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Roundup Of Scrutiny Alerts And Updates

scrutiny alert

Add some to the list, take a few off, future settlement, continuing to seemingly “boil the ocean,” and monitor costs.

This time of year is heavy on annual reports and other corporate disclosures and this post rounds up various scrutiny alerts and updates.

Albemarle Corp.

The North Carolina based chemical company recently disclosed:

“Following receipt of information regarding potential improper payments being made by third party sales representatives of our Refining Solutions business, we promptly retained outside counsel and forensic accountants to investigate potential violations of the Company’s Code of Conduct, the Foreign Corrupt Practices Act (“FCPA”), and other potentially applicable laws. Based on this internal investigation, we have voluntarily self-reported potential issues relating to the use of third party sales representatives in our Refining Solutions business to the U.S. Department of Justice (“DOJ”) and Securities and Exchange Commission (“SEC”), and intend to cooperate with the DOJ and SEC in their review of these matters. In connection with our internal investigation, we have implemented, and are continuing to implement, appropriate remedial measures.

At this time, we are unable to predict the duration, scope, result or related costs associated with any investigations by the DOJ or SEC. We also are unable to predict what, if any, action may be taken by the DOJ or SEC or what penalties or remedial actions they may seek.”

Cognizant Technology Solutions

Previous posts herehere and here have highlighted how Cognizant Technology Solutions has seemingly been “boiling the ocean” since disclosing its FCPA scrutiny in September 2016.

The company recently disclosed: “In 2017, we incurred $36 million in costs related to the FCPA investigation and related lawsuits in addition to the $27 million we incurred in 2016. We expect to continue to incur expenses related to these matters in 2018.”

Add it up and Cognizant has spent approximately $65 million in approximately 18 months in connection with its FCPA scrutiny and related civil lawsuits.

During my nearly decade-long FCPA private practice career, I conducted several FCPA internal investigations around the world. Such investigations are not a cost-free exercise.

However, Cognizant’s disclosure that it has incurred approximately $65 million in approximately 18 months strikes me as highly unusual and if I were a Cognizant board member (not to mention a Cognizant shareholder), I would have some serious concerns.

World Fuel Services

The company disclosed:

“On July 20, 2016, we were informed that the U.S. Department of Justice (the “DOJ”) is conducting an investigation into the aviation fuel supply industry, including certain activities by us and other industry participants at an airport in Central America. In connection therewith, we were served with formal requests by the DOJ about its activities at that airport and its aviation fuel supply business more broadly. We are cooperating with the investigation.”


As highlighted in this previous post, the Illinois-based waste management company is under FCPA scrutiny.

The company recently disclosed:

“On June 12, 2017, the SEC issued a subpoena to the Company, requesting documents and information relating to the Company’s compliance with the FCPA or other foreign or domestic anti-corruption laws with respect to certain of the Company’s operations in Latin America.  In addition, the Department of Justice has notified the Company that it is investigating this matter in parallel with the SEC.  The Company is cooperating with these agencies.  The Company is also conducting an internal investigation of these and other matters, including outside of Latin America, under the oversight of the Audit Committee of the Board of Directors and with the assistance of outside counsel, and this investigation has found evidence of improper conduct.”


As highlighted in this previous post, German healthcare firm Fresenius Medical Care AG (a company with shares traded on the NYSE) has been under FCPA scrutiny since 2012 (no that is not a typo) and recently disclosed:

“Beginning in 2012, the Company received certain communications alleging conduct in countries outside the U.S. that might violate the FCPA or other anti-bribery laws. Since that time, the Company’s Supervisory Board, through its Audit and Corporate Governance Committee, has conducted investigations with the assistance of independent counsel. In a continuing dialogue, the Company voluntarily advised the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) about these investigations, while the SEC and DOJ (collectively the “government” or “government agencies”) have conducted their own investigations, in which the Company has cooperated. In the course of this dialogue, the Company has identified and reported to the government, and has taken remedial actions including employee disciplinary actions with respect to, conduct that might result in the government agencies’ seeking monetary penalties or other sanctions against the Company under the FCPA or other anti-bribery laws and impact adversely the Company’s ability to conduct business in certain jurisdictions. The Company has recorded in prior periods a non-material accrual for certain adverse impacts that were identified. The Company has substantially concluded its investigations and undertaken discussions toward a possible settlement with the government agencies that would avoid litigation over government demands related to certain identified conduct. These discussions are continuing and have not yet achieved an agreement-in-principle; failure to reach agreement and consequent litigation with either or both government agencies remains possible. The discussions have revolved around possible bribery and corruption questions principally related to certain conduct in the Company’s products business in a number of countries. The Company has recorded a charge of €200 M in the accompanying financial statements. The charge is based on ongoing settlement negotiations that would avoid litigation between the Company and the government agencies and represents an estimate from a range of potential outcomes estimated from current discussions. The charge encompasses government agencies claims for profit disgorgement, as well as accruals for fines or penalties, certain legal expenses and other related costs or asset impairments. The Company continues to implement enhancements to its anti-corruption compliance program, including internal controls related to compliance with international anti-bribery laws. The Company continues to be fully committed to FCPA and other anti-bribery law compliance.”

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As highlighted in this previous post, Exterran previously disclosed:

“Exterran Corporation’s Form 10-K/A discloses that it has been cooperating with the SEC in an investigation, including responding to a subpoena for documents related to the restatement and compliance with the U.S. Foreign Corrupt Practices Act, which are also being provided to the Department of Justice at its request. Archrock has been assisting Exterran Corporation in responding to this investigation, including providing information regarding periods prior to the Spin-off that is not otherwise in Exterran Corporation’s possession.


Contemporaneously with filing the Form 8-K on April 26, 2016, we self-reported the errors and possible irregularities at Belleli (a subsidiary of Exterran) EPC to the SEC. Since then, we have been cooperating with the SEC in its investigation of this matter, including responding to a subpoena for documents related to the restatement and compliance with the U.S. Foreign Corrupt Practices Act (“FCPA”), which are also being provided to the Department of Justice at its request. The FCPA related requests in the SEC subpoena pertain to our policies and procedures, information about our third-party sales agents, and documents related to historical internal investigations completed prior to November 2015.”

The company recently disclosed:

“In March 2016, the Audit Committee of the Board of Directors retained legal counsel to conduct an internal investigation related to the application of percentage-of-completion accounting principles to specific Belleli EPC product sales projects. Our Belleli EPC business had historically been comprised of engineering, procurement and construction for the manufacture of tanks for tank farms and the manufacture of evaporators and brine heaters for desalination plants in the Middle East (referred to as “Belleli EPC” or the “Belleli EPC business” herein). On April 26, 2016, we filed a Form 8-K reporting the errors and possible irregularities at Belleli EPC. Contemporaneously with filing the Form 8-K, we self-reported these issues to the SEC. We continue to cooperate with the SEC in its ongoing investigation of this matter, which has included responding to a subpoena for documents related to the circumstances giving rise to the restatement as well as documents related to our compliance with the U.S. Foreign Corrupt Practices Act (“FCPA”), which were also provided to the Department of Justice (“DOJ”) at its request. We also have made the SEC and DOJ aware of our internal investigation regarding previously restated non-income-based tax receivables due to us from the Brazilian government. We could be subject to stockholder or other actions, or further regulatory actions, in connection with these issues in the future.

The SEC staff has notified us that they have concluded their investigation concerning our compliance with the FCPA and that they do not intend to recommend an enforcement action concerning our compliance with the FCPA. The DOJ has similarly informed us that it does not intend to proceed with any further investigation or enforcement. The SEC’s investigation related to the circumstances giving rise to the restatement is continuing, and we are presently unable to predict the duration, scope or results or whether the SEC will commence any legal action. If we are found to have violated securities laws or other federal statutes, we may be subject to criminal and civil penalties and other remedial measures, including, but not limited to injunctive relief, disgorgement, civil and criminal fines and penalties, modifications to business practices including the termination or modification of existing business relationships, modifications of compliance programs and the retention of a monitor to oversee compliance. The imposition of any of these sanctions or remedial measures could have a material adverse impact on our reputation, business, results of operations, financial condition, liquidity and stock price.”

Applied Energetics

The Arizona-based company recently disclosed in connection with a rather strange board room battle:

“In 2016, the Company engaged in preliminary merger discussions with a Company controlled by Thomas Dearmin and Jonathan Barcklow. These discussions were discontinued when the Company learned of potential violations of the Foreign Corrupt Practices Act, by the target Company and a significant shortfall in its predicted revenues.”

Orthofix International

As highlighted in this prior post, in January 2017 Orthofix International joined the repeat offender club by resolving an FCPA enforcment action. The company recently disclosed:

“We received a favorable insurance settlement in 2017 of approximately $6 million associated with prior costs incurred related to SEC and FCPA matters.

Pursuant to our settlement of the SEC Investigation and FCPA matters in Brazil, we agreed to retain an independent compliance consultant for one year to review and test the Company’s FCPA compliance program, which began in March 2017 and resulted in an increase in expense of $1.8 million”

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