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Friday Roundup


Quotable, no reliable way to measure, Microsoft explains, scrutiny alert, a direct selling license in China, and offensive use of the FCPA. It’s all here in the Friday roundup.


Some think – or at least I’ve been told – that certain of my Foreign Corrupt Practices Act views are controversial or out of the “main stream” (whatever the “main stream” actually is or means). Yet, I am confident that much of what I write and talk about represents silent majority views.

Indeed, as I’ve commented before, one of the interesting things about writing about the FCPA and related issues on a daily basis is that often I just need to wait for a former FCPA enforcement official to say the same thing. 

The latest example occurs in this Forbes column in which former DOJ FCPA Unit Chief Mark Mendelsohn, the self-described “architect” of the “DOJ’s modern FCPA enforcement program” states: “[the] DOJ and SEC have employed more expansive and novel theories in recent years.”

No Reliable Way To Measure

This recent Bloomberg BNA article is titled “Foreign Bribery Self-Reporting Up Under the Justice Dept. Program” and notes:

“A Justice Department pilot program offering leniency to companies that self-report violations of a federal foreign bribery law has led to more of them coming forward, a top DOJ official said May 12. In the program’s first year, 22 companies voluntarily disclosed violations, up from 13 the year before, Andrew Weissmann, chief of DOJ’s Fraud Division, said during a Practising Law Institute panel in New York that was also webcast.”

The inference seems to be that more companies voluntarily disclosed between April 2016 – April 2017 compared to April 2015 – April 2016 because of the DOJ’s FCPA Pilot Program.

However, as stated in the article “Grading the DOJ’s FCPA Pilot Program

“Notwithstanding the many shortcomings in the pilot program, going forward there no doubt will be companies (perhaps persuaded by FCPA counsel eying lucrative billings that flow from voluntary disclosures) that choose to voluntarily disclose FCPA issues in the hopes of being ‘‘rewarded’’ under the pilot program. Certain commentators are likely to then proclaim the pilot program a success. However, this line of reasoning completely misses the point that business organizations were often voluntarily disclosing prior to the pilot program. Rather, the key issue to track is whether the pilot program is motivating voluntary disclosure of potential FCPA violations that did not occur prior to the pilot program. It will be impossible to empirically measure this issue.”

DOJ Compliance Counsel Hui Chen recently called out assumed causation as a deficiency in much compliance writing and commentary and the notion that  more companies voluntarily disclosed between April 2016 – April 2017 compared to April 2015 – April 2016 because of the DOJ’s FCPA Pilot Program represents assumed causation.If you prefer the Latin phrase for the logical fallacy it is post hoc ergo propter hoc (in other words since event Y followed event X, event Y must have been caused by event X)

Moreover, when is the last time you heard a high-ranking government official say a program he/she helped create isn’t working?

Microsoft Explains

In this recent blog post, David Howard (Microsoft Corporate Vice President & Deputy General Counsel, Litigation, Competition Law and Compliance) describes why Microsoft is seeking ISO 37001 certification. It turns out, Microsoft likes the standard it was “deeply involved” in creating. And oh by the way, Microsoft has been under FCPA scrutiny since 2013.

Before highlighting the blog post, unless there is some central database of companies who have become ISO 37001 certified, what is the foundation for saying “that Microsoft would be the first U.S. company (and first multi-national company) to seek to certify our anti-corruption compliance program to the new international anti-bribery standard, ISO 37001.” The blog post reads in full:

“A few weeks ago, we announced here, and in Ethisphere Magazine, that Microsoft would be the first U.S. company (and first multi-national company) to seek to certify our anti-corruption compliance program to the new international anti-bribery standard, ISO 37001. This means that an independent and accredited third party will perform a rigorous analysis of our program and ensure that it satisfies the very specific requirements of the new standard. I thought it was worth explaining further why we’ve decided to undergo such a thorough review, and why we think it’s important that other companies make the same decision.

The consistency problem

We start with the proposition that corruption is a problem that we need to help solve, and not just because it’s important to be on the right side of the law. Corruption is a big drain on economic development and makes it harder for us to realize our mission — to enable every person and every organization on the planet to achieve more. We know that most big companies like Microsoft feel the same way, which is why most companies have established and maintain a program that reduces the risk that they will act in a way that facilitates corruption.

The problem is that companies must tailor their anti-bribery programs to satisfy the legal requirements of different jurisdictions, which also involves trying to comply with a patchwork of often inconsistent guidance from different government agencies as well as nongovernmental organizations and non-government experts. The problem is even worse for our thousands of partners and suppliers, who often must try to meet not only their legal obligations, but also the often different compliance requirements of Microsoft, and the many other companies with which they do business. This is inefficient, leads to confusion and ultimately, increases risk.  Corruption is a cross-border problem and demands a common language to help solve it. That’s where ISO 37001 comes in.

A common language

Microsoft was deeply involved in the U.S. Technical Advisory Group which worked closely with experts from over 60 countries to develop the standard so that it could be useful for all organizations regardless of size, structure or geography. When the standard was published in late 2016, it created a common terminology and provided an objective yardstick for organizations to measure their own program, as well as the programs of the partners in their value chain. It also established a rigorous process for the accreditation of independent third parties who would be charged with evaluating and potentially certifying compliance with the standard.

Next steps

We think a consistent approach to anti-corruption programs is a good thing. That, along with an objective and independent certification process, should give governments around the world confidence that the companies which achieve certification are doing everything they reasonably can to reduce corruption. We encourage other major companies to adopt ISO 37001, and we invite other U.S. companies to work with us on a new Technical Advisory Group to ensure that the standard remains relevant and effective.”

For additional reading on ISO 37001 see here and here.

Scrutiny Alert

The U.K’s Guardian reports:

“Anti-corruption investigators in four countries are examining a British firm’s links to a multimillion-pound defence deal involving a former Nigerian warlord. Investigators in the UK, the US, Nigeria, and Norway are scrutinising Cas-Global after it was alleged that the firm paid a bribe to a Norwegian official as part of the sale of seven decommissioned naval vessels.”

A Direct Selling License in China

The 2014 Avon and 2016 Nu Skin FCPA enforcement actions were based in large part on obtaining a direct selling license in China and this issue is likely the reason that USANA Health Sciences and Herbalife are also under FCPA scrutiny for conduct in China. (See this prior post for other reasons why Avon may have obtained the license).

Against this backdrop, it is interesting that Nature’s Sunshine Products, a company that resolved an FCPA enforcement action in 2009 for alleged conduct in Brazil recently disclosed:

“[The company] has received its direct selling license from MOFCOM, China’s Ministry of Commerce.

The license allows Nature’s Sunshine to begin to expand its business scope, including direct selling activities within China. Headquartered in Shanghai, a leading economic center with an urban population of more than 24 million residents, Nature’s Sunshine China began to apply for the direct selling license with MOFCOM following the formation of a joint venture with Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (Fosun Pharma), a leading, local healthcare company, in 2014.

“We are greatly honored to receive our license from the People’s Republic of China,” commented Gregory L. Probert, Chairman and Chief Executive Officer. “This marks an important step toward realizing the vision and potential we saw when we joined forces with Fosun Pharma almost three years ago. By bringing Nature’s Sunshine to the people of China, we are opening a tremendous new chapter and growth opportunity in our Company’s 45-year history, and fulfilling our mission to transform lives around the world through our innovative, industry-leading products.”

“This is the culmination of more than two years of hard work and dedication in laying the foundation of Nature’s Sunshine China,” said Paul E. Noack, President of China and New Markets. “Today is an historic day for our Company, as this license makes it official that Nature’s Sunshine’s direct selling business has arrived in China. Having made significant investments over the last couple of years, building the infrastructure to support the commencement of operations, we are in a position to begin direct selling activities in the near-term. We are immensely proud of the accomplishments of the China management team, and we are optimistic about the opportunity the China market provides.”

Offensive Use of the FCPA

FCPA Ripples highlights, among other things, how the FCPA is increasingly being used offensively for a variety of reasons.

One of the most laughable offensive uses of the FCPA is this recent letter from a variety of environmental organizations opposing David Bernhardt for Deputy Secretary of the Interior. Among the reasons, you better sit down for this one, is the following:

“Bernhardt “pushed multiple bills that would have expanded offshore oil and gas drilling in the aftermath of the BP Deepwater Horizon disaster on behalf of Cobalt International Energy, a company that was investigated by the Securities and Exchange Commission and the Department of Justice for violations under the Foreign Corrupt Practices Act.”

Newsflash, Cobalt was indeed investigated but was never charged with any FCPA offenses.

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