This post highlights Foreign Corrupt Practices Act enforcement and related developments at the mid-point of 2017. For a similar post at the mid-point of 2016 see this prior post.
This post breaks down FCPA enforcement into the following categories: DOJ (corporate); DOJ (individual); SEC (corporate); and SEC (individual). Thereafter, this post highlights other FCPA developments or items of interest thus far in 2017.
DOJ Enforcement (Corporate)
The DOJ has brought 6 corporate FCPA enforcement actions in 2017. DOJ recovery in these actions has been approximately $225 million. The Rolls Royce enforcement action ($170 million) accounts for 75% of the DOJ’s recovery.
None of these enforcement actions have resulted (at least yet) in any related DOJ individual FCPA enforcement actions.
The six corporate DOJ enforcement actions consisted of 2 “declinations” with disgorgement / forfeiture, 2 non-prosecution agreements and 2 deferred prosecution agreements.
CDM Smith Inc. (June 21st)
See here for the prior post
Charges: None
Resolution Vehicle: “Declination” with disgorgement
Guidelines Range: Not set forth in the letter agreement
Settlement: $4 million
Origin: Voluntary disclosure
Monitor: No
Individuals Charged: No
Linde North America Inc. / Linde Gas North America LLC (June 16th)
See here and here for the prior posts
Charges: None
Resolution Vehicle: “Declination” with disgorgement and forfeiture
Guidelines Range: Not set forth in the letter agreement
Settlement: $11.2 million ($7.8 million in disgorgement, $3.4 million in forfeiture)
Origin: Voluntary disclosure
Monitor: No
Individuals Charged: No
Las Vegas Sands (Jan. 19th)
See here for the prior post
Charges: None
Resolution Vehicle: Non-prosecution agreement
Guidelines Range: Not set forth in the NPA, but it does state “the Company received an aggregate discount of 25% off the bottom of the U.S. Sentencing Guidelines fine range.”
Settlement: $6.96 million
Origin: Likely civil litigation (see here for the prior post); the prior SEC action stated “In connection with the investigation by the Staff, the LVSC Audit Committee retained outside counsel to conduct an internal investigation.”
Monitor: No, but the NPA states “in connection with the SEC Resolution, the Company has retained an independent compliance consultant, and agreed that it will submit copies of all reports of the independent compliance consultant to the Fraud Section within three calendar days of the Company’s receipt of such reports until the completion of the independent compliance consultant’s engagement, followed by self-reporting to the Fraud Section pursuant to the terms described herein …”
Individuals Charged: No
Rolls Royce (Jan. 17th)
See here and here for prior posts
Charges: Conspiracy to violate the FCPA’s anti-bribery provisions
Resolution Vehicle: Deferred Prosecution Agreement
Guidelines Range: $260.6 million to $521.3 million
Settlement: $170 million
Origin: The DPA states: “the Company did not voluntarily or timely disclose [to the DOJ], as the Company’s disclosures occurred only after media reports first alleging corruption by the Company and the U.K. Serious Fraud Office initiated an inquiry into the Company’s misconduct …”.
Monitor: No
Individuals Charged: No
SQM (Jan. 17th)
See here and here for prior posts
Charges: Books and records and internal controls violations
Resolution Vehicle: Deferred Prosecution Agreement
Guidelines Range: $20.6 million to $41.3 million
Settlement: $15.5 million
Origin: The SEC administrative order states: “In 2015, in response to inquiries from Chilean tax authorities and related news articles in the Chilean press, SQM conducted an internal investigation based on allegations that SQM had taken improper tax deductions for payments to certain vendors.”
Monitor: Yes
Individuals Charged: No
Zimmer Biomet (Jan. 12th)
See here and here for prior posts
Charges: Zimmer Biomet – willfully failing to implement a system of internal accounting controls; JERDS Luxembourg Holding S.A.R.L – books and records violations
Resolution Vehicle: Zimmer Biomet – Deferred Prosecution Agreement; JERDS – plea agreement
Guidelines Range: $11.6 to $23.3 million
Settlement: $17.4 million
Origin: Breach of prior DPA
Monitor: Yes
Individuals Charged: No
DOJ Enforcement (Individual)
The DOJ has brought two core individual actions thus far in 2017 against five individuals.
As highlighted here, the DOJ announced two additional guilty pleas (involving Juan Hernandez and Charles Beech) in connection with its long-standing enforcement action in connection with alleged corrupt schemes to secure contracts from PDVSA, Venezuela’s state-owned and state-controlled energy company.
As highlighted here, the DOJ charged Joo Hyun Bahn and his father Ban Ki Sang with conspiracy to violate the FCPA’s anti-bribery provisions, three substantive FCPA offenses, and other criminal offenses in connection with an alleged scheme to pay $2.5 million in bribes to facilitate the $800 million sale of a commercial building in Vietnam to a Middle Eastern sovereign wealth fund. The DOJ also charged San Woo in a separate criminal complaint with one count of conspiracy to violate the FCPA for the same alleged bribery scheme.
SEC Enforcement (Corporate)
The SEC has brought 4 corporate FCPA enforcement actions thus far in 2017. SEC recovery in these actions has been approximately $47 million.
Of the 4 corporate enforcement actions, 4 were resolved via administrative cease and desist orders. Of the 4 corporate enforcement actions, none of the enforcement actions have (at least yet) resulted in related individual charges.
Orthofix (Jan. 18th)
See here for the prior post
Charges: None. Administrative cease and desist order finding violations of FCPA’s books and records and internal controls provisions.
Settlement: $6 million (disgorgement of $2,928,000, prejudgment interest of $263,375, and a civil money penalty in the amount of $2,928,000)
Origin: Company disclosed as part of its ongoing self-reporting obligations undertaken as part of its earlier FCPA enforcement action
Individuals Charged: No
Related DOJ Enforcement Action: No
SQM (Jan. 17th)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of FCPA’s books and records and internal controls provisions.
Settlement: $15 million civil penalty
Origin: The administrative order states: “In 2015, in response to inquiries from Chilean tax authorities and related news articles in the Chilean press, SQM conducted an internal investigation based on allegations that SQM had taken improper tax deductions for payments to certain vendors.”
Individuals Charged: No
Related DOJ Enforcement Action: Yes
Biomet (Jan. 17th)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of FCPA’s anti-bribery, books and records and internal controls provisions.
Settlement: $13 million ($5.82 million in disgorgement plus $702,705 in interest and a $6.5 million penalty)
Origin: Breach of prior DPA
Individuals Charged: No
Related DOJ Enforcement Action: Yes
Mondelez Int’l (Jan. 17th)
See here for the prior post
Charges: None. Administrative cease and desist order finding violations of FCPA’s books and records and internal controls provisions.
Settlement: $13 million civil penalty
Origin: The company previously disclosed: “on February 1, 2011, we received a subpoena from the SEC in connection with an investigation under the FCPA, primarily related to a facility in India that we acquired in the Cadbury acquisition.”
Individuals Charged: No
Related DOJ Enforcement Action: No
SEC Enforcement (Individual)
The SEC has brought 1 core enforcement action thus far in 2017 against 2 individuals.
As highlighted here, related to the Sept. 2016 enforcement action against Och-Ziff, the SEC charged Michael Cohen and Vanja Baros with FCPA and other offenses.
Other Developments or Items of Interest
June
As highlighted in this post, in a unanimous decision in Kokesh v. SEC the Supreme Court rejected the SEC’s position and held that disgorgement “in the securities-enforcement context is a ‘penalty’ within the meaning of [28 U.S.C.] 2462 and so disgorgement actions must be commenced within five years of the date the claim accrues.” Although not an FCPA action, Kokesh is FCPA relevant given that, since the SEC first sought a disgorgement remedy in an FCPA enforcement action in 2004, disgorgement has become the dominant remedy sought by the SEC in corporate FCPA enforcement actions including for conduct beyond any conceivable limitations period.
As highlighted in this post, Kokesh should impact SEC FCPA enforcement against issuers. However, statute of limitations issues are meaningless when issuers (as often happens in the FCPA context) waive statute of limitations defenses or agree to toll the statute of limitations. Thus, whether Kokeshwill impact SEC FCPA enforcement against issuers depends on whether issuers will continue to roll over and play dead when under FCPA scrutiny or actually mount a defense.
This post highlights how a footnote in Kokesh seems to be inviting a future disgorgement case perhaps on the fundamental issue of whether the SEC has any statutory basis to seek disgorgement. Finally, This post highlights what others are saying about Kokesh and this post highlights how the FCPA received some mentions during oral argument in the case.
While FCPA enforcement is largely devoid of judicial scrutiny, sentencing of individual defendants remains a judicial function and provides a rare (and often overlooked) public glimpse of someone other than the enforcement agencies weighing in on issues relevant to FCPA enforcement. As highlighted in this post, at a recent FCPA sentencing a federal court judge went off about various aspects of FCPA enforcement.
For the first time in over two years the DOJ is being put to its burden of proof in an FCPA enforcement action. U.S. v. Ng Lap Seng involves alleged bribery of United Nations officials that includes FCPA charges and as highlighted in this post on the eve of the trial the parties battled over the FCPA’s “local law” affirmative defense.
May
As highlighted in this post, speaking in Brazil Acting Principal Deputy Assistant Attorney General Trevor McFadden talked about “some recent developments regarding the DOJ’s international cooperation efforts,” “some of the diverse tools in [the DOJ’s] prosecutorial toolbox that allow [it] to prosecute corruption” and “the importance of transparency in [DOJ] anti-corruption prosecutions.”
Staying on the topic of the many recent DOJ FCPA speeches, as highlighted in this post McFadden (as well as Attorney General Jeff Sessions) nicely articulated the policy rationale for an FCPA compliance defense. However, actions speak louder than words and the DOJ (and SEC) have continually failed to support the best positive incentivize to maximize “soft” enforcement of the FCPA.
As highlighted in this post, Hui Chen (the DOJ’s Compliance Counsel) recently called out the “lack of precision and intellectual rigor” in much compliance writing and commentary. That’s not all Chen has focused on as highlighted in this post regarding her recent social media activity.
April
It was an active speaking month for DOJ officials. As highlighted in this post, Acting Principal Deputy Assistant Attorney General Trevor McFadden made sense when talking about “declinations” and also stated that FCPA investigations should be “measured in months, not years.” As to this later point, the post highlighted that the DOJ said the same thing in 2005, yet 4.25 years was the median length of time companies that resolved FCPA enforcement actions in 2016 were under scrutiny. A few days later, McFadden delivered another FCPA speech.
Attorney General Jeff Sessions also recently delivered the DOJ’s FCPA script. As to repeated statements by DOJ officials regarding individual accountability, here are the facts: The last 17 DOJ corporate FCPA enforcement (4 in 2017 thus far and 13 in 2016) have lacked related DOJ charges against company employees. Indeed, in the past decade over 75% of DOJ corporate enforcement actions have lacked related DOJ charges against company employees. Moreover, as highlighted in this prior post, the number of DOJ individual FCPA enforcement actions in 2016 and 2015 were fewer than the following years: 2008, 2009, 2010, 2011, 2013, and 2014.
Regarding the FCPA’s other enforcement agency, the SEC announced that FCPA Unit Chief Kara Brockmeyer will be leaving. This post highlights additional data points to consider regarding Brockmeyer’s tenure as FCPA Unit Chief. As highlighted in this post, Robert Khuzami, head of the SEC’s Division of Enforcement in 2012 and a signatory of the 2012 FCPA Guidance, has called for additional FCPA guidance or “changing” the “somewhat controversial FCPA.”
On Capitol Hill, a bi-partisan group of Senators introduced the “Combating Global Corruption Act of 2017″ and this post provides a summary of the bill and offers two thoughts regarding the bill relevant to the FCPA.
March
As highlighted in this post, during his confirmation hearing, SEC Chair nominee Jay Clayton stated that because of exposure to the FCPA and related laws “there are some jurisdictions where in the vast majority of the cases it may make sense just not to participate.” As highlighted in this post, as he has done several times in the past seven years, Rep. Ed Perlmutter (D-CO) introduced an FCPA private right of action bill, only this time he got political. As highlighted in this post, once upon a time the DOJ did specifically identify “foreign officials” implicated in an FCPA enforcement action and Rep. Ileana Ros-Lehtinen (R-FL) is rightfully miffed that it doesn’t now. As highlighted in this post, Senator Richard Blumenthal (D-CT) wants the DOJ, “as rapidly as possible,” to issue an advisory opinion “whether executives of The Trump Organization and related companies – including President Trump himself” are violating the FCPA.
The later development is largely based on a recent New Yorker article about the Trump Organization and its business dealings in Azerbaijan. As highlighted in posts here and here the article is in a league of its own when it comes to not the media’s finest moments when it comes to FCPA reporting.
As highlighted in this post, recently the DOJ was noncommittal regarding the future of its FCPA Pilot Program, but then again who really cares as the pilot program did not represent anything new.
February
As highlighted in this post the DOJ recently released a document highlighting 11 factors relevant in evaluating a corporate compliance program. The factors should be familiar to compliance professionals well-versed on best-practices policies and procedures (whether in the FCPA context or otherwise) and there is really nothing new about the document (indeed the document cites to sources long in the public domain). Yet the document, the origins and purpose of which are not known, was released by a “new” DOJ with new leadership and is thus worthy of highlighting.
One can predict with a high degree of certainty what high-ranking DOJ officials will say about the FCPA before even hearing or reading the speech. The script goes like this: the DOJ places a high-priority on FCPA enforcement as well as transparent enforcement; the DOJ is committed not just to corporate enforcement, but holding individuals accountable as well; and companies benefit from voluntary disclosure and cooperation. As highlighted in this post, new DOJ Deputy Assistant Attorney General Trevor McFadden recently delivered the script.
As highlighted in this post, the DOJ and SFO are shooting themselves in the foot by making decisions that should result in any board member, audit committee member, or general counsel informed of current events not making the decision to voluntarily disclose.
January
On inauguration day when Washington D.C. was awash in corporate money more so than a typical day and this post encouraged one to pause and reflect on whether the United States is indeed in a “unique position to spread the gospel of anti-corruption” or on the “right side of history.”
Posts here and here highlight the FCPA views of incoming Trump administration officials.
Transparency International recently released its annual Corruption Perceptions Index (“CPI”) and this post highlights why compliance professionals should take the CPI with a grain of salt.
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