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Scrutiny Alerts And Updates

scrutiny alert

This post highlights scrutiny alerts and updates regarding ABB Ltd. and former Florida congressman David Rivera.


As highlighted in this prior post, in early 2017  it was reported that ABB (a Swiss-based power and automation technology company) was cooperating with law enforcement authorities in the U.S. and the U.K. following a voluntary disclosure regarding its past dealings with Unaoil.

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Will ABB Become a THREE-Time FCPA Violator?


As highlighted in recent posts here and here, there are several companies in the FCPA repeat offender club.

ABB (a Swiss-based power and automation technology company) may become a three-time FCPA violator.

First, some relevant background.

The first time ABB resolved a Foreign Corrupt Practices Act enforcement action was in 2004 concerning conduct in Nigeria, Angola and Kazakhstan. The $16.4 million enforcement action involved an SEC component ($5.9 million) and a DOJ component ($10.6 million).

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Meaningless Settlement Language?

Previous posts (here and here) have discussed scrutiny of SEC resolution procedures in the SEC v. Citigroup case.  Although not an FCPA enforcement action, the SEC policies (such as settlement via neither admit nor deny language) being questioned by Judge Jed Rakoff (S.D.N.Y.) are the same in SEC FCPA enforcement actions.  Thus, Judge Rakoff’s questions are relevant to SEC FCPA enforcement.

A typical SEC FCPA enforcement action involves a permanent injunction prohibiting future FCPA violations – see here for the recent Comverse SEC FCPA enforcement action containing such language.  In this prior post regarding Diebold’s FCPA disclosure, I noted that Diebhold was already subject to an injunction prohibiting future FCPA violations (as a result of a non-FCPA FCPA enforcement action) and  I asked whether Diebold was in jeopardy of violating that injunction. 

If Diebold does indeed become a repeat offender, it will have company.  For instance, in 2004 ABB Ltd. resolved an FCPA enforcement action (see here) and “consented to the entry of a final judgment enjoining it from future FCPA violations.”  In 2010, ABB Ltd. again agreed to resolve an FCPA enforcement action – see here for the prior post.  So much for that permanent injunction thing.   Likewise, in 2001 Baker Hughes resolved an FCPA enforcement action (see here) and was ordered to cease and desist from any future FCPA violations.   In 2007, Baker Hughes again agreed to resolve an FCPA enforcement action – see here.  So much for that cease and desist thing.

Thus, Judge Rakoff’s question in the Citigroup action – whether SEC injunctions against future violations have any meaning is a good question.  Specifically, Judge Rakoff requested an answer to the following question.  “The proposed judgment imposes injunctive relief against future violations.  What does the SEC do to maintain compliance?  How many contempt proceedings against large financial entities has the SEC brought in the past decade as a result of violations of a prior consent judgment?”

In its Citigroup brief the SEC responded as follows.

“Civil contempt is a remedy available to the SEC in the event either (1) that a defendant is engaging in an ongoing violation of an injunction, or (2) compensation is due the SEC as a result of a defendant’s violation of an injunction.  Because alternative effective remedies often are available, including the filing of an independent action with corresponding legal and equitable relief, the Commission has not frequently pursued civil contempt proceedings and does not appear to have initiated such proceedings against a ‘large financial entity’ in the last ten years.  However, prior unlawful conduct by a corporate entity is considered in determining the appropriate penalty in any subsequent enforcement action.”

For additional information see this recent New York Times article from Edward Wyatt.


More On ABB

Deferred prosecution agreements (DPAs) tend to be interesting reads. Often times, a DPA raises more questions than it answers.

The recent ABB Ltd. DPA (here) is no exception.

The DOJ and SEC recently announced a wide ranging enforcement action against ABB Ltd. and its subsidiaries ABB Inc., and ABB Ltd. – Jordan (see here for the prior post).

This post discusses the ABB Ltd. DPA as well as the ABB Inc. plea agreement.

The short summary is as follows: the DOJ resolution concerns Iraq Oil-for-Food conduct as well as conduct in Mexico. However, the DPA is clear that there was “other misconduct” as well and that “corrupt payments” were made by ABB sudsidiaries “in various countries around the world.” ABB Ltd. agrees to pay a total monetary penalty of $30.4 million – the “bottom of the applicable combined Sentencing Guidelines fine range for ABB Inc. [Mexico conduct] and ABB Ltd – Jordan [Iraqi Oil for Food conduct].” As is common in DPA’s, ABB Ltd. agrees to forever say silent about any issues contradicting the facts of the settlement in exchange for the DOJ agreeing to defer prosecution of the criminal charges. In exchange, the DOJ “agrees to cooperate with ABB Ltd.” and tell any “governmental and other debarment authority” about how “extraordinary” ABB Ltd’s “cooperation and remediation” was in the enforcement action.

No wonder DPAs are controversial.

ABB Ltd. Deferred Prosecution Agreement

The DPA has a term of three years. [A DPA is a less harsh resolution to an FCPA enforcement action because, while the criminal charges are technically filed, the charges are deferred or not prosecuted during the term of the DPA.] If ABB abides by its obligations under the DPA, the criminal charges (see below) will be dismissed when the DPA’s term expires.

Those obligations include a corporate compliance program meeting certain common elements as set forth in Attachment C of the DPA as well as “Enhanced Corporate Compliance and Reporting Obligations and Condition of Corporate Probation” as set forth in Attachment D of the DPA (described more fully below).

The DPA term, however, may be terminated early “in the event the Fraud Section finds, in its sole discretion, that there exists a change in circumstances sufficient to eliminate the need for the enhanced compliance obligations” set forth in the agreement.

Pursuant to the DPA, ABB “accepted and acknowledged that it is responsible for the acts of its employees, subsidiaries, and agents” as set forth in the ABB Inc. and ABB Ltd. Jordan criminal informations (see here and here).

According to the DPA, the DOJ agreed to enter into the agreement with ABB based on the following factors: “(a) following discovery of the bribery, ABB Ltd. and ABB Inc. voluntarily and timely disclosed to the Fraud Section and the [SEC] the misconduct” set forth in the informations; “(b) ABB Ltd. conducted a thorough internal investigation of that and other misconduct; (c) ABB Ltd. regularly reported all of its findings to the Fraud Section and SEC; (d) ABB Ltd. cooperated in the Fraud Section’s investigation of this matter, as well as the related SEC investigation; (e) ABB Ltd. undertook substantial remedial measures, including those recommended by the independent compliance consultant engaged after ABB Vetco Gray Inc. and ABB Vetco Gray UK Ltd. settlement in 2004 with the Fraud Section and SEC and the implementation of an enhanced compliance program, and agreed to undertake further remedial measures as contemplated by this Agreement; and (f) ABB Ltd. agreed to continue to cooperate with the Fraud Section subject to applicable law and regulation in any ongoing investigation of the conduct of ABB Ltd. and its employees, agents, consultants, contractors, subcontractors, and subsidiaries relating to violations of the FCPA.” (emphasis added).

The DPA further notes that “ABB Ltd’s cooperation during this investigation has been extraordinary.”

According to the ABB Inc. plea agreement (here), “the extraordinary cooperation” of ABB Ltd. and ABB Inc. “had lead, in part, to the guilty plea by ABB Inc. agent Fernando Maya Basurto […] and the indictment of former ABB Inc. General Manager John Joseph O’Shea …” (see here for more).

According to the DPA, the fine range under the advisory U.S. Sentencing Guidelines for ABB Inc’s conduct was $28.5 million – $57 million; for ABB Ltd. – Jordan’s conduct $1.92 million – $3.2 million. The combined fine range was thus $30.42 million – $60.2 million.

ABB Ltd. agreed to pay a total monetary penalty of $30.42 million “or the bottom of the applicable combined Sentencing Guidelines fine range for ABB Inc. and ABB Ltd – Jordan.”

The DPA states that “the Fraud Section and ABB Ltd. further agree that a fine at the bottom of the applicable combined Sentencing Guidelines fine range is appropriate given the nature and extent of ABB Ltd’s extraordinary cooperation in this matter, including sharing information with the Fraud Section regarding evidence obtained as a result of ABB Ltd’s extensive investigation of corrupt payments made by ABB subsidiaries in various countries around the world.” (emphasis added).

Paragraph 22 of the DPA contains this clause:

“With respect to ABB Ltd’s present reliability and responsibility as a government contractor, the Fraud Section agrees to cooperate with ABB Ltd., in a form and manner to be agreed, in bringing facts relating to the nature of the conduct underlying this Agreement and to ABB Ltd’s and ABB Inc’s extraordinary cooperation and remediation to the attention of governmental and other debarment authorities, including the [Multilateral Development Banks] or other entities, as requested.” The ABB Inc. plea agreement contains the same provision.

The DPA, as most commonly do, forever muzzles ABB or “its attorneys, directors, employees, agents, or any other person authorized to speak for ABB” for making any public statement contradicting the acceptance of responsibility by ABB.” Similarly, the ABB Inc. plea agreement contains this clause: “the defendant agrees that if it or its parent corporation issues a press release in connection with this Agreement, the defendant shall first consult the Fraud Section to determine whether the text of the release is acceptable, and shall only issue a release that has been deemed acceptable to the Fraud Section.” In the U.K. Serious Fraud Office enforcement action against Innospec, Lord Justice Thomas specifically criticized this feature of settlement (see here) and Richard Alderman recently stated in my Q&A with him (see here) that that the “SFO will not be doing this again.”

Attachment D of the DPA is titled “Enhanced Corporate Compliance and Reporting Obligations and Condition of Corporate Probation”

It begins by stating:

“AB will continue to implement and adhere to the 101 compliance program elements recommended by the Independent Compliance Consultant in the Report of the Independent Consultant to ABB Ltd, Securities and Exchange Commission v. ABB Ltd, Civ. Action No. 04-1141 (D.D.C. July 23, 2007) (revised in December 2007), except where not possible because of local law.”

It then contains an extensive list of things ABB will continue to implement relating, but not limited to: risk assessments and audits; acquisitions; business model modification such as “eliminat[ing] the use of ABB Representatives whenever possible;” relationships with third parties; gift, travel, and entertainment; complaints, reports, and compliance issues; training; and certification.


A future post will highlight how the above FCPA enforcement actions against ABB Ltd. and certain of its subsidiaries was not the first time ABB Ltd. and those within its corporate hierachy have settled FCPA enforcement actions.

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