Whistleblower award, interesting observations, scrutiny update, why in the world, you lose some and you win some, and guilty plea. It’s all here in the Friday roundup.
According to this report, “a former Brazilian surgeon who blew the whistle on a medical device company that allegedly bribed doctors to win business will get a $4.5 million award from U.S. regulators, according to his lawyers. The surgeon will get the money for playing a crucial role in helping the SEC uncover a bribery scandal at Biomet Inc. that spanned the globe. (See here for the SEC release).
The whistleblower’s attorneys (Christopher Connors and Andy Rickman) told FCPA Professor that their client went to the SEC only after first alerting the company of the issue internally. “There are many people, like our client, who are very concerned about doctors selecting medical devices based not on the effectiveness of a particular manufacturer’s product for a patient but, rather, on which manufacturer pays the doctor the biggest kickback. The SEC’s recent Biomet FCPA whistleblower award demonstrates the SEC’s continued support of FCPA whistleblowers globally under the Dodd-Frank Reward Program,” said Connors and Rickman.
In February 2017 then DOJ Compliance Counsel Hui Chen drew upon resources long in the public domain regarding various factors relevant to corporate compliance programs and put question marks behind the factors in the form of DOJ guidance (see here for the prior post).
In this recent article, Chen says the following regarding the DOJ’s recently released “The Evaluation of Corporate Compliance Programs” guidance document:
“Practitioners in the compliance industry immediately responded with obsessive parsing of the updated Guidance, as it did when the original version was released [in February 2017]. Back then, I was deeply amused—and often troubled—by the obsession: Many “interpretations” were nothing more than ill-guided attempts by vendors to sell their products and services.”
Chen then highlighted “some reasons why you should not obsess over the Guidance.”
Under the heading “It is NOT a Best Practice Guide,” Chen states:
“The purpose of the Guidance is clearly stated: to help prosecutors determine “the appropriate (1) form of any resolution or prosecution, (2) monetary penalty … and (3) compliance obligations contained in any corporate criminal resolution (e.g. monitorship or reporting obligations).”
In other words, it is used to determine criminal culpability, size of penalty, and need for supervision. But these determinations are predicated on there having been a corporate crime committed. The Guidance is written for a defendant in the dock, not good citizens on the street. It is a best-among-worst practices guide.”
Under the heading, “it is written for prosecutors,” Chen states:
“In addition to determining culpability, penalty, and supervision, the Guidance is written to encourage compliance programs that help produce evidence for prosecution. Take, for example, certification. Prosecutors know that certification does not change behaviors, but they want companies to require it because it provides useful evidence of intent against individual defendants.
Furthermore, any certification submitted over interstate communications networks (online, by mail) may provide a basis for the additional charge of mail or wire fraud. Certification is useful for prosecution, not compliance. The prosecutors know and understand this difference; often, companies don’t.”
See also this recent article co-authored by Chen.
The Washington Post goes in-depth into the current FCPA and related investigation of Major League Baseball (see here for the prior post). According to the article:
“A Justice Department investigation into Major League Baseball’s operations in Latin America and the trafficking of Cuban players has expanded in recent months, with former league and team officials among those contacted by FBI agents and called to testify before a grand jury, according to people with knowledge of the probe. The wide-ranging inquiry is, in part, seeking to root out suspected involvement of MLB team officials with smugglers who force Cuban players to sign away exorbitant portions of their earnings in exchange for passage off the island.
People with knowledge of the investigation say it is being overseen by prosecutors at the Justice Department’s D.C. headquarters who specialize in the Foreign Corrupt Practices Act, signifying interest in whether MLB team employees have been involved in bribing foreign government officials. Agents in the Los Angeles and Miami offices are contributing to the investigation, and are pursuing possible crimes including human trafficking, money laundering and visa fraud, according to people with knowledge of the probe, most of whom spoke on condition of anonymity.”
Why in the World?
In yet another example of a compliance code written poorly, Envision Solar International, Inc.’s Code of Business Conduct and Ethics – applicable to all Company employee – states in pertinent part.
“[T[he Company recognizes that in certain non-U.S. countries some minor government officials will delay or fail to perform their ministerial or clerical functions or services unless payments are made to them. Such payments may be made only if it has been determined in writing by an officer of the Company that:
- the service for which the payment being made is clearly a service that the person receiving the payment is legally required to provide;
- the government action sought is proper for the Company to receive;
- the payments are not made to policy-making government personnel;
- the payments are consistent with local custom and standards;
- the duties of the person receiving the payment are essentially ministerial or clerical; and
- there is not a reasonable alternative to making such payments.
The FCPA does not prohibit payment of certain regulatory fees set by the government. Examples of appropriate payments to foreign governments are regular fees established by the government for:
- obtaining government permits, licenses or other documentation to conduct business;
- the processing of governmental papers (such as work permits and visas);
- the provision of police protection, mail service and utilities, and
- the loading and unloading of product shipments.
Even though Envision Solar International’s Code then says: “given the restrictive nature of these laws, no payment of any kind may be made to any foreign government officials or employees (even if they seem to be within one of the permitted categories described above) without the prior written approval of the Company’s Chief Financial Officer” – why in the world would a company include such language and concepts in its Code of conduct applicable to all employees?
You Lose Some, You Win Some
As highlighted in prior posts here and here, in late 2018 Vantage Drilling resolved a rather unusual $5 million FCPA enforcement action finding violations of the FCPA’s internal controls provisions based on the company’s unique relationship with a former outside director and shareholder that “created a risk that [the company] was providing or reimbursing funds that [the Director] intended to use to make improper payments to officials at Petrobras” in connection with obtaining a drilling services contract.
Recently, Vantage Drilling announced, in connection with the same underlying relationship with Petrobras, that “U.S. District Court Judge Alfred H. Bennett of the Southern District of Texas granted Vantage Deepwater Company’s and Vantage Deepwater Drilling, Inc.’s petition to confirm its international arbitration award against Petrobras [and certain subsidiaries] in connection with their breach of a drilling services contract with the Vantage entities in 2015. The Court also denied the Petrobras entities’ motion to vacate the arbitration award.”
As stated in the release:
“[I]n July 2018, an international arbitration tribunal issued an award in favor of Vantage Deepwater Company and Vantage Deepwater Drilling, Inc. The Tribunal found that [Petrobras] breached the Drilling Contract. The Tribunal awarded Vantage Deepwater Company and Vantage Deepwater Drilling, Inc. damages in the amount of $622.0 million plus interest against [Petrobras] and dismissed the Petrobras entities’ counterclaims against Vantage with prejudice. As of March 31, 2019, the arbitration award stood at $728.4 million, inclusive of interest.
Mr. Ihab Toma, Vantage’s Chief Executive Officer, stated, “We are very pleased with the U.S. Court’s decision to confirm the arbitration award against Petrobras. Above all else, we continue to be focused on providing our clients with superior drilling services.”
As highlighted in this prior post, earlier this year former Credit Suisse bankers Andrew Pearse, Surjan Singh, and Detelina Subeva were criminally charged with conspiracy to violate the FCPA’s anti-bribery provisions and internal controls provisions as well as conspiracy to commit wire fraud, conspiracy to commit securities fraud, and conspiracy to commit money laundering in connection with financing various Mozambican maritime projects.
As highlighted here Subeva recently “pled guilty to a single count of money laundering and not guilty to a count of wire fraud and two counts of conspiracy. She was released on $2 million in bond, secured with $500,000 in cash, and allowed to return to London under supervision until sentencing.”
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