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No U.S. Nexus, No Problem As U.S. Brings $30.5 Million FCPA Enforcement Action Against Chilean Company In Relation To Its Conduct With Chilean Officials

SQM

Last week the DOJ and SEC announced (here and here) a $30.5 million Foreign Corrupt Practices Act enforcement action against Sociedad Quimica y Minera de Chile S.A. (SQM), a chemical and mining company based in Chile, in relation to its conduct with Chilean officials.

The enforcement action is rife with policy issues including the proper scope of FCPA enforcement given that there is no U.S. nexus alleged other than SQM having Series B shares, a form of American Depository Shares, listed on the New York Stock Exchange and thus being required to file periodic reports with the SEC.

The enforcement action included: (i) a DOJ criminal information charging SQM with violating the FCPA’s books and records and internal control provisions that was resolved via a deferred prosecution agreement in which the company agreed to pay a $15.5 million criminal penalty; and (ii) an SEC administrative order finding FCPA books and records and internal violations in which the company agreed to pay $15 million civil penalty.

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Issues To Consider From The Odebrecht / Braskem Enforcement Action

Issues

As highlighted in this prior post, last week’s Foreign Corrupt Practices Act enforcement action against Odebrecht / Braskem was egregious and largely centered on a business unit, the Division of Structured Operations, housed within an Odebrecht subsidiary that allegedly served as little more than a bribe-paying department for the benefit of Odebrecht and Braskem in connection with projects and other issues in Brazil and eleven other countries.

Given the egregious and wide-spread improper conduct, the Odebrecht / Braskem global (Brazil, U.S. and Switzerland) settlement of approximately $3.5 billion set a record. After accounting for various credits and deductions (including for payments to Brazil and Swiss law enforcement agencies and a claimed inability to pay) the net FCPA settlement amount (subject to potential future adjustments) was approximately $420 million (the 5th largest FCPA settlement amount of all-time). [Note, in April 2017 the DOJ trimmed the Odebrecht criminal penalty by $167 million to $93 million (it originally was $260 million). Thus, the overall net FCPA settlement amount is $252 million].

Just because the conduct was egregious does not mean that there are not legal and policy issues to consider from the enforcement action. This prior post highlighted why the Odebrecht / Braskem enforcement action was unique (the bulk of the conduct focused on Brazil and it is believed to be the first FCPA enforcement action ever against a foreign issuer for bribing its own “domestic” officials) and this post continues the analysis by highlighting additional issues to consider.

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