This post highlights FCPA enforcement actions concerning conduct (in whole or in part) in South Korea, North Korea and Japan.
The enforcement action concerned conduct in South Korea and Vietnam.
As to South Korea, the allegations were: “From at least 2009 through 2017, high-level executives of KT maintained slush funds, comprised of both off-the-books accounts and physical stashes of cash, in order to provide items of value to government officials, among others. These included gifts, entertainment and, ultimately, illegal political contributions to members of the Korean National Assembly serving on committees relevant to KT’s business.” “Between 2015 and 2016, KT made payments of over $1.6 million to three organizations at the request of high-level government officials. KT paid $972,616 to Foundation A, described as a foundation for the promotion of Korean culture, and $603,791 to Foundation B, described as a foundation for the promotion of sports. A close associate of a senior Korean government official set up both foundations, and the payments were made at the behest of the Blue House, Korea’s presidential residence and office. The third payment, of $88,420 to another organization, Association C concerning e-Sports, was solicited by a member of Korea’s National Assembly who served on legislative committees important to KT’s business. All of these payments were booked incorrectly, either as charitable donations or as a sponsorship.”
The enforcement action concerned conduct in Greece, Vietnam and South Korea.
As to South Korea, the allegations were: “Between 2011 and August, 2016, Novartis Korea employees made corrupt payments to HCPs to increase prescriptions and sales of Novartis products over that of its competitors. These payments were made through one of several means, and each of which was improperly recorded in Novartis’ consolidated books and records. One scheme to make improper payments to HCPs was disguised as payments made for ostensible medical journal activities organized by a third party vendor.
“In another scheme, Novartis Korea sales managers and employees organized the sponsorship of HCPs to international medical conferences as an inducement for HCPs to increase their prescriptions of Novartis products. Between 2011 and August 2016, Novartis Korea provided funding for 2,032 HCPs to attend 381 international conferences at a combined cost of approximately $7 million.
In yet a third scheme, Novartis Korea employees in the neuroscience business unit devised a local non-interventional clinical study with 17 pre-selected HCPs to improve relationships with those HCPs. The study was organized in May 2013 through a local medical journal with Novartis Korea providing the list of HCPs to participate and the $100,000 funding necessary to complete the study. Novartis Korea recorded the funding to complete the study as advertising expenses and failed to have the study reviewed and approved by medical affairs as required by internal procedures. Over the relevant time period, Novartis was unjustly enriched by over $13.8 million from the improper conduct in Korea.”
The enforcement action concerned conduct in Russia, Azerbaijani, China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia.
In South Korea, the allegations were: “From at least 2009 to 2015 in connection with business meetings, Pratt provided improper entertainment and leisure travel for up to five officials of the Republic of Korea Air Force (“ROKAF”) on seven occasions. At the time, ROKAF was purchasing aftermarket spare parts and repair services from Pratt under short-term contracts, and Pratt was seeking to enter into a long-term contract to facilitate greater predictability. The leisure travel provided to the ROKAF officials was approved with little or no required review. On those occasions when Legal reviewed the contracts, it failed to identify the FCPA risks presented by sponsored travel. Furthermore, when Pratt supervisors reviewed the travel as required, they failed to note basic red flags such as travel to tourist destinations, including Orlando, FL, where Pratt did not have facilities. Most of the trips included a ROKAF senior official, who would attend only one meeting and then spend the remainder of the trip engaged in leisure activities. Pratt and ROKAF entered into a long-term services contract in November 2012, and the improper travel of ROKAF officials continued. Pratt spent over $26,000 on entertainment and leisure travel for ROKAF officials during this period.
The enforcement action concerned conduct in South Korea and China.
As to South Korea, the allegations focused on various “things of value” provided to alleged South Korean “foreign officials” including shopping bags filled with thousands of dollars, cash-filled envelopes exchanged in parking lots and free personal computers, and travel and entertainment expenses. Such “things of value” were: “in exchange for designating IBM-Korea a preferred supplier of mainframe computers to [an alleged government entity] and for placing orders with IBM-Korea at higher prices;” “in exchange for (1) maintaining IBM-Korea as the supplier of mainframe computers to [an alleged government entity]; and (2) for helping an IBM-Korea business partner win bids to supply mainframe computers and storage equipment to [an alleged government entity] worth more than [$21 million]; “in exchange for [an alleged “foreign official’s] assistance to IBM-Korea in obtaining a contract with [an alleged government entity] worth approximately [$13 million] for the installation of a mainframe computer in 2002;” “to entice [foreign official’s] to purchase IBM products:” “to win a contract to supply 657 (later increased to 825) personal computers valued at [approximately $1.4 million]; “in exchange for providing LG-IBM with certain confidential information regarding the product specifications on [an alleged government entity’s] request for procurement;” “to persuade employees of [an alleged government entity] to purchase IBM products;” and to entice alleged foreign officials “to purchase IBM products or to provide information to assist LG-IBM in the bidding process.”
The enforcement action concerned conduct in India, Thailand, and South Korea.
As to South Korea, the allegations were: “Diageo had significant tax and customs issues in South Korea. In April 2003, DK, under Diageo’s direction, requested from South Korea a more advantageous formula for calculating the transfer pricing, for tax purposes, of Windsor Scotch whiskey that DK was importing into South Korea. As part of those negotiations, DK also sought tens of millions of dollars in tax rebates based on a claim that DK had overpaid under the then existing transfer pricing formula. In April 2004, following a year of intense negotiations and lobbying by DK, the South Korean government granted DK a rebate of approximately $50 million. In July 2004, three months after DK received the tax rebates, a DK manager (the “Manager”) paid an apparent reward of 100 million KRW ($86,339) to a Korean Customs Service official (the “Customs Official”) who had played a key role in the transfer pricing negotiations. “During the course of the transfer pricing negotiations in 2003 and 2004, DK also paid $109,253 in travel and entertainment costs for Korean customs and other government officials. Some of these expenses were unapproved and constituted improper inducements of the South Korean officials.
The enforcement action concerned conduct in China, South Korea, Malaysia and the United Arab Emirates.
As to South Korea, the allegations concerned conduct with individuals associated with Korea Hydro and Nuclear Power (an alleged state-owned or state-controlled enterprise in South Korea).
The enforcement action concerned conduct in China and South Korea.
As to South Korea, the allegations were: “In addition to making improper payments for scrap metal sales to government owned steel mills in China, Schnitzer paid bribes to managers of privately owned steel mills in China and South Korea. Schnitzer falsely described the payments as “sales commissions,” “commission to the customer,” “refunds,” or “rebates” in Schnitzer’s books and records. Schnitzer paid managers of the privately owned South Korean steel mills approximately
$1,273,000 in bribes from 1999 to 2004 to induce them to purchase scrap metal from Schnitzer. From 1999 to 2004, SSI Korea also earned $1,513,097 in commissions for brokered sales on behalf of Japanese companies in which such kickbacks were paid. Schnitzer also provided noncash gifts to general managers of Korean customers.”
North Korea
The enforcement action concerned conduct in China, Croatia, Egypt, North Korea, Greece, Hungary, Indonesia, Iraq, Ivory Coast, Latvia, Nigeria, Russia, Serbia and Montenegro, Thailand, Turkey, Turkmenistan, Uzbekistan, and Vietnam.
As to North Korea, the allegations were that a subsidiary entered into contracts for the sale of buses to Mangyong Trading Corporation (and alleged instrumentality of the North Korean government) and that in connection with the contract the subsidiary made an improper payment of 2% of the contract value to an executive of Mangyong Trading Corporation, who was also a director for the state-owned bank involved in the deal.
Japan
The enforcement action concerned conduct in Japan and the allegations were in connection with “a widespread bribery scheme to influence numerous foreign government officials, including members of Japan’s parliament, in its effort to enter the Integrated Resort (“IR”) market and obtain licensing to establish an IR casino in Japan (“the IR project”). At the time, Japan had recently lifted its longstanding ban on casinos and passed legislation to legalize gambling. The scheme included illicit payments of approximately $2.5 million in the form of fees and reimbursements to sham consultants, cash bribes to IR decision makers, and entertainment and extravagant trips for Japanese officials.” Based on the same core conduct, Zhengming Pan (a Chinese national and the former CEO of 500.com) was also criminally charged.
