"Dissecting Mead Johnson's $12 Million Chinese Baby Formula Bribe Settlement"The FCPA Report
Marc Alain Bohn was quoted regarding the compliance lessons to be learned from Mead Johnson's recent settlement with the Securities and Exchange Commission (SEC). Bohn pointed out the company's rapid growth in China during the period in question and noted that Mead Johnson's compliance program did not appear to "grow with the business." He said that "The SEC and the [Department Of Justice (DOJ)]... don't expect small companies to have a GE-style compliance program.... As a company grows, however, it is expected to grow its compliance program as well." Many of his clients "kick the tires with a risk assessment every few years, either using internal counsel or engaging outside counsel." As part of this, Bohn said "They look at spending, conduct interviews and assess whether there are new risks facing the company," adding if Mead Johnson had done that, there is a good chance it would have identified early on the risks that resulted in this enforcement action.
One of the key takeaways from the Mead Johnson settlement for companies, Bohn said, "is that if they are not going to voluntarily disclose, they need to conduct a thorough, documented investigation and anticipate that they may have to defend the results of that investigation to the government one day and justify the decision that was made.... In this case, the company got a harsher penalty than it perhaps would have had it voluntarily disclosed initially or had it even had its ducks in a row in 2013."
Of the DOJ's reported decision to not to pursue enforcement against Mead Johnson, Bohn noted that "all of the misconduct described in the Order was conducted by Mead Johnson China -- the majority-owned subsidiary -- and there is no assertion in the Order that any of the employees involved were U.S. persons." On that basis, Bohn said, "a fair assumption as to why the DOJ didn't prosecute is that the jurisdictional claims were weak."
Regarding the potential that Chinese authorities may decide to prosecute Mead Johnson based on the SEC's allegations, Bohn said the prospect of a parallel enforcement action by the Chinese government can be daunting. "People may claim the FCPA is unfair, and that the DOJ and SEC's interpretation of the statute is expansive, but at least there is some predictability as to what the elements are -- you may disagree with U.S. enforcement authorities' interpretation of 'foreign official,' but you have an idea of what it means, whereas in China, it is often unclear what constitutes a 'state secret' or anticompetitive activity," he said. "The collection of seemingly innocuous data could be deemed by Chinese authorities as anticompetitive conduct -- you never know."