Category: Investigative Fees

Wal-Mart’s FCPA And Compliance Related Expenses Stand At $738 Million – Expected To Grow To Approximately $850 Million

In its recent 4Q FY2016 earnings call presentation Wal-Mart disclosed $33 million in Foreign Corrupt Practices Act and compliance related expenses ($25 million for ongoing investigations and inquiries and $8 million for global compliance program and organizational enhancements).

Doing the math, Wal-Mart’s 4Q FCPA and compliance-related costs is approximately $520,000 per working day.

Over the past approximate four years, I have tracked Wal-Mart’s quarterly disclosed pre-enforcement action professional fees and expenses.

While some pundits have ridiculed me for doing so, such figures are notable because, as has been noted in prior posts and in my article “Foreign Corrupt Practices Act Ripples,” settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from corporate FCPA scrutiny.

Pre-enforcement action professional fees and expenses are typically the largest (in many cases to a degree of 3, 5, 10 or higher than settlement amounts) financial hit to a company under FCPA scrutiny.

While $520,000 per working day remains eye-popping, Wal-Mart’s recent figure suggests that the company’s pre-enforcement action professional fees and expenses have largely crested as the figures for the past nine quarters have been approximately $470,000, $470,000, $516,000, $563,000, $640,000, $662,000, $855,000, $1.1 million and $1.3 million per working day.

In the aggregate, Wal-Mart’s disclosed pre-enforcement professional fees and expenses are as follows.

FY 2013 = $157 million.

FY 2014 = $282 million.

FY 2015  = $173 million.

FY 2016 = $126 million.

In addition, Wal-Mart disclosed: “in fiscal year 2017, we expect our FCPA-related expenses to range between $100 and $120 million.”

Regardless of what may (or may not) have happened at Wal-Mart approximately 5-10 years ago, it is clear that Wal-Mart has recently become an industry-leader in FCPA compliance best practices.

Should you have any doubt about this, read Wal-Mart’s annual “Global Compliance Program Report” (see here for FY 2015 and here for FY 2014).

The significant investment Wal-Mart has made in FCPA compliance should be relevant as a matter of law in the future if a non-executive employee or agent acts contrary to Wal-Mart’s policies and procedures and in violation of the FCPA.  (See my article “Revisiting a Foreign Corrupt Practices Act Compliance Defense“).

Compliance defense detractors say that such a defense will promote “check-a-box compliance” and a “race to the bottom.”

There is nothing “check-a-box” about spending approximately $250 million over the past four years on FCPA compliance enhancements nor can one credibly argue that if other companies follow Wal-Mart’s enhancements and approach that this is a “race to the bottom.”

The key policy issue is this.

Wal-Mart has engaged in FCPA compliance enhancements in reaction to its high-profile FCPA scrutiny.

Perhaps if there was a compliance defense more companies would be incentivized to engage in compliance enhancements pro-actively.

A compliance defense is thus not a “race to the bottom” it is a “race to the top”  (see here for the prior post) and it is surprising how compliance defense detractors are unable or incapable of grasping this point.

Issues To Consider From The SciClone Enforcement Action

IssuesThis recent post highlighted the SEC’s $12.8 million Foreign Corrupt Practices Act enforcement action against SciClone Pharmaceuticals.

The action was based on the marketing and promotional activities of a subsidiary that provided various things of value to healthcare professionals employed by state-owned hospitals in China including weekend trips, foreign language classes, “golf in the morning and beer drinking in the evening,” and travel to the Grand Canyon and Disneyland.

This post continues the analysis of the enforcement action by highlighting various issues to consider.

Time Line

In August 2010, SciClone disclosed that the SEC had issued the company a subpoena inquiring about its business practices in China.

If the SEC wants the public to have confidence in its SEC enforcement program, it must resolve instances of FCPA scrutiny much quicker. 5.5 years is simply inexcusable.

For instance, SciClone previously disclosed that in “July 2015, SciClone reached an agreement in principle with the staff of the US Securities and Exchange Commission (SEC) for a proposed settlement” and its disclosure specified the exact amount in last week’s settlement.

Should it really take 7 months to finalize an agreement in principle to settle?

Nearing 20

According to my figures, SciClone is the 18th corporate FCPA enforcement action based on the enforcement theory that employees of certain foreign health care systems are “foreign officials” under the FCPA.

This enforcement theory has never been subjected to any meaningful judicial scrutiny and, perhaps most telling as to its validity and legitimacy, is that none of the corporate enforcement actions based on this theory have resulted in related charges against an individual.

Initial Disclosure of Settlement Amount

In March 2014, SciClone disclosed, in connection with its FCPA scrutiny, “that a payment of $2.0 million to the government in penalties, fines and/or other remedies is probable.”

As highlighted above, the final settlement was $12.8 million.

Anything of Value

The enforcement action contains the following list of things of value.

  • “weekend trips, vacations, gifts, expensive meals, foreign language classes, and entertainment”

  • attendance at “the annual Qingdao Beer Festival consisting of golf in the morning and beer-drinking in the evening”

  • “vacations to Anji, China”

  • “paying for family vacations and regular family dinners”

  • “$8,600 in lavish gifts”

  • non-business “travel to Las Vegas and Los Angeles with tours of the Grand Canyon or Disneyland.”

  • “sightseeing and [travel to] tourist locations such as Mt. Fuji.”

  • “a weekend stay on the island of Hainan, a resort destination”

Chinese Travel Companies

Purported travel companies, as well as the fapiao’, are well-known compliance risks in China. On these issues, the SEC’s order states:

“Local Chinese travel companies were routinely hired to provide services (such as arranging transportation, accommodations, and meals for HCPs) in connection with what were ostensibly legitimate conferences, seminars, and other events. In addition to a lack of due diligence for these third party vendors … there was a lack of controls over the events to ensure they had an appropriate business purpose and that the events actually occurred. Many events did not include a legitimate educational purpose or the educational activities were minimal in comparison to the sightseeing or recreational activities.”

[…]

As part of its remedial efforts, SciClone conducted a detailed, comprehensive internal review of promotion expenses of employees … This review found high exception rates indicating violations of corporate policy that ranged from fake fapiao, inconsistent amounts or dates with fapiao, excessive gift or meal amounts, unverified events, doctored honoraria agreements, and duplicative meetings.”

Professional Fees and Expenses

Even though SciClone, in its March 2015 annual report, disclosed for the FY ended December 31, 2013 “$5.3 million related to legal matters associated with the ongoing government investigation and our ongoing improvements to our FCPA compliance efforts,” the company’s other disclosures over its long period of FCPA scrutiny lack specifics regarding pre-enforcement action professional fees and expenses.

Nevertheless, it is a safe assumption that the aggregate of such fees and expenses exceeded the $12.8 million settlement amount. Add to this SciClone’s post-enforcement action reporting obligations and the biggest “winner” of SciClone’s FCPA journey would appear to be the law firm representing SciClone.

Other Ripples

FCPA Professor has followed SciClone’s FCPA scrutiny since day one in August 2010 (see here).

As chronicled on FCPA Professor, the biggest storyline was how SciClone’s disclosure of the SEC subpoena triggered a nearly 40% drop in the company stock price, resulting in an absolute feeding frenzy of plaintiff lawyers filing FCPA-related civil claims. (See here and here).

Indeed, SciClone’s FCPA scrutiny is prominently featured in the article “Foreign Corrupt Practices Act Ripples“ which highlights how settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement in this new era.

Nevertheless, savvy investors know that FCPA-induced dips often present buying opportunities and SciClone’s stock closed last Friday (the first day of trading after announcement of the FCPA enforcement action) up 8% and substantially higher compared to its August 2010 close (recognizing of course that a number of factors can influence a company’s stock price over the course of nearly 6 years).

For Your Viewing Pleasure

In this 2014 video, SciClone’s CEO talks about the company’s FCPA scrutiny and, more generally, compliance.

Friday Roundup

Listening in, for the reading stack, and time served.  It’s all here in the Friday Roundup.

Listening In

This previous post about the $75,000 FCPA enforcement action against Hyperdynamics highlighted that the company spent approximately $12.7 million in pre-enforcement action professional fees and expenses (a shocking 170:1 ratio).

In this recent investor conference call, company executives stated:

“The FCPA investigations restricted our available opportunities to raise capital and significantly increased our legal bills.

[…]

Speaking of legal fees I do want to address the fees we incurred during the FCPA investigation.  As you know, we spent $12 MM from inception to closure of that investigation.  We were unhappily aware that FCPA investigations can take years to conclude but that we only had until September 2016 because of the date for the conclusion of the concession.  We therefore determined that our only option was to do everything in our power to facilitate a resolution of the investigation, and ultimately were able to close the investigations in 20 months. This came at a very heavy legal cost to say the least, but again it was the best option we saw to move forward on the path to drilling the well.”

Dear Hyperdynamics executives and shareholders, you ought to be asking some serious questions about the extent of your pre-enforcement action professional fees and expenses.

To learn more how settlement amounts in an FCPA enforcement action are often only a relatively minor component of the overall financial consequences of FCPA scrutiny and enforcement, see here for “Foreign Corrupt Practices Act Ripples.”

Reading Stack

In 2015, the UC-Davis Law Review and Fordham Law Review both held events focused on bribery and corruption topics. The articles from those events were recently published and are available below.

UC-Davis Law Review

Fordham Law Review

Time Served

In 2013 and 2014 the DOJ brought FCPA and related charges against various individuals associated with broker dealer Direct Access Partners in connection with alleged improper payments to Maria Gonzalez (V.P. of Finance / Executive Manager of Finance and Funds Administration at Bandes, an alleged Venezuelan state-owned banking entity that acted as the financial agent of the state to finance economic development projects).

As recently noted here by Reuters:

“Gonzalez “avoided prison time beyond the 16-1/2 months she already served after admitting that she accepted millions of dollars in bribes from a Wall Street brokerage to which she steered business. Maria de los Angeles Gonzalez de Hernandez, who was a senior official at Caracas-based Banco de Desarrollo Económico y Social de Venezuela, also known as Bandes, was further ordered by U.S. District Judge Denise Cote to forfeit the roughly $5 million she garnered from the scheme. Cote said she was “affected by the degree of remorse” Gonzalez showed in a statement she read to the court through an interpreter. “We’re enormously grateful for the court’s compassion and understanding,” said Jane Moscowitz, Gonzalez’s attorney, after the sentencing.”

Previously in connection with the same core action:

  • Jose Hurtado was sentenced to three years in prison, followed by three years of supervised release, and consented to a $11.9 million forfeiture.

  • Ernesto Lujan was sentenced to two years in prison, followed by three years of supervised release, and consented to a $18.5 million forfeiture.

  • Tomas Clarke was  sentenced to two years in prison, followed by three years of supervised release, and consented to a $5.8 million forfeiture.

  • Benito Chinea was sentenced to four years in prison, followed by three years of supervised release, and consented to a $3.6 million forfeiture; and

  • Joseph DeMeneses was sentenced to four years in prison, followed by three years of supervised release, and consented to a $2.7 million forfeiture.

*****

A good weekend to all.

 

Friday Roundup

Checking in on Wal-Mart’s professional fees and expenses, still pouting, scrutiny alerts and updates, and for the reading stack.  It’s all here in the Friday roundup.

Wal-Mart’s Professional Fees and Expenses

In its recent 3Q FY2016 earnings call Wal-Mart stated:

“FCPA and compliance related costs were approximately $30 million, comprised of $22 million for ongoing inquiries and investigations, and $8 million for our global compliance program and organizational enhancements.”

Doing the math, Wal-Mart’s 3Q FCPA and compliance-related costs is approximately $470,000 per working day.

Over the past approximate four years, I have tracked Wal-Mart’s quarterly disclosed pre-enforcement action professional fees and expenses. While some pundits have ridiculed me for doing so, such figures are notable because, as has been noted in prior posts and in my article “Foreign Corrupt Practices Act Ripples,” settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from corporate FCPA scrutiny.  Pre-enforcement action professional fees and expenses are typically the largest (in many cases to a degree of 3, 5, 10 or higher than settlement amounts) financial hit to a company under FCPA scrutiny.

While $470,000 per working day remains eye-popping, Wal-Mart’s recent figure suggests that the company’s pre-enforcement action professional fees and expenses have crested as the figures for the past eight quarters have been approximately $470,000, $516,000, $563,000, $640,000, $662,000, $855,000, $1.1 million and $1.3 million per working day.

In the aggregate, Wal-Mart’s disclosed pre-enforcement professional fees and expenses are as follows.

FY 2013 = $157 million.

FY 2014 = $282 million.

FY 2015  = $173 million.

FY 2016 = $93 million (through the first three quarters).

Still Pouting 

This prior post discussed why SNC-Lavalin should be grateful about various aspects of Canada’s legal system (compared to the U.S.) and not pout. Namely, that Canada does not offer deferred prosecution agreements and enforcement authorities must actually prove cases to prevail.

As noted here, with a new government in Ottawa, SNC-Lavalin’s new CEO continues the pout.

“SNC-Lavalin Group Inc.’s CEO wants the new federal government to allow companies to settle corporate corruption cases — as what happens in the United States and United Kingdom — so that Canadian firms can remain competitive. In his first speech since taking control of Canada’s largest engineering company last month, Neil Bruce said federal corruption charges laid against a few of SNC-Lavalin’s legal entities unfairly point the finger at 40,000 employees who did nothing wrong. Instead, Canada should allow corporate settlements outside the court system so that SNC-Lavalin and other Canadian businesses are not at a disadvantage when competing against rival firms in other G7 countries, Bruce said.

[…]

The company has said it will plead not guilty to the charges but is willing to pay a fine for the alleged transgressions of former employees.”

Scrutiny Alerts and Updates

Affinia Group

As noted in this May 2015 post, Affinia Group (a North Carolina based company involved in design, manufacture, distribution and marketing of industrial grade products and services, including extensive offerings of aftermarket parts for automotive and heavy-duty vehicles) has been under FCPA scrutiny and the company disclosed:

“As previously disclosed, the Company conducted a review of certain allegations arising in connection with business operations involving its subsidiaries in Poland and Ukraine. The allegations raised issues involving potential improper payments in connection with governmental approvals, permits, or other regulatory areas and possible conflicts of interest. The Company’s review was supervised by the Audit Committee of Affinia’s Board of Directors and conducted with the assistance of outside professionals. Affinia voluntarily self-reported on these matters to the U.S. Department of Justice and the U.S. Securities and Exchange Commission and cooperated fully with the U.S. government.  The U.S. Department of Justice has advised that it has decided to decline to prosecute the Company in this matter.”

Several companies have been under scrutiny based on alleged improper relationships with Petrobras.  Three such companies: Ensco, Transocean, and Vantage Group recently  made disclosures.

Ensco

The company recently disclosed:

“Pride International, Inc. (“Pride”), a company we acquired in 2011, commenced drilling operations in Brazil during 2001 and, in 2008, entered into a drilling contract with Petrobras for DS-5, a rig Pride had ordered from a shipyard in South Korea.

Beginning in 2006, Pride conducted periodic compliance reviews of its business with Petrobras, and, after the acquisition, Ensco conducted similar compliance reviews, the most recent of which commenced in early 2015 after media reports were released regarding ongoing investigations of various kickback and bribery schemes in Brazil involving Petrobras.

While conducting our compliance review, we became aware of an internal audit report by Petrobras alleging irregularities in relation to DS-5 – specifically, that Petrobras overpaid under the drilling contract. We believe this allegation is inaccurate, as publicly available data show that the contract’s compensation terms were in line with other contracts signed by Petrobras and other customers with our competitors during the same timeframe (late 2007 and early 2008). We provided this information to Petrobras in June 2015. We continue to operate DS-5 under its existing contract. In addition, all our other rigs contracted to Petrobras – ENSCO 6001, 6002, 6003 and 6004 – continue to work under their contracts.

Upon learning of the Petrobras internal audit report, our Audit Committee appointed independent counsel to lead an investigation into the alleged irregularities. Subsequently, the internal audit report and the alleged irregularities were referenced in Brazilian court documents connected to the prosecution of former Petrobras directors and employees as well as certain other third parties, including a former marketing consultant who provided services to Pride in connection with DS-5. The former marketing consultant entered into a plea agreement with the Brazil authorities. This plea agreement was referenced in a Brazilian court proceeding relating to a project for a competitor having no connection to us. This court proceeding document states that another court action would be made public in due course with respect to DS-5; to date no further proceedings relating to DS-5 have been released.

Independent counsel, under the direction of our Audit Committee, has substantially completed the investigation of these allegations by reviewing and analyzing available documents and correspondence and interviewing current and former employees involved in the contracting of DS-5 as well as the former marketing consultant.

To date, our Audit Committee has found no evidence that Pride or Ensco or any of their current or former employees were aware of or involved in any wrongdoing, and our Audit Committee has found no evidence linking Ensco or Pride to any illegal acts committed by our former marketing consultant. Although the investigation is substantially complete, we cannot predict whether any new or additional allegations will be made and what impact those allegations will have on the timing or conclusions of the investigation. Our Audit Committee will examine any new or additional allegations and the facts and circumstances surrounding them. To date, we have not been contacted by Brazil authorities, and no authority has alleged wrongdoing by Pride or Ensco or any of their current or former employees. In June and July 2015, we voluntarily contacted the SEC and the U.S. Department of Justice (“DOJ”), respectively, to advise them of this matter and our Audit Committee’s independent investigation, and we provided them an update on the investigation in September 2015. We cannot predict whether any governmental authority will seek to investigate this matter, or if a proceeding were opened, the scope or ultimate outcome of any such investigation. If the SEC or DOJ determines that violations of the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”) have occurred, or if any governmental authority determines that we have violated applicable anti-bribery laws, they could seek civil and criminal sanctions, including monetary penalties, against us, as well as changes to our business practices and compliance programs, any of which could have a material adverse effect on our business and financial condition.”

As highlighted in this previous post, in 2010 Pride International resolved a $56 million FCPA enforcement action based on alleged conduct in Nigeria, India, Mexico, Venezuela and other countries.

Transocean

The company recently disclosed:

“We are currently investigating allegations made by a former Petrobras employee relating to the award of a drilling services contract to us. These allegations were made public through an investigation being conducted by Brazilian authorities in response to allegations of corrupt practices involving Petrobras business. To date, we have not identified any wrongdoing by any of our employees or agents in connection with our business in Brazil. We will continue to investigate these types of allegations and, if contacted, will cooperate with governmental authorities. Through the process of monitoring and proactive investigation, we strive to ensure no violation of our policies, code of integrity or law has, or will, occur; however, there can be no assurance as to the outcome of these matters.”

As highlighted in this previous post, in 2010 Transocean resolved a $20.7 million FCPA enforcement action based on alleged conduct in Nigeria.

Vantage Drilling

The company recently disclosed:

“In July 2015, we became aware of media reports that the Brazilian agent that we used in the contracting of the Titanium Explorer drillship, Mr. Padilha, had entered into a plea arrangement with the Brazilian authorities in connection with his role in obtaining bribes for former Petrobras executives.  Mr. Padilha, who simultaneously has represented several international companies in their contracts with Petrobras, provided evidence to the Brazilian prosecutors of an alleged bribery scheme between former Petrobras executives and Mr. Su, a former member of our Board of Directors and a significant shareholder.  Mr. Su was the sole owner of the company that owned the Titanium Explorer at the time the alleged bribe was paid.  At the same time we learned of Mr. Padilha’s plea agreement, we voluntarily contacted the SEC and the DOJ to advise them of these recent developments. We subsequently terminated his advisory contract with us.  Our internal and independent investigations, which are still ongoing, to date have found no evidence of wrongdoing by our employees or participation in any manner with the inappropriate acts alleged to have been conducted by Mr. Padilha.

We cannot predict whether any governmental authority will seek to investigate this matter, or if a proceeding were opened, the scope or ultimate outcome of any such investigation. If the SEC or DOJ determines that we have violated the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”), or if any governmental authority determines that we have violated applicable anti-bribery laws, they could seek civil and criminal sanctions, including monetary penalties, against us, as well as changes to our business practices and compliance programs, any of which could have a material adverse effect on our business and financial condition.”

Reading Stack

“The (Unintended) Consequences of the Yates Memo” here from Kurt Wolfe (Allen & Overy).

“The Yates Memo’s Chilling Effect on FCPA Self-Disclosure” here from Alison Tanchyk and Melissa Coates (Morgan, Lewis & Bockius). “Ironically, the unintended consequence [of the Yates Memo] may be fewer companies opting to self-disclose FCPA concerns, leading to fewer individual corruption prosecutions.”

*****

A good weekend to all.

Friday Roundup

A plethora of scrutiny alerts and updates, dismissed, quotable, and for the reading stack.  It’s all here in the Friday roundup.

Scrutiny Alerts and Updates

Crawford & Company

The company, a “provider of claims management solutions to the risk management and insurance industry, as well as to self-insured entities, with an expansive global network serving clients in more than 70 countries.” recently disclosed:

“The Company has voluntarily self-reported to the Securities and Exchange Commission (the “SEC”) and the Department of Justice (the “DOJ”) certain potential violations of the Foreign Corrupt Practices Act discovered by the Company during the course of its regular internal audit process. Upon discovery, the Company, with the oversight of the Audit Committee and the Board of Directors, proactively initiated an investigation into this matter with the assistance of external legal counsel and external forensic accountants. The Company has been cooperating fully, and expects to continue to cooperate fully, with the SEC and the DOJ in this matter. The Company cannot currently predict when or what, if any, action may be taken by the SEC or the DOJ, or other governmental authorities, or the effect any such actions may have on the Company’s results of operations, cash flows or financial position.”

In the same disclosure, the company disclosed approximately $3.4 million in “legal and professional fees … related to the ongoing investigation of potential violations of the Foreign Corrupt Practices Act.”

SciClone Pharmaceuticals

One of the longest instances of FCPA scrutiny concerns SciClone Pharmaceuticals. The company has been under FCPA scrutiny since August 2010 and recently disclosed:

“As previously disclosed, since 2010 the SEC and the US Department of Justice (“DOJ”) have each been conducting formal investigations of the Company regarding a range of matters, including the possibility of violations of the Foreign Corrupt Practices Act (“FCPA”), primarily related to certain historical sales and marketin g activities with respect to the Company’s China operations. I n response to these matters, the Company’sBoard appointed a Special Committee of independent directors (the “Sp ecial Committee”) to oversee its response to the government inquiry. Based on an initial review, the Special Committee decided to undertake an independent investigation as to matters reflected in and arising from the SEC and DOJ investigations in order to evaluate whether any violation of the FCPA or other laws occurred. The Company continue s to cooperate fully with the SEC and DOJ in the conduct of their investigations.

The Company has engaged in settlement discussions with the SEC related to its investigation into possible violations of the FCPA by the Company. The Company has finalized the terms of an offer of settlement of these matters, subject to final approval by the Commissioners of the SEC. Under the terms of the offer of settlement, the Company, without admitting or denying liability, would consent to the entry of an administrative order requiring that the Company cease and desist from any future violations of the FCPA. The Company also would pay disgorgement of $9.4 million, prejudgment interest of $0.9 million and a civil money penalty of $2.5 million. If the offer of settlement is approved by the Commissioners of the SEC, an administrative order will be issued by the SEC and $ 12,826,000   (which was placed in an escrow facility subsequent to September 30, 2015) will immediately be released to the SEC .

The Company has not yet reached a resolution of these matters with the DOJ and management continues to work diligently to obtain closure on this matter.”

Brookfield Asset Management

The company which previously disclosed FCPA scrutiny recently disclosed:

“[I]n 2012 we were notified by the SEC that it was conducting an anti-bribery and corruption investigation related to a Brazilian subsidiary of ours that allegedly made payments to certain third parties in Brazil and those payments were, in turn, allegedly used, with our knowledge, to pay certain municipal officials to obtain permits and other benefits. The U.S. Department of Justice (“DOJ”) opened an investigation in 2013. A civil action against our Brazilian subsidiary by a public prosecutor in Brazil has been ongoing since 2012. All involved have denied the allegations. The SEC and DOJ sought information from us and we cooperated with both authorities in this regard. In 2012, a leading international law firm conducted an independent investigation into the allegations, and based on the results of that investigation we have no reason to believe that our Brazilian subsidiary or its employees engaged in any wrongdoing. In June 2015 the SEC staff informed us in writing that it concluded its investigation and, based on the information it has to date, does not intend to recommend an enforcement action against us. We hope to resolve any remaining outstanding matters in due course and do not expect that any legal outcome will be financially material to the company.”

Alexion Pharmaceuticals 

The company which previously disclosed its FCPA scrutiny this past summer recently disclosed:

“As previously disclosed, in May 2015, we received a subpoena in connection with an investigation by the Enforcement Division of the U.S. Securities and Exchange Commission (SEC) requesting information related to our grant-making activities and compliance with the Foreign Corrupt Practices Act (FCPA) in various countries. The SEC also seeks information related to Alexion’s recalls of specific lots of Soliris and related securities disclosures. In addition, in October 2015, Alexion received a request from the U.S. Department of Justice for the voluntary production of documents and other information pertaining to Alexion’s compliance with the FCPA. Alexion is cooperating with these investigations. At this time, Alexion is unable to predict the duration, scope or outcome of these investigations. Given the ongoing nature of these investigations, management does not currently believe a loss related to these matters is probable or that the potential magnitude of such loss or range of loss, if any, can be reasonably estimated.”

Alexion was founded by a Yale University professor and the above disclosure was viewed as a big deal by the Yale Daily News (see here).

Hines

According to various media reports (see here and here), Houston-based Hines, a privately-owned real estate firm, is conducting an internal investigation in connection with alleged payments in Brazil involving Petrobras officials.  According to reports, the internal investigation follows a report in a Brazilian newspaper that appeared over the summer alleging improper payments by Hines Brazil in relation to commissions for Petrobras office leases in Rio de Janeiro.

Noble Corp.

Noble Corporation recently disclosed:

“We have used a commercial agent in Brazil in connection with our Petróleo Brasileiro S.A. (“Petrobras”) drilling contracts.  We understand that this agent has represented a number of different companies in Brazil over many years, including several offshore drilling contractors. This agent has pled guilty in Brazil in connection with the award of a drilling contract to a competitor and has implicated a Petrobras official as part of a wider investigation of Petrobras’ business practices.  We are not aware of any improper activity by Noble in connection with contracts that Noble has entered into with Petrobras, and we have not been contacted by any authorities regarding such contracts or the investigation into Petrobras’ business practices.”

As highlighted in this previous post, in 2010 Noble Corp. resolved an $8.2 million FCPA enforcement action  ($2.6 million via a DOJ NPA and $5.6 million in disgorgement and interest via a SEC complaint) in connection with alleged conduct in Nigeria.

Dismissed

This recent post asked where does the truth lie in FCPA enforcement actions?

The post focused on the Mexico prong of the HP enforcement action in which the DOJ and SEC alleged that HP Mexico indirectly made cash payments to a Pemex Chief Information Officer. After the enforcement action, Pemex disclosed in an SEC filing that “the Internal Control Body of [Pemex] concluded its investigation after finding no improper payment.”

HP highlighted the Pemex disclosure in its defense of civil RICO claims brought by Pemex that accused HP of paying bribes to win contracts. As highlighted here, Pemex recently dismissed its lawsuit.

Quotable

Sound advice from Marcus Asner (Arnold & Porter) in this Law360 article titled “A Measured Approach to Internal Investigations” in which he rightly notes: “Outside law firms and vendors … have strong economic incentives to expand investigations.”

For the Reading Stack

From Clifford Chance, an updated version of “A Guide to Anti-Corruption Legislation in Asia Pacific.“

*****

A good weekend to all.