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Potpourri

A bounty and a disclosure.

Bounty

Earlier this week the SEC released this [1] order determining that a whistleblower is to receive approximately $3.5 million. According to the order: “Claimant alerted Commission staff of alleged securities laws violations, prompting Enforcement staff to expand an existing investigation into an additional geographic area. Claimant, a foreign national, also provided significant assistance to Commission staff by traveling to meet in person with staff, identifying an important witness, and providing multiple supplemental submissions that assisted the Commission in bringing the charges in the Covered Action.”

Pursuant to relevant law, the SEC protects the confidentiality of whistleblowers and does not disclose any information that could reveal a whistleblower’s identity. However, attorneys Andy Rickman [2] and Christopher Connors [3] confirmed that they represented the individual and that the award related to the Juniper FCPA enforcement action.

As highlighted in this post [4], in 2019 Juniper resolved an approximately $11.7 million SEC enforcement action concerning conduct in Russia and China. According to the SEC:

“From 2008 through 2013, certain sales employees of the Russian representative office of Juniper’s subsidiary, JNN Development Corp. (“JNN”) secretly agreed with third party channel partners to increase the incremental discount on sales made to customers through those channel partners without passing those increased discounts on to customers. Instead, the channel partners diverted the additional discounts into a fund held by the channel partners for travel and marketing expenses. These off-book funds were referred to as “common funds” and were directed in part by JNN sales representatives. These “common funds” were used in part to pay for customer trips, including trips for government officials, some of which were predominately leisure in nature and had little to no educational or business purpose. Included in the customer travel paid for through the “common fund” were instances of customer travel for foreign officials to various locations where there were no Juniper facilities or industry conferences related to Juniper’s business. In late 2009, Juniper learned of these off-book “common fund” accounts and improper use of additional discounts, both of which were prohibited under Juniper policies. Despite this, JNN’s off-book accounts, funded through diverted additional discounts, and improper travel practices continued through 2013.

Additionally, from 2009 through 2013, certain sales employees of Juniper’s Chinese subsidiaries falsified trip and meeting agendas for customer events that understated the true amount of entertainment involved on the trips. The sales employees submitted these falsified and misleading trip agendas to Juniper’s Legal Department to obtain event approval. In contravention of Juniper’s travel policies, Juniper’s Legal Department approved numerous trips without adequate review and after the event had taken place.

Juniper failed to accurately record the incremental discounts and travel and marketing expenses in its books and records, and failed to devise and maintain a system of internal accounting controls sufficient to prevent and detect off-book accounts, unauthorized customer trips, falsified travel agendas and after-the-fact travel approvals.”

[5]

Disclosure

In July 2020, New Age Beverages Corp. (a Colorado-based organic products company) announced [6] a definitive agreement to acquire ARIIX, together with four additional companies in the e-commerce and direct selling channels, to” create a global firm with estimated pro forma revenues in excess of $500 million across more than 75 countries worldwide.”

Earlier this week, New Age disclosed [7]:

“In December 2020, the Company engaged external counsel, accountants, and other advisors to conduct an independent investigation of Ariix’s international business practices, during which the investigation team identified conduct that potentially was in violation of the FCPA. In August 2021, the Company made a voluntary self-disclosure to the U.S. Department of Justice (“DOJ”) and the SEC about these items and our investigation. Although the reporting to the DOJ and SEC is ongoing, the Company believes its investigation is substantially complete. The Company has initiated procedures to remediate such practices. These findings provide opportunity for targeted, enhanced controls and additional training and other remediation. The Company intends to fully cooperate with the DOJ and SEC, with the assistance of legal counsel, to conclude this matter.”

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