As highlighted in this post, Honeywell recently resolved a net $82 million Foreign Corrupt Practices Act enforcement action concerning conduct in Brazil and Algeria.
This post highlights additional issues to consider.
Timeline
As highlighted in this prior post, in mid-2019 Honeywell disclosed that it was cooperating with the DOJ/SEC and Brazilian law enforcement investigations relating to its use of third parties in relation to Petrobras (Brazil) business as well as a matter involving a foreign subsidiary’s prior engagement of Unaoil in Algeria.
Thus, from start to finish Honeywell’s FCPA scrutiny lasted approximately 3.5 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. Indeed, who can forget a high-ranking DOJ official stating that FCPA investigations should be “measured in months, not years.”
This is particularly true in the Honeywell matter given the following language from the enforcement agencies.
DOJ
“[T]he Company received full credit for its cooperation with the Fraud Section’s and the Office’s investigation pursuant to U.S.S.G § 8C2.5(g)(2) and the FCPA Corporate Enforcement Policy, JM § 9-4.120, by, among other things, (i) proactively disclosing certain evidence of which the Fraud Section and the Office were previously unaware; (ii) providing information obtained through its internal investigation, which allowed the government to preserve and obtain evidence as part of its own independent investigation; (iii) making detailed presentations to the Fraud Section and the Office; (iv) voluntarily facilitating interviews of employees; (v) collecting and producing voluminous relevant documents and translations to the Fraud Section and the Office, including documents located outside the United States.”
SEC
“In determining to accept the Offer, the Commission considered remedial acts undertaken by Honeywell and cooperation afforded the Commission staff. Honeywell cooperated in the Commission’s investigation by identifying and timely producing key documents identified in the course of its own internal investigation, providing the facts developed in its internal investigation, and making current or former employees available to the Commission staff, including those who needed to travel to the United States.”
How It Started
Like several other FCPA enforcement actions, the Honeywell enforcement action seemingly began with employees lying to the company’s compliance department.
Per the DOJ:
“On or about May 17, 2010, two Honeywell UOP employees provided their management with a PowerPoint presentation stating that the two other companies bidding on the Premium Refinery Contract were “STILL a[] threat to us.” Around this time, Honeywell UOP Employee 1 recommended that Honeywell UOP hire Brazil Sales Company to serve as a sales agent for Honeywell UOP to help it win the Premium Refinery Contract.
On or about May 27, 2010, two Honeywell UOP employees submitted a form requesting that Honeywell’s compliance department approve Brazil Sales Company to serve as Honeywell UOP’s sales agent. To increase the likelihood of receiving internal approvals, the Honeywell UOP employees lied on the request form, stating that Brazil Sales Company had been “known to” Honeywell UOP and a Honeywell UOP employee for two years, when, in fact, the companies had no common history and the Honeywell UOP employee had no prior knowledge of Brazil Sales Company.”
And the rest – as they say – is history.
Statue of Limitations
The Brazil conduct at issue in the enforcement actions occurred (per the DOJ/SEC allegations) between 2010 and 2014 and the Algeria conduct (per the SEC allegations) between 2011 and 2012.
In other words, the conduct at issue in the Honeywell enforcement action was beyond any conceivable statute of limitations. But when a company under FCPA scrutiny agrees to waive or toll the statute of limitations (as Honeywell – like most companies – presumably did), black letter legal principles do not matter.
A Government Required Transfer of Shareholder Wealth to FCPA Inc?
In the words of the DOJ:
“Honeywell and its affiliates, including the Company, engaged in extensive remedial measures, including: (i) commencing remedial measures based on internal investigations of the misconduct prior to the commencement of the Fraud Section’s and the Office’s investigation; (ii) disciplining certain employees involved in the relevant misconduct, including terminating one employee; (iii) strengthening its anti-corruption compliance program by investing in compliance resources, expanding its compliance function with experienced and qualified personnel, and taking steps to embed compliance and ethical values at all levels of its business organization; (iv) substantially reducing its anti-corruption risk profile by taking steps to eliminate the Company’s use of sales intermediaries and, in the interim, rolling out a single, automated sales intermediary due diligence tool that requires responsible managers to provide quarterly compliance certifications for all existing sales intermediaries; (v) establishing monitor and audit processes to regularly review and update the compliance program; and (vi) enhancing its internal reporting, investigations, and risk assessment processes.”
Yet, pursuant to the DPA, Honeywell is required to report to DOJ annually during the [three year] Term [of the DPA] regarding remediation and implementation of the compliance measures” required by the DPA.
Another example of a government required transfer of shareholder wealth to FCPA Inc?
