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What You Need To Know From Q4

Q4

FCPA Professor will once again be the place to visit in January for numerous 2016 year in review statistics. But first, let’s close out the fourth quarter of 2016.

This post provides a summary of Foreign Corrupt Practices Act enforcement activity and related developments from the fourth quarter of 2016. (See here for a similar post for the first quarter of 2016, here for the second quarter, and here for the third quarter).

DOJ Enforcement (Corporate)

The DOJ brought five core corporate FCPA enforcement actions in the fourth quarter. DOJ recovery in these actions was approximately $837.5 million.

None of these enforcement actions have resulted (at least yet) in any related DOJ FCPA enforcement actions against company employees.

General Cable Corp. (Dec. 29th)

See here and here for prior posts

Charges: None

Resolution Vehicle: Non-prosecution agreement

Guidelines Range: Not set forth in the NPA although the NPA does state: “The monetary penalty is based upon profits of $51,174,237 as a result of the corrupt scheme, and reflects a discount of 50% off of the bottom of the U.S. Sentencing Guidelines fine range.”

Penalty: $20,469,694

Origin: Voluntary disclosure

Monitor: No

Individual Company Employees Charged: No

Teva Pharmaceutical (Dec. 22nd)

See here and here for prior posts

Charges: Teva LLC (conspiracy to violate the FCPA’s anti-bribery provisions); Teva (conspiracy to violate the FCPA’s anti-bribery provisions and FCPA internal controls violations)

Resolution Vehicle: Teva LLC (plea agreement); Teva (DPA)

Guidelines Range: Approximately $354 million to $708 million

Penalty: $283,177,348

Origin: The resolution documents state: “Teva did not timely voluntarily self-disclose the FCPA violations,” yet also state that Teva disclosed “conduct in Russia and Ukraine of which the [DOJ] was previously unaware.”

Monitor: Yes

Individual Company Employees Charged: No

Odebrecht / Braskem (Dec. 21st)

See here, here and here for prior posts

Charges: Odebrecht (conspiracy to violate the FCPA’s anti-bribery provisions); Braskem (conspiracy to violate the FCPA’s anti-bribery provisions)

Resolution Vehicle: Odebrecht (plea agreement); Braskem (plea agreement)

Guidelines Range: Odebrecht ($6.0048 billion to $12.0096 billion); Braskem ($744 million to $1.488 billion)

Penalty: Odebrecht (plea agreement states that “the appropriate total criminal penalty is $4.503 billion.” Next the plea agreement states that the company in unable to pay a criminal fine in excess of $2.6 billion. Pursuant to the plea agreement, company agreed to pay 10% (or $260 million) to the U.S. with the remaining amount to Brazil and Swiss law enforcement); Braskem (plea agreement states that the “appropriate criminal penalty is $632 million” which reflects a 15% discount off the bottom of the applicable Guidelines fine range.  The plea agreement then states that the company will pay $94.8 million to the U.S. Treasury with the remaining amount ($442 million or 70% being paid to Brazil and $94.8 million or 15% being paid to Switzerland).

Origin: Foreign law enforcement investigation

Monitor: Yes

Individual Company Employees Charged: No

JPMorgan (Nov. 17th)

See here and here for prior posts

Charges: None

Resolution Vehicle: Non-prosecution agreement involving JPMorgan Securities (Asia Pacific) Limited (“JPMorgan-APAC), a wholly subsidiary of JP Morgan headquartered in Hong Kong

Guidelines Range: Not set forth in the NPA

Penalty: $72 million (NPA states that this amount is an aggregate discount of 25% off of the bottom of the U.S. Sentencing Guidelines fine range)

Origin: SEC information request

Monitor: No

Individual Company Employees Charged: No

Embraer (Oct. 24th)

See here and here for prior posts

Charges: conspiracy to violate the FCPA’s anti-bribery provisions and books and records provisions and violations of the FCPA’s internal controls provisions

Resolution Vehicle: Deferred prosecution agreement

Guidelines Range: $134 million to $268 million

Penalty: $107 million

Origin: SEC subpoena

Monitor: Yes

Individual Company Employees Charged: No

DOJ Enforcement (Individual)

The DOJ brought two core individual FCPA enforcement action in the fourth quarter charging six individuals with FCPA offenses.

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As highlighted in this post, the DOJ filed a superseding indictment in an October 2015 enforcement action adding FCPA charges against Ng Lap Seng and Jeff Yin for alleged bribery in connection with a U.N. sponsored conference center in Macau, China and to influence business interactions with Antiguan government officials.

As highlighted in this post the DOJ announced criminal charges and plea agreements against the following individuals (Daniel Perez, Kamta Ramnarine, Victor Valdez, and Douglas Ray) in connection with a scheme to bribe Mexican officials in order to secure aircraft maintenance and repair contracts with government-owned and controlled entities.

SEC Enforcement (Corporate)

The SEC brought five corporate FCPA enforcement actions in the fourth quarter. SEC recovery in these actions was approximately $566.5 million.

Of the five corporate enforcement actions, 1 enforcement action has resulted in related SEC charges against company employees.

General Cable Corp. (Dec. 29th)

See here and here for prior posts

Charges: None.  Administrative cease and desist order finding violations of FCPA’s anti-bribery, books and records, and internal controls provisions

Settlement: $55.3 million (disgorgement of approximately $51.2 million and prejudgment interest of approximately $4.1 million)

Origin: Voluntary disclosure

Individuals Charged: Yes

Related DOJ Enforcement Action: Yes

Teva Pharmaceutical (Dec. 22nd)

See here and here for prior posts

Charges: Settled civil complaint charging violations of the FCPA’s anti-bribery provisions, books and records provisions and internal controls provisions

Settlement: $236 million in disgorgement and prejudgment interest

Origin: The resolution documents state: “Teva did not timely voluntarily self-disclose the FCPA violations,” yet also state that Teva disclosed “conduct in Russia and Ukraine of which the [DOJ] was previously unaware.”

Individuals Charged: No

Related DOJ Enforcement Action: Yes

Braskem (Dec. 21st)

See here, here and here for prior posts

Charges: Settled civil complaint charging violations of the FCPA’s anti-bribery, books and records, and internal controls provisions

Settlement: $65 million in disgorgement

Origin: Foreign law enforcement investigation

Individuals Charged: No

Related DOJ Enforcement Action: Yes

JPMorgan (Nov. 17th)

See here and here for prior posts

Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery, books and records and internal controls provisions

Settlement: $130.6 million in disgorgement and prejudgment interest

Origin: SEC information request

Individuals Charged: No

Related DOJ Enforcement Action: Yes

Embraer (Oct. 24th)

See here and here for prior posts

Charges: Settled civil complaint charging violations of the FCPA’s anti-bribery, books and records and internal controls provisions.

Settlement: $83.8 million in disgorgement and $14.4 million in prejudgment interest. The SEC agreed to credit a disgorgement amount that Embraer agreed to pay to Brazilian authorities (believed to be approximately $18.6 million). Net amount thus equals $79.6 million.

Origin: SEC subpoena

Individuals Charged: No

Related DOJ Enforcement Action: Yes

SEC Enforcement (Individual)

As highlighted here, in connection with the General Cable enforcement action the SEC also found in an administrative action that Karl Zimmer (General Cable’s Senior Vice President of Europe and Africa Supply Chain and Global Supply Chain) knowingly circumvented internal accounting controls and caused FCPA violations when he approved certain improper payments. Without admitting or denying the SEC’s findings, Zimmer agreed to pay a $20,000 civil penalty.

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Other Developments or Items of Interest

The SEC has brought two FCPA enforcement actions based on internship and other hiring practices involving family members of alleged “foreign officials.” The narrative in both enforcement actions was that providing an internship or job to a family member of an alleged “foreign official” represented an attempt to improperly influence the “foreign official” who then exercised discretion – presumably because of the internship or job provided to a family member – to benefit the company. It is this narrative that has resulted in several other companies, including Goldman Sachs, being under FCPA scrutiny. Yet, as highlighted in this post, this narrative was recently rejected by a London judge in a closely watched civil action between the Libyan Investment Authority and Goldman Sachs.

Lennox International recently disclosed to the DOJ and SEC an investigation into a $475 payment in Russia to release a shipment of goods being held by customs officials. As highlighted in this post, it is arguably one of the most absurd FCPA disclosures ever.

Recently, the International Organization for Standardization (ISO) released ISO 37001 anti-bribery management systems – requirements with guidance for use.  One’s view of ISO 37001 likely depends on one’s background, experience and motivation. As highlighted in this post, if you are familiar with the numerous sources of best practices in the anti-bribery space, then ISO 37001 is a complete yawner, indeed a disappointment as several best practices are not even captured in the purported best practices document.

The DOJ offered up the same old, same old when it comes to individual FCPA prosecutions. Yet, as highlighted in this post, it is once again difficult to reconcile the DOJ’s rhetoric about the importance of individual FCPA prosecutions with the reality of facts. As highlighted in this post, the SEC’s Director of Enforcement also talked about individual FCPA prosecutions and a variety of other FCPA topics.

As highlighted in this post, Assistant Attorney General Leslie Caldwell spoke at an FCPA event and focused her remarks on transparency, the DOJ’s FCPA Pilot Program, and corporate compliance. This post shares must-see video clips and this post highlights that, as measured against a “main goal” the DOJ has for its FCPA Pilot Program, that the program is currently failing.

As it does every November, the SEC released its annual report on its Dodd-Frank Act Whistleblower Program and once again FCPA “tips” continue to be a minor component of the program. As highlighted in this post, since the program was enacted in July 2010 the SEC reports that it has received 860 FCPA “tips” but 99.9% of these tips have not presumably yielded a whistleblower bounty.

As highlighted here, an SEC enforcement action against United Continental Holdings Inc. served as another useful reminder that the FCPA has always been a law much broader than its name suggests because of its generic books and records and internal controls provisions. The enforcement action also highlighted once again the SEC’s inconsistent approach to enforcing the books and records and internal controls provisions.

As highlighted here, the FCPA turned 39 and if the FCPA is your area of practice or interest, you owe it to yourself to read the most extensive piece ever written about the FCPA’s history – “The Story of the Foreign Corrupt Practices Act.”

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