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

Scrutiny Alerts And Updates

Lost in the shuffle in this active week of Foreign Corrupt Practices Act enforcement has been the following scrutiny alerts and updates.

This post highlights scrutiny alerts and updates concerning: Cognizant Technology Solutions Corp., Misonix, a PDVSA-related matter, JPMorgan and Standard Chartered.

Cognizant Technology Solutions Corp.

The New Jersey-based provider of information technology, consulting, and business process services disclosed [1]:

“The Company is conducting an internal investigation into whether certain payments relating to facilities in India were made improperly and in possible violation of the U.S. Foreign Corrupt Practices Act and other applicable laws. The investigation is being conducted under the oversight of the Audit Committee, with the assistance of outside counsel, and is currently focused on a small number of Company-owned facilities. The Company has voluntarily notified the United States Department of Justice (the “DOJ”) and United States Securities and Exchange Commission (the “SEC”) and is cooperating fully with both agencies. The internal investigation is in its early stages, and the Company is not able to predict what, if any, action may be taken by the DOJ, SEC or any governmental authority in connection with the investigation or the effect of the matter on the Company’s results of operations, cash flows or financial position.”

In the same filing, the company disclosed that “on September 27, 2016, Gordon Coburn resigned from his position as President of Cognizant Technology Solutions Corporation.”

A link?

Perhaps or perhaps not.

On the day of the disclosure, the company’s stock fell 13.3% to $47.71.

Misonix

New York based Misonix, a company that specializes in the development and commercialization of ultrasonic surgical devices, recently disclosed:

“On September 27, 2016 and September 28, 2016, respectively, Misonix, Inc. (the “Company”) contacted the Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) to voluntarily inform both agencies that the Company may have had knowledge of certain business practices of the independent Chinese entity that distributes its products in China, which practices raise questions under the Foreign Corrupt Practices Act (“FCPA”).

The Audit Committee of the Board of Directors of the Company engaged outside counsel to conduct an internal investigation to review these and other matters. The internal investigation is ongoing. The Company has no current information derived from the investigation to date or otherwise to suggest that its previously reported financial statements and results are incorrect in any material respect.

The Company intends to cooperate fully with the DOJ and SEC as the investigation continues. At this stage, the Company is unable to predict what, if any, action the DOJ or the SEC may take or what, if any, penalties or remedial measures these agencies may seek. Any determination that the Company’s operations or activities are not in compliance with existing laws or regulations could result in the imposition of fines, civil and criminal penalties, equitable remedies, including profit disgorgement, and injunctive relief.”

PDVSA-Related

If providing internship and job opportunities to the family members of “foreign officials” is bribery (a position articulated in several recent FCPA enforcement actions) what about paying the legal fees of Venezuelan President Nicolas Maduro’s two nephews?

See here [2] for the Wall Street Journal story about how the payer of the fees has continued to do business with the Venezuela’s government including recently wining a multi-million-dollar contract from state-owned PDVSA.

Lawyers for the nephews are with well-known U.S. law firms.

JP Morgan

The New York Times returns to JP Morgan’s long-standing FCPA scrutiny. According to this article [3]:

“[J]ust as the bank is preparing to settle with federal prosecutors and the Securities and Exchange Commission, another round of scrutiny has emerged.

JPMorgan’s top regulators — the Federal Reserve and the Office of the Comptroller of the Currency — are seeking to impose their own penalties in the China hiring case, according to people briefed on the investigations. In recent days, the Fed sought a $62 million fine from the bank, and the O.C.C. is expected to seek its own punishment, according to the people, who were not authorized to discuss the private negotiations.

Those agencies, which were not previously known to be involved in the case, could announce a settlement alongside the S.E.C. and prosecutors in the coming months.

The Fed and O.C.C. investigations stem from the bank’s efforts to hire the children of China’s ruling elite — and in some cases link those jobs or internships to securing business with Chinese government-run companies. But unlike the S.E.C. and federal prosecutors, the banking regulators are not focused on the bribery aspect of the case, but rather a breakdown in controls and practices that allowed the improper hiring to take place.”

To the extent there is an SEC enforcement action against JP Morgan, it will most certainly focus on the company’s internal controls practices.

Standard Chartered

This previous post [4] highlighted reports that Standard Chartered Plc informed the U.S. Department of Justice about allegations of bribery involving MAXpower Group Pte, an Indonesian power company in which its private-equity division is a minority shareholder.”

According to this Wall Street Journal article [5]:

“The Justice Department is investigating Standard Chart PLCrede over allegations that an Indonesian power company controlled by the London-based bank paid bribes to win contracts. An internal audit at Maxpower Group Pte. Ltd., a power-plant builder in Southeast Asia, found evidence of possible bribery and other misconduct, findings that were echoed in a separate review by a law firm hired by Maxpower, according to copies of those reports reviewed by The Wall Street Journal. U.S. prosecutors are looking into whether Standard Chartered is culpable for not stopping the alleged misconduct, people with knowledge of the investigation said. Maxpower’s chief executive worked at Standard Chartered until last year, and the bank holds three seats on the power company’s board.”

For a related Wall Street Journal article, see here [6].