SEC Enforcement Of The FCPA – Year In Review
Foreign Corrupt Practices Act enforcement, it is not just about the DOJ. Granted, as a civil enforcement agency its sticks are less sharp than the DOJ’s, but the SEC also claims a significant piece of the FCPA enforcement pie (query whether it should – but that is a subject for another day – for instance as discussed in “The Story of the Foreign Corrupt Practices Act” the SEC wanted no part in enforcing the FCPA’s anti-bribery provisions).
Today’s post is a year in review of SEC FCPA Enforcement. (See here for a similar post for 2013; here for a similar post for 2012; here for a similar post for 2011; and here for a similar post for 2010).
Stay tuned for a similar post on DOJ FCPA enforcement in 2014.
Settlement Amounts and Specifics
In 2014, the SEC collected approximately $327 million in 7 corporate FCPA enforcement actions.
By comparison, in 2013 the SEC collected approximately $300 million in 8 corporate enforcement actions; in 2012 the SEC collected approximately $118 million in 8 corporate FCPA enforcement actions; in 2011 the SEC collected approximately $148 million in 13 corporate FCPA enforcement actions; and in 2010, the SEC collected approximately $530 million in 19 corporate FCPA enforcement actions.
The range of SEC FCPA enforcement actions in 2014 was, on the high end, $175 million (Alcoa), and on the low end, $2 million (Smith & Wesson). Of the $327 million the SEC collected in 2014 corporate FCPA enforcement actions, approximately 54% was in just one enforcement action (Alcoa) and two enforcement actions (Alcoa and Avon) comprised approximately 75% of the amount.
Three corporate FCPA enforcement actions from 2014 were SEC only (Bruker, Layne Christensen and Smith & Wesson).
Of the 7 corporate enforcement actions from 2014, 6 enforcement actions (all but the Avon action) were administrative actions. In other words, there was no judicial scrutiny of 86% of SEC FCPA enforcement actions from 2014. The settlement amounts in these actions comprised approximately 80% of the SEC’s $326 million collected in 2014 corporate FCPA enforcement actions. By comparison, in 2013 there was no judicial scrutiny of 50% of SEC FCPA enforcement actions and settlement amounts in these actions comprised approximately 57% of the SEC’s $300 million collected.
In 2014, the SEC collected approximately $104 million in disgorgement and prejudgment interest in enforcement actions that did not charge anti-bribery violations. This is noteworthy because many question, and rightfully so, whether disgorgement is an appropriate remedy in cases that do not charge FCPA anti-bribery violations. See here for a prior post on so-called “no-charged bribery disgorgement” cases. In 2013, the SEC collected approximately $208 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases; in 2012, the SEC collected approximately $57.4 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases; and in 2011 the SEC collected approximately $51 million in disgorgement and prejudgment interest in n0-charged bribery disgorgement cases.
The $327 million the SEC collected in 2014 FCPA enforcement actions breaks down as follows:
$2.7 million in a civil penalties (Bruker, Layne Christensen and Smith & Wesson); and
$324.3 million in disgorgement and prejudgment interest.
Thus, 99% of SEC FCPA settlement amounts in 2014 consisted of disgorgement and prejudgment interest. By way of comparison, in 2013 98% of SEC FCPA settlement amounts consisted of disgorgement and prejudgment interest; in 2012 86% of SEC FCPA settlement amounts consisted of disgorgement and prejudgment interest; in 2011, disgorgement and prejudgment interest comprised 94% of SEC FCPA enforcement settlement amounts; and in 2010, disgorgement and prejudgment interest comprised 96% of SEC FCPA enforcement settlement amounts.
If one tries to analyze why some SEC FCPA enforcement actions in 2014 included a civil penalty, disgorgement and prejudgment interest (Bruker, Layne Christensen, and Smith & Wesson), whereas other enforcement actions included only disgorgement and prejudgment interest (Avon, Bio-Rad and HP), whereas other enforcement actions included only disgorgement (Alcoa), good luck and please enlighten us all with your insight.
Corporate vs. Individual Actions
Of the 7 corporate SEC FCPA enforcement actions from 2014, 0 (0%) have involved, at present, related SEC charges against company employees. By way of comparison, of the 8 SEC corporate FCPA enforcement actions from 2013, 0 (0%) have involved, at present, related SEC charges against company employees; in 2012, 0 of the 8 corporate (0%) FCPA actions involved related SEC charges against company employees; in 2011, 2 of the 13 (15%) corporate SEC FCPA enforcement actions involved related SEC charges against company employees; in 2010, 3 of the 19 (15%) corporate SEC FCPA enforcement actions involved related SEC charges against company employees.
Voluntary Disclosures
Of the 7 corporate SEC FCPA enforcement actions from 2014, 4 enforcement actions (57%) (Avon, Bruker, Bio-Rad and Layne Christensen) were the result of corporate voluntary disclosures. 1 enforcement action (Smith & Wesson) originated from the manufactured Africa Sting enforcement action, 1 enforcement action (HP) was the result of a previous foreign law enforcement action and 1 enforcement action (Alcoa) was the result of a previous civil lawsuit. By way of comparison, of the 8 corporate SEC FCPA enforcement actions in 2013, 3 enforcement actions (38%) were the result of corporate voluntary disclosures; in 2012 of the 8 corporate SEC FCPA enforcement actions 4 (50%) were the result of corporate voluntary disclosures; and in 2011 of the 13 corporate SEC FCPA enforcement actions 11 (85%) were the result of corporate voluntary disclosures.
This remainder of this post provides an overview of SEC FCPA enforcement in 2014.
Avon (December 17th)
See here and here for prior posts
Charges: Violation of the FCPA’s books and records and internal controls provisions
Settlement: Approximately $67.4 million ($52,850,000 in disgorgement plus prejudgment interest of $14,515,013.13)
Disclosure: Voluntary Disclosure
Individuals Charged: No
Related DOJ Enforcement Action: Yes
Bruker Corp. (December 15th)
See here for the prior post.
Charges: None. Administrative cease and desist order finding violations of the FCPA’s books and records and internal control provisions.
Settlement: Approximately $2.4 million ($1,714,852 in disgorgement, $310,117 in prejudgment interest, and a $375,000 penalty)
Disclosure: Voluntary Disclosure
Individuals Charged: No
Related DOJ Enforcement Action: No
Bio-Rad (November 3rd)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions and books and records and internal control provisions.
Settlement: Approximately $40.7 million in disgorgement
Disclosure: Voluntary Disclosure
Individuals Charged: No
Related DOJ Enforcement Action: Yes
Layne Christensen (November 3rd)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions and books and records and internal control provisions.
Settlement: Approximately $5.1 million ($3,893,472.42 in disgorgement plus $858,720 in prejudgment interest as well as a $375,000 penalty amount)
Disclosure: Voluntary Disclosure
Individuals Charged: No
Related DOJ Enforcement Action: No
Smith & Wesson (July 28th)
See here and here for prior posts.
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery, books and records and internal control provisions.
Settlement: Approximately $2 million ($107,852 in disgorgement, $21,040 in prejudgment interest, and a civil monetary penalty of $1,906,000
Disclosure: The enforcement action originated after a Smith & Wesson employee was criminally charged in the DOJ’s manufactured Africa Sting enforcement action.
Individuals Charged: No (as to the conduct alleged in the corporate enforcement action).
Related DOJ Enforcement Action: No.
HP (April 9th)
See here for the prior post.
Charges: None. Administrative cease and desist order finding violations of the FCPA’s books and records and internal control provisions.
Settlement: $34 million in disgorgement and prejudgment interest (approximately $2.5 million of the disgorgement amount was satisfied by payment of $2.5 million in connection with the HP Mexico DOJ action).
Disclosure: The enforcement action appears to have been the result of a previous German and Russian law enforcement investigation (see here for the prior post).
Individuals Charged: No
Related DOJ Enforcement Action: Yes
Alcoa (January 9th)
See here for the prior post.
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions and books and records and internal control provisions.
Settlement: $175 million in disgorgement (of which $14 million will be satisfied by the payment of the forfeiture in the criminal action).
Disclosure: A 2008 civil lawsuit between Alba and Alcoa.
Individuals Charged: No
Related DOJ Enforcement Action: Yes
SEC Enforcement (Individual)
For the first time since April 2012, the SEC brought an FCPA enforcement action against an individual. This enforcement action is summarized below.
Stephen Timms and Yasser Ramahi (November 17th)
See here for the prior post
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions, causing violations of the FCPA’s books and records provisions
Settlement: Timms and Ramahi consented to the entry of the order and agreed to pay financial penalties of $50,000 and $20,000 respectively.
Employer Charged: The individuals were associated with FLIR System, Inc. but at present the company has not been charged
Related DOJ Enforcement Action: No
What You Need To Know From Q4
Several 2014 year in review posts will be published this month. But first, the fourth quarter of 2014 needs to be closed out.
This post provides a summary of Foreign Corrupt Practices Act enforcement actions and FCPA related events from the fourth quarter of 2014. See here for a similar post from Q1, here for Q2 and here for Q3.
DOJ Enforcement (Corporate)
The DOJ brought four corporate enforcement actions in the fourth quarter. (Alstom, Avon, Dallas Airmotive, and Bio-Rad). DOJ recovery in these enforcement actions was approximately $868 million (with the Alstom action contributing the bulk of this number – $772 million).
In 2014, the DOJ brought seven corporate enforcement actions (Alstom, Avon, Dallas Airmotive, Bio-Rad, HP related entities, Marubeni, and Alcoa). DOJ recovery in these enforcement actions was approximately $1.25 billion (with again the Alstom action contributing the bulk of this number). At present, only the Alstom action has resulted in any individual charges against company employees.
The DOJ enforcement actions from the fourth quarter are summarized below.
Alstom and Related Entities (December 22nd).
See here and here for prior posts
Charges: As to Alstom S.A., violation of the FCPA’s books and records and internal controls provisions. As to Alstom Network Schweiz AG, conspiracy to violate the FCPA’s anti-bribery provisions. As to Alstom Power Inc., conspiracy to violate the FCPA’s anti-bribery provisions. As to Alstom Grid Inc., conspiracy to violate the FCPA’s anti-bribery provisions.
Resolution Vehicle: As to Alstom and Alstom Network Schweiz, plea agreements. As to Alstom Power and Alstom Grid, DPAs.
Guidelines Range: As to Alstom $532.8 million to $1.065 billion
Penalty: As to Alstom, $772 million (the other entities were not required to pay separate penalties).
Disclosure: The enforcement action presumably originated from a prior 2011 Swiss enforcement action (see here and here).
Monitor: No
Individuals Charged: Yes (as to the Indonesia conduct – see here).
Avon Entities (December 17th)
See here and here for prior posts
Charges: As to Avon China, conspiracy to violate the FCPA’s books and records provisions. As to Avon Products, conspiracy to violate the FCPA’s books and records provisions and violation of the FCPA’s internal controls provisions.
Resolution Vehicle: As to Avon China, a plea agreement; as to Avon Products a DPA.
Guidelines Range: As to Avon China, $73.9 million to $147.9 million; as to Avon Products, $84.6 million to $169.1 million.
Penalty: As to Avon China, $67.6 million; as to Avon Products $67.6 million but the Avon China penalty was deducted from this amount.
Disclosure: Voluntary Disclosure.
Monitor: Yes
Individuals Charged: No
Dallas Airmotive (December 10th)
See here for the prior post
Charges: Conspiracy to violate the FCPA’s anti-bribery provisions and violation of the FCPA’s anti-bribery provisions.
Resolution Vehicle: DPA
Guidelines Range: $17.5 million to $35 million
Penalty: $14 million
Disclosure: The enforcement action appears to be casually related to a prior enforcement action against BizJet International and certain of its executives
Monitor: No
Individuals Charged: No
Bio-Rad (November 3rd)
See here and here for prior posts
Charges: Not applicable
Resolution Vehicle: NPA
Guidelines Range: Not set forth in the NPA
Penalty: $14.4 million
Disclosure: Voluntary Disclosure
Monitor: No
Individuals Charged: No
DOJ Enforcement (Individual)
The DOJ did not bring any individual enforcement actions in the fourth quarter.
Year-to-date, the DOJ has brought three core actions in which various individuals have been charged. (See here, here and here).
SEC Enforcement (Corporate)
The SEC resolved four corporate enforcement actions (Avon, Bruker, Bio-Rad and Layne Christensen) in the fourth quarter. SEC recovery in these enforcement action was approximately $115 million. The enforcement actions have not resulted, at least yet, in any individual charges against company employees.
In 2014, the SEC resolved seven corporate enforcement actions (Avon, Bruker, Bio-Rad, Layne Christensen, Smith & Wesson, HP and Alcoa). All but the Avon action was resolved via administrative cease and desist orders. SEC recovery in these enforcement actions was approximately $327 million. At present, none of the enforcement actions have resulted in any individual charges against company employees.
The SEC enforcement actions from the fourth quarter are summarized below.
Avon (December 17th)
See here and here for prior posts
Charges: Violation of the FCPA’s books and records and internal controls provisions
Settlement: Approximately $67.4 million ($52,850,000 in disgorgement plus prejudgment interest of $14,515,013.13)
Disclosure: Voluntary Disclosure
Individuals Charged: No
Related DOJ Enforcement Action: Yes
Bruker Corp. (December 15th)
See here for the prior post.
Charges: None. Administrative cease and desist order finding violations of the FCPA’s books and records and internal control provisions.
Settlement: Approximately $2.4 million ($1,714,852 in disgorgement, $310,117 in prejudgment interest, and a $375,000 penalty)
Disclosure: Voluntary Disclosure
Individuals Charged: No
Related DOJ Enforcement Action: No
Bio-Rad (November 3rd)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions and books and records and internal control provisions.
Settlement: Approximately $40.7 million in disgorgement
Disclosure: Voluntary Disclosure
Individuals Charged: No
Related DOJ Enforcement Action: Yes
Layne Christensen (November 3rd)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions and books and records and internal control provisions.
Settlement: Approximately $5.1 million ($3,893,472.42 in disgorgement plus $858,720 in prejudgment interest as well as a $375,000 penalty amount)
Disclosure: Voluntary Disclosure
Individuals Charged: No
Related DOJ Enforcement Action: No
SEC Enforcement (Individual)
For the first time since April 2012, the SEC brought an FCPA enforcement action against an individual. This enforcement action is summarized below.
Stephen Timms and Yasser Ramahi (November 17th)
See here for the prior post
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions, causing violations of the FCPA’s books and records provisions
Settlement: Timms and Ramahi consented to the entry of the order and agreed to pay financial penalties of $50,000 and $20,000 respectively.
Employer Charged: The individuals were associated with FLIR System, Inc. but at present the company has not been charged
Related DOJ Enforcement Action: No
Other Developments or Items of Interest
As highlighted here, in what has become a mid-November tradition, DOJ and SEC officials gave speeches at an FCPA conference. Topics discussed included the following: individual prosecutions, voluntary disclosure and cooperation, compliance programs, asset recovery, and foreign law enforcement cooperation. Likewise September and October were also active months for DOJ policy speeches that touched upon FCPA topics. Posts here, here and here analyze the speeches.
As highlighted here, FCPA individual defendant Joseph Sigelman is challenging various aspects of the DOJ’s case including its interpretation and application of the “foreign official” element – specifically whether an individual employed by Ecopetrol (an alleged state-owned and state-controlled petroleum company in Colombia) is a “foreign official.”
In this guest post, one of the most read ever on FCPA Professor, an anonymous compliance professional provides an inside perspective of an FCPA investigation.
As highlighted here, the Supreme Court declined an opportunity to hear a substantive FCPA case for the first time in FCPA history. (See here, here and here for briefing in the “foreign official” challenge).
See here for an informative Q&A with an individual experienced in the FCPA from a number of vantage points: DOJ FCPA enforcement attorney, in-house counsel, and lawyer in private practice.
What You Need To Know From Q3
This post provides a summary of Foreign Corrupt Practices Act enforcement activity and related events from the third quarter of 2014. (See here for a similar post from Q1 and here for Q2).
DOJ Enforcement (Corporate)
The DOJ did not bring any corporate enforcement actions in the third quarter.
Year-to-date, the DOJ has brought three corporate enforcement actions (HP related entities, Marubeni, and Alcoa). DOJ recovery in these enforcement actions has been approximately $388 million. At present, none of these enforcement actions have resulted in any individual charges against company employees.
DOJ Enforcement (Individual)
The DOJ did not bring any individual enforcement actions in the third quarter.
Year-to-date, the DOJ has brought three core actions in which various individuals have been charged. (See here, here and here).
SEC Enforcement (Corporate)
The SEC resolved one corporate enforcement (Smith & Wesson) via an administrative order in the third quarter. SEC recovery in this enforcement action was approximately $2 million. The enforcement action has not resulted, at least yet, in any individual charges against company employees.
Year-to-date, the SEC has resolved three corporate enforcement actions (Smith & Wesson, HP and Alcoa) – all via administrative orders. SEC recovery in these enforcement actions has been approximately $195 million. At present, none of the enforcement actions have resulted in any individual charges against company employees.
Smith & Wesson (July 28th)
See here and here for prior posts.
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery, books and records and internal control provisions.
Settlement: Approximately $2 million ($107,852 in disgorgement, $21,040 in prejudgment interest, and a civil monetary penalty of $1,906,000
Disclosure: The enforcement action originated after a Smith & Wesson employee was criminally charged in the DOJ’s manufactured Africa Sting enforcement action.
Individuals Charged: No (as to the conduct alleged in the corporate enforcement action).
Related DOJ Enforcement Action: No.
SEC Enforcement (Individual)
The SEC did not bring any FCPA charges against individuals in the third quarter.
Year-to-date there have not been any SEC FCPA enforcement actions against individuals.
Other Developments or Items of Interest
DOJ Speeches
As in past years, September was a busy month for DOJ policy speeches that touched upon FCPA topics.
As highlighted in this post, DOJ’s Principal Deputy Assistant Attorney General for the Criminal Division, Marshall Miller, delivered a speech focused on how the DOJ is “addressing criminal conduct when it takes place at corporations and other institutions.” While not specific to the Foreign Corrupt Practices Act, Miller did reference the FCPA several times during the speech. The post highlighted how an FCPA reform proposal can help the DOJ better achieve its policy objectives, as sensibly articulated in Miller’s speech, in the FCPA context.
As highlighted in this post, DOJ Attorney General Eric Holder, who recently announced his resignation, delivered a speech that touched upon several issues of general interest such as the statement that “the buck needs to stop somewhere where corporate misconduct is concerned.”
“Foreign Official” Cert Petition
As highlighted in this post, for the first time in FCPA history, a substantive cert petition was filed in the Supreme Court asking the court to review the 11th Circuit’s recent “foreign official” decision in U.S. v. Esquenazi. As highlighted in this post, the Washington Legal Foundation and the Independence Institute joined to file an amicus brief in support of Petitioners as to Question 1 of the Petition (the “foreign official” issue). As highlighted in this post, I also filed an amicus brief in support of Petitioners as to Question 1.
Odd Whistleblower Dynamics
As highlighted in this post, the Second Circuit’s recent decision in the Liu Meng-Lin v. Siemens creates an odd dynamic in that a foreign national is unable to maintain a private cause of action under Dodd-Frank’s anti-retaliation provisions based on allegations that his foreign employer retaliated against him for internally reporting conduct that could implicate the Foreign Corrupt Practices Act, yet that same foreign national can be awarded a whistleblower bounty under Dodd-Frank should the SEC bring an enforcement action based on the information the foreign national provided to it.
Indeed, the odd dynamic was addressed by the SEC in its recent $30 million whistleblower award to a foreign national (see here for the post).
SEC’s Case Against Jackson & Ruehlen Ends With a Whimper
As highlighted in this post, on the brink of the SEC’s first-ever FCPA trial, the SEC’s enforcement action against Mark Jackson & James Ruehlen ended with a whimper. Since the case was filed in February 2012, the SEC’s case against the defendants was consistently trimmed as the SEC attempted to meet its burden (see this post as well as here). Among other things, a portion of the SEC’s claims were dismissed or abandoned on statute of limitations grounds and the trial court judge ruled, in an issue of first impression, that the SEC has the burden of negating the FCPA’s facilitation payments exception. Without admitting or denying the SEC’s allegations, the defendants consented to “obey the law” injunctions and were not required to pay any civil fines.
As highlighted in this post, it was notable that the SEC failed in the individual enforcement action in the aftermath of the DOJ/SEC extracting more than $200 million from a various companies based on the same primary enforcement theory at issue in the Jackson & Ruehlen matter.
Books, Articles, Videos and Events of Interest
The book “The Foreign Corrupt Practices Act in a New Era” continues to generate a buzz. (See here).
Elevate your FCPA knowledge and practical skills at the FCPA Institute – Miami (Jan. 12-13th). (See here).
Improve the FCPA compliance discussion through videos here and here. The first video engages employees in a business organization and inspires them to spot risk. The second video stresses the important role gatekeepers play in ensuring compliance and minimizing risk.
A new article, “FCPA Ripples,” 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.
In the spirit of the football season, this article highlights how a successful football organization can inform FCPA compliance in a business organization.
Friday Roundup
The U.K. SFO flexes its pre-Bribery Act muscle in criminally charging an Alstom subsidiary, other scrutiny alerts and updates, nominate, double standard, quotable, and for the reading stack. It’s all here in the Friday roundup.
Alstom
As has been widely reported (see here and here for instance), the U.K. Serious Fraud Office announced:
“Alstom Network UK Ltd, formerly called Alstom International Ltd, a UK subsidiary of Alstom, has been charged with three offences of corruption contrary to section 1 of the Prevention of Corruption Act 1906, as well as three offences of Conspiracy to Corrupt contrary to section 1 of the Criminal Law Act 1977. The alleged offences are said to have taken place between 1 June 2000 and 30 November 2006 and concern large transport projects in India, Poland and Tunisia.”
According to the release, “the SFO investigation commenced as a result of information provided to the SFO by the Office of the Attorney General in Switzerland concerning the Alstom Group, in particular Alstom Network UK Ltd.”
I inquired with the SFO press office regarding any original source charging documents and was informed as follows. “Beyond our press release today, the nearest date for documents likely to be made available would be the charge sheet at the first court hearing – presently arranged for 9 September, at Westminster Magistrates’ Court.”
As readers likely know, since April 2013 the DOJ has charged four individuals associated with Alstom Power Inc., a subsidiary of Alstom, in connection with an alleged bribery scheme involving the Tarahan coal-fired steam power plant project in Indonesia. (See more below for a recent guilty plea).
As was the case in the U.S. – U.K. enforcement action against BAE (see here for the prior post) there may have been and/or currently is turf war issues between the agencies as to which agency is going to prosecute alleged conduct occurring in various countries.
Speaking of the DOJ action against various individuals associated with Alstom Power, last week, the DOJ announced that William Pomponi, a former vice president of regional sales at Alstom Power, pleaded guilty to a criminal information charging him with conspiracy to violate the FCPA in connection with the awarding of the Tarahan power project in Indonesia.
Assistant Attorney General Leslie R. Caldwell stated:
“The Criminal Division of the Department of Justice will follow evidence of corruption wherever it leads, including into corporate boardrooms and corner offices. As this case demonstrates, we will hold both companies and their executives responsible for criminal conduct.”
As noted in the DOJ release:
“Pomponi is the fourth defendant to plead guilty to charges stemming from this investigation. Frederic Pierucci, the vice president of global boiler sales at Alstom, pleaded guilty on July 29, 2013, to one count of conspiracy to violate the FCPA and one count of violating the FCPA; and, David Rothschild, a former vice president of regional sales at Alstom Power Inc., pleaded guilty to conspiring to violate the FCPA on Nov. 2, 2012. Marubeni Corporation, Alstom’s consortium partner on the Tarahan project, pleaded guilty on March 19, 2014, to one count of conspiracy to violate the FCPA and seven counts of violating the FCPA, and was sentenced to pay a criminal fine of $88 million. FCPA and money laundering charges remain pending against Lawrence Hoskins, the former senior vice president for the Asia region for Alstom, and trial is scheduled for June 2, 2015.”
See here for the original post highlighting the enforcement action against the individuals associated with Alstom and here for the original post regarding the Marubeni enforcement action.
Scrutiny Alerts and Updates
SEC Enforcement Action Against Former Magyar Telekom Executives
From Law360:
“The SEC has slimmed down its FCPA case against three former Magyar Telekom PLC executives, dropping claims they bribed government officials in Montenegro, according to a new complaint … The amended complaint alleged former Magyar CEO Elek Straub and two other former executives, Andras Balogh and Tamas Morvai, authorized bribe payments to government officials in the Republic of Macedonia in exchange for regulations designed to hurt a competitor. The SEC, in its initial complaint in December 2011, had also alleged the defendants engaged in a second bribery scheme in Montenegro. The agency said in a July 14 court filing that it would “continue to pursue the same legal causes of action alleged in its original complaint,” but without the claims related to Montenegro. The SEC previously advised the court and defense attorneys in January 2014 of its intention to narrow the suit.”
Interesting, isn’t it, what happens when the SEC is put to its burden of proof.
Kowalewski Pleads Guilty
The DOJ announced:
“Bernd Kowalewski, the former President and CEO of BizJet, pleaded guilty … to conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and a substantive violation of the FCPA in connection with a scheme to pay bribes to officials in Mexico and Panama in exchange for those officials’ assistance in securing contracts for BizJet to perform aircraft maintenance, repair and overhaul services.”
Assistant Attorney General Leslie Caldwell stated:
“The former CEO of BizJet, Bernd Kowalewski, has become the third and most senior Bizjet executive to plead guilty to bribing officials in Mexico and Panama to get contracts for aircraft services. While Kowalewski and his fellow executives referred to the corrupt payments as ‘commissions’ and ‘incentives,’ they were bribes, plain and simple. Though he was living abroad when the charges were unsealed, the reach of the law extends beyond U.S. borders, resulting in Kowalewski’s arrest in Amsterdam and his appearance in court today in the United States. Today’s guilty plea is an example of our continued determination to hold corporate executives responsible for criminal wrongdoing whenever the evidence allows.”
U.S. Attorney Danny Williams (N.D. Okla.) stated:
“I commend the investigators and prosecutors who worked together across borders and jurisdictions to vigorously enforce the Foreign Corrupt Practices Act. Partnership is a necessity in all investigations. By forging and strengthening international partnerships to combat bribery, the Department of Justice is advancing its efforts to prevent crime and to protect citizens.”
See here and here for posts regarding the 2012 DOJ enforcement action against BizJet and here and here for the 2013 DOJ enforcement action against Kowalewski and others associated with BizJet.
Cilins Sentenced
As noted in this prior post, in April 2013 the DOJ announced (here) that “Frederic Cilins a French citizen, has been arrested and accused of attempting to obstruct an ongoing investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.” The Criminal Complaint charged Cilins with one count of tampering with a witness, victim, or informant; one count of obstruction of a criminal investigation; and one count of destruction, alteration, and falsification of records in a federal investigation. Cilins was linked to Guernsey-based BSG Resources Ltd and in March 2014 the DOJ announced that Cilins pleaded guilty “to obstructing a federal criminal investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.” (See this prior post).
Last week, the DOJ announced that Cilins was sentenced to 24 months in prison. In the DOJ release, U.S. Attorney Preet Bharara said:
“Frederic Cilins went to great lengths to thwart a Manhattan federal grand jury’s investigation into an alleged bribery scheme in the Republic of Guinea. In an effort to prevent the federal authorities from learning the truth, Cilins paid a witness for her silence and to destroy key documents. Today, Cilins learned that no one can manipulate justice.”
Assistant Attorney General Leslie Caldwell said:
“Cilins offered to bribe a witness in an FCPA investigation to stop the witness from talking to the FBI. Today’s sentence holds Cilins accountable for his effort to undermine the integrity of our justice system, and sends a message that those who interfere with federal investigations will be prosecuted and sent to prison.”
FBI Assistant Director-in-Charge George Venizelos said:
“Cilins obstructed the efforts of the FBI during the course of this investigation. His guilty plea and sentence demonstrate our shared commitment with the U.S. Attorney’s Office to hold accountable those who seek to interfere with the administration of justice. This case should be a reminder to all those who try to circumvent the efforts of a law enforcement investigation: the original crime and the cover-up both lend themselves to prosecution.”
According to the release, Cilins was also ordered to pay a fine of $75,000 and to forfeit $20,000.
GSK
From Reuters:
“GlaxoSmithKline faces new allegations of corruption, this time in Syria, where the drugmaker and its distributor have been accused of paying bribes to secure business, according to a whistleblower’s email reviewed by Reuters. Britain’s biggest drugmaker said on Thursday it was investigating the latest claims dating back to 2010, which were laid out in the email received by the company on July 18. The allegations relate to its former consumer healthcare operations in Syria, which were closed down in 2012 due to the worsening civil war in the country. […] GSK has been rocked by corruption allegations since last July, when Chinese authorities accused it of funneling up to 3 billion yuan ($480 million) to doctors and officials to encourage them to use its medicines. The former British boss of the drugmaker’s China business was accused in May of being behind those bribes. Since then, smaller-scale bribery claims have surfaced in other countries and GSK is now investigating possible staff misconduct in Poland, Iraq, Jordan and Lebanon. Syria is the sixth country to be added to the list. The allegations there center on the company’s consumer business, including its popular painkiller Panadol and oral care products. Although rules governing the promotion of non-prescription products are not as strict as for prescription medicines, the email from a person familiar with GSK’s Syrian operations said alleged bribes in the form of cash, speakers’ fees, trips and free samples were in breach of corruption laws. The detailed 5,000-word document, addressed to Chief Executive Andrew Witty and Judy Lewent, chair of GSK’s audit committee, said incentives were paid to doctors, dentists, pharmacists and government officials to win tenders and to obtain improper business advantages.”
Separately, this Reuters article states that the U.K. SFO “is working with authorities in China in a first for such Anglo-Chinese cooperation as it carries out its own investigation into alleged corruption at GSK.” The article quotes SFO Director David Green as follows: “Certainly, so far as I am aware it is the first time we have had cooperation with the Chinese on an SFO case.”
Separately, in the U.S. this Wall Street Journal article states:
“Federal Bureau of Investigation agents have been interviewing current and former GSK employees in connection with bribery allegations made against the drug maker in China, according to a person familiar with the matter, as fresh claims of corruption surfaced against Glaxo’s operations in Syria. The interviews have taken place in Washington, D.C., in the past few months and are part of a Justice Department investigation into GSK’s activities in China, the person added. The U.S. Securities and Exchange Commission also is investigating the company’s business in China, according to people familiar with the matter.”
Key Energy Services
The company stated as follows in its Second Quarter 2014 Update and Earnings Release.
“Pre-tax expenses of approximately $5 million were incurred in connection with the previously disclosed Foreign Corrupt Practices Act investigations.”
Nominate
If FCPA Professor adds value to your practice or business or otherwise enlightens your day and causes you to contemplate the issues in a more sophisticated way, please consider nominating FCPA Professor for the ABA Journal’s Blawg 100 list (see here).
Double Standard
Beginning in 2009, I began writing about the “double standard” and how – despite the similarities between the FCPA and 18 USC 201 (the domestic bribery statute) – a U.S. company’s interaction with a “foreign official” is subject to more scrutiny and different standards than interaction with a U.S. official. Since 2009, approximately 30 posts have appeared under the “double standard” subject matter tag.
Against this backdrop, I was happy to see another individual tackle the same general topic. See here from the Global AntiCorruption Blog – “Is U.S. Campaign Finance Law More Permissive of Corruption Than the FCPA?”
Quotable
In this Corporate Crime Reporter interview, former U.S. Attorney Neil MacBride (E.D. Va.) says the following regarding the use of non-prosecution and deferred prosecution agreements: “The Department now has the ability to reach more ambiguous conduct where it might be more difficult to prove a criminal conviction in court.”
Wait a minute!
If the conduct is ambiguous and the DOJ would have a difficult time to prove a criminal conviction in court, there should be no non-prosecution or deferred prosecution agreement. Period. End of story. The rule of law commands such a result.
Reading Stack
Over at the FCPA Compliance & Ethics blog, Tom Fox recently published a three-part series on M&A issues and the FCPA. See Part I, Part II, and Part III.
Sherman & Sterling’s mid-year FCPA Digest, including its “Trends and Patterns” is here. Among the trends and patterns:
“Recent paper victories by the SEC could be perceived as setbacks in the Commission’s actions against
individual defendants; andThe SEC has continued its practice of pursuing its theory of strict liability against a parent corporation
for the acts of its corporate subsidiaries.”
Kudos to Sherman & Sterling for adopting the “core” approach to keeping FCPA statistics. (See here for the prior post regarding my suggested “core” approach). The Digest states:
“We count all actions against a corporate “family” as one action. Thus, if the DOJ charges a subsidiary and the SEC charges a parent issuer, that counts as one action. In addition, we count as a “case” both filed enforcement actions (pleas, deferred prosecution agreements, and complaints) and other resolutions such as non-prosecution agreements that include enforcement-type aspects, such as financial penalties, tolling of the statute of limitations, and compliance requirements.”
The most recent edition of Miller & Chevalier’s FCPA Update is here. Debevoise & Plimpton’s always informative FCPA Update is here and Mayer Brown’s FCPA mid-year update is here.
Warning, the enforcement statistics cited in certain of the above updates will cause confusion because they do not adopt the “core” approach.
*****
A good weekend to all.
Friday Roundup
The cheerleaders fume, quotable, scrutiny alert, and for the reading stack. It’s all here in the Friday roundup.
The Cheerleaders Fume
In the SEC’s failed enforcement action against Mark Jackson and James Ruehlen, the SEC was forced to carry its burden of proof in the context of an adversarial proceeding. This should be celebrated as evidence that the rule of law worked.
Yet, to the cheerleaders of more FCPA enforcement regardless of enforcement theories or quality of evidence, the end result of the SEC’s failed enforcement action is something to fume about. (See here).
Four words come to mind. Silly, just plain silly.
Quotable
From Robert Amsterdam (here)
“My law firm has counselled entrepreneurs who have seen their companies needlessly gutted by their own lawyers, who in an act of self-preservation turn themselves into appendages of the state to work against their own clients. Even worse, we’ve seen courts seize property for years with little regard for the personal impact on the owners, while others have spent the majority of margin on FCPA compliance costs, leaving little motivation to run their business.
This is all possible thanks to the culture being spread by the war on wealth — we have been so eager to hand over vast powers to regulators and rapidly diminish the rights of those who stand accused, trusting in the flawless execution of the fight against graft and fraud.
There is such a tremendous distrust of the wealthy that politically ambitious prosecutors seek out opportunities for advancement rather than enforcement of the law. The victims tend to be individuals — not the behemoth banks who knowingly traded on debt and credit default swaps, not the industrial giants with decades of experience in bribery, nor the corporate quasi-state bodies that leech off subsidies.
Means to an end
The fight against corruption is important and commendable, and the drive to achieve greater income equality bears an undeniable moral truth. But the way we go about achieving these goals must be intelligent. Rights and due process must continue to be strong throughout the administration of justice. Then expanding opportunities for all, rather than depriving them from some, will put our society back on track for success.”
Scrutiny Alert
GPT Special Project Management Ltd, a unit of Airbus, has been under scrutiny August 2012 (see here). The Wall Street Journal reports here:
“Airbus Group NV said … that the U.K.’s Serious Fraud Office has contacted some of its current and former employees, as well as U.K. defense ministry officials, in a long-running corruption probe into activities at one of its units. Airbus “understands that four former and current employees were recently interviewed, along with MOD [Ministry of Defence] officials, as part of a wide-ranging SFO investigation,” a spokesman said by email. The U.K.’s anticorruption regulator has for roughly two years investigated GPT Special Project Management Ltd., an Airbus unit that works with the U.K.’s defense ministry, regarding allegations relating to its business in Saudi Arabia.”
Reading Stack
See here for Gibson Dunn’s mid-year FCPA update.
“The Ruehlen and Jackson settlements, earned only after two years of hard-nosed litigation that brought the parties to the brink of trial, demonstrate that those who are willing to put the Government to its burden of proof can come out materially better for their efforts.”
See here for Gibson Dunn’s mid-year update on corporate NPAs and DPAs.
“As the debate continues over whether and how to punish companies for unlawful conduct, U.S. federal prosecutors continue to rely significantly on NPAs and DPAs. […] During the first half of 2014, DOJ entered into 11 agreements to resolve a variety of alleged conduct spanning multiple DOJ divisions and sections. The SEC entered into one agreement. Of the 12 agreements total, 5 were NPAs and 7 were DPAs. This figure is in line with the 12 agreements reached in the first half of 2013. In past years, we observed the phenomenon of an uptick in NPAs and DPAs during the second half of the year, so we anticipate that this year’s tallies could match or exceed the 2013 figure of 27 agreements.”
*****
A good weekend to all.