This post provides a summary of Foreign Corrupt Practices Act enforcement activity and related developments from the second quarter of 2016. (See here for a similar post for the first quarter of 2016).
DOJ Enforcement (Corporate)
The DOJ brought one corporate FCPA enforcement action in the second quarter. DOJ recovery in this action was approximately $3.4 million.
This enforcement action has not resulted (at least yet) in any related DOJ individual FCPA enforcement action.
BK Medical (Analogic) (June 21st)
See here and here for prior posts
Charges: None
Resolution Vehicle: NPA against BK Medical (Analogic’s Danish subsidiary)
Guidelines Range: Not set forth in the NPA although the NPA does state: “the Company received an aggregate discount of 30% off the bottom of the U.S. Sentencing Guidelines fine range.”
Penalty: $3.4 million
Origin: Voluntary Disclosure
Monitor: No
Individuals Charged: No
DOJ Enforcement (Individual)
The DOJ did not bring or announce any individual FCPA charges in the second quarter.
SEC Enforcement (Corporate)
The SEC brought 4 corporate FCPA enforcement actions in the second quarter. SEC recovery in these actions was approximately $21.5 million.
Of the 4 corporate enforcement actions, 2 were resolved via administrative cease and desist orders and 2 were resolved via NPAs. Of the 4 corporate enforcement actions, 1 enforcement action resulted in related individual charges.
Las Vegas Sands (April 7th)
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: $9 million civil penalty
Origin: The SEC’s order states “In connection with the investigation by the Staff, the LVSC Audit Committee retained outside counsel to conduct an internal investigation.”
Individuals Charged: No
Related DOJ Enforcement Action: No
Nortek (June 7th)
See here and here for prior posts
Charges: None. NPA references ““possible violations of the books and records and internal accounting controls provisions of the FCPA.”
Settlement: Approximately $322,000 in disgorgement and prejudgment interest
Origin: Voluntary disclosure.
Individuals Charged: No
Related DOJ Enforcement Action: No. The DOJ released a so-called “declination letter” involving the company. See here for the post titled “Nortek / Akamai – Don’t Believe the Hype, Rather Ask What Viable Criminal Charges Did the DOJ Actually Decline?”
Akamai Technologies (June 7th)
See here and here for prior posts
Charges: None. NPA references ““possible violations of the books and records and internal accounting controls provisions of the FCPA.”
Settlement: Approximately $672,000 in disgorgement and prejudgment interest
Origin: Voluntary disclosure
Individuals Charged: No.
Related DOJ Enforcement Action: No. The DOJ released a so-called “declination letter” involving the company. See here for the post titled “Nortek / Akamai – Don’t Believe the Hype, Rather Ask What Viable Criminal Charges Did the DOJ Actually Decline?”
Analogic (June 21st)
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: Approximately $11.5 million in disgorgement and prejudgment interest
Origin: Voluntary disclosure
Individuals Charged: Yes. Based on the same conduct the SEC also announced that “Lars Frost, BK Medical’s former Chief Financial Officer, agreed to pay a $20,000 civil penalty to settle charges that he knowingly circumvented the internal controls in place at BK Medical and falsified its books and records.”
Related DOJ Enforcement Action: Yes
SEC Enforcement (Individual)
The SEC brought an FCPA enforcement action against one individual in the second quarter.
As referenced above, in connection with the Analogic enforcement action, the SEC also announced that “Lars Frost, BK Medical’s former Chief Financial Officer, agreed to pay a $20,000 civil penalty to settle charges that he knowingly circumvented the internal controls in place at BK Medical and falsified its books and records.”
Other Developments or Items of Interest
As highlighted in this post, the Supreme Court unanimously rejected the “government’s boundless interpretation of the federal bribery statute” in U.S. v. McDonnell (the former Virginia governor’s appeal of criminal charges related to the acceptance of $175,000 in loans, gifts, and other benefits from a businessman). Although outside the FCPA context, the case is relevant to FCPA enforcement because of the Court’s narrow interpretation of “official action” (a term that also appears in the FCPA). This post highlights other recent Supreme Court decisions to similarly rebuke enforcement theories relevant to FCPA enforcement. Finally, this post analyzes what if the Supreme Court had accepted cert in the 2014 “foreign official” challenge (“Esquenazi“). As discussed in the post, even though the Supreme Court denied cert, the Supreme Court has recently heard several cases concerning aggressive theories of federal criminal prosecution and implicating the same general statutory interpretation issues at issue in Esquenazi. In each of the analogous decisions, the Supreme Court (often by wide margins) rejected the DOJ’s statutory interpretation and if the Supreme Court had accepted cert in Esquenazi it is probable that the Supreme Court would have overturned the convictions.
DOJ policy justifications for NPAs and DPAs were undermined on both ends of the spectrum. For nearly a decade, the DOJ has implicitly asserted that NPAs and DPAs were needed to avert the “Arthur Andersen effect” ((i.e. that criminal charges alone, and certainly criminal convictions, could be the death sentence of a business organization). Although the theory has long been debunked, this post declares the death of the “Arthur Andersen effect” as FedEx successfully beat back DOJ criminal charges. As discussed in the post, fighting back against what a company perceives to be aggressive and overzealous DOJ theories is an acceptable and viable option and if more companies did what FedEx did the current FCPA enforcement landscape would look much different. On the other end of the NPA and DPA policy spectrum, the DOJ has long maintained that such resolution vehicles “have had a truly transformative effect on particular companies” and that “the result has been, unequivocally, far greater accountability for corporate wrongdoing — and a sea change in corporate compliance efforts.” However, as highlighted in this post, the DOJ determined that Biomet (a company which resolved an FCPA enforcement action in 2012 by agreeing to pay $22.8 million) breached its DPA. Thus, Biomet joined a list of other companies that have resolved FCPA enforcement actions through alternative resolution vehicles to have subsequently resolved additional FCPA enforcement actions or become the subject of additional FCPA scrutiny.
Disgorgement was in the news. As highlighted in this post, the IRS concluded that disgorgement paid in an FCPA enforcement action is not deductible because the “payment was primarily punitive.” In the second disgorgement development, the 11th Circuit concluded that disgorgement is subject to a five-year statute of limitations. As discussed in this post, the decision undermines the government’s assertion in the FCPA Guidance that a five-year statute of limitations “does not prevent SEC from seeking equitable remedies, such as an injunction or the disgorgement of ill-gotten gains, for conduct pre-dating the five-year period.”
As highlighted in this post, DOJ Deputy Attorney General Sally Yates again defended the so-called “Yates Memo.” However, the Yates Memo continues to be met with substantial criticism. For instance, as highlighted in this post former Deputy AG Larry Thompson blasted various DOJ policies.
As highlighted here, in April the DOJ issued a policy document titled “The Fraud Section’s FCPA Enforcement Plan and Guidance.” The document outlined various steps in the DOJ’s “enhanced FCPA enforcement strategy” including a “pilot program” intended to “encourage companies to disclose FCPA misconduct to permit the prosecution of individuals whose criminal wrongdoing might otherwise never be uncovered or disclosed to law enforcement.”
- This post sets forth in a Q&A format what you need to know about the pilot program.
- This post highlights the obvious logical gap in the pilot program.
- This post, titled “FCPA Insanity” highlights how the main thrust of the “pilot program” (that is to encourage voluntary disclosure) is nothing new.
- This post highlights, through the DOJ’s own numbers, how the pilot program is also nothing new in terms of substance.
- This post highlights that the general thrust of practitioner comments is a “thumbs down” for the DOJ’s latest effort to encourage voluntary disclosure with some of the most pointed criticisms coming from former high-ranking DOJ FCPA officials.
- This post discusses that a supreme irony of the pilot program is that it bears the signature of Andrew Weissmann (Chief of the DOJ’s Fraud Section), who in recent years has been a vocal critic of the DOJ’s FCPA enforcement program, and suggests that Weissmann should have listened to his former self.
- Finally, this post highlights various reasons why the corporate community should take the pilot program with a grain of salt.
As highlighted in this post, the D.C. Circuit concluded in U.S. v. Fokker Services (a case outside the FCPA context) that a trial court judge should have been a potted plant because trial court judges lack authority to reject DOJ DPAs.
