Scrutiny alerts, sentenced, Odebrecht-related, messaging apps, and for the reading stack. It’s all here in the Friday roundup.
At present, the largest net settlement in an FCPA enforcement action is $850 million. (See here).
This may soon be eclipsed as Ericsson recently disclosed:
“As previously disclosed, Ericsson has been co-operating voluntarily since 2013 with an investigation by the United States Securities and Exchange Commission (SEC) and, since 2015, with an investigation by the United States Department of Justice (DOJ) into Ericsson’s compliance with the U.S. Foreign Corrupt Practices Act (FCPA) and the process is still ongoing. The investigation covers a period ending Q1 2017 and revealed breaches of the Company’s Code of Business Ethics and the FCPA in six countries: China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam.
The company previously communicated that the resolution of the investigations will result in material financial and other measures. While Ericsson cannot comment in detail on the ongoing process with the U.S. authorities, the Company can with current visibility now estimate the cost and thus make a provision, which will impact the third quarter 2019 results by SEK 12 b. The provision constitutes the Company’s current estimate of expenditure related to resolving the U.S. investigations, of which the combined monetary sanctions from SEC and DOJ is estimated at USD 1 b., and the remainder pertains to other costs related to resolving the investigation. The provision will be booked as Other Operating Expenses in the income statement of Segment Emerging Business and Other.
In the course of the investigations, the Company identified breaches of its Code of Business Ethics and the FCPA. It is the Company’s assessment that the breaches are the result of several deficiencies, including a failure to react to red flags and inadequate internal controls which enabled a limited number of employees to actively circumvent internal controls for illegitimate purposes. Disciplinary measures, including terminations where appropriate, have been taken against identified individuals determined to have breached the Code of Business Ethics. Ericsson has acted to address shortcomings and is significantly enhancing its Ethics & Compliance program, to ensure that the Company is equipped to do business the right way. As the process is still ongoing, Ericsson is not able to, and will not make, any further comments.
Börje Ekholm, President and CEO, says: ”Over the last two years we have operationally turned around our company and established a strong portfolio and competitive cost structure. With today’s announcement we confront another legacy issue and take the next step in resolving it. We have to recognize that the Company has failed in the past and I can assure you that we work hard every day to build a stronger Ericsson, where ethics and compliance are cornerstones in how we conduct business. Over the past two years, we have made significant investments in our ethics and compliance program including our investigative capabilities and have taken actions against employees who have transgressed our values and standards.”
Ronnie Leten, Chairman of the Board of Directors, says: “This has been a formative process for the company. We have worked closely with the Executive Team in enhancing Ericsson’s ethics and compliance program. We are impressed by their conviction in addressing shortcomings and are confident in their ability to deliver on our strategy.”
Based on a thorough internal and external assessment of its Ethics and Compliance program, the Company has implemented significant reforms to address identified gaps and further strengthen the program. This work is still ongoing, and Ericsson will remain relentless in striving to improve and safeguard a strong ethical and compliance culture throughout the company.”
As highlighted in this prior post, Snamprogetti / ENI resolved an FCPA enforcement action concerning conduct in Nigeria in 2010. As highlighted here, in 2013 ENI again became the subject of FCPA scrutiny in Nigeria and Algeria. Recently, the company disclosed:
“Eni is pleased to acknowledge that it received confirmation from the U.S. Department of Justice that the DOJ has closed its investigation of Eni with respect to the OPL 245 and Algeria matters without taking any action.
Eni reiterates that neither the Company nor its management was involved in any alleged corrupt activities in relation to the Opl245 transaction in Nigeria. The Company reminds that its controlling committees had outsourced to independent advisors internal investigations which did not reveal any illegal conduct. Eni is confident that the allegations currently put forward before the Court of Milan will be found to be groundless.
The Court of Milan had previously acquitted the Company and its management in relation to the Algeria proceedings, having found no instances of any wrongdoing or illegal activities. The judgement therefore reaffirmed the findings of several previous inquiries carried out by independent third parties, which found no involvement on the part of Eni or its management of any alleged illegal or corrupt activity.”
According to this Reuters report:
“Following Eni’s statement, Italian prosecutors wrote to the DoJ seeking clarification and asking if the decision to close the inquiry was due to lack of evidence, as they said Eni’s statement seemed to imply.
According to a reply filed with the court in Milan and seen by Reuters on Wednesday, a trial attorney for the DOJ said that in light of the “misleading implication” of a lack of evidence highlighted by the prosecutors, he was sending them a copy of the DOJ’s original communication with Eni’s counsel in the United States.
In that letter, the acting chief of the DOJ’s Foreign Corrupt Practices Act unit said the inquiries had been closed because Italian authorities were prosecuting the case.
“If the circumstances noted above change, the Department may reopen its inquiries.”
As highlighted in this prior post, Luis Alberto Chacin Haddad and a co-defendant were charged and pleaded guilty to conspiracy to violate the FCPA’s anti-bribery provisions in June 2019 in connection with obtaining various contracts with Corporacion Electric Nacional S.A. (Corpoelec), Venezuela’s state-owned electric company.
As reported here, Chacin was recently sentenced to 4.25 years in federal prison by a judge in the Southern District of Florida (a district which has traditionally handed down some of the stiffest FCPA sentences).
As highlighted here, Senator Marco Rubio (R-FL) recently wrote Attorney General William Barr encouraging the DOJ “as appropriate, to ensure that Odebrecht is complying with the terms of the company’s 2016 plea agreement with the U.S. Department of Justice.”
The DOJ’s FCPA Corporate Enforcement Policy states, under the heading “Timely and Appropriate Remediation in FCPA Matters” as follows:
“Appropriate retention of business records, and prohibiting the improper destruction or deletion of business records, including implementing appropriate guidance and controls on the use of personal communications and ephemeral messaging platforms that undermine the company’s ability to appropriately retain business records or communications or otherwise comply with the company’s document retention policies or legal obligations.”
Against this backdrop, see here for a recent Wall Street Journal regarding messaging apps in the workplace.
The most recent edition of the always informative FCPA Update from Debevoise & Plimpton is here.
An informative read here from Davis Polk attorneys regarding the recent ruling that former shareholders of Africo Resources Ltd. are “victims” of Och-Ziff’s bribery. (See here for the prior post). An informative read here as well from Kirkland & Ellis attorneys.
Strategies For Minimizing Risk Under The FCPA
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