of wrongdoing related to work with Eskom and Trillian Capital Partners, which is linked to the Guptas. The family is subject of allegations they are using their friendship with President Jacob Zuma to win lucrative contracts from state companies, which they and Zuma deny.”

In more recent news [12]:

“South Africa’s companies registry office is pursuing criminal complaints against SAP, KPMG and McKinsey on suspicion that business they conducted with friends of President Jacob Zuma broke the companies act, it said on Wednesday. The Companies and Intellectual Property Commission (CIPC)submitted the complaints to South African police in November and December last year and the matter is ongoing, the CIPC said in an emailed response to questions. German software maker SAP, auditor KPMG and management consultants McKinsey have all been accused of unduly influencing government contracts in collusion with companies controlled by the Gupta family, who have been accused of using political connections to win work with the state.”

Didn’t Fit the Narrative

Recently, I received the following e-mail:

“Hello, I’m a reporter for [Major Network] News who’s looking into the administration’s recent policy shift on FCPA and what could happen next. […] Would you be available for a brief phone conversation next week?”

I responded:

“From my perspective nothing has really changed when it comes to the FCPA and FCPA enforcement since Jan. 20, 2017. While 2017 FCPA enforcement was not record-breaking like 2016 (records can’t be broken every year), 2017 FCPA enforcement was very much at or above historical five averages and more robust than certain years in the Obama administration. There has been much more individual enforcement of the FCPA by the DOJ since Trump took office than prior years in the Obama administration.

If your e-mail is referring to the DOJ’s announcement in late November 2017 of a FCPA Corporate Enforcement Policy, this policy is substantively very similar (with a few minor tweaks) to the April 2016 FCPA Pilot Program released by the Obama administration. In short, not much has changed when it comes to FCPA enforcement under Trump and I do not expect much to change in the future.”

Never heard back from the reporter, I guess my answer did not fit her narrative.

Too Far Into the Weeds

Some FCPA commentators get so far into the weeds that the big picture is lost. A good example is this post [13] titled “What Level of Due Diligence Should You Perform.” 

When reading the post, keep in mind that very little of what is mentioned is legally required. 

Rather, the FCPA’s internal control provisions require issuers to “devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that” certain financial objectives are met.

Moreover, I will ask once again pose the question [14] are third-party due diligence practices (in the absence of red flags) xenophobic? Domestic third parties can expose a business organization to a wide range of civil and criminal liability, but is anyone suggesting such practices regarding an agent in Boston or Seattle?

Global Facade of Enforcement

My 2010 article “The Facade of FCPA Enforcement [15]” concludes with a section titled “Why the Facade Matters.” Among the reasons discussed was “modeling” in other words “the increasing frequency by which other nations are modeling enforcement of their own bribery laws on U.S. enforcement methods and theories.” It was noted:

“These methods and theories, unless addressed and corrected here in this country, will continue to be replicated elsewhere, perhaps leading to a global facade of enforcement.”

Fast forward to the present.

The United Kingdom has embraced DPAs, France has embraced DPAs, Canada wants DPAs, Australia wants DPAs and according to recent reports here [16] and here [17] Singapore and Peru want DPAs as well.

Granted, not all DPA regimes are created equal (the U.K. model that many countries are seeking to replicate is far preferable to the U.S. model). Nevertheless for reasons highlighted here [18] and here [19] (among numerous other posts), DPAs are problematic and my prediction of a global facade of enforcement of bribery and corruption laws appears to be taking hold. Yet, few people are talking about this because DPAs are easy for government, preferred by business organizations, and generally embraced by Bribery Inc. because they lead to more enforcement actions and thus expand the market for legal services.

For the Reading Stack

An informative write-up here [20] from McCarthy Tetrault regarding 2017 Corruption of Foreign Public Officials (CFPOA) developments.

Free 90 Minute 2017 FCPA Year In Review Video

A summary of every corporate enforcement action; notable statistics and issues to consider; compliance take-away points; and enforcement agency and related developments. Click below to view the engaging video tutorial.

View [21]