Checking In on Wal-Mart
It’s always a best practice not to believe everything in a newspaper which cites to unnamed sources, but in any event the Wall Street Journal reports:
“Wal-Mart Stores Inc. tried and failed to settle a foreign-bribery probe that has stretched for five years and cost the company more than $820 million, according to people familiar with the federal investigation.
In the final weeks of the Obama administration, the world’s largest retailer and U.S. officials weren’t able to agree on a deal before Donald Trump’s inauguration, people familiar with the matter said. “Wal-Mart and the government are very far apart in terms of a settlement,’’ one of the people said Thursday.”
The article continues:
“Discussions stalled over several issues beyond the size of potential penalties Wal-Mart would have to pay. The people familiar with the probe said one major sticking point has been Wal-Mart’s eligibility to continue accepting food stamps in its 5,300 Wal-Mart and Sam’s Club stores in the U.S. after a settlement is reached.
Another sticking point in the talks was a government demand to assign an independent monitor to watch the retailer’s behavior, a request typical in large settlements for violations of the Foreign Corrupt Practices Act. Wal-Mart has rejected the demand: Wal-Mart executives “won’t take a monitor,” one of the people said, because the retailer believes it has already toughened its compliance efforts.”
Scrutiny Alerts and Updates
Herbalife, a global nutrition company, recently disclosed:
“The SEC has requested from the Company documents and other information relating to the Company’s anti-corruption compliance in China and the Company is conducting its own review. The Company has discussed the SEC’s investigation and the Company’s review with the Department of Justice. The company is cooperating with the SEC’s investigation and cannot predict the eventual scope, duration, or outcome of the matter at this time.”
Just a hunch, but Herbalife’s FCPA scrutiny may be the result of China prohibiting direct selling (the same root cause as the Avon and Nu Skin Enterprises FCPA enforcement actions). If so, the company’s scrutiny demonstrates that once again the root cause of many FCPA inquiries are foreign trade barriers and distortions.
Archrock / Exterran Holdings
Archrock (formerly named Exterran Holdings, Inc.), a company which describes itself as a “pure-play U.S. natural gas contract compression services leader” recently disclosed:
“Exterran Corporation’s Form 10-K/A discloses that it has been cooperating with the SEC in an investigation, including responding to a subpoena for documents related to the restatement and compliance with the U.S. Foreign Corrupt Practices Act, which are also being provided to the Department of Justice at its request. Archrock has been assisting Exterran Corporation in responding to this investigation, including providing information regarding periods prior to the Spin-off that is not otherwise in Exterran Corporation’s possession.
[…]Contemporaneously with filing the Form 8-K on April 26, 2016, we self-reported the errors and possible irregularities at Belleli (a subsidiary of Exterran) EPC to the SEC. Since then, we have been cooperating with the SEC in its investigation of this matter, including responding to a subpoena for documents related to the restatement and compliance with the U.S. Foreign Corrupt Practices Act (“FCPA”), which are also being provided to the Department of Justice at its request. The FCPA related requests in the SEC subpoena pertain to our policies and procedures, information about our third-party sales agents, and documents related to historical internal investigations completed prior to November 2015.”
A rather cryptic report here which states:
“The US Department of Justice has tasked FBI with investigating the EUR-1.8-billion (USD 1.91bn) acquisition of Canadian mining firm Uramin by French nuclear group Areva as the case falls within the scope of the US Foreign Corrupt Practices Act (FCPA).”
U.K. Serious Fraud Office Related
Bribery enforcement actions often lead to more bribery enforcement actions as law enforcement learns of industry practices, certain third parties, or other information that may implicate companies other than the one resolving the enforcement action.
Case in point, the Financial Times reports:
“British investigators have opened “fresh lines of inquiry” into bribery and corruption at several companies, thanks to evidence gathered in a four-year investigation into illegal behaviour at Rolls-Royce.
Ben Morgan, joint head of bribery and corruption at the Serious Fraud Office, told the Financial Times that information collected on a network of corrupt middlemen operating on behalf of Rolls-Royce and other companies was being pieced together “not just in the aerospace or energy sectors, but in other cases”.
“You start to look at how the web reaches out into other companies,” he added. “We don’t think we have caught the one bad apple here at all. Other companies should be concerned.
The SFO declined to specify which companies it was scrutinising.”
Free 90 Minute 2017 FCPA Year In Review Video
A summary of every corporate enforcement action; notable statistics and issues to consider; compliance take-away points; and enforcement agency and related developments. Click below to view the engaging video tutorial.
10th Circuit Opinion
Most courts faced with the issue of whether the FCPA contains a private right action have explicitly rejected the issue, period, end of story. (See this prior post and cases cited therein).
What makes this recent 10th Circuit opinion interesting is that the court, on one level, entertained the plaintiff’s FCPA claim.
The plaintiff, a British citizen living in Israel, claimed as follows.
“Collins filed suit claiming her two minor children were removed from her home after she sought assistance from Israeli social workers, who then falsely claimed the children were “at risk.” Collins claimed her children were taken to homes operated by defendants Women’s International Zionist Organization (WIZO) and S.O.S. Children’s Village-USA, Inc. (SOS), where they were subjected to physical and emotional abuse. She claimed defendant Schusterman raised money ostensibly to help at-risk children in Israel when, in fact, the money raised was paid to Schusterman, WIZO, and SOS by channeling the money through defendant International Fellowship of Christians and Jews. She alleged the individual defendants were Israeli judicial or governmental officers who participated in proceedings to take her children from her.”
Among other things, Collins sought $2 million in damages for alleged FCPA violations. In pertinent part, the court stated (citations omitted):
“Collins also made no allegation of attempts to influence a foreign official in violation of the FCPA. Collins alleged (1) Schusterman “illegally fund[ed] State terrorism,” (2) Schusterman received “the privilege of dictating to the Israeli Ministry of Welfare policies and methods of operation,” and (3) the defendants’ “practices constitute fraud in violation of the . . . FCPA, as donations to [the defendant] organizations can be used to buy influence—for example, by funneling funds or donating to an officials’ favorite charity or cause.” But these general, conclusory allegations are insufficient to state a claim under the FCPA. Even assuming the FCPA authorizes a private right of action, Collins’s allegations do not state a claim. On appeal, Collins argues the securities acts and FCPA apply due to defendants’ “financial activities of seeking donations for U.S. citizens under False pretense and Fraud to promot[e] locking up children in notorious facilities. She further argues, “trafficking in children for a profit and Fundraising on they backs is a crime and she invokes “laws against perpetrating fraud on American donor[s].” This is not adequate legal argument. The party challenging the district judge’s judgment must support her argument with legal argument or authority. Thus, even construing Collins’s arguments liberally, we conclude she has failed to demonstrate error in the district judge’s rulings, and we affirm the dismissal based on the securities acts and the FCPA.”
For the Reading Stack
“In April 2015, a sworn statement submitted in a Nevada lawsuit between rival casino moguls Steve Wynn and Japan’s Kazuo Okada contained an unusual assertion. Its author said Wynn’s head of security had asked to meet him in Japan and then persuaded him to travel to the United States to talk to federal agents pursuing a different matter: a criminal bribery probe into Okada.
The person who provided the statement, Yoshitaka Fujihara, then an executive at Okada’s Universal Entertainment Corp., said he did not pay for his business-class flights, lodging and meals for two meetings with the FBI in California. Wynn Resorts has since acknowledged covering those costs and making other arrangements for Fujihara, as well as other potential witnesses, to meet with the Feds.
Fujihara’s account helped prompt the judge in the Nevada case to allow questioning into Wynn Resorts’ role in facilitating the separate criminal investigation into Okada. As a result, the case has opened a rare window into the workings of a U.S. overseas bribery probe and the role played by a company in the investigation of a rival, according to a Reuters review of court documents and interviews with people involved.
Overseas corruption probes are difficult for the United States to conduct because of language differences, the challenges and costs related to locating and interviewing witnesses, and other issues, legal experts said. As a result, the government leans on companies that are subject to the Foreign Corrupt Practices Act to uncover and report foreign bribes on their own, and corporations often assist investigations into wrongdoing by their own employees or when they believe they are a victim of a crime, the experts said.
But in interviews with half a dozen law professors and former FCPA prosecutors, none said they had heard of a situation in which federal agents had coordinated with a business rival of a target company to contact witnesses and pay for their travel to the United States in an overseas bribery investigation.
Such reliance could suggest that the government probe might not have been pursued in the same way without the rival’s help, and that private interests were helping set the government’s agenda, these experts said. A spokesman for the U.S. Department of Justice declined comment.”