This recent post highlighted the $26.1 million enforcement action against Clear Channel Outdoors based on the conduct of a former indirect, majority-owned Chinese subsidiary (Clear Media Limited).
This post highlights additional issues to consider from the enforcement action.
Timeline
As highlighted here, in April 2018 disclosed FCPA scrutiny.
Thus, from start to finish, Clear Channel’s FCPA scrutiny lasted an unconscionable 5.5 years.
I’ve said it many times, and will continue saying it until the cows come home: if the DOJ/SEC want their FCPA enforcement programs to be viewed as more credible and more effective, the enforcement agencies must resolve instances of FCPA scrutiny much quicker.
This is particularly true in the Clear Channel matter given the following language from the SEC:
“CCOH’s cooperation included: (1) promptly sharing facts developed in its own internal investigation; (2) proactively producing relevant documents, including documents from Clear Media, both prior to and following the sale of CCOH’s interest in Clear Media, that were located overseas; (3) producing, in real time, documentation of audits of Clear Media internal controls during the course of the investigation; (4) providing translations of documents; (5) facilitating the production of documents from third parties; and (6) facilitating the Commission’s staff’s interviews of current and former employees of CCOH’s foreign subsidiaries and of certain third parties.”
Anything of Value
Just don’t “bribe” is often a narrative heard. But that depends on what the “b” word means.
Often times the “b” word includes items that – if offered or provided to Person A – would often be fine, but when the same things are offered or provided to Person B (an alleged “foreign official”) – an FCPA issue may arise.
For example, the Clear Channel administrative order stated:
“To obtain concession contracts from local Chinese government transport authorities, Clear Media provided cash-equivalent gift cards, golf clubs, vases, and other expensive and unidentified gifts and entertainment, some of which were provided “due to being in the negotiation process with clients for a renewal.” Executive A spent hundreds of thousands of dollars, subject to no advance review or approval, on government officials for first-class travel, hotel rooms, meals, and entertainment.”
Accurate Quote?
In the SEC’s release, Charles Cain (Chief of the SEC Enforcement Division’s FCPA Unit) stated:
“Despite repeated red flags raised by its internal auditors, Clear Channel failed to address the deficient internal accounting controls that allowed Clear Media to continue these improper payments for many years.”
Based on the actual findings in the SEC’s order, is it really accurate to say that “Clear Channel failed to address the deficient internal accounting controls”?
Among other things, the order finds that
- “From 2012 through 2017, CCOH’s internal auditors repeatedly reported elevated bribery risks at Clear Media and concerns regarding Clear Media’s compliance program and internal accounting controls, including in relation to cleaning and maintenance vendors; travel, gifts, and entertainment; compliance training; and whistleblower hotline implementation.
- The “CCOH audit reports identified certain remedial actions to be taken by Clear Media”
- In 2017, Clear Media’s Principal Executive Officer blocked CCOH’s internal auditors, Clear Media’s internal auditor, and others “from obtaining access to the requested records.”
- Following the 2017 audit, CCOH’s internal auditors raised concerns about access to records with Clear Media management and with Clear Media’s Chairman of the Board and Audit Committee Chair. Executive A’s actions were then reported to CCOH’s senior executives and audit committee. CCOH’s internal auditors assigned Clear Media an “unsatisfactory” audit rating due largely to CCOH’s internal auditors’ inability to provide assurance on the appropriateness or validity of Clear Media’s payments to cleaning and maintenance vendors.”
- Clear Media’s Principal Executive Officer “continued to deny CCOH’s internal auditors access to financial records related to the cleaning and maintenance entities’ expenses in 2019. CCOH’s internal auditors reported this to their executive management, along with continuing concerns regarding Clear Media’s whistleblowing hotline implementation and provision of meals and entertainment.”
