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What You Need To Know From Q1

This post provides a summary of Foreign Corrupt Practices Act enforcement activity and related developments from the first quarter of 2017.

DOJ Enforcement (Corporate)

The DOJ brought 4 corporate FCPA enforcement actions in the first quarter. DOJ recovery in these actions was approximately $210 million. None of these enforcement actions have resulted (at least yet) in any related DOJ individual FCPA enforcement actions.

 Las Vegas Sands (Jan. 19th)

See here [1] 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.”

Penalty: $6.96 million

Origin: Likely civil litigation (see here [2] for the prior post); the prior SEC action [3] 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 [4] and here [5] 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

Penalty: $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 [6] and here [7] 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

Penalty: $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 [8] and here [9] 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

Penalty: $17.4 million

Origin: Breach of prior DPA

Monitor: Yes

Individuals Charged: No

[10]

DOJ Enforcement (Individual)

The DOJ brought two core individual actions in the first quarter against five individuals.

As highlighted here [11], 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 [12], 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 brought 4 corporate FCPA enforcement actions in the first quarter. SEC recovery in these actions was 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 [13] 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 [6] and here [7] 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 [8] and here [9] 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 [14] 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 brought 1 core enforcement action against 2 individuals.

As highlighted here [15], related to the Sept. 2016 enforcement action against Och-Ziff [16], the SEC charged Michael Cohen and Vanja Baros with FCPA and other offenses.

Other Developments or Items of Interest

While FCPA enforcement has waned with the change in executive administration (take a deep breath [17], FCPA enforcement isn’t going anywhere), FCPA issues frequently popped up on Capitol Hill in March.

As highlighted in this post [18], 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 [19], 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 [20], 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 [21], 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 [22] and here [23] 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 [24], 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.

As highlighted in this post [25] 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 [26], new DOJ Deputy Assistant Attorney General Trevor McFadden recently delivered the script.

As highlighted in this post [27], 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.

On inauguration day when Washington D.C. was awash in corporate money more so than a typical day and this post [28] 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 [29] and here [30] highlight the FCPA views of incoming Trump administration officials.

Transparency International recently released its annual Corruption Perceptions Index (“CPI”) and this post [31] highlights why compliance professionals should take the CPI with a grain of salt.

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