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Scrutiny Alerts And Updates

scrutiny alert

This post highlights Foreign Corrupt Practices act and related scrutiny alerts and updates regarding the following companies: International Flavors and Fragrances, Herbalife, Veolia, Stericycle, and Bombardier.

International Flavors and Fragrances

In October 2018, New York based International Flavors and Fragrances (IFF) Inc. acquired Israel-based Frutarom Industries Ltd. (a flavors, savory solutions and natural ingredients company).

IFF recently disclosed:

“During the integration of Frutarom, IFF was made aware of allegations that two Frutarom businesses operating principally in Russia and Ukraine made certain improper payments, including to representatives of a number of customers. IFF promptly commenced investigations of such allegations with the assistance of outside legal and accounting firms. IFF’s investigations are not yet complete, but preliminary results indicate that improper payments to representatives of customers were made and that key members of Frutarom’s senior management at the time were aware of such payments. IFF has not uncovered any evidence suggesting that such payments had any connection to the United States.

Based on the results of the investigations to date, IFF believes that such improper customer payments are no longer being made and the estimated affected sales represented less than 1% of IFF’s and Frutarom’s combined net sales for 2018. IFF does not believe the impact from these matters is or will be material to IFF’s results of operations or financial condition. The costs arising from these matters, however, could be material in a particular fiscal quarter.

Although the investigations are continuing, based on the results to date and other compliance-related integration activities IFF is not currently aware of similar instances of misconduct.”


Herbalife has been under FCPA scrutiny since early 2017 (see this prior post) and recently disclosed:

“As previously disclosed, the SEC and the Department of Justice, or DOJ, have been conducting investigations into the Company’s compliance with the Foreign Corrupt Practices Act, or FCPA, in China, which are mainly focused on the Company’s China external affairs expenditures relating to its China business activities and the adequacy of and compliance with the Company’s internal controls relating to such expenditures. These investigations are proceeding, the government is continuing to request documents and other information relating to these matters, and the Company has commenced discussions with the government regarding possible resolution of these matters. The Company has conducted its own review and has taken remedial and improvement measures based upon this review, including but not limited to replacement of a number of employees and enhancements of Company policies and procedures in China. The Company is continuing to cooperate with the SEC and DOJ. Although a likely outcome could include resolutions or government actions, the Company cannot predict the eventual scope, duration, or outcome of the government investigations at this time, including potential monetary payments, injunctions, or other relief, the results of which may be materially adverse to the Company, its financial condition, its results of operations, and its operations. At the present time, the Company is unable to reasonably estimate the amount of loss relating to these matters.”

In the same filing, the company disclosed:

“As previously disclosed, the SEC has also requested from the Company documents and other information relating to the Company’s disclosures regarding its marketing plan in China. The Company is discussing a possible resolution with the SEC and, based on the course of these discussions to date, believes that a final resolution of this matter is likely to include a civil penalty in the amount of $20.0 million and has accordingly recorded an accrued liability in that amount within its condensed consolidated balance sheet as of June 30, 2019. While the Company believes the final resolution of this matter is nearing a conclusion, there can be no assurance as to the timing or the terms of any final resolution, or that a settlement will be reached at all. In the event a settlement is not reached, litigation may ensue and, accordingly, the actual loss incurred in connection with this matter could be less than or exceed the amount accrued and may be materially adverse to the Company, its financial condition, its results of operations, and its operations. At the present time, the Company is unable to reasonably estimate the amount of any potential loss in excess of the amount already accrued relating to this matter.”


The France based water management, waste management and energy services company recently disclosed:

“In 2000, Apa Nova Bucuresti (“ANB”), Veolia Eau’s Romanian subsidiary in which it holds a 74% stake, signed a 25- year concession agreement for water distribution and wastewater services with the city of Bucharest. At the end of July 2015, the National Anticorruption Division of Ploiesti (“NAD”) opened an investigation on influence peddling involving several persons and entities, including several Romanian subsidiaries of the Company. ANB and certain of its former managers are suspected of having purchased, between 2008 and 2015, the influence of three natural persons in order to obtain favorable decisions from Bucharest’s public authorities, resulting in significant increases in water prices. In exchange for their influence, ANB allegedly made significant payments to companies controlled by these three persons or related persons, without these payments being proportionate to the services rendered, and without these services necessarily being real.

Since August 2015, ANB, as well as other subsidiaries of the Company with water and energy activities in Romania, have provided the NAD, at its request, with numerous documents. Throughout October 2015, three former managers of ANB were questioned by the NAD, and then placed under the status of “inculpat” and under judicial supervision. On October 30, 2015, ANB was placed under this same status, for bribery, buying influence, invasion of privacy, tax evasion and money laundering. The investigation continues and to date, the file has not been sent to Court. ANB is cooperating with the NAD. So far, it only has partial access to the criminal case file.

The Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) opened investigations concerning possible violations of US federal laws, relating to the facts which are the subject of NAD’s investigation. As part of its investigation, the SEC has asked the Company to voluntarily provide documents and information regarding these facts. At the SEC’s behest, as part of international cooperation, the Autorité des marchés financiers (AMF) has made requests of the Company as well, which are also related to the facts which are the subject of NAD’s investigation, in connection with its own investigation on the matter. The Company is fully cooperating with the investigating authorities and, in particular, providing all requested information, in accordance with applicable laws.

In 2017, the Parquet National Financier confirmed that a preliminary investigation has been launched. At the beginning of 2018, a search took place in the Company’s premises in Aubervilliers and some hearing of witnesses were conducted. At the end of August 2018, one of the Company’s subsidiaries was searched in Prague. By letter July 8, 2019, the SEC informed the Company’s US lawyer that it has concluded its investigation and that it does not intend to recommend any enforcement action against the Company.”


The company has been under FCPA scrutiny since mid-2017 and 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 DOJ has notified the Company that it is investigating this matter in parallel with the SEC.  The Company is cooperating with these agencies and certain foreign authorities.  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 part of the FCPA investigation discussed above, the SEC has requested certain additional information from the Company.  On July 29, 2019, the SEC issued a subpoena to the Company requesting documents relating to the Company’s pricing practices concerning small quantity customers, as alleged in the Contract Class Actions and in the Securities Class Action.  The Company intends to cooperate with the SEC’s request.

The Company has not accrued any amounts in respect of this matter, as it cannot estimate any reasonably possible loss or any range of reasonably possible losses that the Company may incur.  The Company is unable to make such an estimate because, based on what the Company knows now, in the Company’s judgment, the factual and legal issues presented in this matter are sufficiently unique that the Company is unable to identify other circumstances sufficiently comparable to provide guidance in making estimates.”


According to this report:

“Bombardier Inc. is hiring an independent organization to review its procedures for doing business in foreign markets in the wake of allegations that company officials used corruption and collusion to win a rail contract in Azerbaijan. The Canadian airplane and train maker said in its second-quarter financial statements that it will work with a third-party group chosen by Export Development Canada “to evaluate our existing due diligence processes.” EDC helps Canadian exporters through insurance and financing and has been involved in billions of dollars of Bombardier contracts in overseas markets.”

See this prior post for other instances of scrutiny of the company.

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