Cannabis industry, fooled me, questions abound, investigative fees and expenses, survey says, scrutiny alert, and for the reading stack.
It’s all here in the Friday roundup.
This recent FBI public recording states: “As an increasing number of states change their marijuana legislation, the FBI is seeing a public corruption threat emerge in the expanding cannabis industry. States require licenses to grow and sell the drug—opening the possibility for public officials to become susceptible to bribes in exchange for those licenses.”
This same dynamic was flagged in this recent post discussing why the burgeoning marijuana industry has FCPA risk.
In this recent Corporate Crime Reporter interview, Tarek Helou (who recently left the DOJ’s FCPA Unit after 12 years and is now with Wilson Sonsini) talks about so-called DOJ declinations and states:
“Those declinations are all cases in which the Justice Department could have brought a criminal case and could have proved beyond a reasonable doubt that a crime was committed.”
“This [a declination] is only used in a situation where a crime was committed and a crime could be proved.”
Could have fooled me.
Read the following “declinations” and describe – based on the information in declination letter – just what viable criminal charges the DOJ actually declined?
Investigative Fees and Expenses
As highlighted in this prior post, in late 2016 Misonix made a voluntary disclosure to the DOJ and SEC to “inform both agencies that the Company may have had knowledge of certain business practices of an independent Chinese entity that distributes its products in China, which practices raise questions under the Foreign Corrupt Practices Act.”
As highlighted in this prior post, neither the SEC or DOJ brought an enforcement action. However, as highlighted in this recent disclosure the company still ended up spending approximately $4 million in investigate fees and expenses as a result of its disclosure and related issues. The disclosure states:
“Although neither the SEC or DOJ have taken any enforcement action in these matters, our investigative costs, including costs of shareholder litigation relating to these matters (which has now been settled), are approximately $3.9 million to date, of which $0.8 million, $0.5 million and $2.4 million was charged to expense during the three years ended June 30, 2019, respectively.”
As noted here, according to a recent survey:
“[E]ven “exhaustive upfront due diligence” demonstrated an inability to identify certain critical risks presented by third-party vendors. The report further notes that the problem isn’t necessarily in the initial due diligence conducted. Rather, issues emerged only after the onboarding process was completed, reinforcing a growing belief that a legacy approach to third-party risk management is no longer adequate to mitigate risk.”
According to the survey, “83% of organizations discover risks with third-party vendors only after the due diligence period.”
There have been a lot of outlandish pieces written about Wal-Mart’s FCPA scrutiny and enforcement action over the years, but this recent Law360 article might be in a league of its own.
Here are the questions I have, among others, after reading the article.
- Isn’t the rule of law the actual “winner” in this case – not Walmart?
- Based on the information in the DOJ and SEC’s resolution documents, just what crime do you suggest Walmart be prosecuted for?
- What is the factual support for the statement: “Failing to make any self-disclosures to the government before The New York Times reporting efforts came to the company’s attention” or the statement “self-disclosure came only after Walmart learned the matter was going to come to light anyway due to the New York Times investigation.”?
- What is the factual support for the assertion that the delay in resolving the case was Walmart’s doing? Perhaps Walmart wanted to resolve this case years ago, but it was the gov’t dragging its feet as it typically does in FCPA inquiries that caused the delay.
- Given the actual conduct alleged in the government’s resolution documents, why is $282 million settlement a “favorable settlement” to Walmart?
- Why is the Trump administration “less FCPA friendly.” After all, FCPA enforcement thus far in the Trump administration has been above historical averages in terms of corporate enforcement actions and settlement amounts and has outpaced FCPA enforcement during certain years of the Obama administration. Moreover, the Trump administration has used the same resolution vehicles and advanced the same enforcement theories as the Obama administration (and prior administrations).
According to this Wall Street Journal report:
“The Justice Department and the SEC have assigned staff to investigate whether any bribes were paid to secure the high price Pemex [Mexico’s state-owned oil company] paid for [Grupo Fertinal], according to people familiar with the matter and law-enforcement communications reviewed by the Journal. Because Pemex bonds are traded in the U.S., any improper payments could constitute a violation of the Foreign Corrupt Practices Act, a U.S. anticorruption law.”
The most recent edition of the always informative FCPA Update from Debevoise & Plimpton states as follows regarding the Second Circuit’s recent decision in Ng.
“Because of the different statutory language, and the lack of constitutional concerns relating to interactions between constituents and representatives in the U.S. system, it was always somewhat questionable whether McDonnell would be read to limit the FCPA’s application. Nor did the facts of the Ng case, in which one of the ambassadors testified the he viewed the payments as a bribe, present the best vehicle for raising the issue. The Second Circuit is the first federal appellate court to evaluate McDonnell’s applicability in the FCPA context, but the true breadth of the FCPA’s statutory language as it relates to gifts and other inducements remains unexamined by a U.S. appellate court. Meanwhile, the enforcement agencies continue to take a broad view. While understandable from the perspective of statutory interpretation, the Ng decision has made incongruent the domestic bribery statute and the foreign bribery statute, applying a narrower standard to payments to U.S. officials and a broader one in the context of foreign officials. As a result, a gift of a Rolex watch to a U.S. government official may be merely a “tawdry tale” while a gift of a Cartier watch to a foreign official is often a violation of the FCPA’s anti-bribery provisions.”
This recent White & Case publication regarding recent guidance from the U.K. SFO asks: “Is there a point at which co-operation becomes capitulation? Is there a danger inherent in co-operating without the guarantee of a favourable outcome for doing so?”
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