Sixth Circuit Concludes That Just Because The United Nations Convention Against Corruption Requires That American Courts Be Available To Foreign Plaintiffs In Corruption Cases Does Not Mean “That Foreign States Win In Our Courts No Matter The Merits Of Their Arguments”
As highlighted in this prior post, in 2013 Stryker resolved a $13.2 million enforcement action based on alleged conduct in Mexico, Poland, Romania, Argentina, and Greece.
As to the Mexico conduct, the SEC found: “Between March 2004 and January 2007, Stryker’s wholly-owned subsidiary in Mexico (“Stryker Mexico) made three payments totaling more than $76,000 to foreign officials employed by a Mexican governmental agency (the “Mexican Agency”) responsible for providing social security for government employees. Stryker made these payments to win bids to sell its medical products to certain public hospitals in Mexico.”
Ericsson “Ripple Effects”
Prior posts here, here, here, and here covered the 2019 Foreign Corrupt Practices Act enforcement action against Ericsson resolved through a deferred prosecution agreement; how the DOJ in 2021 accused Ericsson of breaching its DPA obligations; recent reports suggesting that “Ericsson may have made payments to the ISIS terror organization to gain access to certain transport routes in Iraq;” and the recent release by the International Consortium of Investigative Journalists of the “Ericsson List.”
As highlighted here, most recently Ericsson disclosed: “On March 1, 2022, the DOJ informed Ericsson that the disclosure made by the company prior to the DPA about its internal investigation into conduct in Iraq in the period 2011 until 2019 was insufficient. Furthermore, it determined that the company breached the DPA by failing to make subsequent disclosure related to the investigation post-DPA.”
This post highlights certain ripple effects from the recent activity.
From The Docket
As highlighted in this prior post, in 2016 Misonix made a voluntary disclosure to the DOJ and SEC to “inform both agencies that the Company may have had knowledge of certain business practices of the independent Chinese entity that distributes its products in China, which practices raise questions under the Foreign Corrupt Practices Act.”
In 2017 Cicel (Beijing) Science & Technology Co. Ltd. brought a variety of civil claims against Misonix concerning its business relationship with the company. Among the claims brought by Cicel was a breach of contract claim. Misonix acknowledged that it terminated the contract, but argued that it “was justified in doing so because of Misonix’s FCPA investigation” regarding Cicel. In response, Cicel claimed that the investigation “was a ruse for breaching the contract.”
As highlighted in this prior post, a judge allowed Cicel’s claim to proceed beyond the motion to dismiss stage.
Recently, a judge granted Misonix’s motion for summary judgment on the breach of contract claim. The decision (2022 WL 188994) provides a rare public view into the origin’s of Misonix’s scrutiny and investigation.
Cognizant’s $95 Million 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).
Judge Recommends Dismissal Of 500.com Bribery Related Securities Fraud Suit
500.com is an online gaming company incorporated in the Cayman Islands with principal executives offices in China and shares traded on the New York Stock Exchange.
In a securities fraud class action lawsuit, investors claimed that the company and certain of its executives “made false statements, misrepresentations, and omissions in various SEC filings after paying bribes of millions of yen to government officials in Japan for the purpose of securing a lucrative license to operate a casino.” Specifically, the plaintiffs alleged that the company paid Tsukaka Akimoto, a member of Japan’s legislature who was in charge of awarding licenses to run integrated resorts, approximately 7.6 million yen which came in the form of compensation for speaking at a 500.com symposium, elaborate trips, and other gifts. Plaintiffs also alleged that 500.com paid bribes to five members of Japan’s parliament in exchange for preferential treatment related to the integrated resorts the licenses which totaled approximately 5 million yen.