Retail Industry Sweep
This previous post discussed the Wal-Mart effect, how Wal-Mart is clearly not the only company subject to the FCPA that needs licenses, permits and the like when doing business in Mexico, and that it is likely that Wal-Mart’s potential FCPA exposure has caused sleepless nights for many company executives doing business in Mexico and the general region.
Sure enough.
Aruna Viswanatha reports in this Reuters story that “retailers have been reviewing their international operations in light of a bribery scandal at Wal-Mart’s operations in Mexico that is the subject of investigations by the Justice Department and the Securities and Exchange Commission.” According to the story, “other retail companies have also since reported to U.S. agencies suspicions of their own potential violations, which in turn has the Justice Department and SEC considering a sweep of the entire industry.” For more on industry sweeps, see this previous post.
Barclays Dealings With Sovereign-Wealth Funds Scrutinized
The Wall Street Journal reported on Friday (here) that Barclays PLC’s “chief financial officer is under investigation by British authorities related to the bank’s 2008 fundraising activities with Middle Eastern investors.” According to the story, the “probe is focused at least in part on how Barclays wooed Qatar’s sovereign-wealth fund to pump billions of pounds into the bank as the financial crisis intensified.” According to this Wall Street Journal article, Barclays previously disclosed “£240 million of payments made to Qatar Holding and Abu Dhabi’s Sheik Mansour Bin Zayed Al Nahyan related to its £7.3 billion capital raise in 2008.”
Barclays has ADRs traded on the New York Stock Exchange and, according to the article, the SEC “is aware of the probe” and will be updated on its progress. As the article notes, the SEC is currently conducting an expansive investigation of various financial institutions concerning relationships with sovereign-wealth funds.
Halliburton’s Latest Disclosure
Halliburton previously disclosed potential FCPA issues concerning the use of an Angolan vendor. Last week in this quarterly report, the company provided an update on that investigation as well as new investigations concerning additional conduct in Angola as well as Iraq. The disclosure states as follows.
“We are conducting internal investigations of certain areas of our operations in Angola and Iraq, focusing on compliance with certain company policies, including our Code of Business Conduct (COBC), and the FCPA and other applicable laws. In December 2010, we received an anonymous e-mail alleging that certain current and former personnel violated our COBC and the FCPA, principally through the use of an Angolan vendor. The e-mail also alleges conflicts of interest, self-dealing, and the failure to act on alleged violations of our COBC and the FCPA. We contacted the DOJ to advise them that we were initiating an internal investigation. Since the third quarter of 2011, we have been participating in meetings with the DOJ and the SEC to brief them on the status of our investigation and have been producing documents to them both voluntarily and as a result of SEC subpoenas to the company and certain of our current and former officers and employees. During the second quarter of 2012, in connection with a meeting with the DOJ and the SEC regarding the above investigation, we advised the DOJ and the SEC that we were initiating unrelated, internal investigations into payments made to a third-party agent relating to certain customs matters in Angola and to third-party agents relating to certain customs and visa matters in Iraq. We expect to continue to have discussions with the DOJ and the SEC regarding the Angola and Iraq matters described above and have indicated that we would further update them as our investigations progress. We have engaged outside counsel and independent forensic accountants to assist us with the investigations. We intend to continue to cooperate with the DOJ’s and the SEC’s inquiries and requests in these investigations. Because these investigations are ongoing, we cannot predict their outcome or the consequences thereof.”
In 2009, Halliburton and related entities settled DOJ and SEC FCPA enforcement actions concerning Bonny Island, Nigeria conduct by agreeing to pay $579 million in combined fines and penalties. See here and here. Pursuant to the SEC settlement, Halliburton is permanently enjoined from violating the FCPA’s books and records and internal control provisions.
W.W. Grainger Updates Its Disclosure
This previous post discussed W.W. Grainger’s February disclosure concerning an investigation that sales employees of a China subsidiary may have provided prepaid gift cards to certain customers. As noted by Chris Matthews in this recent Wall Street Journal Corruption Currents post, the company in a recent SEC filing stated as follows.
“The results of the investigation, which have been submitted to the DOJ and the SEC, did not substantiate initial information suggesting significant use of gift cards for improper purposes. The Company cannot predict at this time whether any regulatory action may be taken or any other potential consequences may result from this matter.”
The Corruption Currents post contains a quote from Grainger spokeswoman as follows. “We conducted a very thorough investigation, and based on our findings we do not believe this is a material issue. We have submitted our findings to the DOJ and the SEC and we are in conversations with them regarding the conclusion of this matter.”
Contrary to the Corruption Currents headline “W.W. Grainger’s FCPA Probe Finds No Wrongdoing” the disclosure is qualified by the term “significant” use of gift cards for improper purposes and the quote from the company representative is qualified by the term “material” issue. Very few FCPA issues in multinational companies rise to the level of quantitative materiality – even if the SEC takes the view that all payments in violation of the FCPA are qualitatively material.
As noted in this previous post concerning Congressional interest in DOJ FCPA declination decisions, the DOJ has stated that it “has declined to prosecute corporate entities in several cases based on particular facts and circumstances presented in those matters” including the following: “a single employee, and no other employee, was involved in the provision of improper payments; and the improper payments involved minimal funds compared to the overall business revenues.”
