This previous post  went in-depth into the approximate $232 million Fresenius FCPA enforcement action and this post continues the analysis by highlighting additional issues to consider.
As highlighted in this prior post , Fresenius disclosed its FCPA scrutiny in August 2012. Thus from start to finish, its FCPA scrutiny lasted an unconscionable 6.5 years.
I’ve said it once, I’ve said it twice, and I will continue to say it until the cows come home: if the DOJ/SEC want the public to have trust and confidence in its FCPA enforcement program, it must resolve instances of FCPA scrutiny much quicker.
This is particularly true given that Fresenius, in the words of the DOJ:
“conduct[ed] a thorough internal investigation; ma[de] regular factual presentations to the Department; provid[ed] facts learned during witness interviews; voluntarily ma[de] foreign-based employees available for interviews in the United States; produc[ed] documents to the Department from foreign countries in ways that did not implicate foreign data privacy laws; collect[ed], analyz[ed], and organiz[ed] voluminous evidence and information from multiple jurisdictions for the Department, including translating key documents; and disclos[ed] conduct to the Department that was outside the scope of its initial voluntary self-disclosure …”.
In the words of the SEC, Fresenius:
“FMC produced documents, including key document binders and translations as needed, and made current or former employees available to the Commission staff, including those who needed to travel to the United States.”
As a foreign issuer, Fresenius is only subject to the FCPA’s anti-bribery provisions to the extent “the mails or any means or instrumentality of interstate commerce” are used in connection with a bribery scheme.
What was the precise jurisdiction nexus to support the anti-bribery violations in the Fresenius matter?
We really don’t know as the DOJ and SEC’s resolution documents merely make generic reference to the Angola and Saudi Arabia conduct involving ‘agents and employees utiliz[ing] the means and instrumentalities of U.S. interstate commerce, including the use of internet-based email accounts hosted by numerous service providers located in the United States.”
Since its invention in the 2002 Syncor enforcement action, the DOJ/SEC have used the enforcement theory that physicians and others associated with foreign healthcare systems are “foreign officials” (and thus occupy a status similar to a President or Prime Minister) approximately 30 times. (Looking for one reason for the general increase in FCPA enforcement in the modern era, well this is one reason).
This enforcement theory has never been subjected to any meaningful judicial scrutiny (including in the Fresenius matter resolved via a DOJ NPA and an SEC administrative order). Moreover, and perhaps a reflection of its validity, this enforcement has never been used to charge an individual.
The bulk of the FCPA anti-bribery violations in the Fresenius matter were based on the Angola and Saudi Arabia conduct. Per the SEC’s findings, the Angola conduct occurred between 2004 and 2013. Per the SEC’s findings, the Saudi Arabia conduct occurred between 2007 and 2012. Based on Angola findings, the SEC appears to have secured $10 million in disgorgement and based on the Saudi Arabia findings, the SEC appears to have secured $40 million in disgorgement.
In short, that’s $50 million in disgorgement beyond disgorgement’s five year statue of limitations as the Supreme Court unanimously held in Kokesh (see here  for the prior post). Yet once again, statute of limitations matter little when issuers cooperate and agree to resolve SEC enforcement actions in the absence of judicial scrutiny. (See here ).
No-Charged Bribery Disgorgement
The SEC’s findings relevant to Morocco, Turkey, Spain, China, Serbia, Bosnia, and Mexico did not result in anti-bribery findings, but merely books and records and internal controls findings. The SEC appears to have secured $46 million in disgorgement based on this conduct.
This represents yet another example of no-charged bribery disgorgement (in other words the SEC seeking a disgorgement remedy in the absence of FCPA anti-bribery charges or findings).
As highlighted in this  previous post (and numerous prior posts thereafter), so-called no-charged bribery disgorgement is troubling. Among others, Paul Berger (here ) (a former Associate Director of the SEC Division of Enforcement) has stated that “settlements invoking disgorgement but charging no primary anti-bribery violations push the law’s boundaries, as disgorgement is predicated on the common-sense notion that an actual, jurisdictionally-cognizable bribe was paid to procure the revenue identified by the SEC in its complaint.” Berger noted that such “no-charged bribery disgorgement settlements appear designed to inflict punishment rather than achieve the goals of equity.”
This prior post  highlighted the hidden employee costs of FCPA scrutiny and enforcement and how the aggregate costs of this ripple are surely meaningful when one considers certain inevitable wrongful termination or separation costs, lost productivity, and the time and expense of recruiting and hiring replacements. In recent years, the DOJ has quantified employee departures in certain FCPA enforcement actions and did so once again in the Fresenius matter. As stated by the DOJ:
“the Company engaged in remedial measures, including: (1) causing at least ten employees who were involved in or failed to detect the misconduct described in the Statement of Facts to be removed from the Company, because their employment was terminated, they resigned after being asked to leave, or they voluntarily left once the Company’s internal investigation began.”
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