Scrutiny alerts and updates, quotable, ripple, and for the reading stack.
It’s all here in the Friday roundup.
Scrutiny Alerts and Updates
Earlier this week, the Australia-based mining company with ADR shares traded on the New York Stock Exchange issued this release.
“On 29 August 2016, Rio Tinto became aware of email correspondence from 2011 relating to contractual payments totalling US$10.5 million made to a consultant providing advisory services on the Simandou project in Guinea. The company launched an investigation into the matter led by external counsel. Based on the investigation to date, Rio Tinto has today notified the relevant authorities in the United Kingdom and United States and is in the process of contacting the Australian authorities. Energy & Minerals chief executive Alan Davies, who had accountability for the Simandou project in 2011, has been suspended with immediate effect. Legal & Regulatory Affairs group executive Debra Valentine, having previously notified the company of her intention to retire on 1 May 2017, has stepped down from her role. Rio Tinto intends to co-operate fully with any subsequent inquiries from all of the relevant authorities. Further comment at this time is therefore not appropriate.”
Misonix has been under FCPA scrutiny since late September 2016 and yesterday the company disclosed:
“Misonix, Inc. previously reported that, as a result of an investigation being overseen by its Audit Committee related to deficiencies in the Company’s internal control over financial reporting at June 30, 2016, the filing by the Company of its Annual Report on Form 10-K for the fiscal year ended June 30, 2016 would be delayed. This investigation, which includes an investigation of previously disclosed potential questions under the Foreign Corrupt Practices Act, is ongoing and, as a result, the filing of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2016 also will be delayed pending completion of the investigation. As a result of the foregoing, the Company will not be in a position to file its Quarterly Report on Form 10-Q within the 5-day extension period provided in Rule 12b-25(b). The Company is working diligently to resolve these matters and intends to file its Quarterly Report on Form 10-Q and its Annual Report on Form 10-K as promptly as reasonably practicable. Management currently believes that the Company will be in a position to file the aforementioned reports not later than January 31, 2017.”
Kentucky-based General Cable Corp. first disclosed FCPA scrutiny in September 2014 and recently disclosed:
“We continue to make progress toward a potential resolution of our previously disclosed and ongoing FCPA related investigations. Last quarter, based on discussions with the SEC and the DOJ at that time, we increased the range of potential resolution for disgorgement of profit and pre-judgment interest to between $33 million and $59 million. Based on recent discussions with the DOJ, we now are able to include in our estimated range of potential resolution an estimated range of a potential DOJ penalty and further potential disgorgement. As a result, the new estimated range of reasonably possible resolution, including disgorgement of profits, pre-judgment interest, and any potential DOJ penalty, is between $33 million and $120 million. We are continuing to have discussions with the SEC and DOJ regarding the terms of a potential resolution. At this time, we are not able to reasonably estimate the amount of any additional possible fines, civil penalties or other relief that may be sought with respect to the SEC’s FCPA investigation or the SEC’s previously-disclosed investigation into accounting issues.”
The company recently disclosed:
“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 did not allege any violations of law by Quanta or its employees. On October 27, 2016, the SEC notified Quanta that it had concluded its investigation and, based on the information received, did not intend to pursue further action in connection with this inquiry.”
The “declination” crowd is likely to use the “d” word in connection with Quanta’s FCPA scrutiny. That is why this term is a big, muddy mess.
Rolls Royce has been under scrutiny by the U.K. Serious Fraud Office and DOJ for several years.
“An investigation by the BBC and The Guardian has found new evidence that suggests Rolls-Royce was involved in corruption. Panorama [a television program] understands that the company made secret payments of around £10m to an unregistered Indian agent. And the programme has found evidence of a suspicious payment of cash that may have helped Rolls-Royce win a major contract for engines on Hawk aircraft.
Panorama has also been told by a Brazilian prosecutor that Rolls-Royce is co-operating with an investigation looking at bribery allegations in Brazil. It is alleged Rolls-Royce paid bribes to win a $100m contract to supply power systems to the Brazilian state oil company Petrobras.”
“We have to act sometimes as shoe salesmen, flogging competence in FCPA violations, that occur in subsidiaries or with foreign suppliers,” says my white collar defense specialist contact. “This work leads us to countries and legal systems we don’t know well, to uncover chickenshit violations that occur far from home.” (See here).
As highlighted in FCPA 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 FCPA scrutiny or enforcement.
According to Bloomberg:
“Och-Ziff Capital Management Group LLC, the hedge fund that settled a federal bribery probe in September [for $412 million – see here], said clients pulled $2.5 billion of assets in the last month. The firm suffered withdrawals of $2.4 billion on Oct. 1, and about $102 million over the rest of the month, the company said … in a statement.”
For the Reading Stack
A good weekend to all.