DOJ’s year in review, ripple, scrutiny alerts and updates, simply false, and amusing. It’s all here in the Friday roundup.
DOJ’s Year In Review
The DOJ Fraud Section recently released its year in review. According to the document, “the FCPA Unit has 32 prosecutors.” When reviewing the statistics in the document keep in mind that the FCPA Unit “investigates and prosecutes cases under the FCPA and related statutes.” In other words, the statistics include non-FCPA matters such as when the DOJ charges or prosecutes alleged “foreign officials” for money laundering and related offenses.
“FCPA Ripples” highlights how 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.
As highlighted here, in December 2017 Keppel Offshore & Marine resolved a net $105.5 million FCPA enforcement action based on Brazil bribery schemes.
Earlier this week, an assortment of energy investment funds filed this civil RICO lawsuit against Keppel. In summary fashion, it alleges:
“This case arises from Keppel’s wrongful participation in a highly organized RICO conspiracy that conspired to, and in fact, committed the RICO predicate acts of Travel Act violations, money laundering and wire fraud in the United States in violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(d). This conspiracy and its underlying RICO predicate acts caused plaintiffs to lose the entirety of their $221 million investment in Sete Brasil Participaceies, S.A. (“Sete”).
Keppel’s admission in the DPA that it committed violations of the FCPA constitute an admission that it conspired to commit and did commit the RICO predicate acts of Travel Act violations and money laundering.”
Scrutiny Alerts and Updates
As highlighted in this previous post, in mid-2013 the company disclosed:
“The U.S. Securities and Exchange Commission and the U.S. Department of Justice are conducting investigations into possible violations by the Company of the U.S. Foreign Corrupt Practices Act. The Company is cooperating with these agencies regarding these matters. The Company is unable to predict the duration, scope or outcome of these investigations.”
The company recently disclosed:
“The Company also announced that it received a letter from the U.S. Department of Justice (“DOJ”) notifying the Company that the DOJ has closed the Company’s previously disclosed investigation into possible violations by the Company of the U.S. Foreign Corrupt Practices Act (“FCPA”) without taking any action against the Company. In its letter, the DOJ acknowledged the Company’s cooperation in the investigation. As previously disclosed, the Securities and Exchange Commission is also conducting an FCPA investigation, and that matter has not yet been resolved.”
As highlighted in this previous post, in 2016 GlaxoSmithKline plc (a U.K. company with shares traded on the NYSE) coughed up $20 million to resolve an SEC administrative action based on findings that employees and agents of its China-based subsidiary and China-based joint venture provided various things of value to healthcare professionals in China. GSK recently disclosed:
“As previously disclosed, in May 2014 the UK Serious Fraud Office (‘SFO’) began a formal criminal investigation into the Group’s commercial operations in a number of countries, including China. The SFO has requested information from the Group on its commercial operations in these countries. The Group is co-operating and responding to these requests. The SFO inquiry followed investigations initiated by China’s Ministry of Public Security in June 2013 (the ‘China Investigations’) which resulted in a ruling in 2014 that, according to Chinese law, GSK China Investment Co. Ltd (‘GSKCI’) had offered money or property to non-government personnel in order to obtain improper commercial gains and GSKCI being found guilty of bribing non-government personnel. In the course of its ongoing inquiry, the SFO has requested additional information from the Group regarding third party advisers engaged by the Company in the course of the China Investigations. GSK is co-operating and responding to these requests. The Group has also informed the SEC and DOJ of these matters and is responding to their requests for additional information.”
As highlighted in this previous post, New York based Misonix (a company that specializes in the development and commercialization of ultrasonic surgical devices) has been under FCPA scrutiny since September 2016 concerning its business practices in China. The company recently disclosed:
“Although the Company’s investigation is complete, additional issues or facts could arise which may expand the scope or severity of the potential violations. The Company has no current information derived from the investigation or otherwise to suggest that its previously reported financial statements and results are incorrect.
At this stage, the Company is unable to predict what, if any, action the DOJ or the SEC may take or what, if any, penalties or remedial measures these agencies may seek. Nor can the Company predict the impact on the Company as a result of these matters, which may include the imposition of fines, civil and criminal penalties, which are not currently estimable, as well as equitable remedies, including disgorgement of any profits earned from improper conduct and injunctive relief, limitations on the Company’s conduct, and the imposition of a compliance monitor. The DOJ and the SEC periodically have based the amount of a penalty or disgorgement in connection with an FCPA action, at least in part, on the amount of profits that a company obtained from the business in which the violations of the FCPA occurred. During its distributorship relationship with the prior Chinese distributor from 2010 through 2016, the Company generated revenues of approximately $8 million.
Further, the Company may suffer other civil penalties or adverse impacts, including lawsuits by private litigants in addition to the lawsuits that already have been filed, or investigations and fines imposed by local authorities. The investigative costs to date are approximately $2.8 million, of which approximately $0.1 million and $0.3 million was charged to general and administrative expenses during the three and six months ended December 31, 2017, respectively, compared with $0.6 million and $1.4 million for the three and six months ended December 31, 2016.”
USANA Health Sciences
As highlighted in this previous post, in February 2017 USANA (a Utah based nutritional company that manufacturers supplements, personal care and healthy food products) disclosed FCPA scrutiny concerning its China operations. The company recently disclosed:
“Costs related to China and the Company’s internal investigation into its China operations, which was first disclosed in February 2017, negatively impacted fourth quarter net earnings by approximately $2.7 million after tax and earnings per diluted share by $0.11.”
This piece written by Tom Fox (who frequently calls himself the Compliance Evangelist) states:
“For the first time, companies that sustain an FCPA violation are required to perform a root cause analysis and incorporate that information back into the compliance program.”
A good idea, sure, and the DOJ’s FCPA Corporate Enforcement Policy does state that if a business organization wants to avail itself of the voluntary program and “receive full credit for timely and appropriate remediation” among the items required will be “demonstration of thorough analysis of causes of underlying conduct (i.e., a root cause analysis) and, where appropriate, remediation to address the root causes.”
However, the statement as written is completely false.
Compliance with the facts matter.
It is a source of amusement for some in the FCPA space to read Richard Bistrong’s (a convicted felon who served time in federal prison for violating the FCPA) commentary. In this recent post titled “My Friend, The Agent, Blackmailed Me,” Bistrong seems to be playing the victim card.
Yet as Bistrong has previously stated: “When I am asked, ‘what could have stopped you? My response is quite simple: nothing.”
As written by the jury foreman in the failed, manufactured Africa Sting trial where Bistrong was a key witness: “Mr. Bistrong … freely admitted on the stand more illegal acts than the entire group of defendants was accused of, yet was able to plead to only one count of conspiracy to violate the FCPA.”
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.