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Friday Roundup

By on April 22, 2016 in 21st Century Fox, Anything of Value, AT&T, Citibank, CreditSuisse, Dmitrij Harder, Golf, HSBC Holdings, JPMorgan, Julius Baer Group, KPMG, Newmont Mining, Nike, Petrofac, PTC, Related Foreign Investigations, SQM, Standard Chartered, Statute of Limitations, UBS
Roundup

Harder pleads guilty, scrutiny alerts and updates, when the dust settles, visual proof, and golf. It’s all here in the Friday roundup.

Harder Pleads Guilty

As highlighted in this post, in January 2015 the DOJ announced a Foreign Corrupt Practices Act enforcement action against Dmitrij Harder for allegedly bribing an official with the European Bank for Reconstruction and Development. Harder is a Russian national, naturalized German citizen and permanent resident of the U.S. and the former owner and President of Chestnut Consulting Group Inc. and Chestnut Consulting Group Co. both based in Pennsylvania.

The enforcement action was notable in that it invoked the rarely used “public international organization” prong of the FCPA’s “foreign official” definition.

Continue Reading

Friday Roundup

By on May 9, 2014 in Citigroup, CreditSuisse, Distributor Issues, Dmitry Firtash, Fresenius Medical Care, Goldman Sachs, Hiring Family Members of Foreign Officials, Internal Controls, Joseph Sigelman, Key Energy Services, Morgan Stanley, Parametric Technology, PetroTiger, PTC, Quanta Services, Technology Industry, Third Parties, UBS

Is trust “reasonable,” Sigelman formally indicted, scrutiny alerts and updates, and for the reading stack.  It’s all here in the Friday roundup.

Is Trust “Reasonable”

This prior post asked:

Would FCPA compliance be better achieved if companies had fewer formal internal controls and instead devoted greater effort to fostering trust within a business organization?  Would such an approach even satisfy an issuer’s obligations under the FCPA’s internal controls provisions which require that issuers devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are properly authorized, recorded, and accounted for by the issuer?

The questions are posed once again after reading this New York Times article titled “Berkshire’s Radical Strategy: Trust.”  In the article, Charlie Munger, vice chairman of Berkshire Hathaway (arguably one of the most well-respected companies in America) “ruminates on the state of corporate governance, offering a counternarrative to the distrustful culture of most businesses: instead of filling your ranks with lawyers and compliance people, he argued, hire people that you actually trust and let them do their job.”

As highlighted in the article:

“Here’s a little-known fact: Berkshire Hathaway, the fifth-largest company in the United States, with some $162.5 billion in revenue and 300,000 employees worldwide, has no general counsel that oversees the holding company’s dozens of units. There is no human resources department, either.

If that sounds like a corporate utopia, that’s probably because it is. To some people in this day and age — given the daily onslaught of headlines about scandal and fraud in corporate America — that also may sound almost like corporate negligence.”

Sigelman Formally Indicted

In January 2014, the DOJ announced FCPA and related charges against former executives of PetroTiger Ltd., a British Virgin Islands oil and gas company with operations in Colombia and offices in New Jersey, “for their alleged participation in a scheme to pay bribes to foreign government officials in violation of the FCPA, to defraud PetroTiger, and to launder proceeds of those crimes.”  The individuals charged were former co-CEOs of PetroTiger Joseph Sigelman and Knut Hammarskjold and former general counsel Gregory Weisman.  (See this prior post for additional details).

In this criminal complaint, Sigelman was charged with conspiracy to violate the FCPA’s anti-bribery provisions as well as three substantive FCPA charges.  The FCPA charges were based on allegations that Sigelman and others made at least four transfers of money in the approximate amount of $333,500 to an account in Colombia of a “foreign government official in Colombia.”

In this release, the DOJ announced today that Sigelman was formally criminally indicted for the same conduct.  The release states that Sigelman “charged with conspiracy to violate the FCPA and to commit wire fraud, conspiracy to launder money, and substantive FCPA and money laundering violations.”

The DOJ release further states:  “The case was brought to the attention of the department through a voluntary disclosure by PetroTiger, which cooperated with the department’s investigation.”

As previously noted, both Hammarskjold and Weisman have pleaded guilty.

Scrutiny Alerts

Key Energy Services

Key Energy Services disclosed in its recent SEC filing:

“The U.S. Securities and Exchange Commission has advised us that it is investigating possible violations of the U.S. Foreign Corrupt Practices Act involving business activities of Key’s operations in Russia. We take any such allegations very seriously and are conducting an investigation into the allegations. We are fully cooperating with and sharing the results of our investigation with the Commission. While the outcome of our investigation is currently not determinable, we do not expect that it will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.”

Quanta Services

Quanta Services (an engineering, procurement and construction services company) disclosed in its recent SEC filing:

“On March 10, 2014, the SEC notified Quanta of an inquiry into certain aspects of Quanta’s activities in certain foreign jurisdictions, including South Africa and the United Arab Emirates. The SEC also requested that Quanta take necessary steps to preserve and retain categories of relevant documents, including those pertaining to Quanta’s U.S. Foreign Corrupt Practices Act compliance program. The SEC has not alleged any violations of law by Quanta or its employees. Quanta has complied with the preservation request and is cooperating with the SEC.”

PTC Inc.

PTC Inc. (formerly known as Parametric Technology) first disclosed its FCPA scrutiny in August 2011 and recently disclosed in this  SEC filing:

“China Investigation
We have been cooperating to provide information to the U.S. Securities and Exchange Commission and the Department of Justice concerning payments and expenses by certain of our business partners in China and/or by employees of our Chinese subsidiary that raise questions concerning compliance with laws, including the U.S. Foreign Corrupt Practices Act. Our internal review is ongoing and now includes periods earlier than those previously examined. We continue to respond to requests for information from these agencies, including a subpoena issued to the company by the SEC. We cannot predict when or how this matter may be resolved. Resolution of this matter could include fines and penalties; however we are unable to estimate an amount that could be associated with any resolution and, accordingly, we have not recorded a liability for this matter. If resolution of this matter includes substantial fines or penalties, this could materially impact our results for the period in which the associated liability is recorded or such amounts are paid. Further, any settlement or other resolution of this matter could have collateral effects on our business in China, the United States and elsewhere.”
Fresenius Medical Care
Germany-based Fresenius Medical Care first disclosed FCPA scrutiny in August 2012 and stated as follows in its recent SEC filing:
“[The previously disclosed internal] review has identified conduct that raises concerns under the FCPA or other anti-bribery laws that may result in monetary penalties or other sanctions.  In addition, the Company’s ability to conduct business in certain jurisdictions could be negatively impacted.  The Company has recorded a non-material accrual for an identified matter.  Given the current status of the internal review, the Company cannot reasonably estimate the range of possible loss that may result from additional identified matters or from the final outcome of the continuing internal review.”
Financial Services Industry

In case you had not heard that numerous financial services companies were under FCPA scrutiny for alleged hiring practices, the Wall Street Journal reports:

“U.S. regulators have expanded their investigation into large banks’ hiring practices in Asia, seeking more information from at least five U.S. and European firms, according to people close to the probe.  The Securities and Exchange Commission in early March sent letters to a group of companies including Credit Suisse Group AG, Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc. and UBS AG seeking more information about their hiring in Asia, according to people.  […]  The SEC late last year issued a round of letter to at least six banks, seeking information on their hiring practices, such as whether the firms had special programs dedicated to relatives of influential officials, according to people close to the inquiry.  The second round of requests reflects a deepening of the probe.  The agency is seeking more data on the banks’ recruiting in Asia, including lists of employees hired as a result of referrals from foreign officials and clients, added the people familiar with the investigation.”

As to the above, Goldman disclosed in its most recent SEC filing:

“Regulatory Investigations and Reviews and Related Litigation.

[The company] and certain of its affiliates are subject to a number of other investigations and reviews by, and in some cases have received subpoenas and requests for documents and information from, various governmental and regulatory bodies and self-regulatory organizations and litigation relating to various matters relating to the firm’s businesses and operations, including:

compliance with the U.S. Foreign Corrupt Practices Act, including with respect to the firm’s hiring practices …”

Reading Stack

No surprise that an individual who paid $174 million to post bail has hired an A-list legal team in defense of DOJ allegations that he violated, among other laws, the FCPA.  (See here for a recent New York Times article regarding Dmitry Firtash).

Sound advice from former DOJ FCPA Unit Chief Chuck Duross in this MoFo Tech article concerning FCPA risk and the technology industry:

“[T]echnology companies are also at risk from the distribution model that’s often used in the industry. Many companies sell their products to channel partners, which add some value to the product or service—such as other hardware, software, an installation, or a service plan—and then resell it at a higher price. That’s an entirely appropriate business model. But as with any third party, companies need to appreciate the potential risk if, for example, the distributor is simply reselling at a higher price without adding any legitimate value and using that profit as a slush fund to funnel bribes to government officials. It may seem to the company that it is not violating the FCPA. It has simply sold its product to another company. But if a company’s employees are aware that the distributor is paying (or just offering) bribes to government officials to help sell the product, the company and its employees could be criminally liable as conspirators and aiders and abettors.

What should tech companies be doing to avoid these issues?

One thing is to know the third parties they’re doing business with. It is also fundamental to understand the business reason for working with third parties. One of the first questions asked during a DOJ or SEC investigation will often be, “What was the business purpose behind working with X?” Having a clear answer will earn credibility with regulators and underscore the company’s commitment to compliance. Also, making sure employees—and third parties—understand company policies, are properly trained, execute FCPA certifications, and are subject to appropriate ongoing reviews can prevent violations and mitigate (or avoid altogether) penalties if a problem does occur. That is just good business. Corruption tends to occur at companies with loose control environments. While I was at DOJ, we routinely saw loose control environments leading to embezzlement, self-dealing, fraud, and even antitrust violations. When a company doesn’t know where its money is going, that’s bad business and negatively impacts shareholder value. When companies invest in a compliance program, they are investing in the health of the business.”

This Kyiv Post article notes:

“Some of Ukraine’s underpaid cadre of civil servants might get bonuses from international finance institutions to reduce the temptation of taking bribes. According to Ukrainian Tax Service chief Ihor Bilous, the European Bank for Reconstruction and Development is exploring the idea of setting up a fund that would provide officials with additional pay. ‘Last week I had a meeting with EBRD representatives and they proposed to create a fund to pay money for people who serve the state in high positions,’ Bilous told the Kyiv Post. This idea was successfully implemented in Georgia, he adds, “we need to change the system, state salaries are very low and this situation creates some kind of temptation.”

*****

A good weekend to all, and to all mothers, Happy Mother’s Day!

Requiring The DOJ or SEC To Prove Its Case Is Not “Criminal”

By on February 12, 2014 in Board Issues, JPMorgan, Prosecutorial Common Law, UBS

It is truly a sorry state of affairs that have come to define government enforcement of criminal (or even civil) laws against business organizations.

Exhibit A is this recent CNBC video clip of Andrew Ross Sorkin’s interview of JPMorgan CEO Jamie Dimon.

As you likely know, JPMorgan recently resolved a variety of criminal and civil matters brought by various government enforcement agencies for approximately $20 billion.

“SORKIN: So, you look at these big numbers. And they are big numbers. And so the public looks at them and they are trying to grasp and understand what to make it. Do you think ultimately, that it was fair?

DIMON: No. I think a lot of it was unfair, but I’m not going to go into the details.”

No surprise there as the various JPMorgan resolution documents contained a so-called “muzzle clause.”  (See paragraph 17 of the JPMorgan DPA).

Dimon continued:

“And I’m grateful to have it behind us. Because the most important thing for a company is you do your job. Serving clients and communities around the world. And this is a huge negative for the company – a huge distraction of management time, board time, when we should really be helping our clients, which includes cities and schools. So we just wanted to get back, do what we’re good at and what we are supposed to be doing.”

The interview then continued as follows.

“SORKIN: On the stuff you think was wrong, do you think you fully remedied it?

DIMON: I guess at one point it doesn’t matter who you think is wrong or right, so we can debate all day long whether we should have paid. […] You know, again, you’re really caught between two bad choices. We made the one that was better for the company.

SORKIN: Right.

DIMON: Whether it should have been high or low, I don’t care anymore. I’ve moved on. That was last year. I’m looking forward to 2014.

SORKIN: One more question on that, which though is, was there a moment – what was the moment for you when you said to yourself, “ok. Pay it. I want to put this behind me.” And was there something that happened? Was it a conversation with the board? Was it a conversation with Eric Holder? What was that moment for you?

DIMON: First of all, the board was involved every step of the way in this. It was this kind of unprecedented, kind of – you know we have multiple regulators and multiple U.S. attorneys and district – Department of Justice. And it was just, thinking it through, looking at our options and realizing there are two really bad options. And that the wrong thing to do is to complain, fight and then you could have said, well why not go to court all those years? So if you are my board, you would have said, why would you do that and subject your company to three or four more years and the outcomes could be worse. Then wouldn’t even necessarily be better. So a lot of people said fight – if you think you are right, fight – banks have a very tough time doing that. It would really hurt this company and that would have been criminal for me to subject our company to that kind of – those kinds of issues.”

Obviously, one can assume that Dimon did not literally mean it was criminal to put the DOJ and/or SEC to its burden of proof.

However, the notion that an individual with fiduciary duties to a corporation and its shareholders would speak in those terms about something so basic and fundamental to the rule of law and our legal system is truly troubling.

But then again, can you blame Dimon?  He was perhaps simply acting consistent with those fiduciary duties and in the best interest of shareholders.   After all, should JPMorgan have put the DOJ (or SEC) to its burden of proof and thus been criminally indicted (or merely charged in a civil case) the hit to JPMorgan’s market capitalization (approximately $215 billion) likely would have been greater than $20 billion.  Viewed this way, the decision of JPMorgan’s board and it executives seems like a rationale corporate decision in the best interest of shareholders.

But here is the problem as I recently highlighted in my article “Why You Should Be Alarmed By the ADM FCPA Enforcement Action.”  While the specific risk-averse business decisions of a specific company may seem minor in isolation, the aggregate effect of these numerous decisions contributes to a facade of enforcement of any law – whether it is the Foreign Corrupt Practices Act (see here) or otherwise.

As former U.S. Attorney General Alberto Gonzales rightly noted in the FCPA context:

“In an ironic twist, the more that American companies elect to settle and not force the DOJ to defend its aggressive interpretation of the [FCPA], the more aggressive DOJ has become in its interpretation of the law and its prosecution decisions.”

For more on this dynamic see “Prosecutorial Common Law” by Michael Levy –  one of best guest posts in the history of FCPA Professor.

It truly is a sorry state of affairs.

And there is more.

As highlighted at the end of this video (around the five minute mark), Senator Elizabeth Warren chides government regulators for not exploiting this imbalance even more to extract even more shareholder money from risk averse corporations.

*****

The New York Times returns, once again, to JPMorgan’s FCPA scrutiny concerning alleged hiring practices in China.  This article states:

“[A] confidential email has emerged that shows a top Chinese regulator directly asked Jamie Dimon, the bank’s chief executive, for a “favor” to hire a young job applicant. The applicant, a family friend of the regulator, now works at JPMorgan.  […]  JPMorgan said Mr. Dimon had nothing to do with the decision to hire the young woman, described within the bank as well qualified. And like the C.E.O. of any large company, Mr. Dimon can be expected to meet with many people in a given day. According to a person briefed on the investigation, he is not suspected of any wrongdoing. Still, the episode underscores the dual forces driving JPMorgan and other Wall Street banks to hire the family and friends of China’s ruling elite. The banks sought to build good will with Chinese officials, who, in turn, expected favors from the banks.”

*****

Related to the above issue, this article states:

“UBS has suspended two staff members, including its top capital markets banker in Asia, as the Swiss bank investigates its hiring of the daughter [Joyce Wei] of the chairman of a Chinese chemicals company that is considering a $1 billion share sale the bank has sought a role in.  […]  Ms. Wei is the daughter of Wei Qi, the chairman of Tianhe Chemicals, a privately owned Chinese company that is considering a potential $1 billion initial public offering in Hong Kong this year. UBS is one of the banks positioned to secure a role in the deal.  […]  “It’s not a ‘princeling’ issue, because Joyce Wei is not a princeling,” [a person familar with the matter] said, referring to the children of senior Chinese government officials. “Tianhe is not a state-owned company,” the person added. Instead, the investigation is focused on “whether internal processes were adhered to or not.”

Even so, UBS remains part of the SEC’s industry sweep of the financial sector regarding hiring practices in China.

Friday Roundup

By on January 3, 2014 in Citigroup, CreditSuisse, Deutsche Bank, Financial Services Industry, Goldman Sachs, H-P, JPMorgan, Morgan Stanley, Related Foreign Investigations, SEC, Siemens Argentina Enforcement Action, UBS, Year in Review 2013

Scrutiny alerts and updates, sunshine, year in review roundups, and for the reading stack.  It’s all here in the Friday roundup.

Scrutiny Alerts and Updates

H-P

The company has been under FCPA scrutiny since at least 2010 and recently disclosed, in pertinent part, as follows.

“The U.S. Department of Justice and the SEC have been conducting an investigation into the Russia GPO deal and potential violations of the Foreign Corrupt Practices Act (“FCPA”). These U.S. enforcement agencies, as well as the Polish Central Anti-Corruption Bureau, are also conducting investigations into potential FCPA violations by an employee of Hewlett-Packard Polska Sp. z o.o., an indirect subsidiary of HP, in connection with certain public-sector transactions in Poland. In addition, the same U.S. enforcement agencies are conducting investigations into certain other public-sector transactions in Russia, Poland, the Commonwealth of Independent States, and Mexico, among other countries.  HP is cooperating with these investigating agencies. In addition, HP is in advanced discussions with the U.S. enforcement agencies to resolve their investigations.”

JPMorgan

The New York Times returned – yet again (see here and here for prior NY Times article) – to JPMorgan’s hiring practices in China.  The article states:

“For Wall Street banks enduring slowdowns in the wake of the financial crisis, China was the last great gold rush. As its economy boomed, China’s state-owned enterprises were using banks to raise billions of dollars in stock and debt offerings — yet JPMorgan was falling further behind in capturing that business.  The solution, the executives decided over email, was to embrace the strategy that seemed to work so well for rivals: hire the children of China’s ruling elite.

[…]

In the months and years that followed, emails and other confidential documents show, JPMorgan escalated what it called its “Sons and Daughters” hiring program, adding scores of well-connected employees and tracking how those hires translated into business deals with the Chinese government. The previously unreported emails and documents — copies of which were reviewed by The New York Times — offer a view into JPMorgan’s motivations for ramping up the hiring program, suggesting that competitive pressures drove many of the bank’s decisions that are now under federal investigation.

The references to other banks in the emails also paint for the first time a broad picture of questionable hiring practices by other Wall Street banks doing business in China — some of them hiring the same employees with family connections. Since opening a bribery investigation into JPMorgan this spring, the authorities have expanded the inquiry to include hiring at other big banks. Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs and Morgan Stanley have previously been identified as coming under scrutiny. A sixth bank, UBS, is also facing scrutiny, according to interviews with current and former Wall Street employees.

[…]

The investigation has also had a chilling effect on JPMorgan’s deal-making in China, interviews show. The bank, seeking to build good will with federal authorities, has considered forgoing certain deals in China and abandoned one assignment altogether.”

Once again, the latest NY Times article sparked much commentary.  See here, here and here.

Former Siemens Executives

The Buenos Aires Herald reports:

“Seventeen people, including former managers of the Siemens company, were … accused of paying off officials in order to help win a contract to produce the national identity cards …”.  The decision was made by Federal Judge Ariel Lijo, who decided to indict them for having allegedly committed bribery.”

Regarding the defendants, the article states:

“Twelve people working for Siemens were included in the indictment: Uriel Jonathan Sharef, Ulrich Albert Otto Fritz Bock, Eberhard George Reichert, Luis Rodolfo Schirado, Andrés Ricardo Truppel, Ernst Michael Brechtel, Bernd Regendatz, Ralph Matthias Kleinhempel and José Alberto Ares. Sharef, for instance, was a member of Siemens’ managing board. He also was the first former board member of a Fortune Global 50 company to be indicted under the US Foreign Corrupt Practices Act, as happened in 2011.  Judge Lijo also charged Carlos Francisco Soriano, Miguel Ángel Czysch and José Antonio David as “middlemen” between the company and Menem’s administration to arrange the payment for benefitting the company in the bid. The magistrate also accused Antonio Justo Solsona, Guillermo Andrés Romero, Orlando Salvestrini, Luis Guillermo Cudmani and Federico Rossi Beguy, who allegedly worked for the company competing in the bid against Siemens IT Services and who presumably agreed not to challenge the government’s decision.”

Allegations regarding the Argentine identity card project were included in the 2008 FCPA enforcement action against Siemens (see here) and also served as the basis for 2011 criminal and civil charges against several former Siemens executives, including those recently charged in Argentina (see here for the prior post summarizing the action).

As noted in this previous post, the U.S. charges against the former Siemens executives were brought after the DOJ faced scrutiny (including at the Senate’s 2010 FCPA hearing) for not bringing any individual enforcement action in connection with a bribery scheme “unprecedented in scale and geographic reach” in which there existed at Siemens a “corporate culture in which bribery was tolerated and even rewarded at the highest levels of the company.”

The U.S. criminal charges against former Siemens executives sits on the docket and a recent docket search indicates that there has not been any activity in the case in over two years.

Sunshine

Mark Cuban, who recently prevailed against the SEC in a long-running insider trading enforcement action, says in this Wall Street Journal article that he is “now considering a new venture publicizing SEC transcripts.”  Says Cuban, “I’m going to get as many as I can, and I’ll put it out there.” “Sunshine is the best disinfectant.”

The article further states:

“Mr. Cuban says he isn’t against the SEC as a whole but thinks that the lawyers who work there should be held responsible for their actions. “There’s such a revolving door, and it was run by attorneys with an attorney’s mind-set looking for their next job,” he says. “It’s a résumé builder.” Mr. Cuban says individual lawyers aren’t held accountable because the public is familiar only with the name of the SEC’s chair, Mary Jo White.  “No wonder they say or do whatever they damn well please,” he says. “I’m like, ‘OK, I’m going to start calling them out by name.’  George Canellos, co-director of the SEC’s enforcement division, sent a response to Mr. Cuban’s statements through an SEC spokesperson: “Mr. Cuban’s comments are without merit and uncalled for. Our lawyers acted in the finest traditions of government counsel and entirely appropriately in strongly advocating the position of the government in this matter.”

On a related note, did you know that the FCPA Professor Scribd page contains approximately 250 hard to find FCPA documents, pleadings, briefs, etc.

Year In Review Roundups

From the Wall Street Journal Risk & Compliance Journal page – a “Q&A with Asheesh Goel, Ropes & Gray, on The Year in FCPA”

From Trace Blog – “FCPA Corporate Settlements by the Numbers”

From Michael Volkov (Corruption, Crime & Compliance) – “The FCPA Person of the Year – The Prosecutor” and “FCPA Predictions for the New Year – 2014”

From Thomas Fox (FCPA Compliance and Ethics Blog) – “My Favorite Blog Posts from 2013”

Reading Stack

Thomas Fox (FCPA Compliance and Ethics Blog) and Jon Rydberg (Orchid Advisor) are out with a new book here titled “Anti-Bribery Leadership: Practical FCPA and U.K Bribery Act Compliance Concepts for the Corporate Board Member, C-Suite Executive and General Counsel.”

*****

A good weekend to all.

Scrutiny Alerts And Updates

By on April 3, 2013 in H-P, IBM, Image Sensing Sytems, InBev, Net 1, Oracle, Panasonic, UBS, Wal-Mart

This post revisits themes originally explored in this prior post “The Sun Rose, A Dog Barked and a Company Disclosed FCPA Scrutiny” and this prior post “Recent Disclosures Raise Many Questions.”

Why, in this era of increased FCPA compliance, does there seem to be more, not less, FCPA inquiries?  Does effective compliance reduce FCPA scrutiny or does effective compliance uncover more potential FCPA issues?  If every company hired FCPA counsel to do a thorough review of its world-wide operations would – given the current enforcement theories – 50% of companies find technical FCPA violations?  75%? 95%?  If the answer is any one of these numbers (and my guess is that 95% is probably the best answer), is that evidence of how corrupt business has become, evidence of how unhinged FCPA enforcement theories have become, or evidence of something else?

In other words, what does it say about enforcement of a law if, at any given time, the majority of corporations are on the wrong end of how that law is being enforced? 

After all, according to the FCPA Blog’s most recent corporate disclosure list (here) approximately 90 companies are currently under investigation for FCPA violations.  As the FCPA Blog rightly notes “nearly all entries are based on disclosures in SEC filings. That means non-issuers (non-public companies) aren’t included. And perhaps not all issuers have made a disclosure about a pending FCPA investigation, in which case the company may not appear on this list.”

This post highlights FCPA scrutiny and developments concerning the following companies:  UBS, Panasonic, Image Sensing Systems, H-P, Oracle, IBM, InBev, Wal-Mart, and  Net1,

*****

UBS

It reads like a law school issue-spotting exam.

A Kuwaiti sheik (and also a former Minister of Interior) alleges that a company subject to the FCPA offered a $20 million commission to derail a bid by a company for various telecommunication assets so that the subject company could get a lead role in finding a different buyer.  The sheik alleges that he then used his influence, on the subject company’s behalf, placed a series of telephone calls, and the bid was derailed.  The sheik then assisted the subject company in landing a lead advisory role on the sale to a different buyer giving the subject company a $22.5 million fee.  The subject company then offers the sheik a job paying over $600,000 a year.

So reads this recent article in the Wall Street Journal concerning a Kuwaiti sheik and UBS and the sheik’s efforts to obtain the fee he says he is owed.

Panasonic

According to this recent Wall Street Journal article, “U.S. authorities are investigating whether [Panasonic Avionics Corp. (“PAC”)  a U.S.-based subsidiary of Japanese electronics giant Panasonic Corp. that makes in-flight entertainment and communications systems for airlines] paid bribes abroad to land business.”  According to the article, PAC’s legal department has instructed certain executives and employees to preserve documents “concerning any benefits or gifts provided, or the payment of anything of value, by Panasonic or PAC to any airline employee or government officials.”

Image Sensing Systems

Image Sensing Systems Inc. (a Minnesota based provider of above ground detection and information management solutions for markets including security, police and parking) disclosed in this recent release as follows.

“The Company has learned that Polish authorities are conducting an investigation into alleged violations of Polish law by two employees of ISS Poland, who have been charged with criminal violations of certain laws related to a project in the City of Lodz, Poland. Neither the Company nor any of its subsidiaries has been charged with any offense. A committee of the Company’s independent directors, with the assistance of independent counsel and accounting advisors, is conducting an investigation into these matters focusing on possible violations of Company policy, internal controls, and laws, including the Foreign Corrupt Practices Act, the U.K. Anti-Bribery Act and Polish law. This investigation is ongoing, and the Company is voluntarily disclosing this matter to the Securities and Exchange Commission and the Department of Justice.  ‘We take these matters very seriously, and are cooperating fully. Image Sensing Systems aims to conduct its business lawfully and ethically.  We have taken remedial actions, including ending the employment of the two Polish employees.  We are also assessing and implementing enhancements to our internal policies, procedures and controls.  The Company’s known costs related to the investigation to date were immaterial in 2012 and approximately $1.5 million through March 22, 2013. While we are working diligently towards a timely conclusion, we are presently unable to determine the likely outcome or range of loss, if any, or predict with certainty the timeline for resolution of these matters.'”

H-P, IBM and Oracle

This recent ProPublic report highlights the relationship between various tech companies including H-P, IBM and Oracle with a “senior technology officer for Poland’s national police and, later, the nation’s Interior Ministry, [who] set the terms for hundreds of millions of dollars in technology contracts and decided which ones should be awarded without competitive bidding.

According to the article, Polish prosecutor say that the individual “received more than a $1 million in cash and brand-name gifts in exchange for steering government contracts to the three American companies, as well as to a Polish company called Netline.  According to prosecutors, the gifts included a BMW motorcycle, a Nissan SUV, a Harmon Kardon home theater, a Sony 50 inch television, 12 HP laptops, several iPads and a refrigerator.”

The article further states as follows.

“IBM and Hewlett-Packard said in statements  that they were cooperating with Polish authorities. Hewlett-Packard noted that “no current HP employees are suspects in this case,” while IBM pointed out that “press reports” on the case referred to a “former IBM employee.”  The company said in its statement that it “believes in the highest ethical standards for its employees and is committed to the principles of business ethics and lawful conduct.”  Oracle, whose possible entanglement in the investigation had not been publicly known before today, would not comment for this article”

IBM and Oracle have both recently been the subjects of FCPA enforcement actions (see here and here) and as noted in this post H-P has been under FCPA scrutiny since approximately April 2010.

AB InBev

InBev, a leading global brewer based in Belgium with ADRs traded on the N.Y. Stock Exchange, recently disclosed in its annual report as follows.

“We have been informed by the SEC that it is conducting an investigation into our affiliates in India, including our nonconsolidated Indian joint venture, InBev Indian Int’l Private Ltd, and whether certain relationships of agents and employees were compliant with the FCPA. We are investigating the conduct in question and cooperating with the SEC.”

As noted in this Bloomberg article, AB InBev’s market share in India is about 2 percent and operations are run by an Indian subsidiary, Crown Beers India, and a joint venture with RKJ Group for local production, in which AB InBev holds a minority stake.

Other beverage industry companies also currently the subject of FCPA scrutiny include Owens Illinois (see here for prior post), Beam Inc. (see here for the prior post) and Central European Distribution Corp. (see here for the prior post).

An industry sweep?  (See here from the Wall Street Journal Corruption Currents).

Wal-Mart

In its recent 10-K filing, Wal-Mart stated, in pertinent part, regarding its FCPA scrutiny as follows.

“Our process of assessing and responding to the governmental investigations and the shareholder lawsuits continues. While we believe that it is probable that we will incur a loss from these matters, given the on-going nature and complexity of the review, inquiries and investigations, we cannot reasonably estimate any loss or range of loss that may arise from these matters. Although we do not presently believe that these matters will have a material adverse effect on our business, given the inherent uncertainties in such situations, we can provide no assurance that these matters will not be material to our business in the future.”

[…]

“These matters may require the involvement of certain members of the Company’s senior management that could impinge on the time they have available to devote to other matters relating to the business. The Company expects that there will be on-going media and governmental interest, including additional news articles from media publications on these matters, which could impact the perception among certain audiences of the Company’s role as a corporate citizen.”

Related to Wal-Mart’s overall FCPA scrutiny, this recent article in the Wall Street Journal suggests that Wal-Mart’s “compliance crackdown” is one of the reasons for the company’s stalled growth in India.  Another reason discussed is “India’s labyrinthine process for developing commercial real estate and operating stores”

Net1

As noted in this previous post, in December 2012, Net1 UEPS (a South African telecommunications company with shares traded on a U.S. exchange) disclosed that it received letters from the DOJ and SEC informing the company that the agencies had begun an investigation into whether Net 1 violated the FCPA by engaging in a scheme to make corrupt payments to officials of the Government of South Africa in connection with securing a contract with the South African Social Security Agency to provide social welfare and benefits payments.

The company recently announced as follows.

“[A] full bench of the South African Supreme Court of Appeal (“Appeal Court”) unanimously ruled that the tender process followed by the South African Social Security Agency (“SASSA”) in awarding a contract to Net1’s wholly owned subsidiary Cash Paymaster Services (Proprietary) Limited (“CPS”) was valid and legal.”

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