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Friday Roundup

Scrutiny alerts and updates, Goldman ripples, and for the reading stack. It’s all here in the Friday roundup.

Scrutiny Alerts and Updates

MTS

As highlighted in this 2015 post [1], the Uzbekistan telecom bribery scheme involved several companies. In 2016, VimpelCom resolved an FCPA enforcement action [2] with a net settlement amount (after accounting for various credits and deductions for related foreign law enforcement action) of approximately $398 million. In 2017, Telia resolved an FCPA enforcement action [3] with a net settlement amount of $483 million.

Next up will be Russia-based Mobile TeleSystems PJSC, a company with shares traded on the New York Stock Exchange, which recently disclosed [4]:

“In its Q3 2018 financial statements, MTS reserved RUB 55.8 bln [$US 849 million] as the potential liability with respect to the investigation being conducted by the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ) in relation to its former operations in Uzbekistan. MTS continues to cooperate with the U.S. authorities in the ongoing investigation. There can be no assurance as to the form, timing or terms of any resolution to the investigation. As a result of this provision recognition the Group finished Q3 2018 with Net loss of RUB 37.0 bln. Excluding this one-off factor, the Group would have reported Net profit of RUB 18.7 bln.”

General Electric 

This Wall Street Journal article [5] titled “GE Seeks Power Sales in Iraq, But Report Spotlights Corruption Concerns,” states:

“General Electric Co. learned from a consultant’s report this past summer of corruption allegations against key business partners in Iraq, where the company is trying to shore up its position in one of the most important foreign markets for its struggling power business. The industrial giant said it has a robust compliance operation and doesn’t believe it has violated any federal laws, including ones covering foreign corruption. However, that confidential report, parts of which were reviewed by The Wall Street Journal, underscores the dilemma GE faces as it chases new business in one of the few places with demand for its multimillion-dollar heavy duty gas turbines. The study, prepared for GE this spring by corporate intelligence firm Hakluyt & Co., paints a portrait of widespread corruption and bribery in the Iraqi power sector, accusing high-ranking officials in the Ministry of Electricity, from which GE is currently vying with Siemens AG for $15 billion in new power contracts. Siemens declined to comment.

[…]

The study follows a previously unreported Justice Department inquiry into corruption allegations against GE employees in Iraq in April. That inquiry was triggered by a whistleblower complaint alleging employees of GE Power, the conglomerate’s power unit, were involved in corruption, according to people familiar with the complaint. GE said it investigated the whistleblower accusation and found it to be without merit. The company learned of the whistleblower when U.S. agencies, including the departments of State and Commerce, withdrew their commercial support for the company’s efforts in Iraq over the accusation. The embassy resumed its support for GE after the company agreed to investigate the allegation, the people familiar with the complaint said. The status of the Justice Department’s inquiry into the whistleblower’s claims couldn’t be determined.”

As highlighted here [6], in 2010 General Electric resolved an FCPA enforcement action concerning conduct in Iraq.

[7]

Goldman Ripples

As highlighted here [8], earlier this month the DOJ announced criminal FCPA and related charges against former employees and other associated with Goldman Sachs in connection with the 1MDB scandal.

Since then, its shares have been downgraded [9] and as reported [10] here:

“International Petroleum Investment Company, a one-time investment partner of scandal-struck 1MDB, named Goldman in a lawsuit filed in a state court in New York [11]. The suit, which also named several other individuals associated with 1MDB, didn’t specify the amount of damages IPIC was seeking. “Goldman Sachs conspired with others to bribe IPIC’s and Aabar’s former executives,” the court filing said, referring to IPIC’s subsidiary Aabar Investments PJS.”

Reading Stack

It’s hard not to think of the Foreign Corrupt Practices Act when reading this recent article [12] in the Wall Street Journal titled “Countries Push to Extract More Cash from Big Mining Companies.”

“Developing-world leaders, spurred by rising mineral prices, are making their toughest demands on Western mining companies in years, squeezing them to pay higher royalties and taxes, process commodities locally and cede control of mines.”

Don Zarin [13] (Holland & Knight) recently published this article [14] titled “An Assessment of the Impact the Foreign Corrupt Practices Act Over It’s Forty Year History.” He states:

“[F]rom my limited vantage point as an FCPA practitioner, I would estimate that more than half of U.S. companies doing business abroad, especially small and medium sized businesses, still lack effective anti-corruption compliance program and have only a rudimentary understanding of the FCPA. In most of the other signatory countries to the OECD Convention, the adoption of compliance programs is still in its infancy, as enforcement is still in its early stages.

In effect, the international enforcement of anti-corruption laws, despite some very large penalties and extensive publicity surrounding some enforcement actions, has barely scratched the surface in the fight against bribery. It is an important that direction. But it needs to be recognized and acknowledged that corruption continues unabated. In remains endemic to many countries around the world. One of the enduring challenges for those living with corruption on a daily basis is how to change the culture of corruption. Irrespective of the multilateral legal and enforcement efforts that have developed over the past forty years, the battle has barely begun.”

See here [15] for a video titled, “How the FCPA Been Successful in Achieving Its Objectives.”

FCPA Institute - Nashville (April 11-12, 2019)

A unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills through active learning. Learn more, spend less. CLE credit is available.

Learn More & Register [16]