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Mid-Year FCPA Report

mid-year report

This post highlights Foreign Corrupt Practices Act enforcement and related developments at the mid-point of 2019. As highlighted below, 2019 FCPA enforcement is already the third-most active year in FCPA history as measured by the amount of net settlements (approximately $1.5 billion) secured by the U.S. government.

For a similar post at the mid-point of 2018 see here, for 2017 see here, and for 2016 see here.

This post breaks down FCPA enforcement into the following categories: DOJ (corporate); DOJ (individual); SEC (corporate); and SEC (individual). Thereafter, this post highlights other FCPA developments or items of interest thus far in 2019.

DOJ Enforcement (Corporate)

The DOJ has brought 5 core corporate enforcement actions thus far in 2019. Net FCPA settlements secured in these actions has been approximately $1.05 billion.

TechnipFMC (June 25)

See here for the prior post.

Charges: As to Technip USA a criminal information charging conspiracy to violate the FCPA’s anti-bribery provisions; as to TechnipFMC criminal information charging two counts of conspiracy to violate the FCPA’s anti-bribery provisions.

Resolution Vehicle: As to Technip USA, plea agreement; as to TechnipFMC, deferred prosecution agreement.

Guidelines Range: $282 million – $564 million

Settlement: Net $81.9 million after a credit of $214 million paid to Brazil law enforcement in connection with a related matter.

Origin: The company disclosed that it “received an inquiry from the DOJ.”

Monitor: No

Individuals Charged: No

Walmart (June 20)

See herehere and here for prior posts.

Charges: As to Walmart Brasilia, violations of the books and records provisions; as to Walmart none (but reference is made in the NPA to the internal controls provisions).

Resolution Vehicle: As to Walmart Brasilia, plea agreement; as to Walmart NPA

Guidelines Range: Not set forth in the NPA, but it does state: “Walmart agreed to pay a total monetary penalty in the amount of approximately $138 million which reflects a discount of 25% off of the bottom of the U.S. Sentencing Guidelines fine range for the portion of the penalty applicable to conduct in Brazil, China, and India, and 20% off of the bottom of the U.S. Sentencing Guidelines fine range for the portion of the penalty applicable to conduct in Mexico.”

Settlement: $138 million.

Origin: The NPA states: “The Defendant did not receive voluntary disclosure credit because it did not voluntarily and timely disclose, through the Parent Company, to the Fraud Section and the Office the conduct … Although the Parent Company disclosed the conduct related to Brazil prior to the Fraud Section or the Office learning of that conduct, such disclosure was after the Fraud Section and the Office had already begun investigating the Parent Company relating to conduct in another country.” The SEC order states: ““Walmart made an initial self-disclosure of the potential FCPA violations in Mexico to the Commission’s staff in November 2011, after it retained outside counsel to conduct an internal investigation under the direction of the Audit Committee of Walmart’s Board of Directors. Subsequently, Walmart voluntarily expanded its investigation and disclosed its findings concerning Brazil, China, and India to the Commission staff, although such disclosure was after the Commission staff had already begun investigating the Company related to conduct in Mexico.” Walmart’s 8-K filing on the day of the enforcement action states: “As previously reported, the Audit Committee of the Board of Directors (the “Audit Committee”) of Walmart Inc. (the “Company”) conducted an internal investigation into, among other things, alleged violations of the U.S. Foreign Corrupt Practices Act (“FCPA”) and other alleged crimes or misconduct in connection with the Company’s foreign subsidiaries, including Wal-Mart de México, S.A.B. de C.V., and whether prior allegations of such violations and/or misconduct were appropriately handled by the Company. In November 2011, the Company voluntarily disclosed that investigative activity to the U.S. Department of Justice (the “DOJ”) and the Securities and Exchange Commission (the “SEC”), with the DOJ and the SEC opening related investigations of the Company. The Audit Committee and the Company also investigated allegations of FCPA violations in foreign subsidiaries in Brazil, India, and China, and engaged outside counsel from a number of law firms and other advisors who assisted the investigation of all of these matters.”

Monitor: Yes

Individuals Charged: No

Fresenius (March 29)

See here for a prior post

Charges: None

Resolution Vehicle: NPA

Guidelines Range: None referenced in the NPA although it states “40% off of the bottom” of the guidelines range

Settlement: $84.7 million

Origin: Voluntary disclosure

Monitor: Yes

Individuals Charged: No

MTS (March 6)

See here and here for prior posts

Charges: As to Kolorit Dizayn Ink LLC, criminal information charging conspiracy to violate the FCPA’s anti-bribery and books and records provisions; as to MTS criminal information charging conspiracy to violate the FCPA’s anti-bribery and books and records provisions

Resolution Vehicle: Kolorit resolved the charges through a plea agreement; MTS resolved the charges through a DPA

Guidelines Range: The DPA references an advisory guidelines range of $673 million to $1.35 billion

Settlement: $750 million

Origin: The related Uzbekistan matters (MTS, Telia, and Vimpelcom) began with foreign media reporting

Monitor: Yes

Individuals Charged: No

Cognizant Technology Solutions (Feb. 15)

See herehere and here for prior posts.

Charges: None

Resolution Vehicle: Declination with disgorgement

Guidelines Range: Not mentioned in the letter agreement

Settlement: None, the letter agreement refers to disgorgement of $19,370,561 which the DOJ credited based on the parallel resolution with the SEC

Origin: Voluntary disclosure

Monitor: No

Individuals Charged: Yes

DOJ Enforcement (Individual)

The DOJ brought or announced seven core individual actions thus far in 2019 against 13 individuals.

As highlighted here, in yet another FCPA and related enforcement action concerning conduct in Venezuela, the DOJ charged Jesus Ramon Veroes and Luis Alberto Chacin Haddad with conspiracy to violate the FCPA’s anti-bribery provisions in connection with obtaining various contracts with Corporacion Electric Nacional S.A. (Corpoelec), Venezuela’s state-owned electric company.

As highlighted here, the DOJ brought additional criminal charges against Armengol Alfonso Cevallas Diaz and Jose Melquiades Cisneros Alarcon in connection with a PetroEcuador bribery scheme.

As highlighted here, former Credit Suisse bankers Andrew Pearse, Surjan Singh, and Detelina Subeva were criminally charged with conspiracy to violate the FCPA’s anti-bribery and internal controls provisions in connection with financing various Mozambican maritime projects.

As highlighted here, James Lyon (the owner of Lyon Associates Inc. – a privately-held engineering and consulting company headquartered in Hawaii) was criminally charged and pleaded guilty to charges concerning bribery of Micronesian and Hawaiian officials.

As highlighted here, in connection with the Cognizant matter, former executives Gordon Coburn and Steven Schwartz were criminally charged with FCPA violations.

As highlighted here, in connection with is long-standing PDVSA bribery scheme enforcement action, the DOJ announced criminal FCPA and related charges against Rafael Pinto and Franz Muller.

As highlighted here, in connection with the MTS matter, the DOJ criminally charged former MTS executive Bekhzod Akhmedov with FCPA and related offenses.

SEC Enforcement (Corporate)

The SEC has brought five corporate FCPA enforcement actions thus far in 2019. SEC recovery in these actions was approximately $421 million.

Walmart (June 20)

See herehere and here for prior posts

Charges:  None (administrative order findings violations of the FCPA’s books and records and internal controls provisions)

Settlement: $144 million in disgorgement prejudgment interest

Origin: The DOJ NPA states: “The Defendant did not receive voluntary disclosure credit because it did not voluntarily and timely disclose, through the Parent Company, to the Fraud Section and the Office the conduct … Although the Parent Company disclosed the conduct related to Brazil prior to the Fraud Section or the Office learning of that conduct, such disclosure was after the Fraud Section and the Office had already begun investigating the Parent Company relating to conduct in another country.” The SEC order states: ““Walmart made an initial self-disclosure of the potential FCPA violations in Mexico to the Commission’s staff in November 2011, after it retained outside counsel to conduct an internal investigation under the direction of the Audit Committee of Walmart’s Board of Directors. Subsequently, Walmart voluntarily expanded its investigation and disclosed its findings concerning Brazil, China, and India to the Commission staff, although such disclosure was after the Commission staff had already begun investigating the Company related to conduct in Mexico.” Walmart’s 8-K filing on the day of the enforcement action states: “As previously reported, the Audit Committee of the Board of Directors (the “Audit Committee”) of Walmart Inc. (the “Company”) conducted an internal investigation into, among other things, alleged violations of the U.S. Foreign Corrupt Practices Act (“FCPA”) and other alleged crimes or misconduct in connection with the Company’s foreign subsidiaries, including Wal-Mart de México, S.A.B. de C.V., and whether prior allegations of such violations and/or misconduct were appropriately handled by the Company. In November 2011, the Company voluntarily disclosed that investigative activity to the U.S. Department of Justice (the “DOJ”) and the Securities and Exchange Commission (the “SEC”), with the DOJ and the SEC opening related investigations of the Company. The Audit Committee and the Company also investigated allegations of FCPA violations in foreign subsidiaries in Brazil, India, and China, and engaged outside counsel from a number of law firms and other advisors who assisted the investigation of all of these matters.”

Individuals Charged: No

Related DOJ Enforcement Action: Yes

Telefonica Brasil (May 9)

See here and here for prior posts.

Charges:  None (administrative order findings violations of the FCPA’s books and records and internal controls provisions)

Settlement: $4.125 million civil penalty.

Origin: The company previously disclosed: “The Company is currently conducting an internal investigation regarding possible violations of applicable anticorruption laws. The Company has been in contact with governmental authorities about this matter and intends to cooperate with those authorities as the investigation continues. It is not possible at this time to predict the scope or duration of this matter or its likely outcome.” The SEC order states: “Telefônica Brasil’s cooperation included timely sharing of facts developed during the course of an internal investigation by its board and voluntarily producing and translating documents.”

Individuals Charged: No

Related DOJ Enforcement Action: No

Fresenius  (March 29)

See here for a prior post

Charges:  None (administrative order finds violations of the FCPA’s anti-bribery, books and records and internal controls provisions)

Settlement: $147 million

Origin: Voluntary disclosure

Individuals Charged: No

Related DOJ Enforcement Action: Yes

MTS  (March 6)

See here and here for prior posts

Charges:  None (administrative finds violations of the FCPA’s anti-bribery, books and records and internal controls provisions)

Settlement: $100 million

Origin: The related Uzbekistan matters (MTS, Telia, and Vimpelcom) began with foreign media reporting

Individuals Charged: No

Related DOJ Enforcement Action: Yes

Cognizant Technology Solutions  (Feb. 15)

See herehere and here for prior posts

Charges:  None (administrative order findings violations of the FCPA’s anti-bribery, books and records and internal controls provisions)

Settlement: $25 million

Origin: Voluntary disclosure

Individuals Charged: Yes

Related DOJ Enforcement Action: Yes

SEC Enforcement (Individual)

The SEC has brought one core individual enforcement action thus far in 2019. As highlighted here, in connection with the Cognizant matter, the SEC charged Coburn and Schwartz with violating the FCPA’s anti-bribery, books and records and internal controls provisions.

Other Developments or Items of Interest

Second Quarter

As highlighted here, in the long-standing Firtash et al enforcement action concerning alleged bribery in connection with Indian licenses, a judge recently denied a defense motion to dismiss and in doing so disagreed with the Second Circuit’s decision in Hoskins.

As highlighted here, the DOJ secured FCPA and related convictions of Joseph Baptiste and Roger Boncy in connection with a Haitian bribery scheme.

As highlighted here, in a recent decision a federal court judge stated that she was “deeply troubled” by the DOJ’s outsourcing of investigations.

As highlighted here, DOJ Principal Deputy Associate Attorney General Claire McCusker Murray recently stated that “subregulatory guidance isn’t law – it’s just paper.

This post discusses how the DOJ appears to be lost when it comes to resolving alleged FCPA violations by business organizations.

As highlighted in this post , the DOJ released a guidance document titled “The Evaluation of Corporate Compliance Programs.” While not FCPA specific, the guidance is FCPA relevant as it is meant to assist prosecutors in making decisions for purposes of determining the appropriate form of any resolution or prosecution, money penalty, and compliance obligations contained in any corporate criminal resolution. (See here for an additional post).

First Quarter

As highlighted here, the DOJ made revisions to its FCPA Corporate Enforcement Policy.

As highlighted here, the Commodity Futures Trading Commission issued an enforcement advisory concerning companies and individuals “that timely and voluntarily disclose to the Division violations of the Commodity Exchange Act involving foreign corrupt practices, where the voluntary disclosure is followed by full cooperation and appropriate remediation.”

The Ninth Circuit concluded in a whistleblower action that the FCPA is not a “rule or regulation” of the SEC (see here ).

As highlighted here , Canada is experiencing an OECD Article 5 moment as allegations of political interference are lodged against the Prime Minister’s office for attempting to persuade prosecutors to go light on SNC-Lavalin.

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