The article “Measuring the Impact of NPAs and DPAs on FCPA Enforcement” chronicles the DOJ’s use of alternative resolution vehicles to resolve alleged instances of FCPA violations by business organizations.
In doing so, the article highlights how the DOJ has gone beyond justifying its extensive use of NPAs and DPAs to championing their use to resolve alleged instances of corporate crime. Who can forget former DOJ Assistant Attorney General Lanny Breuer’s assertion that such agreements “have had a truly transformative effect on particular companies and, more generally, on corporate culture across the globe.”
Breuer further stated: “The result has been, unequivocally, far greater accountability for corporate wrongdoing — and a sea change in corporate compliance efforts.”
As highlighted in the article, the DOJ’s policy justification for NPAs and DPAs rings hollow as there is no data to suggest that resolving alleged instances of corporate criminal liability through NPAs or DPAs achieves any meaningful deterrence.
As further highlighted in the article through reference to specific companies, despite the DOJ’s statement that companies resolving FCPA enforcement actions through NPAs or DPAs have “undergone dramatic changes,” several companies that resolved FCPA enforcement actions through alternative resolution vehicles have subsequently resolved additional FCPA enforcement actions or become the subject of additional FCPA scrutiny.
Add Biomet to this list.
In terms of background, as highlighted in this prior post, in 2012 Biomet resolved parallel DOJ and SEC FCPA enforcement actions concerning alleged conduct in Argentina, Brazil and China by agreeing to pay $22.8 million ($17.3 million via a DOJ deferred prosecution agreement, and $5.5 million via a settled SEC civil complaint).
The DPA contained the standard breach clause under which if the DOJ determines, in its sole discretion, that Biomet committed a felony under federal law, Biomet “shall therefore” be subject to criminal prosecution for any federal criminal violation of which the DOJ has knowledge, including the deferred charges.
As highlighted here, in 2015 the term of the DPA was extended and in recent months Biomet disclosed that the DOJ may determine the company breached the DPA because of additional FCPA issues.
Earlier this month, the DOJ filed a status report in the case which states in full as follows.
“On March 26, 2012, Biomet, Inc. (“Biomet”), entered into a Deferred Prosecution Agreement (“DPA”) with the government. Pursuant to the terms of the DPA, the government agreed to defer prosecution of Biomet if the company satisfied its obligations under the DPA, including the obligation to implement and maintain a compliance and ethics program designed to prevent and detect violations of the FCPA and other applicable anti-corruption laws throughout its operations. The DPA had a three-year term and could be extended for up to one year if the government determined, in its sole discretion, that Biomet had knowingly violated any provisions of the DPA. Biomet also agreed that an independent compliance monitor would review Biomet’s compliance program to determine whether it was reasonably designed and implemented to detect and prevent violations of the anti-corruption laws and was functioning effectively. As described in a prior filing in this case, the government extended the DPA and the independent compliance monitor’s appointment for one additional year.
On March 18, 2016, the government filed a status report with the Court stating that the government was considering whether Biomet had breached the DPA based on conduct in Brazil and Mexico that was disclosed by the company in 2014 and based on Biomet’s failure to implement and maintain a compliance program designed to prevent and detect violations of the FCPA and other anti-corruption laws. The Court ordered that the government file an additional status report on or before June 6, 2016.
On April 15, 2016, the government notified Biomet that the government had determined that Biomet had breached the DPA based on the conduct in Mexico and Brazil and based on Biomet’s failure to implement and maintain a compliance program as required by the DPA. Biomet has represented that it is committed to continuing to cooperate, and the government and Biomet have been in discussions to resolve this matter which would obviate the need for a trial. Those discussions are ongoing.
At this time, the government does not seek any hearings or any other relief.”
The Biomet example is not the first instance in which a company has breached an FCPA DPA. As highlighted in “Measuring the Impact of NPAs and DPAs on FCPA Enforcement”
“In 2008 Aibel Group Ltd. pleaded guilty to violating the FCPA anti-bribery provisions and “admitted that it was not in compliance with a deferred prosecution agreement it had entered into with the Justice Department in February 2007 regarding the same underlying conduct.” The DOJ release stated: “This is the third time since July 2004 that entities affiliated with Aibel Group have pleaded guilty to violating the FCPA.” Similarly, in 2012 Marubeni Corp. resolved a $54.6 million FCPA enforcement action through a DPA concerning alleged improper conduct in Nigeria.51 In 2014, the company resolved another FCPA enforcement action — an $88 million dollar action concerning alleged improper conduct in Indonesia.”
But don’t forget.
NPAs and DPAs “have had a truly transformative effect on particular companies and, more generally, on corporate culture across the globe. […] The result has been, unequivocally, far greater accountability for corporate wrongdoing — and a sea change in corporate compliance efforts.”
