Top Menu

What You Need To Know From Q1

Q1

This post provides a summary of Foreign Corrupt Practices Act enforcement activity and related developments from the first quarter of 2016.

DOJ Enforcement (Corporate)

The DOJ brought 3 corporate FCPA enforcement actions in the first quarter. DOJ recovery in these actions was approximately $267 million (after accounting for various credits and deductions in the VimpelCom action).

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

PTC Entities (February 16th)

See here and here for prior posts

Charges:  None

Resolution Vehicle:  NPA against the following PTC entities: Parametric Technology (Shanghai) Software Co. Ltd. and Parametric Technology (Hong Kong) Limited

Guidelines Range:  Not set forth in the NPA

Penalty:  $14.5 million

Origin: The NPA states: “Although the Companies, through their parent corporation PTC Inc., reported to the Office in 2011 certain misconduct identified through a then-ongoing internal investigation, they did not voluntarily disclose relevant facts known to PTC Inc. at the time of the initial disclosure until the Office uncovered salient facts regarding the Companies’ responsibility for the improper travel and entertainment expenditures at issue independently and brought them to the Companies’ attention, after which the Companies disclosed information that they had learned as part of an earlier internal investigation”

Monitor:  No

Individuals Charged:  No

Vimpelcom (February 18th)

See here, here, and here for prior posts

Charges:  Unitel LLC – conspiracy to violate the FCPA’s anti-bribery provisions; VimpelCom Ltd – conspiracy to violate the FCPA’s anti-bribery and books and records provisions and a separate count of violating the FCPA’s internal controls provisions.

Resolution Vehicle:  Unitel – plea agreement; VimpelCom – DPA

Guidelines Range:  Unitel – $732 million to $1.46 billion; VimpelCom – $836 million to $1.67 billion

Penalty:  $460.3 million (reduced to $230.1 million after accounting for various credits and deductions)

Origin:  Unclear from the resolution documents

Monitor:  Yes

Individuals Charged:  No

Olympus Latin America (March 1st)

See here and here for prior posts

Charges:  Conspiracy to violate the FCPA’s anti-bribery provisions and violating the FCPA’s anti-bribery provisions

Resolution Vehicle:  DPA

Guidelines Range:  $28.5 million – $57 million

Penalty:  $22.8 million

Origin: Unclear from the resolution documents

Monitor:  Yes

Individuals Charged:  No

DOJ Enforcement (Individual)

In connection with a 2015 individual FCPA enforcement action involving Venezuela’s state-owned and state-controlled energy company, Petroleos de Venezuela S.A. (see here) the DOJ unsealed additional charges against Moises Abraham Millan Escobar (Millan), a former employee of Abraham Shiera, an individual previously charged in 2015.

SEC Enforcement (Corporate)

The SEC brought 7 corporate FCPA enforcement actions in the first quarter. SEC recovery in these actions was approximately $231 million (after accounting for various credits and deductions in the VimpelCom action).

Of the 7 corporate enforcement actions, 6 were resolved via administrative cease and desist orders. Of the 7 corporate enforcement actions, 3 enforcement actions have resulted in related individual charges.

SAP (February 1st)

See here and here for prior posts

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

Settlement:  Approximately $3.9 million (disgorgement of $3.7 million and prejudgment interest of $188,896)

Origin:  The SEC’s order states “when SAP learned of the conduct as a result of the SEC’s inquiry, SAP conducted a thorough internal investigation and extensively cooperated with the SEC’s investigation …”

Individuals Charged: Yes – in August 2015 Vicente Garcia (a former head of Latin American sales for SAP) resolved a parallel DOJ / SEC FCPA enforcement action based on the same conduct (see here for the prior post).

Related DOJ Enforcement Action: No

SciClone Pharmaceuticals (February 4th)

See here and here for prior posts

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

Settlement:  $12.8 million ($9,426,000 in disgorgement, prejudgment interest of $900,000 as well as a $2.5 million civil penalty)

Origin:  SEC subpoena

Individuals Charged: No

Related DOJ Enforcement Action: No

PTC (February 16th)

See here and here for prior posts

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

Settlement:  $13.7 million ($11.9 million in disgorgement and $1.8 in prejudgment interest)

Origin:  The SEC’s order states: “PTC only discovered the improper payments to or for the benefit of Chinese government officials in 2011, while investigating complaints concerning a senior PTC-China salesperson. Upon learning this information, PTC, with the oversight of the Audit Committee of the Board of Directors, engaged independent counsel and an independent forensic consulting firm to undertake an investigation. PTC voluntarily self-reported the results of its internal investigation to the Commission and responded to information requests from the Commission staff. PTC did not, however, uncover or disclose the full scope and extent of PTC-China’s FCPA issues until 2014.”

Individuals Charged: Yes

Related DOJ Enforcement Action: Yes

VimpelCom (February 18th)

See here, 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: $167.5 million in disgorgement (after accounting for various credits and deductions)

Origin:  Unclear from the resolution documents

Individuals Charged: No

Related DOJ Enforcement Action: Yes

Qualcomm (March 1)

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: $7.5 million civil penalty

Origin:  Qualcomm’s FCPA scrutiny was, at least partially, related to September 2010 formal order of private investigation from the SEC that arose from a “whistleblower’s” allegations made in December 2009 to the audit committee of the Company’s  Board of Directors and to the SEC. As Qualcomm previously disclosed, “the audit committee completed an internal review of the allegations with the assistance of independent counsel and independent forensic accountants. This internal review into the whistleblower’s allegations and related accounting practices did not identify any errors in the Company’s financial statements.” More directly related to the FCPA scrutiny, according to Qualcomm’s previous disclosure: “On January 27, 2012, the Company learned that the U.S. Attorney’s Office for the Southern District of California/DOJ has begun a preliminary investigation regarding the Company’s compliance with the Foreign Corrupt Practices Act (FCPA), a topic about which the SEC is also inquiring.”

Individuals Charged: No

Related DOJ Enforcement Action: No

Nordion (March 3)

See here and herefor prior posts

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

Settlement: $375,000 civil penalty

Origin:  Voluntary disclosure

Individuals Charged: Yes

Related DOJ Enforcement Action: No

Novartis (March 23)

See here and here for prior posts

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

Settlement:  $25 million ($23 million in disgorgement and prejudgment interest and a $2 million penalty)

Origin:  The resolution documents state: “n connection with the SEC Staff s investigation and in response to media reports concerning a competitor in August 2013, Novartis instituted an expansive review of its relationships in China with travel and event planning vendors”

Individuals Charged: No

Related DOJ Enforcement Action: No

SEC Enforcement (Individual)

The SEC brought FCPA enforcement actions against three individuals.

In connection with the Nordion enforcement action, the SEC also found that Mikhail Gourevitch (a dual Canadian and Israeli citizen who was fired years ago by Nordion) violated the FCPA’s anti-bribery, books and records, and internal controls provisions. Without admitting or denying the SEC’s findings, Gourevitch agreed to pay disgorgement of $100,000, prejudgment interest of $12,950, and a $66,000 civil penalty.

In connection with the PTC enforcement action, the SEC also alleged in a DPA that Yu Kai Yuan (a Chinese citizen who resides in Shanghai and a former employee of the PTC China entities) caused violations of the FCPA’s books and records and internal controls provisions. Without admitting or denying the SEC’s allegations, Yuan agreed to refrain from violating the securities laws and agreed to a so-called “muzzle clause.”

As highlighted in this prior post, the SEC found in an administrative cease and desist order that Ignacio Cueto Plaza, the current CEO of LAN airlines, caused books and records and internal controls violations by LAN, that Cueto also knowingly circumvented or knowingly failed to implement a system of internal accounting controls or knowingly falsified book, record or account, and that Cueto also violated falsified or cause to be falsified, a book, record, or account.  Without admitting or denying the SEC’s findings, Cueto agreed to cease and desist from future legal violations and agreed to pay a $75,000 civil penalty.

Other Developments or Items of Interest

While not an FCPA case, this post highlights how the Supreme Court recently agreed to hear a domestic corruption appeal to address the meaning of “official action” (a term also used in the FCPA).

This post asks “why does the SEC even have an FCPA unit?”

Perhaps you’ve noticed the emergence of the term “compliance 2.0″ in the Foreign Corrupt Practices Act space and beyond? This post asserts that “compliance 2.0” is mostly a meaningless buzzword.

This post highlights the “alter ego” theories advanced by the SEC in the SciClone and PTC enforcement actions.

This post contains a Q&A on the uncomfortable truths and double standards of U.S. bribery enforcement.

This post is a must read for anyone interested in learning how FCPA enforcement statistics are often distorted.

As highlighted in this post, in what is believed to be a first, a federal court judge construed the the rarely implicated “public international organization” prong of the FCPA’s “foreign official” definition.

As highlighted in this post, despite much talk about the importance of transparency, the DOJ continues to block public release of the Siemens’ monitor report, a condition of settlement from the still record-setting $800 million FCPA enforcement action against Siemens in 2008.

The new FCPA Professor contains a new feature – the FCPA Flash Podcast. In this episode, Paul Pelletier, a former Principal Deputy Chief of the DOJ’s fraud section, discusses the long time periods often associated with FCPA inquiries, FCPA investigative costs, and how the DOJ can best allocate its resources to fight bribery. In this episode, Paul Calli (an FCPA practitioner who prevailed against the DOJ on behalf of a client at trial) discusses the DOJ’s rather dismal FCPA trial court record and what it says about the DOJ’s modern FCPA enforcement program and how the DOJ measures success.

Powered by WordPress. Designed by WooThemes