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

Friday Roundup

Another individual defendant added to the broker-dealer enforcement action, scrutiny alert, want to open a building in China open to the public?, and additional boondoggle specifics.  It’s all here in the Friday roundup.

Additional Individual Defendant Added to the Broker-Dealer Enforcement Action

This [1] previous post highlighted the SEC examination that led to DOJ and SEC charges (including FCPA charges) against Tomas Clarke (a Direct Access Partners (“DAP”) Executive Vice President who worked out of the company’s Miami office) and Alejandro Hurtado (a back-office employee of DAP in Miami).  The enforcement action is based on alleged improper payments to Maria Gonzalez (V.P. of Finance / Executive Manager of Finance and Funds Administration at Bandes, an alleged Venezuelan state-owned banking entity that acts as the financial agent of the state to finance economic development projects).

Earlier this week, the DOJ announced here [2] that Ernesto Lujana (a managing partner at DAP and a branch manager of its Miami offices) was arrested and charged (see here [3] for the criminal complaint) in connection with the same alleged bribery scheme.   As noted in the DOJ’s release “Lujan was charged with one count each of conspiracy to violate the Foreign Corrupt Practices Act (FCPA), violation of the FCPA, conspiracy to violate the Travel Act and violation of the Travel Act [as well as] conspiracy to commit money laundering and money laundering.

Like in the previous enforcement action, the SEC also brought an enforcement action (see here [4] for the complaint) against Lujana.  In this [5] SEC release, Andrew Calamari (Director of the SEC’s New York Regional Office) stated as follows.  “For a scheme this bold to succeed, it required the sneaky collaboration of several individuals including the head of the Miami office.  Lujan and the others may have believed they were covering their tracks, but the SEC’s exam and enforcement teams unraveled their fraud.”

Scrutiny Alert

The Wall Street Journal reported yesterday in this [6] article that GlaxcoSmithKline “is investigating allegations from an anonymous tipster that it sales staff in China was involved in widespread bribery of doctors to prescribe drugs, in some cases for unauthorized uses, between 2004 and 2010.”

The article reported as follows.  “According to e-mails and other documents reviewed by the Wall Street Journal, the tipster has alleged that Glaxo’s China sales staff provided doctors with speaking fees, cash payments, lavish dinners and all-expenses-paid trips in return for prescribing the drug firm’s products.”  As reported in the WSJ article, a Glaxo spokesman confirmed that the company is investigating the allegations, but that after thoroughly investigating “each and every claim” from the anonymous source, the company “has found no evidence of corruption or bribery in or China business.”

The WSJ article further noted that “in 2010 Glaxo disclosed it had been contacted by the Justice Department and the SEC about its overseas operations as part of a wider FCPA investigation into pharmaceutical industry practices abroad.”

As noted in this [7] prior year in review post,  in 2012 50% of corporate FCPA enforcement actions involved, in whole or in part, foreign health care providers (such as physicians, nurses, mid-wives, lab personnel, etc.).  See here [8] for a prior post on the origins and prominence of this enforcement theory. [9]

Want to Open a Building in China Open to the Public?

This [9]recent article in the South China Morning Post reminded me of the many business barriers (including arcane and complex licensing, certification and inspection requirements) which often funnel companies seeking to do business in a foreign country into an arbitrary world of low-paying civil servants who frequently supplement their meager salaries through payments condoned in the host country.

The article states, in pertinent part, as follows.

“To obtain a fire-safety certificate from a local fire department, a business owner must pass five ‘checkpoints’ in a complicated and lengthy administrative process.  Each checkpoint is guarded by officials in charge of site inspections and reviewing construction blueprints, equipment and contingency plans. Bribes considerably expedite the process that officials might otherwise draw out for weeks, months or years. Bribes range from a few thousand yuan to hundreds of thousands, per official, depending on their rank and the size of the project. But money isn’t everything – some officials must be wined and dined or given luxury cigarettes. Others request the services of prostitutes. […] Salaries of firefighters are quite low – about 3,400 yuan (HK$4,300) a month in Shanghai – and many come from poor or rural families, as the job hazards dissuade many people from joining. […] However, competition for administrative posts within fire departments was fierce, and only those with strong connections or family influence would stand a chance of winning non-frontline jobs where the real money was made.”

Additional Boondoggle Specifics

This [10] recent Friday roundup detailed boondoggle specifics concerning Wal-Mart’s FCPA scrutiny and related investigation.  As noted here [11], Jeff Gearheart, the executive officer overseeing global compliance for Wal-Mart Stores Inc., told analysts last week that “300 legal and accounting professionals have logged more than 100,000 hours toward FCPA issues.”

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A good weekend to all.