This post provides a summary of FCPA enforcement actions and FCPA related events from the first quarter of 2012.
DOJ Enforcement
The DOJ resolved 4 core corporate FCPA enforcement actions in the first quarter. Total DOJ recovery in these enforcement actions was approximately $100.5 million. All 4 of these enforcement actions were resolved with either a deferred prosecution agreement or a non-prosecution agreement. At present, none of these corporate enforcement actions have resulted in any individual charges against company employees. Although there has been a general downward trend in recent years of monitors being imposed in corporate FCPA enforcement actions, 3 of the 4 corporate enforcement actions thus far this year have resulted in imposition of a monitor.
Biomet (March 26th)
See here for the prior post.
Charges: Conspiracy to violate the FCPA, three substantive FCPA anti-bribery violations, and FCPA books and records violation.
Resolution Vehicle: Criminal information resolved via a DPA (term 3 years).
Guidelines Range: $21.6 – $43.2 million.
Penalty: $17.3 million (20% below the minimum amount suggested by the Guidelines).
Disclosure: Industry sweep inquiry followed by disclosure of misconduct at issue, including a portion of which that was voluntarily disclosed.
Monitor: Yes (18 month term).
Individuals Charged: No.
BizJet International / Lufthansa Technik (March 14th)
See here for the prior post.
Charges: BizJet – conspiracy to violate the FCPA; Lufthansa – no charges.
Resolution Vehicle: BizJet – criminal information resolved via a DPA (term 3 years); Lufthansa – NPA (term 3 years).
Guidelines Range: $17.1 – $34.2 million.
Penalty: $11.8 million (30% below the minimum amount suggested by the Guidelines).
Disclosure: Voluntary disclosure.
Monitor: No.
Individuals Charged: No.
Smith & Nephew (Feb. 6th)
See here for the prior post.
Charges: Conspiracy to violate the FCPA, FCPA’s anti-bribery violation, and FCPA books and records violation.
Resolution Vehicle: Criminal information resolved via a DPA (term 3 years).
Guidelines Range: $21 – $42 million.
Penalty: $16.8 million (20% below the minimum amount suggested by the Guidelines).
Disclosure: Industry sweep inquiry followed by disclosure of misconduct at issue.
Monitor: Yes (term 18 months).
Individuals Charged: No.
Marubeni (Jan. 17th)
See here for the prior post.
Charges: Conspiracy to violate the FCPA, and aiding and abetting FCPA anti-bribery violations.
Resolution Vehicle: Criminal information resolved via DPA (term 2 years).
Guidelines Range: $54.6 – $109.2 million.
Penalty: $54.6 million.
Disclosure: Enforcement action based on a previous foreign law enforcement investigation.
Monitor: Yes (2 year term).
Individuals Charged: No.
In addition to the above corporate enforcement actions from the first quarter, the DOJ also brought one individual enforcement action in the first quarter by adding Cecilia Zurita as a defendant in a previously filed Haiti Teleco related enforcement action (see here).
SEC Enforcement
The SEC resolved 2 corporate FCPA enforcement actions and 1 individual FCPA enforcement action in the first quarter. Total recovery in these enforcement actions was approximately $10.9 million. At present, there have been no related individual charges against company employees in the 2 corporate enforcement actions. In addition, the SEC also brought charges against two individuals that have not yet been resolved.
Biomet (March 26th)
See here for the prior post.
Charges: Settled civil complaint charging violations of the FCPA’s anti-bribery provisions, and books and records and internal controls provisions.
Settlement: $5.5 million ($4.4 million in disgorgement and $1.1 million in prejudgment interest).
Disclosure: Industry sweep inquiry followed by disclosure of misconduct at issue, including a portion of which that was voluntarily disclosed.
Individuals Charged: No.
Related DOJ Enforcement Action: Yes.
Smith & Nephew (Feb. 6th)
See here for the prior post.
Charges: Settled civil complaint charging violations of the FCPA’s anti-bribery provisions, and books and records and internal controls provisions.
Settlement: $5.4 million ($4,028,000 in disgorgement and $1,398,799 in prejudgment interest).
Disclosure: Industry sweep inquiry followed by disclosure of misconduct at issue.
Individuals Charged: No.
Related DOJ Enforcement Action: Yes.
Thomas O’Rourke (former controller and head of internal audit at Noble Corp.) (Feb. 24th)
See here for the prior post.
Charges: Settled civil complaint charging aiding and abetting Noble’s violations of the FCPA anti-bribery provisions, books
and records and internal controls provisions and direct violations of the FCPA’s internal controls provisions and false records provisions of the Exchange Act.
Settlement: $35,000 civil penalty.
Mark Jackson (former Noble Corp. CEO) and James Ruehlen (current Director and Division Manager of Noble’s subsidiary in Nigeria) (Feb. 24th)
See here for the prior post.
Charges: The complaint against Jackson and Ruehlen allege they directly violated the FCPA’s anti-bribery provisions, the FCPA’s internal control provisions and the false records provisions of the Exchange Act. The complaint further alleges that they aided and abetted Noble’s violations of FCPA’s anti-bribery provisions and the books and records and internal controls provisions. The complaint further alleges that Jackson directly violated Exchange Act Rule 13b2-2 by misleading auditors and Exchange Act Rule 13a-14 by signing false certifications of Noble’s financial statements. The complaint also alleges that Jackson is liable as a control person under Section 20(a) of the Exchange Act for violations of the FCPA anti-bribery, books and records, and internal controls provisions by Noble, Ruehlen, and O’Rourke.
Other Events
DOJ Setbacks
The big news of course from the first quarter was the spectacular failure of the DOJ’s Africa Sting case. The string of DOJ setbacks in this manufactured case in 2011 carried into 2012 as well. In January (see here), the jury returned not guilty verdicts as to Patrick Caldwell and John Godsey. Shortly thereafter (see here), Judge Leon declared a mistrial as to the remaining charges against John Mushriqui, Jeana Mushriqui and Mark Morales. Shortly thereafter, the jury foreman of the Africa Sting case made a guest post on this site (see here) stating among other things, that “prolonging this prosecution is a waste of government resources.” Shortly thereafter (see here), the DOJ moved to dismiss “with prejudice the Superseding Indictment, and all underlying indictments, against the remaining defendants who are pending trial.” In granting the motion to dismiss (see here), Judge Leon said that the dismissal was “the end of a long and sad chapter in the annals of white collar criminal enforcement.” Shortly thereafter (see here), the DOJ also moved to dismiss the charges against Jonathan Spiller, Haim Geri and Daniel Alvirez (individuals who had previously pleaded guilty). The DOJ’s record in the manufactured Africa Sting case (a case Assistant Attorney General Lanny Breuer called a “turning point”) ended at 0-22.
The Africa Sting case was not the only DOJ setback in the first quarter. As described in this previous post, in January U.S. District Court Judge Lynn Hughes (S.D. Tex.) granted, at the close of the DOJ’s case, John O’Shea’s motion for acquittal and found him not guilty of all substantive FCPA charges.
The Africa Sting, O’Shea and other recent DOJ FCPA setbacks were the focus of a piece I recently published (here) “What Percentage of DOJ FCPA Losses is Acceptable?”
FCPA Reform
Conventional wisdom is that introduction of an FCPA reform bill was forestalled when the DOJ announced in November 2011 that it would issue FCPA guidance in 2012. Since then, the focus has been on DOJ guidance. See here, here, and here for previous posts. Relevant to the FCPA reform issue, in January I released (here) “Revisiting a Foreign Corrupt Practices Act Compliance Defense” (forthcoming Wisconsin Law Review).
Offensive Use of the FCPA
Rarely does one hear of offensive use of the FCPA to accomplish a business objective. Usually it is the other way around – the FCPA thwarts a business objective such as acquiring a foreign target, not hiring the foreign agent who says he knows a way to get that lucrative contract, etc. But then again, rarely does one hear of a corporate board member accusing the company of conduct that could implicate the FCPA, which then causes the SEC to open an inquiry, which then results in the company accusing the board member of separate and distinct conduct that could implicate the FCPA. In short, the above describes one of the more interesting FCPA storylines in recent times involving Wynn Resorts and Kazuo Okada. See here, here and here for previous posts.
For other developments during the first quarter, see this recent post from the FCPA Blog.
Looking Ahead
Looking ahead to the second quarter of 2012 are the following issues: DOJ FCPA guidance (expected in the second quarter); a historic “foreign official” circuit court appeal in the Esquenazi and Rodriguez Haiti Teleco related action; and briefing in the Jackson and Ruehlen SEC enforcement action (a rare instance in which the SEC may be put to its burden of proof in an FCPA enforcement action).
