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Friday Roundup

Roundup

Guilty plea, scrutiny alerts and updates, SEC Director of Enforcement to leave, sound analysis of the JPMorgan enforcement action, and for the reading stack.

It’s all here in the Friday roundup.

Mebiame Guilty Plea

As highlighted in this previous post, in August 2016 the DOJ unsealed a criminal complaint charging Samuel Mebiame, a Gabonese national connected to Och-Ziff, with conspiracy to violate the FCPA’s anti-bribery provisions. In pertinent part, the complaint alleged that Mebiame, on behalf of Och-Ziff and related entities, routinely paid bribes to foreign government officials in at least each Niger, Guinea and Chad.”

Today, the DOJ announced that Mebiame pleaded guilty.

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Friday Roundup

Roundup

As we say not as we do, scrutiny alerts and updates, and further RIP to the “Arthur Andersen effect.” It’s all here in 200th edition of the Friday roundup.

As We Say, Not As We Do

This previous post highlighted the April Fools’ Day 2015 SEC enforcement action against KBR for its non-existent, theoretical muzzling of individuals in certain employment agreements. According to the SEC, this violated SEC Rule 21F-17, which provides in relevant part: (a) No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications.”

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DOJ Determines That Biomet Has Breached Its Prior FCPA DPA

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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.”

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In Times Like These, We Need To Ask: Is The FCPA Effective?

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In passing the Foreign Corrupt Practices Act, Congress anticipated that the “criminalization of foreign corporate bribery will to a significant extent act as a self-enforcing preventative mechanism.” Likewise since the FCPA’s earliest days, the DOJ has recognized that the “most efficient means of implementing the FCPA is voluntary compliance by the American business community.”

In short, the FCPA was never intended to be just a mechanism to achieve “hard enforcement” (actual enforcement actions), but more a mechanism to achieve “soft enforcement” (compliance) in furtherance of the statutory objective of  reducing bribery and corruption. Indeed, as stated by the Sixth Circuit in Lamb v. Phillip Morris Inc., 915 F.2d 1024 (1990) and repeated by several other courts, the FCPA’s statutory scheme “clearly evinces a preference for compliance in lieu of prosecution.”

Yet, as the FCPA nears its 40th anniversary those in this space need to start asking the question of whether the FCPA – as currently written and currently enforced – has been effective?

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Two Thoughts Regarding The Extension Of Biomet’s DPA

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One reason to read FCPA Professor is it allows you to stay ahead of the curve and gain insight into the issues others will be talking about months or years later.

For instance, this July 2014 post highlighted how Biomet’s 2013 deferred prosecution agreement (concerned alleged conduct in Brazil, Argentina, and China) was at risk of being extended based on the company’s additional FCPA scrutiny in Brazil and Mexico.

Sure enough, recently Biomet disclosed:

“On March 13, 2015, the DOJ informed Biomet that the DPA and the independent compliance monitor’s appointment have been extended for an additional year.

Pursuant to the DPA, the DOJ has sole discretion to determine whether conduct by Biomet constitutes a violation or breach of the DPA. The DOJ has informed Biomet that it retains its rights under the DPA to bring further action against Biomet relating to the conduct in Brazil and Mexico disclosed in 2014 or the violations set forth in the DPA. The DOJ could, among other things, revoke the DPA or prosecute Biomet and/or the involved employees and executives. Biomet continues to cooperate with the SEC and DOJ and expects that discussions with the SEC and the DOJ will continue.”

Two thoughts regarding the extension of Biomet’s DPA.

First, the extension makes the DOJ look foolish.

Why?

Well, for many years the DOJ advanced the policy position that DPAs (and NPAs) “have had a truly transformative effect on particular companies and, more generally, on corporate culture across the globe.” (See here for the prior post). Specifically in the FCPA context, the DOJ stated that “the companies against which DPAs and NPAs have been brought have often undergone dramatic changes.”  (See here for the prior post).

Yet, Biomet’s post FCPA enforcement action FCPA scrutiny puts it in a category of several other companies (such as Orthofix International, Willbros Group, Marubeni, Diebold, IBM, Tyco, Aibel Group, and Ingersoll-Rand) that have become the subject of additional scrutiny or enforcement after resolving FCPA enforcement actions through a DPA or agreeing to an SEC permanent injunction.

Second, and completely distinct from the first point, is the extension of the Biomet DPA shows how difficult FCPA compliance can be.

Why?

Because Biomet’s post FCPA enforcement action FCPA scrutiny demonstrates that not even companies with the greatest incentive to comply with the FCPA because they are:

(i) subject to post-enforcement action compliance obligations; and

(ii) subject to “double prosecution” for failure to do so

are able to ensure FCPA compliance across its business organization or eliminate FCPA scrutiny.  In short, FCPA compliance can not be guaranteed in a business organization, rather steps can be taken that only minimize the risk of non-compliance occurring.

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