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Cognizant’s $95 Million Ripple

Ripple

Foreign Corrupt Practices Act settlement amounts are one obvious consequence of alleged FCPA non-compliance and tend to generate the most headlines.

However, as has been discussed on these pages for years  including in this article “FCPA Ripples”, settlement amounts are only one consequence of the overall financial ramifications of FCPA scrutiny and enforcement.

As highlighted in this prior post, in early 2019 Cognizant Technology Solutions, without admitting or denying the SEC’s findings, resolved a $25 million SEC enforcement action in connection with various licenses and permits in India. To get to that point, the company spent approximately $75 million in pre-enforcement action professional fees and expenses. (See here).

Like many instances of FCPA scrutiny and enforcement, Cognizant was also hit with a variety of civil lawsuits by shareholders. (See here).

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Senators Renew Request That CFIUS Review U.S. Transactions Of FCPA Violator

JBS

As highlighted in this prior post, in October 2020 J&F Investimentos S.A. (a private investment holding company based in Brazil that owns approximately 250 companies primarily involved in the meat and agriculture business) and a related entity JBS as well as J&F owners Joesley Batista and Wesley Batista resolved a net $155 million Foreign Corrupt Practices Act enforcement action for allegedly bribing Brazilian officials.

Recently, in this letter to Secretary of Treasury Janet Yellen, U.S. Senators Marco Rubio (R-FL) and Bob Menendez (D-NJ) renewed their request that the Committee on Foreign Investment in the United States (CFIUS) conduct a formal review of the transactions of Brazilian meatpacking conglomerate JBS S.A., its holding company J&F Investimentos, and any entity owned or controlled by Wesley and Joesley Batista.

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Ericsson’s $97 Million Ripple

Ripple

Foreign Corrupt Practices Act settlement amounts are one obvious consequence of FCPA non-compliance and tend to generate the most headlines.

However, as has been discussed on these pages for years  including in this article “FCPA Ripples”, settlement amounts are only one consequence of the overall financial ramifications of FCPA scrutiny and enforcement.

As highlighted in this prior post, in late 2019 Swedish telecom company Ericsson (a company with American Depositary Shares traded in the U.S.) resolved a $1.06 billion net FCPA enforcement action concerning conduct in Djibouti, China, Vietnam, Kuwait, Indonesia, and Saudi Arabia.

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Vitol’s FCPA Ripples

Ripple

Foreign Corrupt Practices Act settlement amounts are one obvious consequence of FCPA non-compliance and tend to generate the most headlines. However, as has been discussed on these pages for years  including in this article titled “FCPA Ripples”, settlement amounts tend to be a relatively modest consequence of the overall financial ramifications of FCPA scrutiny and enforcement.

Pre-enforcement action professional fees and expenses are often 3-5 times (and sometimes higher) the actual FCPA settlement amount and post-enforcement action professional fees and expenses quickly add up as well. In addition, many instances of FCPA scrutiny and enforcement result in shareholder litigation – whether a derivative action against officers and directors for alleged breaches of fiduciary duty and/or a securities fraud action.

And then there can be numerous other business effects as the below example concerning Vitol demonstrates.

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Potpourri

Potpourri

FCPA Whistleblower Bounty?

The SEC recently announced “an award of over $5 million to joint whistleblowers whose tip caused the opening of an investigation that resulted in a successful enforcement action.” According to the SEC,  “the whistleblowers provided significant information about misconduct abroad that directly supported certain allegations in the enforcement action.”

The accompanying order is heavily redacted, but does mention that the underlying enforcement action “involved misconduct abroad” and was resolved through an administrative proceeding.

My guess is that the underlying action was likely an FCPA enforcement action. If true, this would be rare instance of a bounty being paid out in connection with an FCPA enforcement action.

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