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Friday Roundup

Quotable, sentenced, scrutiny updates, dismissed and for the reading stack. It’s all here in the Friday roundup.

Quotable

In a recent Corporate Crime Reporter [1] interview, former DOJ FCPA prosecutor Ephraim Wernick was asked if FCPA enforcement has changed under the Trump administration and stated:

“The answer is no. It’s not unusual that things will change at the margins. But there was some discussion with the change of administration – what would happen with the FCPA program? And that was linked to comments that the President made in 2012 about the FCPA. There were questions as to what would happen. Those quickly fell by the wayside as resources continued to be expended, prosecutors were added, and cases continued to be built and enforced with no interference as far as I could ever tell from above. In fact, the opposite was true. Enforcement became more robust.”

“What began in 2016 and 2017 as questions about what the future would hold, turned  into questions about – is the FCPA now a tool of the America First foreign policy? It’s kind of a 180 degree turn from –  would it be eviscerated? – to – is it now fully employed to go after foreign companies? Neither is true.”

“I never saw politics play a hand in the enforcement of FCPA cases in the unit. I can’t speak to what was happening elsewhere in the Department. But this was not an area where I saw the administration take an active role one way or another.”

Those who predicted drastic changes in FCPA enforcement in the Trump administration [2] were seriously off their rocker and their credibility in this space was damaged.

Sentenced

The DOJ recently announced [3] that Master Halbert, the Micronesian government official involved in the FCPA enforcement action against Frank Lyon (see here [4] for the prior post), was sentenced to 18 months in prison followed by three years of supervised release after pleading guilty to conspiracy to commit money laundering.

In this article [5], Halbert’s attorney states:

“Massy’s crimes pale in comparison to the systematic corruption of James Lyon and his company. Pacific Islanders are particularly vulnerable to the corrupt practices of their wealthy partners, albeit American, Chinese, Japanese or other industrialized countries. This vulnerability is consistent with the unequal balance of power between first and third world economies.”

Very odd statement.

[6]

Scrutiny Updates

USANA

The company has been under FCPA scrutiny for 2.5 years and recently disclosed [7]:

“As the Company first disclosed in February 2017, it is voluntarily conducting an internal investigation of its China operations, BabyCare Ltd. The investigation focuses on compliance with the Foreign Corrupt Practices Act and certain conduct and policies at BabyCare, including BabyCare’s expense reimbursement policies. The Audit Committee of the Company’s Board of Directors has assumed direct responsibility for reviewing these matters and has hired experienced counsel to conduct the investigation. While the Company does not believe that the subject amounts are quantitatively material, or will materially affect its financial statements, it cannot currently predict the outcome of the investigation on its business, results of operations, or financial condition. The Company’s internal investigation is substantially complete, however the Company continues to cooperate with the Securities and Exchange Commission and the United States Department of Justice. The Company cannot currently predict the duration, scope, or result of the investigation.”

World Acceptance Corp.

The company has been under FCPA scrutiny for over two years and recently disclosed:

“As previously disclosed, we retained outside legal counsel and forensic accountants, upon receipt of an anonymous letter regarding compliance matters, to conduct an investigation of our operations in Mexico. The investigation focuses on the legality under the U.S. Foreign Corrupt Practices Act and certain local laws of certain payments related to loans, the maintenance of the Company’s books and records associated with such payments, and the treatment of compensation matters for certain employees. We voluntarily contacted the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) in June 2017 to advise both agencies that an investigation was underway. We are committed to compliance with applicable laws and regulations and intend to cooperate fully with both the SEC and the DOJ.”

Dismissed

Another securities fraud class action compliant with FCPA connections was recently dismissed. In this recent decision [8], a judge in the N.D. of California wrote:

“Statements in the New Riders Offering Memorandum fare no better. For example, Plaintiff points to generic statements about the risks of FCPA violations as purportedly misleading for failing to disclose that “Uber was then engaging in activities proscribed by the FCPA.” But Plaintiff here ignores the Court’s prior holding that “[t]he omission of unproven regulatory or statutory violations as pled here does not constitute an actionable omission.” In other words, generic statements about FCPA risks are not material omissions based on unproven subsequent allegations of FCPA violations.”

For the Reading Stack

The most recent edition of the always informative FCPA Update from Debevoise & Plimpton is here [9]. Regarding the recent TechnipFMC enforcement action (see here [10] and here [11] for prior posts), the Update states:

“TechnipFMC DPA is an unusual example of successor liability in the FCPA context. Typically, a merged entity will have FCPA exposure because of residual issues with one of the pre-merger legacy companies. In this case, as in 2010’s Alliance One resolution, each party brought with it pre-merger FCPA liability as the charges arose out of two independent schemes. Because both companies were subject to the FCPA prior to their merger, those liabilities passed to the successor company along with the assets.”

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Elevate Your Research [12]