A home run, quotable, monitors, up north, scrutiny alerts and updates, irksome, and for the reading stack. It’s all here in the Friday roundup.
The latest issue of the always informative FCPA Update from Debevoise & Plimpton (released by the way on the opening day of the Major League Baseball season) hits a home run.
The lead article by Paul Berger (former Associate Director of the SEC’s Enforcement Division) concerns the recent Elbit Imaging enforcement action (see here for the prior post) and states in pertinent part:
“The Elbit Order continues a trend in SEC enforcement actions – dating back at least to the 2012 enforcement action against Oracle – of charging violations of the accounting provisions without any specific findings of bribery or, alternatively, “illicit” or “improper” payments. Similar actions also have been brought outside the foreign bribery context, most notably the SEC’s 2016 cease-and-desist order against Continental and United Airlines. The Elbit Order, with regard to the real estate development in Romania, like 2017’s Cadbury Mondelez settlement, takes this trend even further, by charging a violation of the books and records and internal controls provisions based only on a finding that “there is no evidence to suggest” that due diligence was done and that “there is no documentation or other evidence showing” any services rendered by the consultants. This, coupled with a vague assertion that therefore something bad (bribery or embezzlement) “could have” or “may have” happened, forms the basis of the SEC’s Elbit Order.
As such, the Elbit Order once again highlights the breadth of the SEC’s interpretation of the accounting provisions and underscores the importance of internal controls and proper documentation of transactions involving “red flags.” At the same time, the Elbit Order raises the question of whether the SEC’s interpretation of the accounting provisions is too broad, as it suggests that the SEC need only find the absence of such documentation (without more) in order to make its case. We recognize that parties settle for a variety of reasons many of which have little to do with liability. However, it seems unlikely that the SEC would actually litigate such actions based on unsubstantiated, inchoate claims.
[P]ractitioners and the bar should ask whether it is appropriate for the SEC (or any other enforcement agency) to bring an action under the accounting provisions (or any other provision) based simply on the bare allegation that something untoward “could have” or “may have” occurred. After all, apart from resolving specific misconduct, a Commission Order is supposed to provide guidance to the marketplace through a description of the violation and the legal basis underpinning it. Amorphous descriptions of conduct that “may” or “could” violate the law do not offer clear direction to companies trying to develop a strong compliance program.”
Despite the doom and gloom predictions of some apprentice commentators, this November 2016 post encouraged all to take a deep breath regarding FCPA enforcement in the Trump administration. In short, it was predicted that the FCPA was not going any where and FCPA enforcement would continue.
In this regard, this recent Corporate Crime Reporter profile of Laura Perkins is worth highlighting.
“Laura Perkins spent ten years at the Justice Department’s Foreign Corrupt Practices Act (FCPA) unit. She left in July 2017 to become a partner in the Washington D.C. office of Hughes Hubbard & Reed.
Despite all of the noise, Perkins hasn’t noticed a difference in FCPA enforcement under the Trump administration.
“I was at the Department for six or seven months after the Trump administration came in,” Perkins told Corporate Crime Reporter in an interview last week. “There was very little change in FCPA enforcement. There was very little change in how the unit operated, in the resources made available to the unit, in how the cases were being handled. And since I have left, the cases that have come out have been in line in both form of resolution and size of fines as before. I’ve seen very little change.”
This Wall Street Journal Risk & Compliance post is titled “U.S. Lawyers Propose Changes to Justice Dept. Monitor Program.” The title is a bit leading as there are no actual formal proposals suggested, but a few quotes from lawyers.
Here is my two cents.
If a court wants to impose a monitor fine, but perhaps the best proposal is for the DOJ to stop appointing monitors as a condition of certain settlements.
Moreover, think about this.
If monitors are so darn important, then why in many instances do months pass, and in some cases years, post-settlement before the monitor is actually appointed? (See here, here and here for prior post).
Earlier this week the Government of Canada announced it “has introduced legislative amendments to create a made-in-Canada version of a deferred prosecution agreement (DPA) regime, to be known as a Remediation Agreement Regime.”
Scrutiny Alerts and Updates
Internet Gold (an Israel-based holding company with shares traded on NASDAQ and with the controlling interest in B Communications Ltd., which in turn holds the controlling interest in Bezeq, The Israel Telecommunication Corporation Ltd.) recently disclosed:
“The Audit Committee of the Company has engaged outside U.S. counsel to conduct an assessment of: (a) the internal controls of the company and, as applicable, those of Bezeq – The Israel Telecommunications Corporation Ltd., in connection with the preparation of the Company’s financial statements to be included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2017 (the “20-F”), and (b) whether there have been any violations of the U.S. Foreign Corrupt Practices Act or any other laws that may affect the preparation of the Company’s 20-F.”
I’ve never understood why certain media lop up certain civil society reports about alleged corruption. I guess you got to fill the pages every day.
Earlier this week, Global Witness released this “investigation” regarding Exxon’s 2013 purchase of Liberia’s Block 13 oil license and how it “likely enriched former government officials who may have illegally owned the block.” The Wall Street Journal and U.K. Guardian then use to the report to go in-depth here and here in generally unremarkable, underwhelming articles.
“During 2016–2017 we invited external experts to evaluate the robustness of our anti-corruption program. Following the review, we adjusted the anti-corruption program to closer align with the US Foreign Corrupt Practices Act (FCPA). In 2017, the program was strengthened with adding resources on group level and appointing Regional Compliance Officers in all Market Areas. Moreover, one of the elements of the Group targets for sustainability and corporate responsibility is anti-corruption.
In 2017 the Company continued to roll out an automated anti-corruption screening tool for supplier and third party due diligence, which was launched in 2016. By the end of 2017, close to 93% of active employees had completed the Company’s anti-corruption e-learningcourse since the training was launched in 2013. A customized online anti-corruption training is also available for Ericsson’s suppliers on the Company website.
In 2017, Ericsson introduced a vetting process that focuses on ethics and compliance. So far we have used it for appointments to the Executive Team and for approximately 110 employees in exposed positions. All members of the current Executive Team have been vetted, and all future recruitments to these positions will also go through mandatory vetting. Business Partner Review Boards have been established in all Market Areas to over-see mitigation of the corruption risks in relation to onboarding of new business partners.
Ericsson is currently voluntarily cooperating with inquiries from the United States Securities and Exchange Commission and the United States Department of Justice regarding its compliance with the U.S. Foreign Corrupt Practices Act. As of today, these inquiries concern a period from January 1, 2007 and onwards, and the Company will make additional disclosures regarding these inquiries to the extent required.”
Admittedly minor issues, but issues that have always irked me.
Why do SEC press releases announcing administrative actions frequently use the word “charge” in the headline when the reality is the issuer is not “charged” with anything but rather the SEC administratively “finds” violations? (See this example earlier this week regarding Kinross Gold.
Separately, why does the SEC frequently invoke the words “FCPA” in headlines when finding certain violations of the books and records and internal controls provisions (such as Kinross Gold) but does not invoke the words “FCPA” in other headlines that also find certain violations of the books and records and internal controls provisions? (See this example earlier this week regarding Maxwell Tech).
For the Reading Stack
An informative read from Jenner & Block attorneys discussing “five major legal differences between U.S. and English law, each of which can profoundly affect the course of an investigation and prosecution.”
Airbus seems to be between a rock and hard place. As noted in this Bloomberg article:
“Airbus SE is being forced by French courts to pay millions of dollars to partners who it alleges used corruption to broker aircraft deals in strategic countries. In one case, the manufacturer was made to settle an outstanding $825,000 bill from a go-between that helped secure sales in China even after Airbus said it had evidence the business relationship was “tarnished” by corruption, according to an unreported ruling released earlier this month. Airbus argued this “called for suspending all payments.” The court proceedings have put Airbus in a seemingly contradictory situation. The planemaker is under investigation for paying bribes to secure overseas contracts and says it’s cooperating and turning over evidence from an internal investigation. But judges have stymied the company’s efforts to cut off brokers who it suspects have facilitated questionable payments.”
FCPA Institute - Zoom (May 16-18, 2023)
Elevate your FCPA knowledge and practical skills. Nine hours of integrated and cohesive instruction led by Professor Koehler (an FCPA expert with teaching experience). Learn more, spend less. Professional credential available.