This post provides a summary of Foreign Corrupt Practices Act enforcement activity and related developments from the third quarter of 2016. (See here for a similar post for the first quarter of 2016 and here for the second quarter of 2016).
DOJ Enforcement (Corporate)
The DOJ brought four corporate FCPA enforcement actions in the third quarter. DOJ recovery in these actions was approximately $229 million (with $213 million coming in the Och-Ziff action).
None of these enforcement actions have resulted (at least yet) in any related DOJ individual FCPA enforcement actions against company employees.
HMT LLC (Sept. 29)
See here for the prior post.
Charges: None
Resolution Vehicle: DOJ “declination” letter pursuant to which the company paid disgorgement.
Guidelines Range: Not applicable / not set forth in the “declination” letter
Penalty: None, but disgorgement of $2.7 million
Origin: Voluntary Disclosure
Monitor: No
Individual Company Employees Charged: No
NCH Corp. (Sept. 29)
See here for the prior post.
Charges: None
Resolution Vehicle: DOJ “declination” letter pursuant to which the company paid disgorgement.
Guidelines Range: Not applicable / not set forth in the “declination” letter
Penalty: None, but disgorgement of $335,000
Origin: Voluntary Disclosure
Monitor: No
Individual Company Employees Charged: No
Och-Ziff (Sept. 29)
See here for the prior post.
Charges: OZ Africa Management GP LLC – conspiracy to violate the FCPA’s anti-bribery provisions; Och-Ziff Capital Management – conspiracy to violate the FCPA’s anti-bribery provisions, and violations of the FCPA’s books and records and internal controls provisions
Resolution Vehicle: OZ Africa – plea agreement; Och-Ziff – DPA.
Guidelines Range: $266 million to $532 million
Penalty: $213 million
Origin: The company previously disclosed: “Beginning in 2011, and from time to time thereafter, we have received subpoenas from the SEC and requests for information from the U.S. Department of Justice (the “DOJ”) in connection with an investigation involving the FCPA and related laws.”
Monitor: Yes
Individual Company Employees Charged: No
LAN / LATAM Airlines (July 25th)
See here and here for prior posts.
Charges: FCPA books and records and internal controls violations.
Resolution Vehicle: DPA
Guidelines Range: $10.2 million – $20.4 million
Penalty: $12.75 million
Origin: Argentine media reports
Monitor: Yes
Individual Company Employees Charged: No
DOJ Enforcement (Individual)
The DOJ brought one individual FCPA enforcement action in the third quarter. As highlighted in this post, the DOJ unsealed criminal charges against Samuel Mebiame, a Gabonese national connected to Och-Ziff, charging conspiracy to violate the FCPA’s anti-bribery provisions.
SEC Enforcement (Corporate)
The SEC brought 8 corporate FCPA enforcement actions in the second quarter. SEC recovery in these actions was approximately $260 million (with $199 million coming in the Och-Ziff matter).
All 8 corporate enforcement actions were resolved via administrative cease and desist orders. Of the 8 corporate enforcement actions, 2 enforcement actions have resulted in related individual charges against company employees.
GlaxoSmithKline (Sept. 30th)
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: $20 million civil penalty
Origin: The company previously disclosed: “The US Securities and Exchange Commission (SEC) and the US Department of Justice (DOJ) initiated an industry-wide enquiry in 2010 into whether pharmaceutical companies may have engaged in violations of the US Foreign Corrupt Practices Act (FCPA) relating to the sale of pharmaceuticals, including in Argentina, Brazil, Canada, China, Germany, Italy, Poland, Russia and Saudi Arabia. The Group is one of the companies that has been asked to respond to this enquiry and is cooperating with the SEC and DOJ. The Group has informed the DOJ and SEC about the investigation of its China operations by the Chinese government that was initiated in 2013 and the outcome of that investigation. The Group also has briefed the DOJ and SEC regarding other countries and issues.”
Individuals Charged: No
Related DOJ Enforcement Action: No
Och-Ziff (Sept. 29th)
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: Approximately $199 million in disgorgement and prejudgment interest.
Origin: “Beginning in 2011, and from time to time thereafter, we have received subpoenas from the SEC and requests for information from the U.S. Department of Justice (the “DOJ”) in connection with an investigation involving the FCPA and related laws.
Individuals Charged: Yes.
Related DOJ Enforcement Action: Yes
AB InBev (Sept. 28th)
See here for the prior post.
Charges: None. Administrative cease and desist order finding violations of FCPA’s anti-bribery, books and records and internal controls provisions. The SEC also found that AB InBev entered into a separation agreement with a former employee that violated an SEC Rule implementing Dodd-Frank’s whistleblower provisions.
Settlement: $6 million ($2.7 million in disgorgement plus interest of $292,381 and a penalty of $3 million).
Origin: The SEC’s order states: “AB InBev did not report the 2009 and 2011 complaints to the Commission staff before the Commission first contacted AB InBev in October 2011.”
Individuals Charged: No.
Related DOJ Enforcement Action: No.
Nu Skin (Sept. 20th)
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: $765,688 ($431,088 in disgorgement, prejudgment interest of $34,600, and a $300,000 civil money penalty).
Origin: Voluntary disclosure
Individuals Charged: No
Related DOJ Enforcement Action: No
AstraZeneca (Aug. 30th)
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: $5.5 million (disgorgement of $4,325,000, prejudgment interest of $822,000, and a civil money penalty of $375,000)
Origin: In an August 2010 filing, the company disclosed: “AstraZeneca PLC has received inquiries from the US Department of Justice and the Securities and Exchange Commission in connection with an investigation into Foreign Corrupt Practices Act issues in the pharmaceutical industry. AstraZeneca is cooperating with their inquiries.”
Individuals Charged: No
Related DOJ Enforcement Action: No
Key Energy (Aug. 11th)
See here, 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: $5 million in disgorgement
Origin: The SEC’s order states: “In or around January 2014, the staff of the Commission contacted Key Energy with respect to potential FCPA violations by Key Energy. In April 2014, Key Mexico employees reported to Key Energy information they had received suggesting the recently resigned country manager had promised bribes to one or more Pemex employees during his employment with Key Mexico. Upon learning of these allegations, Key Energy reported the allegations to the staff of the Commission.”
Individuals Charged: No
Related DOJ Enforcement Action: No
Johnson Controls (July 11th)
See here, here, 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: $$14.4 million (disgorgement of $11.8 million, prejudgment interest of $1,382,561 and a $1.18 million civil penalty)
Origin: Voluntary disclosure
Individuals Charged: No
Related DOJ Enforcement Action: No
LAN Airlines (July 25th)
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: $9.4 million in disgorgement and prejudgment interest
Origin: Argentine media reports
Individuals Charged: Yes – In February 2016 the SEC charged Ignacio Cueto Plaza, the current CEO of LAN Airlines (see here)
Related DOJ Enforcement Action: Yes
SEC Enforcement (Individual)
The SEC brought FCPA enforcement actions against three individuals in the third quarter in two core actions.
In connection with the Och-Ziff enforcement action, the SEC found that Daniel Och (Chairman and CEO) was a cause of certain of the company’s FCPA books and records violations and that Joel Frank (CFO) was a cause of certain of the company’s FCPA books and records and internal controls violations. As highlighted in this post, this represents what is believed to be the first time in FCPA history that the SEC also found the current CEO and CFO of the issuer company liable for company FCPA violations. Without admitting or denying the SEC’s findings, Och agreed to pay approximately $2.2 million (the largest settlement amount in FCPA history by an individual in an SEC action.). Frank likewise agreed to resolve the action without admitting or denying the SEC’s findings and the SEC’s order states that “a penalty will be assessed against him at a future date.”
As highlighted in this post, the SEC announced an administrative action finding that Jun Ping Zhang (a U.S. citizen and former Chairman and CEO of CareFx China, a dissolved Chinese subsidiary of Harris Corp.) violated the FCPA. Without admitting or denying the SEC’s findings, Ping agreed to pay a $46,000 civil penalty and cease and desist for committing any future FCPA anti-bribery violations and books and records violations. In connection with the Ping action, the SEC announced that there would be no enforcement action against Harris Corp. prompting the company’s counsel to call the enforcement action a “first of its kind.” However, as highlighted in this post, the Harris Corp. situation represents the 20th example since 2000 in which the DOJ/SEC charged an individual with FCPA violations but neither the DOJ or SEC charged the corporate employer.
Other Developments or Items of Interest
Historically, September has also been an active month for enforcement agency official speeches. This post analyzes the comments of the DOJ’s Principal Deputy Assistant Attorney General that the DOJ’s FCPA Pilot Program is “sophisticated” and “transparent.” This post analyzes SEC Chair Mary Jo White’s recent comments about the FCPA.
The OECD recently released a report regarding “Liability of Legal Persons for Foreign Bribery” and this post discusses the significant differences among OECD Convention countries on legal person criminal liability and highlights how the U.S. system for legal person liability for alleged bribery offenses is very unique among peer countries.
In connection with FCPA scrutiny, opportunistic plaintiffs’ counsel often bring derivative actions alleging that board members and other executives breached their fiduciary duties owed to the company and shareholders. Such claims are rarely successful. Indeed, as highlighted in this post, the Eighth Circuit recently affirmed dismissal of derivative claims brought by Wal-Mart shareholders and as highlighted in this post, the Ninth Circuit recently affirmed dismissal of derivative claims brought by Wynn Resort shareholders.
In resolving the record-setting Siemens FCPA enforcement, the DOJ complimented Siemens on its remedial measures, stating that the company “set a high standard for multi-national companies to follow.” Yet as highlighted in this post, in a recent filing in a case seeking release of the Siemens monitor report, the DOJ advances a laughable position. That position – as articulated by the DOJ in seeking to block release of the monitor report – is that “disclosure of confidential information about Siemens’ compliance programs would provide a free roadmap as to what works in international commerce without violating the FCPA and other anti-corruption laws, what activities to avoid, how build an effective compliance program and system of internal controls, etc.”
As highlighted in this post, the U.K. Serious Fraud Office announced its second DPA against an unnamed company apparently in the steel industry (according to the SFO, due to ongoing legal proceedings the name of the company and its U.S. parent company were disclosed). As highlighted in the post, the U.K.’s second DPA was much different than the U.K. first use of a DPA in the December 2015 Standard Bank enforcement action.