Even though the DOJ and SEC have long talked about the importance of prompt Foreign Corrupt Practices Act investigations (for instance who can forget a high-ranking DOJ enforcement attorney stating in 2017 that the DOJ’s “intent is for our FCPA investigations to be measured in months, not years”), the fact remains that FCPA lasts way too long.
Stericycle (an Illinois based medical waste disposal company) that has been under FCPA scrutiny since mid-2017.
In November 2021, Stericycle disclosed the accrual of $61 million for resolution of the FCPA matter.
Recently, the company upped the accrual to approximately $81 million and disclosed that it has “reached agreements in principle with the DOJ and SEC.”
Specifically, Stericyle 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 notified the Company that it was investigating this matter in parallel with the SEC. The Company is cooperating with these agencies and certain foreign authorities. The Company also conducted 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 found evidence of improper conduct. As part of the FCPA investigation discussed above, the SEC requested certain additional information from the Company.
As previously disclosed, the Company has engaged in settlement discussions in connection with the foregoing government investigations. The Company has reached agreements in principle with the DOJ and the SEC to settle these matters. Under the Company’s agreement in principle with the DOJ, the Company would enter into a deferred prosecution agreement (“DPA”) with the DOJ, under which the DOJ would defer criminal prosecution of the Company for a period of three years for charges relating to conspiracy to violate the anti-bribery and books and records provisions of the FCPA. If the Company remains in compliance with the DPA during its three-year term, the deferred charge against the Company would be dismissed with prejudice. The Company would pay $52.5 million in criminal fines to the DOJ. Under the Company’s agreement in principle with the SEC, the Company would enter into an administrative resolution with the SEC with respect to alleged violations of the anti-bribery, books and records and internal controls provisions of the FCPA, and would disgorge $22.2 million and pay pre-judgment interest of $6.0 million to the SEC. In addition, under both the agreement in principle with the DOJ and with the SEC, the Company would engage an independent compliance monitor for two years and undertake compliance with self-reporting obligations for an additional year.
Based on these agreements in principle and as provided by U.S. GAAP, in addition to the $61.0 million previously accrued, the Company has recognized an additional estimated aggregate accrued liability for these matters of approximately $19.7 million within its consolidated financial statements as of December 31, 2021, for a total accrual of $80.7 million relating to these matters. Final resolution of these matters is subject to negotiation of documentation satisfactory to all parties. It is also subject to final approvals by the Company’s board of directors, the DOJ, and the SEC, and may require court approval of the DPA. The Company is also discussing potential settlement of investigations by Brazilian authorities. Because negotiations with the Brazilian authorities are ongoing, the Company cannot predict with certainty the outcome of these negotiations, including whether a settlement will be reached, the amount of any potential monetary payments, or injunctive or other relief. In the event the Company is able to negotiate a settlement with the Brazilian authorities, certain monetary portions of the agreements in principle with the DOJ and SEC may be offset by payments made thereto. At the present time, the Company is unable to reasonably estimate nor provide any assurance regarding the amount of any potential loss in excess of the amount accrued relating to these matters.”