Over the past decade or so, I’ve been following Foreign Corrupt Practices Act enforcement as close as anybody. However, I do not recall a period as interesting as the past 30-day period (February 1 – March 3, OK that is slightly more than 30 days, but you get the point).
Two words come to mind, but because this is a professional website, I will simply say “wow”!
Wow not necessarily because there was 8 core enforcement actions. There have been 30-day periods before with a similar number of FCPA enforcement actions (for instance in November 2010 the DOJ/SEC announced on the same day related enforcement actions against 7 companies in the so-called CustomsGate enforcement action focused primarily on Nigeria customs issues).
Wow not necessarily because the recent FCPA enforcement actions netted approximately $472 million (with the Vimpelcom action comprising approximately 85% of this amount). Other 30-day periods have yielded higher settlement amounts (largely on the strength of just one or two enforcement actions).
Rather, wow because of the diversity of FCPA enforcement actions over the past 30 days.
The enforcement actions were both DOJ and SEC enforcement actions.
The enforcement actions were against companies in diverse industries: technology, pharma, telecommunications, medical device, and an individual in the airline industry.
Certain of the enforcement actions contained egregious allegations about executive officers as well as various corporate committees that were engaged in the improper conduct that painted a picture of a culture of corruption at the company with high-level executives seeking legal cover at nearly every turn to facilitate the alleged bribery scheme. Other enforcement actions involved a single actor who circumvented company internal controls and self-profited from his conduct through kickbacks. Other enforcement actions contained allegations about “golf in the morning and beer drinking in the evening.” One enforcement action involved a company resolving an action regarding legal provisions that do not apply to that company.
The enforcement actions were resolved through a buffet of resolution vehicles: non-prosecution agreements, deferred prosecution agreements, plea agreements, settled SEC civil complaints, SEC administrative orders, and the SEC’s first individual DPA in the FCPA context.
Certain of the enforcement actions were consequential and involved significant financial penalties and post-enforcement action monitors. Other enforcement actions were inconsequential with no specific allegations against the “defendant” who, without admitting or denying the SEC’s allegations, agreed to settle without paying any money but only agreeing to refrain from future legal violations.
The enforcement actions raised a broad range of policy issues:
- Did VimpelCom get off too lightly
- Was SAP and Nordion (Canada) treated too harshly?
- Does the U.S. have a valid interest in prosecuting an Uzbekistan entity for allegedly bribing Uzbekistan officials?
- Does the U.S. have a valid interest in prosecuting a Chilean citizen for allegedly bribing Argentine officials ten years ago? Does the U.S. have a valid interest in prosecuting a dual Canadian and Israeli citizen for allegedly bribing Russian officials?
- Should it really take over five years to resolve instances of FCPA scrutiny?
Because there was no FCPA enforcement in January, the below summaries and links to the enforcement actions over the past 30-days serve as a comprehensive 2016 enforcement update at this early stage of the year.
What will the next 30 days, 3 months, or the remainder of the year have in store? Only time will tell and FCPA Professor will be the place for the most in-depth, comprehensive, real-time coverage.
- 2016 FCPA enforcement began with an SEC enforcement action against SAP. As highlighted here, the enforcement action was based on the same Panama conduct from the parallel 2015 SEC enforcement action against Vicente Garcia (a former head of Latin American sales for SAP). Without admitting or denying the SEC’s findings in an administrative order, SAP agreed to pay approximately $3.9 million. This post highlights several significant (and alarming) issues from the enforcement action.
- As highlighted in this post, SciClone Pharmaceuticals resolved its long-standing (since 2010) FCPA scrutiny. Without admitting or denying the SEC’s findings in an administrative order, SciClone agreed to pay $12.8 million based on findings that its Chinese subsidiary provided things of value (such as weekend trips, foreign language classes, “golf in the morning and beer drinking in the evening,” and travel to the Grand Canyon and Disneyland) to healthcare professionals employed by state-owned hospitals in China. This post highlights additional issues to consider from the enforcement action.
- As highlighted in this post, the current CEO of LAN Airlines (Chilean citizen Ignacio Cueto Plaza) resolved an SEC enforcement action based on a payment he authorized 10 years ago in connection with a labor dispute in Argentina. Without admitting or denying the SEC’s findings, Cueto agreed to cease and desist from future legal violations and agreed to pay a $75,000 civil penalty. The post highlights how the Cueto enforcement action was noteworthy in at least five respects.
- As highlighted in this post, PTC Inc. and related entities paid $28 Million in yet another FCPA enforcement action involving travel and entertainment provided to alleged Chinese “foreign officials.” The enforcement action focused on travel to PTC’s facilities in the U.S. that morphed to include non-business leisure travel to places such as New York, Las Vegas, Honolulu and included activities such as guided tours, golfing and other leisure activities. In addition, the foreign subsidiaries provided gifts (such as iPods, gift cards, wine and clothing) ranging from $50 to $600 to the alleged “foreign officials.” The enforcement action involved: (i) a DOJ non-prosecution agreement against Parametric Technology (Shanghai) Software Co. Ltd. and Parametric Technology (Hong Kong) Limited in which the Companies agreed to a criminal penalty of $14,540,000; (ii) an SEC administrative order against PTC Inc. which the company agreed to resolve through a payment of approximately $13.7 million; and (iii) an SEC DPA against Yu Kai Yuan (a Chinese citizen who resides in Shanghai and a former employee of the PTC China entities) in what the SEC called “its first DPA with an individual in an FCPA case.” This post highlights additional issues to consider from the enforcement action.
- As highlighted here and here, VimpelCom and a related entity resolved a parallel DOJ and SEC enforcement action that netted $397.5 in U.S. settlement amounts. The enforcement action focused on an Uzbekistan bribery scheme and the resolution documents contain numerous allegations about VimpelCom executive officers as well as various VimpelCom corporate committees that were engaged in the improper conduct. The allegations in the VimpelCom action are egregious and paint a picture of a culture of corruption at VimpelCom with high-level executives seeking legal cover at nearly every turn to facilitate the alleged bribery scheme. The enforcement action involved: (i) a DOJ criminal information against Unitel LLC (an entity headquartered and incorporated in Uzbekistan) resolved via a guilty plea; (ii) a DOJ criminal information against VimpelCom (a Bermuda company that was headquartered in Moscow, Russia until 2010 when it moved its headquarters to Amsterdam, the Netherlands and which has shares traded on NASDAQ and previously the New York Stock Exchange) resolved via a deferred prosecution agreement; and (iii) settled SEC civil complaint against VimpelCom. This post highlights additional issues to consider from the enforcement action.
- As highlighted here, as part of a much larger enforcement action, Olympus Latin American Inc. (OLA) agreed to pay $22.8 million in the latest FCPA enforcement based on the theory that certain health care professionals are “foreign officials” under the FCPA. According to the charging documents (a criminal information resolve via a DPA), from 2006 to 2011 OLA provided approximately $3 million in “hundreds of unlawful payments” to publicly employed healthcare professionals in Brazil, Bolivia, Colombia, Argentina, Mexico, and Costa Rica to “induce the purchase of Olympus products, influence public tenders, or prevent public institutions from purchasing or converting to the technology of competitors.”
- As highlighted in this post, Qualcomm caved by agreeing, without admitting or denying the SEC’s findings in an administrative order, to pay $7.5 million in connection with alleged improper hiring and other practices in China. As the Second Circuit recognized in a recent high-profile SEC matter, “trials are primarily about truth” whereas SEC settlements are “primarily about pragmatism.”
- As highlighted in this post, Nordion (Canada) Inc. agreed, without admitting or denying the SEC’s findings in an administrative order, to pay a $375,000 civil penalty. The basic findings were as follows. Approximately 16 years ago, Mikhail Gourevitch (a dual Canadian and Israeli citizen who was fired years ago by Nordion) represented to the company that “his purported childhood friend from Russia” could help the company’s business in Russia. Gourevitch and this eventual agent “conspired to use a portion of the funds Nordion paid the Agent to bribe Russian government officials to obtain approval for TheraSphere” a liver cancer therapy. Gourevitch also received kickbacks from the Agent and otherwise “hid the scheme from Nordion” through, among other things, misrepresentations to his employer. In the words of the SEC, through his conduct Gourevitch “secretly enrich[ed] himself” and received “at least $100,000 for his role in the arrangement which was not disclosed to Nordion.” In August 2014, Nordion was acquired by Nordion (Canada) Inc., a privately held company. The SEC’s order finds that Nordion (not the actual Respondent in the action Nordion (Canada) Inc.) violated the FCPA’s books and records and internal controls provisions. Based on the same conduct, the SEC also found that Gourevitch violated the FCPA’s anti-bribery, books and records, and internal controls provisions. Without admitting or denying the SEC’s findings in an administrative order, Gourevitch agreed to pay disgorgement of $100,000, prejudgment interest of $12,950, and a $66,000 civil penalty.
