FCPA Autumn Review 2019
The third quarter of 2019 witnessed a burst of activity in Foreign Corrupt Practices Act (FCPA)-related dispositions – especially by the Securities and Exchange Commission (SEC), which announced seven corporate resolutions and two resolutions with individuals during the quarter. Meanwhile, the Department of Justice (DOJ) had at least seven individuals sentenced and announced three guilty pleas, but otherwise had a relatively quiet quarter on the corporate side, announcing only one non-prosecution agreement. The DOJ also won appellate victories in the Second Circuit Court of Appeals, as the court upheld two separate convictions after the defendants attempted to use the Supreme Court's narrow reading of the term "official acts" in 2016's McDonnell v. United States to challenge convictions under the FCPA and other statutes. For the DOJ, however, the third quarter was likely a period of "quiet before the storm," as the DOJ was preparing for the six FCPA-related trials on the calendar for the current fourth quarter (many of which have recently concluded, as discussed below). Additionally, three known DOJ and SEC corporate investigations closed without enforcement action. Overall, the corporate enforcement actions resulted in penalties and disgorgement of nearly $80 million, which is a relatively modest amount given the number of resolutions (for example, in the third quarter of 2018, the total penalties and discouragement were nearly $2 billion; however, nearly $1.8 billion of that amount was attributable to the Petrobras FCPA resolution). This trend is consistent with the fact that many of the resolutions in Q3 2019 were civil resolutions by the SEC for violations of the FCPA's accounting provisions alone.
Since the close of 2019's third quarter, there have been a number of significant FCPA developments, especially on the DOJ side. We quickly summarize them here but note that we will discuss them in greater detail in the FCPA Winter Review 2020. For example, on October 30, 2019, the DOJ announced that two former senior executives at Monaco-based Unaoil, the former CEO and the former Chief Operations Officer, together with a former business development manager at the company, had pleaded guilty in March 2019 and August 2018, respectively, each to one count of conspiracy to violate the FCPA. These guilty pleas are linked to a large number of resolutions and investigations of companies and executives who employed Unaoil as an agent, including the TechnipFMC resolution with the SEC discussed below. On the same day (October 30, 2019), the DOJ reached a settlement of its civil forfeiture cases to recover more than $700 million in assets that had been acquired by Low Taek Jho and his family using funds allegedly misappropriated from 1Malaysia Development Berhad (1MDB), Malaysia's investment development fund.
As indicated above, the DOJ had six FCPA trials scheduled for the fall. On October 11, 2019, Frank Roberto Chatburn Ripalda pleaded guilty to a money laundering conspiracy for his role in using the U.S financial system to launder money to promote violations of the FCPA and Ecuadorian bribery law, thus avoiding the trial that had been scheduled to begin on October 15. Two other trials were delayed.
In November 2019, the DOJ had three high-profile trials, including two convictions with deliberations scheduled to resume after the Thanksgiving holiday . On November 8, 2019, a jury in Connecticut convicted Lawrence Hoskins – a former Alstom executive – of six counts of violating the FCPA, three counts of money laundering, and two counts of conspiracy. On November 22, 2019, a jury in Maryland convicted Mark Lambert, the former president of Transportation Logistics, Inc., of participating in a scheme to bribe a Russian official to secure contracts for his company to transport uranium to and from Russia. On December 2, 2019, a jury in Brooklyn, New York, acquitted Jean Boustani of charges related to allegations that he had defrauded U.S. investors involving $2 billion in loans for Mozambican government projects, through various bribes and kickbacks. As indicated, we plan to discuss each of these resolutions or trials in the forthcoming Winter Review in the new year.
Before returning to third quarter developments, we also note that on November 20, 2019, the DOJ implemented a subtle change to its FCPA Corporate Enforcement Policy (Policy), which offers companies the presumption that the DOJ will decline prosecution if they self-report foreign bribery, fully cooperate with a subsequent government investigation, and remediate the compliance failures. Specifically, the DOJ clarified certain of its expectations from companies under the Policy when they self-report foreign bribery and seek to cooperate with the DOJ that may not have been apparent in the previous language.
The first chart presented below shows that announced dispositions by the DOJ and SEC through three quarters of 2019 are already on par with most prior years – except the record years of 2010 and 2016 – with regard to both corporate and individual resolutions. It is unlikely that the 2019 statistics as a whole will rival those from 2010 or 2016, but these numbers show that the DOJ and SEC both remain committed to aggressive enforcement of the FCPA. The second chart shows the largest corporate resolutions – based on total corporate settlement amounts in the resolution papers – during the Trump administration, and again this chart shows that the DOJ and SEC continue to collect large amounts in penalties, fines, disgorgement, and more, based on FCPA and related law violations.
We summarize this quarter's corporate enforcement actions, individual enforcement actions, investigations closed without enforcement, and other policy, litigation, and international developments below.
During the third quarter of 2019, there were some DOJ-SEC joint resolutions, but also a large number of SEC-only resolutions during the quarter – thus, all of the resolutions this quarter involved issuers.
- Microsoft Corporation. On July 22, 2019, the SEC announced that Microsoft Corporation (Microsoft), a U.S. issuer, consented to a Cease-and-Desist Order (Order) with the SEC and agreed to pay more than $16 million to resolve charges that it had violated the books-and-records and internal-accounting-controls provisions of the FCPA with improper conduct by the company's wholly-owned subsidiaries in Hungary, Saudi Arabia, Thailand, and Turkey. On the same day, the DOJ announced that a Hungarian subsidiary entered into a Non-Prosecution Agreement (NPA) for willingly and knowingly causing Microsoft to falsely record and maintain inaccurate books, records, and accounts by incorrectly recording amounts disguised as discounts that were in fact used to fund improper payments under the FCPA. Under the terms of the NPA, Microsoft's Hungarian subsidiary agreed to pay a criminal penalty of $8.7 million, bringing the DOJ-SEC combined total payments to $25.3 million. The NPA further stated that Microsoft failed to "exercise meaningful oversight…to ensure that discounts that Microsoft approved were passed on to [Microsoft] Hungary's end customers instead of being used to facilitate" a corrupt scheme and that "[a]lthough this failure of oversight at Microsoft did not amount to a criminal violation by the parent company" the DOJ viewed it as "a discretionary factor" that the DOJ considered when entering into an agreement with Microsoft Hungary. We discuss the Microsoft enforcement actions in greater detail below.
- Deutsche Bank AG. On August 22, 2019, the SEC announced that it had entered a Cease-and-Desist Order (Order) against Deutsche Bank AG (Deutsche Bank), marking, along with the Barclays resolution discussed below, the latest enforcement actions arising out of SEC's investigations into the hiring of so-called "princelings" (i.e., relatives of senior government officials) by financial services companies. Focusing on the bank's efforts to win business in the Asia Pacific region and Russia, the SEC found that Deutsche Bank had violated the books-and-records and internal-accounting-controls provisions of the FCPA. Pursuant to the Order, Deutsche Bank agreed to pay disgorgement of almost $11 million, prejudgment interest of $2.4 million, and a $3 million civil penalty. According to the SEC, the settlement reflected Deutsche Bank's cooperation and remediation, including sharing factual findings developed during the internal investigation and remedial measures that Deutsche Bank put into place, such as enhancements to its compliance program and internal accounting controls. We discuss the Deutsche Bank enforcement action in greater detail in the next section.
- Juniper Networks, Inc. On August 29, 2019, the SEC announced that it had entered a Cease-and-Desist Order (Order) against Juniper Networks, Inc. (Juniper), a California-based networking and cybersecurity solutions provider, in connection with violations of the FCPA. According to the Order, from 2008 through 2013, sales employees of JNN Development Corp. (JNN), Juniper's subsidiary in Russia, secretly agreed with third-party distributors to fund leisure trips for customers, including government officials, through the use of off-book accounts, and that Juniper's initial efforts to remediate the situation were ineffective. The SEC also found that from 2009 through 2013, sales employees of Juniper's subsidiaries in China had falsified trip and meeting agendas for customer events to understate the true amount of entertainment involved in the trips, which, in contravention of Juniper's travel policies, Juniper's legal department had approved without adequate review and after they had already taken place. Pursuant to the SEC's Order, Juniper agreed to resolve charges that it had violated the internal-accounting-controls and recordkeeping provisions of the FCPA and pay more than $11.7 million in monetary relief, including $4 million in disgorgement, $1.25 million in prejudgment interest, and a $6.5 million civil penalty. We discuss the Juniper settlement in greater detail below.
- TechnipFMC. On September 19, 2019, the SEC announced that it had issued a Cease-and-Desist Order (Order) against TechnipFMC plc (TFMC), a global oil and gas services provider, to resolve FCPA charges involving conduct in Iraq by FMC Technologies, Inc. (FMC) prior to its merger with Technip S.A. (Technip) in 2017. The SEC resolution follows TFMC's earlier resolution with the DOJ in June 2019 on the same facts, as well as conduct by Technip in Brazil to pay bribes to Brazilian officials, including at the country's state-controlled oil-and-gas company Petrobras, and a scheme by FMC to pay bribes to officials in Iraq, which we discussed in detail in our FCPA Summer Review 2019. The SEC's Order charges TFMC, as a successor in interest for FMC, with violations of the anti-bribery, books-and-records, and internal-accounting-controls provisions of the FCPA. Specifically, the SEC found that from at least 2008 through 2013 FMC paid almost $800,000 to a third-party consultant, which then used part of the funds to bribe Iraqi government officials to procure business with Iraq state-owned oil companies. According to the Order, FMC paid the consultant without evidence of services rendered, allowed the consultant to use subagents and success-fee-based compensation without adequate due diligence, and falsely characterized the payments in its books and records. The Order also found that FMC "failed to properly assess and manage its anti-corruption risks in Iraq, and devoted insufficient resources to compliance" regarding its business in Iraq. Pursuant to the Order, TFMC agreed to pay more than $5 million in disgorgement and prejudgment interest and to self-report to the SEC on its compliance program for three years. We discuss the TFMC settlement with the SEC in greater detail in the next section.
- Quad/Graphics. On September 26, 2019, the SEC announced that it had entered a Cease-and-Desist Order (Order) against Quad/Graphics, Inc. (Quad), a Wisconsin-based provider of digital and print marketing services, to resolve charges that it had violated the anti-bribery, books-and-records, and internal-accounting-controls provisions of the FCPA. The SEC found that from at least 2011 to January 2016, Quad/Graphics Peru S.A. (Quad Peru), Quad's subsidiary in Peru, paid or promised bribes to Peruvian government officials to secure sales contracts and tried to improperly influence the outcome of a dispute with the Peruvian tax authorities, which had imposed over $12 million in value-added tax, interest, penalties, and fines. Quad Peru also created false records to conceal transactions with a state-controlled Cuban telecom, which was subject to U.S. sanctions and exports controls laws. The Order further found that from 2010 to 2015, Quad/Tech Shanghai Trading Company (Quad/Tech China), Quad's subsidiary in China, used sham sales agents to make or promise approximately $182,000 in improper payments to employees of private and government customers to secure business. According to the SEC, Quad failed to ensure that its internal accounting controls were sufficient to prevent the bribery in Peru and China and the concealment of the sales in Cuba. Pursuant to the Order, Quad agreed to pay nearly $10 million in total monetary relief, including nearly $7 million in disgorgement, nearly $1 million in prejudgment interest, and a civil penalty of $2 million. Earlier, on September 19, 2019, Quad received a letter from the DOJ, in which the DOJ stated that, consistent with the FCPA Corporate Enforcement Policy, it declined prosecution of the company for violations of the FCPA. According to the letter, the DOJ "ha[s] reached this conclusion despite the bribery committed by employees of the Company's subsidiaries in Peru and China." We discuss the Quad/Graphics enforcement action in greater detail below.
- Barclays Bank Plc. On September 27, 2019, the SEC announced that Barclays Plc (Barclays or the Bank) agreed to settle charges that it had violated the FCPA's books-and-records and internal-accounting-controls provisions, when Barclays' Asia Pacific (APAC) region hired relatives and friends of foreign government officials to improperly influence them in connection with the Bank's investment banking business in the APAC region. According to the SEC's Cease-and-Desist Order (Order), between 2009 and 2013, Barclays' APAC hired approximately 117 job candidates referred by or connected to government officials or executives of the Bank's non-government clients, with some of the employment offers made as a personal benefit to those officials and executives with the expectation that the Bank would obtain or retain investment banking business. Pursuant to the Order, Barclays agreed to pay more than $6 million in disgorgement, prejudgment interest, and a civil penalty. We discuss the Barclays Bank enforcement action in greater detail in the next section.
- Westport Fuels. In another press release on September 27, 2019, the SEC announced that Westport Fuels Systems, Inc. (Westport), a Vancouver, Canada-based clean fuel technology company, and Nancy Gougarty, its former CEO, had agreed to pay more than $4.1 million combined to resolve charges that they had violated the anti-bribery, books-and-records and internal-accounting-controls provisions of the FCPA. According to SEC's Cease-and-Desist Order (Order), Westport, acting through Gougarty and others, engaged in a scheme to bribe a Chinese government official to obtain business and a cash dividend payment from a joint venture (JV) between Westport and the state-owned enterprise (SOE) that employed the relevant government official (the Chinese SOE had a controlling stake in the JV). In exchange for a transfer of shares of stock in Westport's Chinese JV at a reduced rate to a Chinese private equity fund in which the official held a beneficial interest, Westport and Gougarty believed that the government official would influence the JV to authorize a dividend payment of $3.5 million to Westport and to execute a framework supply agreement between Westport and the JV. Westport agreed to pay $2.5 million in disgorgement and prejudgment interest and a civil penalty of $1.5 million, while Westport's former CEO agreed to pay a civil penalty of $120,000. We discuss the Westport Fuels enforcement action in greater detail below.
The chart below shows an update on known investigations by industry over the last ten years. It shows that industries that have historically attracted FCPA enforcement attention continue to do so in the current environment. This is partly due to inherent risks in some sectors that feature heavy government regulation or the involvement of state actors in transactions, and likely in part caused by the nature of investigations, which often focus on multiple companies implicated in the same or similar behaviors.
Below we summarize recent developments related to individual enforcement actions that either occurred during the third quarter or were reported in the third quarter, including appellate victories for the DOJ, sentencings for six individuals, three guilty pleas, and two individuals reaching settlements with the SEC (although one settlement involving Westport's former CEO is summarized above).
- On August 5, 2019, the Second Circuit Court of Appeals upheld the convictions of Macau, China-based billionaire real estate developer Ng Lap Seng and the former Guinean mining minister Mahmoud Thiam. As discussed in greater detail in our FCPA Autumn Review 2017, a federal jury had found Ng guilty in 2017 of paying approximately $1.3 million in bribes to two former U.N. officials in exchange for U.N. support for a multi-billion-dollar conference center he planned to construct in Macau. Thiam, on the other hand, had been convicted in 2017 by a New York federal jury for laundering $8.5 million in bribes he had received in exchange for valuable mineral mining rights in violation of U.S. money laundering statues and Guinea's bribery law. During his trial and on appeal, Ng argued that McDonnell's narrow interpretation of the term "official act" in the U.S. domestic bribery statute should also apply to the FCPA and the federal program bribery statute. Specifically, Ng argued that the DOJ failed to prove that the bribes he paid resulted in any "official acts" by the former U.N. officials, and that the jury was not properly instructed that an "official act" was required to fulfill the "quid pro quo" elements of the FCPA and the federal program bribery statute. The Court rejected Ng's appeal and declined to extend McDonnell to other anti-corruption and fraud statutes. The Second Circuit rejected a similar appeal from Thiam, who had tried to apply McDonnell to Guinea's anti-bribery law, which had been used as the basis for the money laundering charge against him. The Second Circuit panel disagreed, ruling that principles of international comity weigh against applying McDonnell's definition of an "official act" to Guinean law.
- On April 12, 2019, Jose Luis de la Paz Roman (Roman) was sentenced to 36 months in prison for his role in a conspiracy to make bribe payments to officials at PetroEcuador, the state-owned and state-controlled oil company of Ecuador. Although Roman's sentence was imposed on April 10, 2019 and entered into the docket two days later, the case did not get reported until August 2019.
- On June 26, 2019, Julia Vivi Wang (Wang), a naturalized U.S. citizen born in China and a former executive of South-South News, a media group that promoted U.N. development goals, was sentenced to three years of supervised release and restitution of $629,295 after she had pleaded guilty in April 2018 to one count of conspiracy to violate the FCPA, one count of violating the FCPA, and one count of submitting fraudulent tax returns in which she failed to report to the IRS a total of approximately $2 million in income from 2010 to 2013. In April 2013, Wang wired $500,000 to John Ashe who, before leading the U.N. General Assembly between late 2013 and September 2014, had served as the Permanent Representative of Antigua and Barbuda to the U.N. In exchange for the bribe, Wang sought to obtain a diplomatic position for herself or her late husband with the government of Antigua.
- On July 22, 2019, in two separate hearings, James Finley, a British citizen and a former senior Rolls-Royce executive, and Andreas Kohler, an Austrian citizen and a former managing director at an engineering firm, were each sentenced to four months of imprisonment in connection with a scheme to bribe Kazakh and Chinese officials. As part of their sentences, Finley and Kohler also received eight and four months of home confinement and were required to pay fines of $500,000 and $72,000, respectively.
- On July 31, 2019 and August 21, 2019, respectively, Enrique Pinto Franceschi (Pinto), a former sales representative of a Miami-based equipment supplier to Venezuela's state-owned energy company Petróleos de Venezuela S.A. (PDVSA), and Franz Herman Muller Huber (Muller), the president of the same supplier, each pleaded guilty to two counts – conspiracy to violate the FCPA and conspiracy to commit wire fraud. Pinto and Muller were both Venezuelan nationals residing in the United States. They had been charged on February 21, 2019 in a five-count indictment in the U.S. District Court for the Southern District of Texas, including conspiracy to violate the FCPA, conspiracy to commit wire fraud, wire fraud, and conspiracy to launder money, for their alleged roles in a scheme to corruptly secure contracts and other business advantages from PDVSA.
- In related proceedings, on August 28, 2019, Moises Abraham Millan Escobar (Millan), a former employee of a Venezuelan businessman, Abraham Jose Shiera Bastidas (Shiera), was sentenced in the Southern District of Texas to three years' probation and fined $15,000 for his role in an alleged scheme to bribe three PDVSA officials. In January 2016, Millan had pleaded guilty to one count of conspiracy to violate the FCPA and agreed to forfeit proceeds from the bribery scheme amounting to more than $533,000. Shiera had been charged in December 2015 and pleaded guilty in March 2016 for violating the FCPA by bribing the three Venezuelan officials to secure energy contracts. A day later, on August 29, 2019, a former employee of PDVSA, Jose Luis Ramos-Castillo, received an 18-month-long sentence, two years of supervised release, and a fine of $15,000 for accepting bribes in exchange to assisting companies in winning energy contracts with PDVSA and for conspiracy to commit money laundering.
- On September 13, 2019, the SEC resolved civil FCPA charges against Sridhar Thiruvengadam, a former Chief Operating Officer of New Jersey-based technology-related outsourcing services provider Cognizant Technology Solutions Corporation (Cognizant), that he had violated the FCPA by participating in a scheme with three other Cognizant executives to bribe an Indian government official on behalf of the company. According to the Cease-and-Desist Order, the $2 million bribery payment was made in response to the official's demand to procure a construction planning permit. Thiruvengadam also concealed the true nature of the payment by signing false sub-certifications to the company's management representation letters. As part of the settlement, Thiruvengadam paid a penalty of $50,000 and agreed to cooperate with the SEC, as the SEC currently has pending enforcement actions against two other former Cognizant executives.
- On September 25, 2019, Luis Alberto Chacin Haddad (Chacin) of Miami, Florida, was sentenced to 51 months in federal prison and two years of supervised release for bribing officials at Venezuela's national electricity company in exchange for $60 million in contracts for his companies. In June 2019, Chacin had pleaded guilty to one count of conspiracy to violate the FCPA. As part of the plea agreement, Chacin forfeited approximately $5.5 million in profits he had made from the corrupt contracts as well as real estate in the Miami area that he had purchased with the proceeds of the bribery scheme.
Each of these developments is discussed below in more detail.
For the third quarter of 2019, we have identified the following two investigations that have been closed without enforcement action:
- Misonix, Inc. (Misonix): We reported in our FCPA Summer Review 2019 that on June 18, 2019, Misonix had received a letter from the SEC stating the SEC did not intend to recommend an enforcement action against Misonix. On August 16, 2019, Misonix publicly disclosed in its Form 8-K that the company had received two days earlier a letter from the DOJ, dated August 13, 2019, stating that DOJ had closed its inquiry into Misonix without any action.
- Ciena Corp. (Ciena): On September 11, 2019, Ciena disclosed in its Quarterly Report that the SEC had closed its FCPA investigation into potentially improper payments to an individual employed by one of Ciena's customers in the ASEAN region and that the Commission's staff did not intend to recommend any enforcement action by the SEC against the company. The DOJ had closed a parallel investigation in December 2018, declining to prosecute the matter.
On September 9, 2019, SEC Chair Jay Clayton gave a speech to the Economic Club of New York that focused in part of FCPA enforcement issues. Among other issues, Mr. Clayton commented that he had not seen "meaningful improvement" in efforts by other countries to enforce laws against foreign bribery, citing economic game theory as a possible reason for this perceived lack of effort. He thus noted that FCPA enforcement has sometimes placed U.S. companies at a disadvantage in relation to their competitors from countries that do not enforce similar laws.
Mr. Clayton's speech received media attention in part because of comments critical of certain aspects of FCPA enforcement that he made well before taking his current position as SEC Chair. We note that, in the same speech, Mr. Clayton also stated: "To be clear, I do not intend to change the FCPA enforcement posture of the SEC." We also note that Mr. Clayton's focus on enforcement activities by other countries has been a consistent theme for U.S. policy since at least the early 1990s, when the United States supported efforts to negotiate international treaties such as the Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention in an effort to promote enforcement by other countries. Indeed, a key aspect of the OECD's ongoing work in this area is testing and critiquing the enforcement efforts of Convention signatories.
As noted above, on November 20, 2019, the DOJ slightly changed its FCPA Corporate Enforcement Policy. Companies were previously required under the Policy to "disclose all relevant facts known to [them]" to qualify for voluntary disclosure credit under the Policy. Recognizing that the previous language may have been confusing and may have created a disincentive for companies to come forward with information about wrongdoing, companies are now expected to disclose "all relevant facts known to [them] at the time of the disclosure, including as to any individuals substantially involved" in the misconduct.
Another change to the Policy relates to proactive cooperation, with the updated policy now stating that companies must inform the DOJ "where the company is aware of relevant evidence not in the company's possession." In contrast, the Policy previously required companies to inform the DOJ "where the company is or should be aware of opportunities for the Department to obtain relevant evidence not in the company's possession and not otherwise known to the Department." Similar to the tweak to the self-reporting requirement, the change to the cooperation language potentially makes this requirement less onerous and comes after the DOJ has realized that the language was potentially ambiguous, likely creating confusion about what a company "should" be doing or looking for in order to satisfy the proactive cooperation requirement.
Finally, this quarter saw several significant anti-corruption developments outside of the United States, with several corporate enforcement actions and one individual enforcement action that ended in a conviction and confiscation order. In Brazil, Camargo Correa entered into a leniency agreement with the Controller General and the Attorney General of Brazil, agreeing to pay approximately $339 million in connection with bribery and price fixing-related conduct that the company had admitted to in a previous settlement with the Brazilian authorities in July 2015. Also in Brazil, EcoRovias settled corruption and money laundering allegations related to road concession contracts. EcoRovias agreed to pay approximately $100 million as part of the agreement with Brazil's Federal Prosecution Service and obtain an independent compliance monitor for 32 months, the first Brazil-only compliance monitorship. Another corporate enforcement action in Brazil was Odebrecht's Negotiated Resolution Agreement (Agreement) with the Inter-Development Bank Group (IDB) following an investigation by IDB's Office of Institutional Integrity. The Agreement covered two of Odebrecht's subsidiaries, CNO S.A. and OEC S.A., and resulted, among other disciplinary actions, in CNO's (but excluding its African branches) six-year debarment from participating in any IDB-financed projects.
And in the United Kingdom, the Serious Fraud Office (SFO) obtained a confiscation order in September 2019 against Peter Chapman, the former manager of Innovia Securency PTY Ltd. (Securency), requiring him to pay approximately $545,000 as repayment of the benefits of bribes he had paid to government agents. An earlier five-week trial in 2015 had resulted in Chapman's conviction on four counts of making corrupt payments and acquittal on two. Finding that he had paid more than $205,000 to an agent of Nigerian Security Printing and Mining PLC in exchange for contracts with Securency, the court sentenced him to 30 months in prison. The SFO also completed a DPA with Serco Geografix Ltd., which had in 2013 reached a civil settlement with the U.K.'s Ministry of Justice related to fraud and false accounting in connection with electronic monitoring contracts. We discuss the Camargo Correa leniency agreement, EcoRovias's settlement, Odebrecht's Negotiated Resolution Agreement, SFO's confiscation order against Securency's former manager, and SFO's DPA with Serco Geografix in greater detail below.
Microsoft Corporation and Its Hungarian Subsidiary Settle Criminal and Civil Charges Related to Conduct in Hungary, Saudi Arabia, Thailand, and Turkey
On July 22, 2019, Microsoft Corporation (Microsoft), a global provider of technology and software solutions headquartered in Redmond, Washington, and its direct, wholly-owned Hungary-based subsidiary, Microsoft Magyarország Számítástechnikai Szolgáltató és Kereskedelmi Kft. (Microsoft Hungary), resolved civil and criminal charges with the SEC and DOJ, respectively. Microsoft consented to a Cease-and-Desist Order (Order) with the SEC to resolve charges that it had violated the books-and-records and internal-accounting-controls provisions of the FCPA. On the same day, Microsoft Hungary reached a Non-Prosecution Agreement (NPA) with the DOJ for willingly and knowingly causing Microsoft, a U.S. issuer, to falsely record and maintain inaccurate books, records, and accounts by incorrectly recording amounts disguised as discounts used to fund improper payments under the FCPA. The NPA stated that Microsoft failed to "exercise meaningful oversight…to ensure that discounts that Microsoft approved were passed on to [Microsoft] Hungary's end customers instead of being used to facilitate" a corrupt scheme and that "[a]lthough this failure of oversight at Microsoft did not amount to a criminal violation by the parent company" the DOJ viewed it as "a discretionary factor" that the DOJ considered when entering into an agreement with Microsoft Hungary. As a result of the SEC's Order and DOJ's NPA, Microsoft and Microsoft Hungary agreed to pay $25.3 million in penalties, disgorgement, and prejudgment interest.
Microsoft's stock is registered pursuant to Section 12(b) of the Exchange Act is and publicly-traded on the NASDAQ, making it an "issuer" under the FCPA. The financial results of Microsoft's wholly-owned foreign subsidiaries, including those in Hungary, Saudi Arabia, Thailand, and Turkey, are ultimately consolidated into Microsoft's financial statements.
The allegations described in the Order cover conduct related to the operations of Microsoft's foreign-based wholly-owned subsidiaries in four markets—Hungary, Saudi Arabia, Thailand, and Turkey—while the DOJ NPA relates only to conduct in Hungary (which overlaps with the Hungary-based conduct discussed in the Order).
The violations set forth in the Order include the following:
- Hungary: The SEC Order covers two distinct schemes in Hungary—one related to inflated discounts in connection with licensing transactions, and the other related to unjustified consulting service engagements.
- Licensing Transactions. First, in 2014 and 2015, the SEC Order states that Microsoft Hungary employees requested "excessive discounts," using false or "vague justifications," including "competition with other bidders, end customer price sensitivity, and the possibility of winning related services contracts." The discounts were approved by Microsoft's Business Desk—a group managed by Microsoft personnel in Redmond, Washington with employees around the world responsible for approving discounts above certain thresholds. However, according to the Order, there was no process to determine if discount requests were legitimate, and Microsoft lacked visibility into whether the end customer would be the ultimate beneficiary of the approved discounts. In two examples described in the SEC Order, Microsoft Ireland Operations Limited (MIOL), an indirect wholly-owned Microsoft subsidiary, sold software licenses to approved distributor and/or third-party resellers called Licensing Solution Partners (LSPs) at heavily discounted rates. In one instance, MIOL sold licenses to an LSP that did not bid on the tender at issue. As a result, that LSP resold the licensing rights to another LSP, which resold the licensing rights to the end-government customer without passing on the full discount amount. In another instance, MIOL sold the licenses to an LSP that resold them to a non-approved third party. Again, the third party did not pass on the full discount amount to the end customer. In both cases, the SEC Order states that a portion of the "discount" not passed on to the end customer was used to pay government officials to allegedly influence the transactions. In turn, according to the SEC Order, the amounts paid to government officials to win business were improperly recorded in Microsoft Hungary's books and records, which were consolidated into Microsoft's financials. As a result of improper payments to government officials connected to the licensing transactions, the SEC Order alleged that Microsoft received $13,780,733 in business.
- Consulting Service Engagements. In addition, in 2014 and 2015, Microsoft Hungary contracted third parties in connection with consulting service engagements that Microsoft Hungary had entered into with government customers in Hungary. In certain instances, there was minimal, if any, evidence supporting the nature of the services provided by the third parties. Also, the SEC Order notes that Microsoft Hungary employees and third-party employees falsely recorded supposed work performed on various service engagements in Microsoft's timekeeping system. In one instance, Microsoft failed to conduct due diligence on a third party that was hired upon request by a government customer. In another instance, Microsoft Hungary contracted a third-party entity that used a government employee to provide services—Microsoft failed to conduct due diligence on both parties. The purported services provided were incorrectly recorded as legitimate transactions in Microsoft Hungary's books and records.
- Saudi Arabia: From 2012 through 2014, according to the Order, employees in Microsoft's indirect, wholly-owned subsidiary Microsoft Arabia (Microsoft Saudi Arabia) funneled at least $440,000 intended to be used for marketing expenses and business proposals to a "slush fund." The SEC Order states that the slush fund was used to cover travel expenses for seven Saudi government employees as well as for gifts, furniture, electronics, and other equipment for government agencies. Microsoft Saudi Arabia funded the slush fund through "larger than usual discounts" as well as through payment to four third parties—two vendors and two LSPs. Two of Microsoft Saudi Arabia's vendors managed the fund and disbursed payments at the direction of Microsoft Saudi Arabia employees; the SEC Order alleges that the vendors received approximately $130,000 in commissions and service fees for maintaining the fund. According to the SEC Order, Microsoft's records did not accurately reflect the total amount and use of the funds.
- Thailand: From January 2013 through April 2015, the Order alleges that an employee at Microsoft's indirect, wholly-owned subsidiary Microsoft Thailand Ltd. (Microsoft Thailand) and a Microsoft Thailand LSP employee provided at least $100,000 in gifts and travel benefits to employees of a non-government banking customers. Specifically, the SEC Order states the Microsoft Thailand LSP established an account funded through discounts provided by Microsoft and funds intended for end-customer training. Instead, the individuals used the funds to purchase technology equipment and pay for travel for employees of Microsoft Thailand's non-government end customers. To cover up the scheme, the Microsoft Thailand employee directed the Microsoft Thailand LSP employee to submit false purchase orders to Microsoft Thailand's training vendors. In turn, the vendors would submit an invoice in connection with the purchase order that was paid from an account managed by the LSP that was intended for training. Similar to conduct in Saudi Arabia, the vendors were compensated for their role in the scheme.
- Turkey: In July 2014, executives from Microsoft's indirect, wholly-owned subsidiary Bilgisayar Yazilim Hizmetleri Limited Sirketi (Microsoft Turkey) approved an "excessive discount" in connection with a public tender issued by Turkey's Ministry of Culture for Microsoft licenses and services. The tender was awarded to an unauthorized third party, a "system integrator." As a result, a Microsoft Turkey employee directed an authorized LSP to work on the transaction with the system integrator and did not disclose the system integrator's role in the transaction. The Microsoft Turkey employee negotiated the payment terms between the system integrator and the LSP and Microsoft Turkey authorized a seven percent discount over the standard discount. According to the Order, "Microsoft's records do not reflect what services, if any, the system integrator provided, and the authorized reseller informed Microsoft that it provided the services on the transaction. Moreover, there is no evidence the additional discount was passed on to the government customer." As a result, the Order notes that Microsoft violated the internal-accounting-controls and books-and-records provisions of the FCPA.
The DOJ NPA covers Microsoft Hungary's scheme related to creating inflated margins associated with certain licensing deals that it entered into with government customers (which overlaps with the first of the two Hungary-related schemes summarized by the SEC above). Specifically, from approximately 2013 to June 2015, an executive at Microsoft Hungary and other employees falsely told Microsoft that discounts were necessary to close deals with government customers. Once discounts were approved, they were not fully passed on to the government customers and were instead used to improperly compensate government officials who played a role in the sale of Microsoft software to the Hungarian government agencies. As a result, the NPA states that Microsoft Hungary knowingly and willfully caused Microsoft to record false discounts in its books and records. According to the NPA the licensing deals that led to the false reporting of discounts resulted in USD $14,586,325 in profits for Microsoft Hungary.
In connection with its NPA with the DOJ, Microsoft Hungary agreed to pay a criminal penalty of $8,751,795. In calculating the penalty amount, the NPA notes that the DOJ applied a 25 percent discount off the bottom of the Guidelines fine range – the maximum discount allowable for companies that did not voluntarily disclose the misconduct – as a result of the company's cooperation and remediation. The SEC did not impose a civil penalty in addition to the criminal penalty resulting from Microsoft Hungary's NPA with the DOJ. However, it ordered Microsoft to pay disgorgement of $13,780,733 and prejudgment interest of $2,784,417.92.
- Cooperation and Foreign Data Privacy Laws: In the NPA, the DOJ noted that despite not receiving voluntary disclosure credit, Microsoft Hungary received full cooperation credit including for "producing documents to the Fraud Section and the Office from foreign countries in ways that did not implicate foreign data privacy laws (emphasis added)." This language has appeared in several recent settlement agreements (see e.g., Walmart, TechnipUSA, Fresenius, Credit Suisse) and affirms that the DOJ is aware of the complex challenges raised by these laws, that prosecutors expect companies in a cooperative posture to find solutions to get relevant information to investigators despite the presence of such laws, and that the DOJ rewards companies that do so.
- Importance of Visibility in Discount Process: Various past FCPA enforcement actions involve schemes whereby inflated margins from discounts were used to facilitate improper payments to officials (see e.g., Polycom, Orthofix, General Cable, SAP, Mead Johnson, Weatherford International, Eli Lilly, Pfizer, Smith & Nephew, and Daimler). Moreover, as noted below, another resolution this quarter for Juniper Networks also included inflated discounts to third parties that did not relay the discount to the ultimate customer. According to the DOJ's NPA, Microsoft had in place procedures to "ensure consistency in Microsoft pricing and to avoid improper use of discounts by sales personnel" and a specific unit—the Microsoft Business Desk—responsible for reviewing requests for larger-than-normal discounts to ensure appropriate factors were considered before approving certain discounts. Indeed, in one of the schemes described in the NPA, the Microsoft Business Desk initially rejected a discount request because the estimated reseller margin was deemed too high. However, as demonstrated by this settlement, processes to review and approve discounts at the initial stages of a transaction may not be sufficient to effectively address risks. Rigorous business justification and documentation requirements throughout the life of a transaction, targeted training that enables reviewers to spot red flags, and assertive auditing processes are additional tools that companies should consider using to limit employees' ability to fund "off the books" schemes and to deter other conduct that can create risks for companies, such as revenue recognition and related financial reporting issues.
- Data Analytics for Identifying High-Risk Transactions: In the NPA, the DOJ summarized "extensive remedial measures" by both Microsoft and Microsoft Hungary. Among the standard list was a measure that has seen increasing use in the compliance space -- the two companies had "develop[ed] and us[ed] data analytics to help identify high-risk transactions." Prior to the NPA with Microsoft Hungary, the DOJ had issued guidance to prosecutors, suggesting that they ask companies, "What information or metrics has the company collected and used to help detect the type of misconduct in question? How have the information or metrics informed the compliance program?" Since this resolution, DOJ prosecutors have had public comments on the importance of data analytics in compliance programs. In September 2019, the DOJ said that data analytics are "an area of focus," which would soon be used across the board in compliance, according to both the DOJ and SEC. The SEC views the use of data analytics by companies positively, calling it "absolutely a good thing," and expects that companies will eventually have an analytics program as the technology develops. For its part, the DOJ said in November 2019 that various factors would determine whether or how companies use data analytics but "it can be helpful."
- Scope of SEC Cease-and-Desist Order Versus Scope of Disgorgement Amount: It is noteworthy that the SEC Cease-and-Desist Order summarizes conduct from four countries, including one country (Thailand) in which the SEC summarized payments to employees of "non-government banking customers" without mention of government officials, indicating that the SEC was targeting commercial bribery rather than public bribery. At the same time, however, the SEC used only the profits from the business in Hungary in calculating the disgorgement owed by Microsoft. Thus, the activity in Thailand, Saudi Arabia, and Turkey did not appear to affect the financial terms of the Cease-and-Desist Order.
On August 22, 2019, the SEC entered a Cease-and-Desist Order (Order) against Deutsche Bank AG (Deutsche Bank) to resolve alleged violations of the books-and-records and internal-accounting-controls provisions of the FCPA. Pursuant to the Order, the bank agreed to disgorge $10,785,900, pay $2,392,950 in prejudgment interest, and pay a civil monetary penalty of $3 million. In total, Deutsche Bank agreed to pay just over $16 million to resolve the matter with the SEC.
With shares traded on the NYSE since 2001, Deutsche Bank is a publicly traded, multinational financial services corporation and an "issuer" under the FCPA. The SEC alleged that between 2006 and 2014, the bank employed the relatives of government officials in an effort to influence the officials and obtain or retain business for the bank. By 2009, Deutsche Bank had internal policies which recognized the corruption risks presented by providing employment at the request of clients and government officials, but the SEC stated that the bank did not sufficiently address those risks through effectively implemented global policies and practices until 2015. Further, the SEC alleged that Deutsche Bank falsified books and records and failed to maintain sufficient internal accounting controls around its hiring practices "sufficient to provide reasonable assurances that its employees did not bribe foreign government officials."
The SEC alleged that hires made at the request of government officials in China and Russia generated $10,785,900 in unjust enrichment for the bank. The SEC specifically pointed to five alleged hires by Deutsche Bank or its China-based joint venture as supporting this conclusion: the daughter of the chairman of a Chinese state-owned entity (SOE), the son of two SOE executives, the son of the chairman of another Chinese SOE, the daughter of a Deputy Minister at a Russian government entity, and the son of a senior executive at a Russian SOE. According to the Cease-and-Desist Order, Deutsche Bank hired these persons at the request of government officials and SOE executives, despite the prospective employees lacking work experience and performing poorly during the admission and interview process. According to the SEC's Order, one "human resource employee stated that … [one of the hires] failed to come to work, cheated on an exam, and was 'a liability to the reputation of the program, if not the firm…'"
The settlement reflected Deutsche Bank's cooperation with regulators, which the SEC said included sharing factual findings developed during the bank's internal investigation, as well as remedial measures put into place by the bank, including enhancements to its compliance program and internal accounting controls.
- Deutsche Bank Held Responsible for Hires by China Joint Venture: Two of the five hires the SEC specifically described in the Cease-and-Desist Order were at least initially made by the China joint venture at the request of the bank. In one case, allegedly due to headcount restrictions and because "the hire request would likely have been rejected by Deutsche Bank human resources and compliance" functions, Deutsche Bank's Chairman of the Asia-Pacific region (APAC) Corporate Finance and the lead banker for an SOE instructed the joint venture to make the hire. The individual was later hired by the bank itself following her request for a transfer. In another case, Deutsche Bank's compliance team allegedly rejected the proposed hire twice because the circumstances were determined to potentially violate the bank's hiring policy. Nonetheless, according to the Cease-and-Desist Order, the candidate was hired by the joint venture and Deutsche Bank senior APAC management allowed that person to work on Deutsche Bank business and at the bank, despite knowing compliance had previously rejected the hire.
- SEC Continues to Investigate Hiring Practices in the Financial Industry: The Deutsche Bank settlement and the Barclays resolution summarized below mark the latest enforcement actions arising out of the SEC's investigation into the hiring of so-called "princelings," a term given to the relatives (usually dependents) of senior government officials by companies in the financial industry. As we reported in 2015, a $14.8 million settlement with The Bank of New York Mellon Corp. marked the first official casualty of the SEC's princeling investigation. Since then, other banks have settled with the SEC and other agencies over similar allegations, including a 2016 settlement between the DOJ, SEC, Federal Reserve Board, and JPMorgan Securities (Asia Pacific) Limited for a total of approximately $264.4 million in penalties and a 2018 settlement between the DOJ, SEC, and Credit Suisse (Hong Kong) Limited (CSHK) for a total of approximately $76.8 million in penalties. Deutsche Bank is the only resolution to include the hiring of children of Russian officials, however.
On August 29, 2019, California networking equipment provider, Juniper Networks (Juniper) agreed to pay more than $11 million in penalties and disgorgement to resolve charges that the company had violated the books-and-records and internal-accounting-controls provisions of the FCPA as a result of certain activities by several of its subsidiaries in Russia and China. Juniper is a Delaware incorporated corporation, registered on the New York Stock Exchange, and is thus an "issuer" under the FCPA.
According to the SEC's Cease-and-Desist Order (Order), from 2008 to 2013 certain sales employees from the company's Russian subsidiary, JNN Development Corp. (JNN), entered into an agreement with third party intermediaries known as "channel partners" to "increase the incremental discount on sales made to customers through those channel partners without passing those increased discounts on to customers." The resulting pool of funds was then used in part to pay for customer trips which had "little to no educational or business purpose." The Order also states that from 2009 to 2013 certain sales employees from Juniper's Chinese subsidiaries "falsified trip and meeting agendas for customer events that understated the true amount of entertainment involved on the trips." The SEC alleges that Juniper "failed to accurately record the incremental discounts and travel marketing expenses in its books and records, and failed to devise and maintain a system of internal accounting controls sufficient to prevent and detect off-book accounts, unauthorized customer trips, falsified travel agendas and after-the-fact travel approvals."
The SEC Order states that between 2008 and 2013, certain JNN sales employees in Russia misrepresented the need for "increased discounts to meet [Juniper's] competition." The SEC Order alleges that – in fact – these JNN employees "secretly agreed" with channel partners that the increased discounts, referred to as "common funds," would be retained by channel partners in off-book accounts rather than passed to the customer. According to the SEC Order, JNN employees structured these transactions in this manner "to keep the common funds off Juniper's books so that local JNN and channel partners could thereafter direct the funds without obtaining proper internal Juniper approvals."
The proceeds were in part used by JNN employees and channel partners to fund customer trips, which the SEC characterized as "excessive, inconsistent with Juniper policy, predominantly leisure in nature" and lacking "any legitimate business purpose." Examples contained in the SEC's Order include: "travelling to international tourist destinations, such as Italy, Portugal, and various U.S. cities where there were no Juniper facilities, industry specific conferences or other business justifications." More specifically, some of these trips also included "sightseeing tours, [trips to] amusement parks, national park excursions and meal entertainment for customers" and sometimes customer family members. Some of the customers involved in the trips were government officials, according to the Order.
The SEC noted that former JNN employees discussed "their desire to have a business impact based on this leisure travel and entertainment." The Order cites one internal communication seeking approval for a "five-day international sightseeing trip", whereby an employee explained that the "purpose of the trip" was to meet with a "top [state-owned customer] manager to speed up Q2 bookings." In another case, a JNN employee allegedly asked to take a state-owned customer "on a seven-day leisure trip to the U.S., explaining his belief that if the trip was not approved, Juniper would lose customer sales."
The SEC Order further alleges that in late 2009 a former member of senior management became aware that JNN employees in Russia had created "off-book accounts that were funded in part by improperly obtained incremental discounts" both of which were in contravention of Juniper's policies. While Juniper instructed JNN employees to discontinue the practices, they nevertheless persisted through 2013. Moreover, the SEC notes that the company's "overall remedial efforts were ineffective" and consequently, Juniper "failed to properly account for these off-book funds and failed to implement or maintain a system of effective internal accounting controls to prevent off-book accounts, improper expenses, and the misuse of product discounts."
In China, the SEC Order alleges that between 2009 and 2013, employees of Juniper's Chinese subsidiaries engaged in improper travel practices by funding domestic travel and entertainment of customers, some of whom were foreign officials, "that was excessive and inconsistent with Juniper policy." In support of such activities, certain local marketing employees in China falsified agendas for trips provided to customer employees, which understated the extent of the entertainment involved in the trips. According to the SEC Order, "these falsified and misleading trip agendas" were submitted to Juniper's legal department for approval, though the Order notes that, in other instances, no such approvals were obtained in contravention of company policy. The SEC also alleges that marketing employees "also provided these falsified agendas to their customer invitees to assist the invitees in obtaining their own internal approvals to attend events."
The SEC Order also notes that members of Juniper's legal department "regularly approved events that had already" occurred. Such actions, according to the SEC, "[violated] Juniper's policies and undermin[ed] its internal accounting controls over travel and entertainment."
Resolution and Remediation
As a result of the conduct described above, the SEC imposed a total fine of $11,745,018 on Juniper, which included $4 million in disgorgement, $1,245,018 in prejudgment interest and a civil penalty in the amount of $6.5 million. However, the SEC also recognized Juniper's cooperation which included "timely disclosure" of the facts ascertained during the company's internal investigation, voluntary production and translation of documents, and presentations to SEC staff regarding the company's investigation.
According to the SEC Order, Juniper also took the following remedial actions: "revisiting its compliance policies and making enhancements to its compliance group…realign[ing] its compliance function into an integrated unit" funneling all reporting into a "newly created and empowered Chief Compliance Officer…implement[ing] a mandatory escalation police to ensure the Company's Board of Directors is informed of serious issues…institut[ing] a compliance preview and requir[ing] pre-approval of non-standard discounts…requir[ing] pre-approval for third-party gifts, travel, and entertainment, channel partner marketing expenses, and…certain operating expenses in high risk markets." Finally, the SEC's Order also notes that Juniper conducted "additional employee training on anti-corruption issues and improved its process for conducting internal investigations of potential violations of anti-corruption laws."
- Risks at the Top: Notably, the SEC Order points to deficiencies in senior management's response, including the company's legal department, in connection with the off-book accounts in Russia and travel and hospitality expenses in China. As mentioned above, upon learning that JNN employees in Russia created "off-book accounts," in contravention to company policies, senior management failed to adequately address the issue such that the practices persisted through 2013. In China, the SEC Order suggests that Juniper's legal department contributed to the problem by "regularly approv[ing] events that had already" occurred. In doing so, Juniper's legal department not only violated company policies but also "undermin[ed] its internal accounting controls over travel and entertainment."
- No DOJ Declination: Juniper's settlement with the SEC comes more than a year after the company disclosed that the DOJ closed its FCPA investigation of the company in a public filing dated February 9, 2018. Specifically, according to the company's February 9, 2018 Form 8-K, the DOJ closed its investigation without taking any action against the company, and "acknowledged the Company's cooperation in the investigation." In closing the investigation, the DOJ did not identify this decision as a declination.
On September 19, 2019, the SEC issued a Cease-and-Desist Order (Order) against TechnipFMC Plc (TFMC), a global provider of oil and gas services based in Texas, to resolve FCPA charges involving conduct in Brazil and Iraq. This Order is issued in connection with the June 25, 2019 DPA that TFMC entered with the DOJ. As noted in our FCPA Summer Review 2019 (which has additional background on the facts at issue), the resolution with the SEC was foreshadowed through the Board resolution attached to the DPA between TFMC and the DOJ. The SEC's Order charges TFMC with violations of the anti-bribery, books-and-records, and internal-accounting-controls provisions of the FCPA. TFMC is the result of a 2017 merger between Technip S.A. and FMC Technologies, Inc., and as such, TFMC is a successor in interest for both Technip S.A. (Technip) and FMC Technologies, Inc. The SEC Order states that TFMC began trading in the United States on January 17, 2017 under FMC Technologies' old ticker, "FTI."
In connection with its resolution with the SEC, TFMC agreed to pay disgorgement of $4,327,194 and prejudgment interest of $734,712. TFMC also agreed to self-reporting to the SEC on its compliance program for a period of three years. Thus, the agreement corresponded to the terms outlined in the board resolution attached to the DPA. The SEC did not impose a civil penalty, citing the imposition of a $296,184,000 criminal fine as part of TFMC's resolution with the DOJ. For the full summary and analysis of allegations against TFMC, please refer to our previous article in the 2019 Summer Review.
Printing Services Provider Quad/Graphics Settles with SEC for Books-and-Records and Internal-Accounting-Controls Violations in Peru and China
On September 26, 2019, the SEC announced a Cease-and-Desist Order (Order) against Quad/Graphics, Inc. (Quad), a marketing solutions and printing services provider headquartered in Sussex, Wisconsin. Under the Order, Quad agreed to pay a total of $9,895,334—including disgorgement of $6,936,174, prejudgment interest of $959,160, and a civil penalty of $2,000,000—to resolve charges that it had violated the books-and-records and internal-accounting-controls provisions of the FCPA.
Approximately one month prior, on September 19, 2019, the DOJ declined to prosecute Quad for the same conduct, formally finding that criminal prosecution was warranted but that the company had met the conditions set forth in the DOJ's FCPA Corporate Enforcement Policy, most notably by voluntarily self-disclosing potential misconduct and by agreeing to disgorge "the full amount of its ill-gotten gains" to the SEC. Nevertheless, the DOJ made clear that the formal declination for Quad "does not provide any protection against prosecution of any individuals" associated with Quad, leaving open the possibility that the DOJ may bring individual charges against Quad executives.
The conduct giving rise to Quad's dispositions with the DOJ and SEC occurred between 2010 and 2016. Prior to 2010, Quad was a private company primarily focused on sales in the United States. In 2010, Quad acquired World Color Press, Inc. (World Color), another printing company headquartered in Montreal, Canada, but with shares registered on the NYSE. After the acquisition, such shares in World Color became shares in Quad, making the company an "issuer" under the FCPA. Quad also acquired several former World Color subsidiaries outside the United States, most notably Quad/Graphics Peru S.A. (Quad Peru) and Quad/Tech Shanghai Trading Company, Ltd. (Quad/Tech China).
According to the public documents, this acquisition substantially changed Quad's FCPA risk profile. Quad's new status as an issuer under the FCPA meant that it was now subject to the books-and-records and internal-accounting-controls provisions of the FCPA. Furthermore, Quad's new foreign subsidiaries in Peru and China increased the risk that company personnel might come into contact with foreign officials, potentially increasing the risk of improper payments. Despite this change in risk profile, Quad reportedly failed to put in place measures to appropriately mitigate FCPA risk. According to the SEC Order, the company's compliance program immediately after acquisition was "non-existent" and the company's "internal audit had no visible role in anti-corruption testing and the company failed to conduct broad FCPA or ethics training until approximately 2012."
Against this backdrop, the SEC found that Quad failed to meet its FCPA books-and-records and internal-accounting-controls obligations in a number of areas, namely:
- Failure to prevent payments to MINEDU and INEI officials in Peru: According to the SEC Order, from 2011 to 2015, Quad Peru's insufficient bookkeeping and internal accounting controls allowed senior executives at Quad Peru to make improper payments to government officials at the Peruvian Ministry of Education (MINEDU), the Peruvian National Institute of Statistics Information (INEI), and various Peruvian municipalities. Quad Peru executives allegedly made payments to sham vendors for various services that were in fact handled by Quad Peru employees in house or by unrelated external third parties. The Order states that the sham vendors, three of which were owned by an individual with influence in the Peruvian government, then allegedly passed these payments onto officials at MINEDU, INEI, and various Peruvian municipalities in order to obtain various benefits for the company, including assistance in securing contracts and leniency in meeting delivery dates and avoiding penalties under existing contracts. In 2013, finance personnel within Quad Peru had notified a finance executive for Latin America who was based in the U.S. about certain suspicious invoices issued by the sham vendors, raising concerns about red flags such as identical dates and dollar amounts for certain invoices, as well as consecutive invoice numbers. However, it was only after the departure of a senior Quad Peru finance manager in 2015 that the invoices were reported up to the chain to Quad's U.S. legal department.
- Failure to prevent judicial bribery in Peru: From 2011 to 2013, Quad Peru's management allegedly arranged for payments to Peruvian judges through a local law firm initially retained to handle ongoing litigation with the Peruvian tax authority, Superintendencia Nacional de Aduanas y de Administraciόn Tributaria (SUNAT). Specifically, after litigation settlements, the local law firm allegedly suggested that Quad Peru make payments to certain Peruvian judges to influence their decisions in the SUNAT court case, which would be facilitated by the law firm itself. According to the Order, with approval from at least one operations executive based in the United States, Quad Peru executives agreed to the law firm's proposed plan and funneled payments to litigation and administrative court judges, either through invoices issued directly by the law firm to Quad Peru for "success fees" or "extraordinary fees" or through invoices issued to Quad Peru by other third-party vendors, which were then paid and the funds returned to a Quad Peru executive to pay the law firm. The SEC noted that specific payments through the law firm coincided with favorable judicial decisions in the litigation. The law firm also allegedly refunded some payments after a setback in the litigation at the appellate level.
- Concealment of prohibited business with Cuban state-owned entity in Peru: From 2010 to 2013, Quad Peru also continued certain pre-acquisition contracts for the printing telephone directories with the Cuban state-controlled telecommunication company, Empresa de Telecomunicaciones de Cuba S.A. (ETECSA). Possibly due to concerns about compliance with sanctions against Cuba by the United States, Quad Peru executives sought to conceal the nature of these contracts from the company's U.S. legal department after acquisition. Per the Order, such concealment efforts included removing any references to Cuba and the Cuban company's full name in company reports, as well as hiring a "broker" or "pass through" in Peru whose name would appear on contracts, shipping documents, invoices, and journal entries when the true customer was in fact ETESCA in Cuba. The Order alleges that executives in both Peru and the United States also actively misled the U.S. legal department, writing in e-mails that sales with Cuba had been discontinued. Quad Peru executives also allegedly paid hotel bills for ETESCA officials who visited Peru to review sample telephone directives and paid for sales representatives to travel to Cuba to meet with officials about pending printing projects.
- Failure to prevent kickbacks in China: Finally, the SEC Order alleges that Quad/Tech China employees engaged in a scheme to bribe customers and win business in China from 2010 to 2015. Specifically, Quad/Tech China allegedly paid fake commissions of approximately two percent of sales orders to sales agents. According to the SEC, these sales agents did not provide any legitimate services, but instead transferred the two percent to employees of Quad/Tech China's customers, including Chinese state-owned entities and privately-owned companies. These payments were allegedly described in invoices as "technical service fees" and in Quad/Tech China's books and records as "commissions."
- Use of the FCPA Books-and-Records and Internal-Accounting-Controls Provisions to Investigate Potential U.S. Sanctions Violations: As noted above, a portion of the alleged misconduct by Quad involved concealing ongoing business with a Cuban entity in company reports, contracts, shipping documents, invoices, and journal entries. While rare, this is not the first time that the FCPA's books-and-records and the internal-accounting-control provisions have been cited in a settlement in relation to conduct that may have violated U.S. sanctions law. Most recently, in 2013, the SEC reached a settlement with the Swiss oilfield equipment and services provider Weatherford International Ltd. that included sanctions-related issues. While the SEC has been criticized for using settlements to expand the scope of the accounting provisions beyond their statutory definition, much of the misconduct cited here in relation to potential sanctions issues – falsifying company reports, invoices, and accounting journal entries – falls within the generally understood ambit of the books-and-records provisions.
- Improper Payments Arranged Through Local Law Firm: Quad Peru's local law firm played a central role in the judicial bribery scheme, allegedly first suggesting that the company make payments to certain judges after litigation setbacks and offering to arrange for the payment on top of the legitimate legal service also provided. This highlights the potential corruption risks posed by local counsel, which, like other higher-risk third parties, often interact directly with government officials (judges and regulators) on companies' behalf. Indeed, payments funneled through local counsel have been the basis for charges in past enforcement actions, including Layne Christensen Company and Stryker Corporation. Managing these risks can also be challenging, as law firm services can also be more difficult to benchmark than services rendered by other agents. Generally, however, this FCPA risk can be mitigated if companies subject local law firms to the same controls as other third-party service providers, including due diligence, benchmarking, and auditing, among other measures.
- Alleged Lack of Sufficient Compliance Measures Following Acquisition: Although the FCPA books-and-records and internal-accounting-controls provisions cover only certain accounting and controls obligations, the SEC tends to consider such technical provisions alongside broader compliance failures, including failure to conduct training, failure to adopt sufficient policies and procedures, and failure to include anti-corruption during internal audits. The SEC appeared to follow the same playbook here, noting the company's "non-existent" compliance program at the time of acquisition and initial failure to make use of internal audit's capabilities and FCPA or ethics training.
On September 27, 2019, the SEC issued a Cease-and-Desist Order (Order) to resolve allegations that Barclays PLC (Barclays) violated the books-and-records and internal-accounting-controls provisions of the FCPA. During the period in question, Barclays, a bank holding company headquartered in London, United Kingdom, registered American Depository Receipts on the New York Stock Exchange and filed periodic reports with SEC and, therefore, was an "issuer" for the purposes of the FCPA.
As described more fully below, according to the Order, from at least 2009 through August 2013, offices in Barclays' Asia Pacific (APAC) region provided employment opportunities to approximately 117 relatives and friends of government officials and private sector clients, with most provided through an "unofficial internship program." The Order further alleges "Barclays failed to devise and maintain a system of internal accounting controls" to provide reasonable assurances that its "employees were not using employment opportunities as an improper inducement."
The Order required Barclays to pay $3,824,686 in disgorgement, $984,040 in prejudgment interest, and a civil penalty of $1,500,000. The Order indicated that the SEC considered that Barclay self-reported prior to the SEC launching an investigation, undertook remedial steps including the termination of senior personnel, revisions to hiring policies, and enhancements to other elements of its compliance program, in addition to making factual information and personnel available to the SEC.
In the Order, the SEC alleged that although Barclays' policies prohibited leveraging employment opportunities for future business, Barclays did not train APAC employees or monitor adherence to the policies. The Order details instances, for example, where Barclays executives indicated that they "did not know that offers of internships or employment were items of value or that such offers could not be used to obtain business." The Order also details how certain executives, even compliance personnel, were unaware of Barclays' anti-bribery policies or the FCPA. For example, the Order notes that "a senior regional compliance executive said that he had never read the 2009 anti-bribery and corruption policy, which required pre-approval by compliance before Barclays could offer internships to public officials or their close family members." This same individual also said, according to the Order, "that it was not until 2012 that the he understood that an internship was considered an item of value for compliance purposes." Compliance personnel also indicated a lack of awareness of how to monitor policy compliance.
The Order indicated that in April 2009, an "unofficial intern program" for Barclays Korea was approved by a senior executive in APAC. The unofficial program was not part of the bank's formal internship program. Ostensibly, the unofficial program's purpose was to provide professional experiences for students and occasionally to offer employment opportunities to individuals who had a relationship with Barclays and were qualified for the opportunity. Rather than being an occasional practice, the Order noted that "[a]pproximately half of the candidates between 2009 – 2013" were connected to a client of the bank. A Barclays senior executive responsible for the program said that he believed "the key factor" in hiring a candidate was the business the associated client could provide to Barclays.
The Order provided numerous examples of internship offers to the children of government decision-makers. For example, in April 2009, a Korea-based banker suggested that Barclays extend an internship offer to the child of an influential figure at a state-owned entity (SOE) while Barclays vied to manage the SOE's bond offering. Barclays extended the internship offer and, shortly thereafter, was named the bond offering's lead manager, which generated approximately $971,000 in fees for the bank. A month later, in May 2009, after an executive at a Korean SOE requested that Barclays hire a specific individual for a permanent position notwithstanding that candidate performed worse than another candidate, a Barclays banker endorsed the hiring indicating it was important to honor the request "to avoid potentially losing that client's business," according to the Order. Without compliance's preapproval, which was required under Barclay's policy, a senior executive approved the hire. Just one month later, in June 2009, at the request of the same SOE, Barclays hired the specific individual for an internship. Later that month Barclays received bond offering work from the SOE, earning approximately $1.15 million in revenue.
The Order indicated that by June 2009, APAC compliance officers knew of the practices described above but failed to fully perform their responsibilities consistent with the anti-bribery policy. For example, the Order notes that if "compliance officers reviewed relationship hiring requests, their review was generally limited to potential conflicts of interest, despite an April 2009 Barclays policy that expressly addressed anti-corruption risks" for such hires. The Order provides that compliance officers were unaware of the policy's anti-bribery aspects, with one senior compliance officer stating that he had not read the policy, while a senior compliance officer who was responsible for the review of relationship hires represented that "he never reviewed information relating to pending business with Barclays' clients even though he had access to that information."
Notwithstanding the requirement for compliance review and approval, referral hires were made without involving compliance, involving compliance but withholding or falsifying information to hide the person who referred the candidate, or failing to implement safeguards required by compliance. For example, in September 2010 bankers requested to hire the daughter of an influential official of a Chinese SOE. The candidate did not perform well in the interview process, but still the banker advocated for her hire due to the "tangible business" she would bring. The Order provided that when a compliance officer raised the issue to a more senior compliance officer, the latter responded, "I am sure this is not the first time," and approved the hire provided the business attested that she would be hired "for her qualifications and her skills, not for any other reason." No such attestation was provided and, nevertheless, Barclays offered the individual a spot in their graduate program, according to the Order.
Barclays adopted a "work experience program" in APAC in May 2011, to better address relationship hires, according to the Order. As part of the program's controls, Barclays personnel had to disclose whether a client had referred the candidate and to document the reasons for hiring the individual. Notwithstanding the enhanced controls, violations of the new program occurred. For example, a SOE executive asked the bank to hire the daughter of a close friend whose employer regulated the SOE. Barclays hired the individual even though the compliance department was aware the bank was vying for a role in the SOE's bond issuance. The SOE hired Barclays for the issuance, resulting in approximately $300,000 in fees for Barclays.
In March 2012, Barclays sought to improve its referral hiring controls by requiring employees to attest that candidates were not recruited to obtain or retain business. The Order notes the improved process had "little impact," as bankers make incorrect representations or provided accurate attestations which compliance approved knowing of business opportunities. For example, in May 2012, at the request of a SOE official, compliance approved an intern's hiring when the business rational indicated "client relationship."
In July 2012, Barclays again sought to improve its guidance by reiterating "zero tolerance" of bribery, which included employment offers. As with other improvements, the July 2012 enhancement had little impact in APAC. For example, in November 2012, the treasurer of a SOE sought out Barclays to secure an internship in the formal summer program for a child of a party official and director at the SOE. In support of the individual's candidacy, a banker forwarded the government official's request to Barclays executives and managers "explaining that the candidate's father held an ‘important' post" and that Barclays was trying to win bond work with the SOE. A senior banker responded to the group, writing "[w]e will evaluate [the candidate] on his own merits" and then, minutes later, separately wrote the banker "I had to say that." The Order indicated that notwithstanding the candidate's subpar interviews, poor technical capabilities, a late application, and no evidence of compliance's review, Barclays offered the candidate a position. In July 2013, the SOE selected Barclays for a bond deal, for which Barclays earned approximately $332,700 in revenue.
In March 2013, Barclay's Financial Crime Compliance unit recommended that the work experience program be shut down. At the same time, news reports highlighted similar hiring practices at other financial institutions in Asia. In response, instead of terminating the program, Barclays again revised the program's controls. The Order indicated that Barclays improved policy, governance, and training initiatives; introduced regional help desks to facilitate the escalation of issues; and adopted independent testing and assurance initiatives to improve the efficacy of the controls, among other enhancements.
The Order alleged employees "submitted, reviewed, and approved inaccurate compliance questionnaires and attestations forms containing inaccurate information that failed to disclose the true source of candidates referred for hire and the intended purpose for the relationship hires." As a result, Barclays violated the books-and-records provision of the FCPA.
With respect to the internal-accounting-controls provisions, the Order alleges that even though Barclays had instituted polices, the bank failed to implement them adequately.
- Hiring Practices Industry Sweep: Barclays is the sixth FCPA enforcement action based in whole or in part on hiring practices. In August 2015, BNY Mellon settled, followed by Qualcomm (March 2016), JP Morgan (November 2016), Credit Suisse (July 2018), and Deutsche Bank (August 2019). Five of the entities – all but Qualcomm – are financial service providers, suggesting an industry sweep. Industry sweeps are particularly attractive to enforcement authorities as similar practices are often seen across different companies in the same industry, thereby enabling regulators to leverage their learnings from one investigation across several potentially similar investigations.
- Disgorgement But No Bribery Charge: The SEC did not allege violations of the FCPA's anti-bribery provisions yet required disgorgement of Barclays' ill-gotten gains. Notwithstanding the absence of the anti-bribery charge, the SEC sought disgorgement. Initially, this approach may be viewed as at odds with the purpose of disgorgement – an equitable remedy to put the culpable party in the position they would have been but for the improper conduct – and another tool to punish wrongdoing, more akin to a fine. On the other hand, the Order does describe conduct by employees in Barclays' APAC offices that the SEC likely viewed as improper payments, even if the conduct may have been outside the reach of the FCPA. It is worth noting that foreign-based issuers (such as Barclays) are not subject to the "alternative jurisdiction" provision of the FCPA, and therefore the SEC would need to meet heightened jurisdiction standards in assessing whether the relevant conduct violated the anti-bribery provisions of the FCPA.
- Conduct Beyond the Statute of Limitations Led to Disgorgement: Another aspect of the disgorgement that is noteworthy is that all of the disgorgement is for conduct that occurred between 2009 and 2013 – between six and 10 years ago – and seemingly outside of the statute's statute of limitations and at odds with the Supreme Court's decision in Kokesh. As a practical matter, it likely that Barclays agreed with the SEC to toll the statute during the investigation and settlement discussions, rendering the limitation period and Kokesh decision as nonfactors.
On September 27, 2019, the SEC entered into a Cease-and-Desist Order (Order) with Westport Fuels Systems, Inc. (Westport), a Canadian fuel technology company, that included just over $4 million in fines and disgorgement. Westport has common stock registered under Section 12(b) of the Exchange Act and available on the NASDAQ, bringing it under the jurisdiction of the SEC. In a parallel proceeding, the SEC also reached a settlement with the former Chief Executive Officer of Westport, Nancy Gougarty, a U.S. citizen residing in South Carolina, that called for her to pay a civil penalty of $120,000. Gougarty was the CEO of Westport from July 2016 through January 2019, and also served as a member of the Board of Directors during that time, and originally joined the company in July 2013 as Chief Operating Officer. According to the Order, Westport violated the books-and-records provision and the internal-accounting-controls provisions of the FCPA, via the acts of Gougarty during her time at the company. Neither Westport nor Gougarty admitted or denied the findings in the Order.
Per the Order, Westport, through the actions of Gougarty and other employees, bribed a Chinese government official in exchange for the official exerting influence to allow "an increased dividend payment of $3.5 million to Westport" and to secure a "framework supply agreement" between Westport and a joint venture controlled by a Chinese state-owned enterprise (but also owned in part by Westport). The relevant official held a senior-level position with the Chinese state-owned-entity that held a controlling stake in the relevant joint venture. The Order stated that the primary vehicle for the bribe was an agreement by Westport, directed and facilitated by Gougarty, to transfer a certain portion of shares in the joint venture "at a low valuation" to "a Chinese private equity fund in which Gougarty and others had been informed that the Government Official held a financial interest."
The Order stated that the bribery scheme was initiated due to efforts to take the joint venture between Westport and the Chinese state-owned entity public through an initial public offering (which ultimately never occurred). Various proposals for re-structuring the venture were made, and the Order notes that Gougarty and the Asia Pacific General Manager (GM) for Westport headed the negotiations related to those transactions. According to the SEC, "[e]arly in the negotiations, the Asia Pacific GM reported that he was told that the Government Official had a significant but undisclosed financial interest in the Chinese private equity fund that was to receive the JV shares from Westport." The Asia Pacific GM "also reported that it was the Government Official's personal financial interest, not Chinese law, which was motivating the transfer of shares to the private equity fund." The Order describes how the "Government Official's personal interest became a central part of Westport's negotiation strategy" – driving Westport's demands for the dividend payment and the "framework supply agreement" for Westport in exchange for facilitating the share transfer. The Order also notes that Westport's negotiations were affected by the company's "worsening finances" and market issues.
The SEC alleged that Gougarty did not inform the Westport Board of Directors regarding her knowledge of the government official's personal financial interest when the Board considered approval of proposed transactions. The SEC specifically noted that "[i]n fact, approximately nine months before obtaining the Board's approval, Gougarty withheld this information from the Board, deleting a sentence in a September 2014 draft letter to the Board prepared by the Asia Pacific GM that described the proposed transfer." The Westport Board of Directors voted to approve the share transfer on June 29, 2015. By October 2016, Westport had received a dividend and had secured the supply agreement with the joint venture, as agreed to in the bribery scheme as described in the Order.
According to the SEC, Gougarty had reviewed the 2010 and 2016 versions of the Westport Code of Conduct and was aware of the Code's prohibitions against bribery; she also had been trained on the FCPA at another company. Nevertheless, she proceeded with the conduct described in the Order. The SEC also stated that "[a]s evidenced by her own misconduct, Gougarty as CEO failed to discharge her duty on behalf of Westport to devise and maintain a sufficient system of internal accounting controls."
The SEC Order contained some criticisms of Westport's compliance program and related internal accounting controls at the time of the described conduct. The Order acknowledged that the relevant Codes of Conduct banned the payment of bribes to government officials via third parties and required due diligence as part of the process to engage a third party to provide services to the Company. However, the SEC noted that the Code did not specifically mandate due diligence of any transactions where a government official may have an interest in the third party. The Code also failed to mandate the use of anti-bribery clauses in agreements with third parties when conducting a share transfer, as in the case with the joint venture. Further, the SEC asserted that Gougarty executed a certification "falsely attesting that Westport had disclosed all significant deficiencies and material weaknesses in the design and operation of its internal controls to the outside auditors." The Order stated in this regard that "as Gougarty knew, she had failed to disclose to the outside auditors the deficiencies and weaknesses in the internal controls that she had exploited in carrying out an unlawful bribery scheme in circumvention of Westport's anti-bribery policies and its key accounting controls."
The SEC noted certain remediation efforts undertaken by Westport as well. The Order recognized that Westport had improved its "anticorruption and compliances policies and training programs, and its disclosure policies and controls" as well as specific internal accounting controls that would have addressed due diligence of transactions and third parties as described in the Order. Additionally, Westport voluntarily provided documents requested by the agency and made witnesses available. Despite these efforts, the Order required Westport to pay $2.35M in disgorgement, $196,000 in prejudgment interest and $1.5M in civil penalties. In addition, the SEC required Westport to undertake certain self-monitoring and self-reporting obligations related to the company's compliance program and related controls – consisting of an initial report to the SEC followed by two additional reviews and reports over the next two years. The Order requires the reports to focus in part on "implementation of compliance measures, particularly as to the areas of due diligence of third-party entities and persons, FCPA training and the testing of relevant controls including the collection and analysis of compliance data."
- Investment Valuation Used as a Bribe: The SEC alleged that the use of an investment valuation, in this case purposefully lowering the valuation of the JV in order to transfer the shares to a fund affiliated with the government official, constituted a bribe. While the use of an investment valuation as a bribe is unusual, this stance by the agency is not unprecedented – and is long-standing. In the 1986 Ashland Oil case, the SEC cited as improper a transaction in which Ashland purchased a chrome mine in Zimbabwe from an official for approximately $25 million dollars, when more objective asset assessments and contemporaneous transactions involving a portion of the assets showed the value to be far less. More recently, enforcement actions by the DOJ and SEC in September 2017 against Telia Company AB (Telia) involved the company's transactions with a shell company of a government official in order to indirectly pay money to the foreign official. According to the SEC's Cease-and-Desist Order, Telia's bribes were funneled through payments for "sham lobbying and consulting services to a front company controlled by the foreign official." We covered Telia's settlements in our FCPA Autumn Review 2017. As such, the Westport settlement emphasizes the importance of companies implementing effective controls to review transactions as well as valuations in order to ensure they are not used as a mechanism to conceal bribes and related misconduct.
- Executive Involvement: It is of note that the agency decided to proceed with both disgorgement and a civil monetary penalty against Westport and penalties against Gougarty individually. The involvement of the former CEO of Westport directly in coordinating and setting up the bribery scheme likely played a part in the agency's decision to seek both remedies in this instance. As described in the Order, Gougarty was actively involved in hiding information from other Board members to carry out the bribery scheme, including purposefully deleting information from a letter to the Board that would have disclosed the role of the private equity fund in the scheme, and not carrying out proper due diligence on the fund. It would behoove other companies to ensure that multi-player controls are in place and review mechanisms in order to avoid misconduct by senior management. According to Westport's securities filing, the company disclosed the SEC investigation and settlement and did not mention an investigation by the DOJ into Gougarty and the company.
In August, the Second Circuit Court of Appeals – in two separate decisions – upheld the convictions of Macau, China-based billionaire real estate developer Ng Lap Seng and former Guinean mining minister Mahmoud Thiam, both of whom argued that the standard for proving bribery articulated by the Supreme Court in McDonnell v. United States should have been applied to their cases.
As reported in our FCPA Autumn Review 2017, a federal jury found Ng Lap Seng guilty of paying approximately $1.3 million in bribes to two former United Nations officials in exchange for formal U.N. support for a multi-billion dollar conference center he planned to construct in Macau. Ng was convicted of paying illegal bribes and gratuities, violating the FCPA, money laundering, and conspiracy to commit those offenses. He was sentenced to four years in prison and fined $1 million.
In appealing his conviction and sentence, Ng argued that McDonnell, which narrowly interpreted the term "official act" as used in the U.S. domestic bribery statute (18 U.S.C. § 201(a)(3)), should also apply to offenses charged under the FCPA and the federal program bribery statute, 18 U.S.C. § 666. Specifically, Ng argued that the DOJ failed to prove that the bribes he paid resulted in any "official acts" by the former U.N. officials, and that the jury was not properly instructed that an "official act" was required to fulfill the "quid pro quo" elements of the FCPA and § 666. Moreover, because he was arrested before the conference center could be built, Ng argued that no "official act" could have occurred. The Second Circuit disagreed and declined to extend McDonnell to either bribery statute. In holding that neither the FCPA nor § 666 require prosecutors to show that bribes have been paid in exchange for an "official act," the Second Circuit interpreted the "quid pro quos" of each statute broadly. Section 666 broadly prohibits bribery concerning programs receiving federal funding and does not mention "official acts" or place any limits on the type of businesses or transactions that can be influenced beyond a connection with a threshold amount of federal funding. Similarly, the court found that the FCPA broadly prohibits giving anything of value in exchange for four specific actions: (1) influencing an act or decision of a foreign official; (2) inducing a foreign official to do or omit any act; (3) securing any improper advantage; or (4) inducing the foreign official to influence an act of a foreign government. None of those actions, the court noted, are limited to the definition of "official act" as that term is used in 18 U.S.C. § 201 and defined by McDonnell.
The Second Circuit's decision joins the Third, Fifth, Sixth, and Eighth Circuits in declining to extend McDonnell to other anticorruption and fraud statutes. In addition, the Second Circuit is the first court to consider the application of McDonnell to the FCPA, and as a result may influence future charging decisions as prosecutors choose to pursue corrupt conduct under the FCPA and other anticorruption statutes where McDonnell's narrow "official act" standard is not applicable. Ng has filed a petition for a rehearing of his appeal.
The Second Circuit rejected a similar appear from Mahmoud Thiam, the former Guinean minister of mining and geology who was convicted in 2017 of laundering $8.5 million in bribes from two Chinese investment firms, which violated both U.S. money laundering statues and Guinea's bribery law. Thiam accepted the payments in exchange for assistance securing lucrative mineral contracts in Guinea—payments which he then deposited in several U.S. banks. Thiam appealed his conviction and seven-year sentence on grounds that prosecutors failed to prove he committed an "official act" under the standard articulated by McDonnell because he did not have any influence over decisions to award the contracts. Because violations of Guinean antibribery law were the predicate offenses underlying Thiam's money laundering conviction, he argued that McDonnell's definition of "official act" should apply.
The Second Circuit disagreed and declined to apply McDonnell to a foreign bribery statute. The court noted that to apply McDonnell's definition of "official act" to the Guinean statute would necessarily require the court to interpret Guinean law and potentially limit the type of conduct that Guinea had chosen to criminalize. Moreover, the court noted that no existing Second Circuit precedent supported the application of McDonnell beyond honest services fraud and Hobbs Act extortion cases and thus "principles of international comity" precluded such an extension in this case.
On June 26, 2019, Julia Vivi Wang, a naturalized U.S. citizen born in China, was sentenced to three years of supervised release and restitution in the sum of $629,295 after she pleaded guilty to one count of conspiracy to violate the FCPA, one count of violating the FCPA, and one count of submitting fraudulent tax returns.
As reported in our FCPA Summer Review 2018, Ms. Wang wired $500,000 to John W. Ashe, a former Ambassador to the United Nations from Antigua and Barbuda and former President of the United Nations General Assembly, to secure an improper advantage for Chinese businesspeople doing business in the Caribbean. She initially faced a maximum of five years of imprisonment, but, as reported in the media, Ms. Wang's "extensive cooperation" that lead to a conviction of Chinese billionaire Ng Lap Seng (discussed in our FCPA Autumn Review 2017) resulted in a more lenient sentence of Ms. Wang.
Former Rolls Royce Executive and Consultant Each Sentenced to Four Months Imprisonment for Their Roles in a Bribery Scheme
In two separate hearings on July 22, 2019, James Finley (British citizen), a former senior Rolls-Royce executive, and Andreas Kohler (Austrian citizen), a former managing director at an engineering firm, were each sentenced to four months of imprisonment in connection with a scheme to bribe Kazakh and Chinese officials.
According to the relevant judgment, Finley also received a $500,000 fine and eight months of supervised release with electronic monitoring at his residence for a conspiracy to commit violations of the FCPA and two counts of violating the FCPA.
According to the relevant judgment, Kohler, in his turn, also received four months of home confinement and a $72,000 fine for a conspiracy to commit violations of the FCPA.
We previously reported on this investigation in our FCPA Winter Review 2017, where we explained that Rolls-Royce had entered into deferred prosecution or leniency agreements with the U.S., U.K., and Brazil, and in our FCPA Winter Review 2018 where we discussed guilty pleas of Finley and Kohler.
As reported by media, the government recommended an eight-month sentence for Kohler and a 12-month imprisonment for Finley. During the sentencing hearing, U.S. District Judge Edmund Sargus, however, openly struggled with the limited sentencing options for foreign citizens as opposed to U.S. nationals and noted, according to the media, that he "was taking care that his decisions were equivalent to sentences he would impose on an American." Presumably these considerations led Judge Sargus to give both Finley and Kohler lesser sentences than what the prosecutors had requested.
Court Rejects Request for Probation from Ecuadorian Businessman Who Pleaded Guilty to Bribing PetroEcuador Officials
On April 12, 2019, Jose Luis de la Paz Roman was sentenced to 36 months in prison for his role in a conspiracy to make bribe payments to officials at PetroEcuador, the state-owned and state-controlled oil company of Ecuador. De la Paz pleaded guilty in January 2019 and also agreed to a forfeiture judgment of just over $2 million. According to his guilty plea, de la Paz was president and co-owner of NoLimit C.A., an Ecuadorian company that has provided services to PetroEcuador since 2012. Between 2012 and 2016, de la Paz and others paid a total of $8.25 million to PetroEcuador officials in order to secure improper advantages in connection with contract awards.
Specifically, according to the public records, before his company won its first PetroEcuador contract in December 2012, de la Paz met with PetroEcuador official Marcelo Reyes Lopez, who referred de la Paz to an intermediary to coordinate payments to PetroEcuador officials. After the contract was awarded to NoLimit, the intermediary instructed de la Paz to wire $4.6 million to three different Miami-based companies so that the money could be transferred to PetroEcuador officials. De la Paz orchestrated those payments through affiliated U.S.-based companies under his control. Then, in December 2015, de la Paz agreed to transfer $3.65 million to four PetroEcuador officials in exchange for the release of funds owed by PetroEcuador to NoLimit and the promise of future business. Once again, de la Paz made those payments to the officials through his Miami-based companies.
Following his guilty plea, de la Paz faced a maximum of five years in prison with a guideline range of 87-108 months. De la Paz argued for a term of probation with intermittent confinement, community confinement, or home detention as an alternative to prison. He argued that, contrary to every other defendant involved in the PetroEcuador bribery scheme, he did not evade authorities in the U.S. or Ecuador and instead repeatedly traveled to the U.S. to cooperate with the government. He argued that "the sentence imposed should focus on his unique status and send the message that individuals outside the United States will receive favorable treatment if they voluntarily submit to our justice system rather than become fugitives or avoid extradition." De la Paz also argued that the sentencing guidelines were unduly harsh because they were driven in large part by an 18-level increase based on the loss amount of $8.25 million, payment amounts that were unilaterally dictated by the PetroEcuador officials, not by de la Paz. Describing his actions as part of "a serious and calculated crime," the government argued that a guideline sentence was appropriate. The government argued that de la Paz was an experienced businessman who consistently engaged in improper payments to public officials in order to advance his business interests.
In imposing a three-year term of incarceration, the court seemingly rejected de la Paz's argument that his decision to submit to U.S. jurisdiction should be rewarded with a sentence of alternative confinement to create an incentive for other defendants to cooperate with the U.S. government. Still, with the sentence of 36 months, the court departed from a guideline sentence of five years imprisonment. In recent years, increasing numbers of courts have departed from guideline sentences in white collar sentencings, particularly where the guidelines are driven largely by high loss amounts.
The DOJ has obtained guilty pleas from two more individual defendants charged in its investigation of an alleged bribery scheme of Venezuela's state-owned energy company Petróleos de Venezuela S.A. (PDVSA), which was discussed previously in our FCPA Autumn Review 2018 and FCPA Winter Review 2019.
The president and a former sales representative of a Miami-based company that served as PDVSA's equipment supplier have separately pleaded guilty to criminal charges for their respective roles in a scheme to bribe PDVSA officials. Venezuelan nationals residing in the United States, they were both charged on February 21, 2019 in the U.S. District Court for the Southern District of Texas in Houston with the same five counts, including conspiracy to violate the FCPA, conspiracy to commit wire fraud, wire fraud, and conspiracy to launder money. On July 31, 2019, Rafael Enrique Pinto Franceschi (Pinto), the former sales representative, pleaded guilty to two counts – conspiracy to violate the FCPA and conspiracy to commit wire fraud. Then nearly one month later on August 21, 2019, Franz Herman Muller Huber (Muller), the company president, pleaded guilty to the same two counts of conspiracy. With Pinto's and Muller's pleas, now eighteen of the twenty-one individuals charged for their roles in the alleged PDVSA bribery scheme have pleaded guilty.
According to the allegations, Muller and Pinto conspired from 2009 to 2013 to bribe three PDVSA officials in exchange for contracts and other advantages such as inside information and assistance in receiving payments on past due invoices for the Miami supplier. In particular, the indictment details how they agreed to the exchange with the PDVSA officials, including a scheme to take three percent of each payment by PDVSA to the Miami supplier and split it amongst the officials with some kickbacks to Pinto and Muller themselves. The Miami supplier had an affiliate pay false consulting invoices submitted by a Panamanian shell company using a Swiss bank account. From the Swiss account, the proceeds were distributed to the officials as well as Pinto and Muller, using various offshore accounts, accounts in the names of third parties, and accounts in the names of corporate entities. Pinto played a significant role in meeting with the three officials in Houston, communicating the amounts for the false invoices, and orchestrating disbursements, while Muller received the false invoices and caused bribe payments to be wired from the Miami supplier's affiliate to the Swiss account. In total, they caused over $3 million in payments to the Swiss account under the scheme. Based on the amounts they received in kickbacks, Pinto and Muller were ordered to forfeit more than $985,000 and $263,000, respectively. In addition to detailing their alleged roles in the conspiracy, the indictment also noted that Pinto and Muller attempted to conceal the bribes and kickbacks by communicating about the scheme using their personal email accounts, rather than their corporate email. Muller and Pinto are both scheduled to be sentenced on February 20, 2020.
These guilty pleas are the latest in a series of DOJ prosecutions involving bribery of PDVSA officials that began in 2015 and continues to underscore the DOJ's emphasis on individuals' liability under the FCPA. Even as early as 2016, then-Assistant Attorney General Leslie R. Caldwell remarked how the DOJ's commitment to holding individuals accountable for violating anti-corruption laws was perhaps most clearly demonstrated in the ongoing series of prosecutions for bribery of PDVSA officials, which at that time had resulted in six guilty pleas. Since those remarks, the DOJ has managed to expose extensive further corruption and triple the number of guilty pleas in the PDVSA investigation.
On August 28, 2019, Moises Abraham Millan Escobar (Millan) was sentenced to three years of probation and was required to pay a $15,000 fine for his role in a scheme to bribe officials at Venezuela's state-owned oil company Petroleos de Venezuela SA (PDVSA). As discussed in our FCPA Spring Review 2016, Millan pleaded guilty under seal in January 2016 to one count of conspiracy to violate the FCPA and agreed to forfeit the proceeds from the bribery scheme in the amount of $533,578.
In related proceedings, on August 29, 2019, a former employee of PDVSA, Jose Luis Ramos-Castillo, was sentenced to 18 months in custody, two years of supervised release, and a fine of $15,000. As discussed in our FCPA Spring Review 2016, in December 2015, Ramos-Castillo pleaded guilty under seal to conspiracy to commit money laundering and admitted that while he was a PDVSA employee he accepted bribes in exchange for assisting companies to win PDVSA tenders. Because the FCPA does not criminalize the receipt of a bribe, the charges against Ramos-Castillo instead arose under the money laundering statute.
On August 29, 2019, the DOJ announced that Robin Longoria, of Mansfield, Texas, pleaded guilty in the U.S. District Court for the Northern District of Ohio to one count of conspiracy to violate the FCPA and to commit wire and visa fraud.
According to the DOJ's press release, Longoria, who helped arrange adoptions at an Ohio-based adoption agency, admitted to bribing Ugandan officials and defrauding U.S. adoptive parents and the U.S. Department of State to facilitate adoptions of Ugandan children in the United States. Longoria admitted that she and her co-conspirators had caused bribes disguised as fees to be paid to a Ugandan agent. According to the Information filed by the U.S. government, bribes to court registrars were described as "court filing fees" and bribes to Ugandan judges were described as "judge's fees." Bribes were in the amount of hundreds of U.S. dollars or more.
Longoria admitted that she knew that the fees would be used to bribe court registrars and Ugandan High Court judges so that the court registrars would assign particular cases to judges who were more likely to grant U.S. clients of the adoption agency guardianship rights over Ugandan children. Longoria further admitted that she and her co-conspirators concealed the bribes from the U.S. adoptive parents. Longoria and her co-conspirators also created false documents for submission to the U.S. Department of State, which was responsible for approving visa applications for the Ugandan children who were being considered for adoption.
On September 13, 2019, the SEC settled civil FCPA charges with Sridhar Thiruvengadam, a former Chief Operating Officer (COO) of publicly-traded Cognizant Technology Solutions Corporation (Cognizant) headquartered in Teaneck, New Jersey. According to the Cease-and-Desist Order (Order), the former COO agreed to settle charges under the FCPA's internal-accounting-controls and recordkeeping provisions in connection with a $2 million bribe to an Indian government official. In February 2019, Cognizant had agreed to pay $25 million to settle FCPA charges with the SEC. Also relatedly, criminal and civil prosecutions of Cognizant's former CEO and GC have been underway this quarter in federal court in New Jersey.
According to the Order, the bribery payment was made to ensure a permit for the construction of a commercial office in Chennai, India. According to the SEC, the scheme required falsification of Cognizant's books and records and Thiruvengadam participated in the concealment of payments through signing false sub-certifications. According to the Order, Thiruvengadam promised to fully cooperate with the SEC in any related investigations and pay a civil penalty in the amount of $50,000.
On September 25, 2019, Luis Alberto Chacin Haddad (Chacin) of Miami, Florida, was sentenced to 51 months of imprisonment and two years of supervised release for one count of conspiracy to commit felony violations of the FCPA.
As discussed in our FCPA Summer Review 2019, in June 2019, Chacin pleaded guilty to one count of conspiracy to violate the FCPA. According to the plea agreement, Chacin was part of a scheme to make corrupt payments to officials at Venezuela's state-owned and controlled electricity company Corporación Eléctrica Nacional (Corpoelec) in exchange for "lucrative" procurement contracts. As part of his guilty plea, Chacin was required to forfeit approximately $5.5 million—the amount acquired through the corruption scheme—as well as real estate located in Florida that was purchased with the proceeds of the scheme.
On July 31, 2019, Camargo Corrêa Construções e Paricipações S.A. and Construções e Comercio Camargo Correa S.A. (collectively, Camargo Corrêa) entered into a leniency agreement (Agreement) with the Controller General (CGU) and Attorney General (AGU) of Brazil. According to press reports, the Agreement relates to conduct that Camargo Corrêa admitted to in a previous settlement with the Brazilian Public Prosecutors Office and Administrative Council for Economic Defense in July 2015. (We discussed the 2015 settlement in our 2015 Autumn Review.)
As part of the Agreement, Camargo Corrêa will pay R$1.396 billion (approximately $339 million), which is composed of R$905.9 million for illicit enrichment (i.e., revenue Camargo Corrêa earned that it was not entitled to) from fraudulent contracts, R$330.3 million for restitution for bribes paid, R$123.6 million for a civil fine, and R$36.2 million for an administrative fine. The CGU and AGU agreed that these amounts will be shared between the entities harmed by Camargo Corrêa and the federal government. The CGU and AGU further agreed to offset the amounts by any payments that Camargo Corrêa makes as part of its July 2015 settlement.
The Agreement contains some standard requirements also found in U.S. DPA/NPA compliance requirements and in dispositions in Brazil and other countries. For example, the Agreement requires that Camargo Corrêa continue to cooperate in investigations and improve its compliance program. Additionally, in respect to program improvements, the Agreement requires Camargo Corrêa to present a detailed plan outlining the improvements the company intends to make, which the CGU will review. Camargo Corrêa must implement the CGU's comments unless the company demonstrates a "technical operational impossibility" with the CGU's suggestion, according to the Agreement. The Agreement further requires Camargo Corrêa to report every six months for a period of three years on the program's development. Finally, the CGU may test the implementation of the compliance program.
In what appears to be a trend for the Brazilian agreements, Camargo Corrêa agreed to obtain ISO 37001 certification from an entity accredited with the Brazilian government by July 31, 2021. In four of the last 10 leniency agreements, the CGU has required ISO certification. While the ISO certification requirement is likely to be less onerous than other commitments recently required by authorities, such as the requirement that EcoRovias retain an independent compliance monitor (as discussed below), ISO certification will require a resource commitment by Camargo Corrêa. It will be interesting to see if the CGU continues to require companies to obtain ISO certification in future settlements and under what conditions such requirements will be imposed.
In announcing the Agreement with the Camargo Corrêa, the CGU noted that it has entered into nine settlements with companies that misused public funds, including seven arising out of Lava Jato (Operation Carwash), which will result in R$11.5 billion being paid for fines, damages, and illicit enrichment.
EcoRodovias Settles Corruption and Money Laundering Allegations, Agrees to First Brazil-Only Compliance Monitorship
On September 6, 2019, Brazil's Federal Prosecution Service (MPF) ratified a two-part leniency agreement (available here and here) with EcoRodovias S.A. (EcoRodovias) that had been agreed to on August 12, 2019. EcoRodovias, a Brazilian highway operator, agreed to pay R$400 million (approximately $100 million) to resolve charges of corruption and money laundering tied to road concession contracts for a highway in the Brazilian state of Parana. Under terms of the leniency agreement, EcoRodovias will pay R$30 million in civil fines; R$150 million for road work improvements; and R$220 million for toll reductions in its highway operation.
While the leniency agreement contains boilerplate language about EcoRodovias' collaboration and a commitment to continue to improve its compliance program, the agreement uniquely requires the company to obtain an independent compliance monitor for 32 months. This is the first time that Brazilian authorities have required a monitor without U.S. authorities also insisting on a monitor. There is no express provision in Brazilian law regarding independent monitors, and the imposition of monitors is still novel. As such, it is premature to opine whether the monitor requirement will be a trend with Brazilian regulators. We will continue to review forthcoming settlements to see how the use of monitors develops.
On September 4, 2019, the Inter-American Development Bank Group (IDB) announced a Negotiated Resolution Agreement (Resolution) with Brazilian construction conglomerate Odebrecht S.A. (Odebrecht) covering two Odebrecht subsidiaries, CNO S.A. (CNO) and Odebrecht Engenharia e Construcao S.A. (OEC), following an investigation by the IDB's independent investigative body, the Office of Institutional Integrity (OII). According to the IDB's press release, the Resolution was negotiated by OII "in accordance with the IDB's Group's Sanctions Procedures," a dispute resolution system utilized by the IDB Group that is similar to investigations and debarment processes used by other international development banks.
According to a summary of its investigation, OII discovered bribes paid by CNO in connection with two IDB-financed projects: the Tocoma Hydroelectric Power Plant Program in Venezuela and the Highway Rehabilitation Program in the State of São Paulo, Brazil. OII alleged that the corrupt payments totaled approximately five to six percent of each contract's amount. With respect to the Highway Rehabilitation Program specifically, the OII discovered that between 2006 and 2008, CNO paid government officials approximately $380,000. In connection with Tocoma Hydroelectric Power Plant Program, however, the payments were much larger. OII discovered that CNO made corrupt payments totaling approximately $118 million between 2007 and 2015. According to OII, these payments were made by "utilizing a complex network of agents and offshore financial payment schemes."
As part of the Resolution, Odebrecht did not contest the OII's evidence and conclusions. In addition, Odebrecht agreed to various other conditions going forward as part of the Resolution, including:
- Conditional non-debarment on OEC for a period of 10 years;
- Conditional non-debarment on CNO for a period of four years, following its six-year debarment period;
- Debarment of 19 of CNO's subsidiaries (excluding African branches);
- Conditional non-debarment of 41 of OEC's subsidiaries; and
- Starting in 2024, charitable contributions totaling US$ 50 million to NGOs and charities "with the purpose of improving the quality of life of vulnerable communities in the IDB's developing member countries."
The IDB also noted that the Resolution permits a shortened debarment period because of Odebrecht's "continued cooperation," which includes conducting internal investigations to identify "system integrity risks to IDB-Group Financed activities." To this end, the IDB cited Odebrecht's commitment [in the Resolution] to "report on its compliance program through its independent monitor." (We previously reported on Odebrecht's 2017 settlement with U.S. authorities, including the company's agreement to retain an independent compliance monitor for three years.)
CNO's six-year debarment means that it is barred from participating in any IDB Group-financed projects. In contrast, conditional non-debarment allows a company to participate in IDB Group-financed projects, but only upon fully meeting the conditions of its settlement. In addition, Section 8.2.2. of the IDB's Sanction Procedures stipulates that failure to comply with the conditions of a settlement "may result in automatic debarment" under the terms of the settlement. Accordingly, OEC will remain eligible to participate in IDB Group-financed projects as along as it fully complies with the conditions in the Resolution. CNO will regain its eligibility after its six-year debarment.
Notably, one implication of debarment by the IDB is that it triggers cross-debarment by other multilateral development banks under the 2010 Agreement for Mutual Enforcement of Debarment Decisions. Accordingly, this means that CNO and 19 of its subsidiaries may be restricted from participating in projects financed by other multilateral development banks.
In September 2019, Peter Chapman, former manager of banknote manufacturer Innovia Securency PTY Ltd. (Securency), was ordered by an English court to pay £441,944.38 (approximately $545,000) as repayment of the benefits of bribes he had paid to government agents. In May 2015, Chapman was charged with six counts of making corrupt payments. After a five-week trial, Chapman was convicted of four counts and was acquitted on two. The court found that Chapman paid more than $205,000 to an agent of Nigerian Security Printing and Minting PLC in exchange for contracts with Securency. As a result, he was sentenced to 30 months. The confiscation order issued in September 2019 requires Chapman to repay £441,944.38, which is the amount he benefited from the improper payments, more than double what he was found to have paid to the agent of Nigerian Security Printing and Minting PLC. According to the SFO press release, if Chapman does not pay the entire amount within three months, he could receive an additional sentence of four years.
As previously reported, Securency pleaded guilty in Australia in 2011 to conspiring to bribe foreign official and was sentenced in 2012, resulting in a fine of more than $20 million. Though the SFO announced in October 2010 that it had made arrests in its probe of Securency relating to improper payments in Vietnam, Nigeria, Malaysia, and Indonesia, the company's settlement with the Australian government remained private until November 2018, when the Supreme Court of Victoria Australia lifted suppression orders over the case. The allegations described in the Australian sentencing order included bribe payments in Indonesia, Malaysia, and Vietnam. However, neither Chapman nor Nigeria were referenced in the company's sentencing order, indicating that the SFO and Australian Commonwealth Director of Public Prosecutions may have agreed to separately prosecute the improper payments depending on the country in which the officials resided.
On July 4, 2019, the SFO announced the completion of a DPA with Serco Geografix Ltd. (SGL). The DPA was approved by Justice William Davis and included three offenses of fraud and two false accounting offenses against SGL. The DPA noted the company's previous agreement to pay the U.K.'s Ministry of Justice £70.1 million ($90.25 million) in 2013 as part of a limited civil settlement reached with the Ministry involving fraud and false accounting related to electronic monitoring contracts.
As discussed in the DPA, SGL was involved in a scheme where it falsified the profits of its parent company, Serco Limited, in reports to the U.K.'s Ministry of Justice regarding profits from 2010 to 2013. SGL had a contract where it provided electronic monitoring equipment to the government. According to the Judgment, the falsification of the information made it appear to the Ministry of Justice that the company incurred costs it had not, and it also made false accounting entries.
As part of the DPA, the company will pay a fine of £19.2 million ($24.72 million) and will pay £3.7M ($4.76 million) in investigative costs to the SFO. In addition, SGL must implement certain remediation efforts, including (a) executing a multi-year Corporate Renewal Program, (b) changing senior management, and (c) conducting internal and external audits and testing to monitor accomplishments in remediation efforts. Specifically, as part of the Corporate Renewal Program, the DPA noted several "key components" that SGL is required to include: "i. revising Serco Group's Code of Conduct and other principles, supported by extensive training; strengthening contract-level governance; ii. Strengthening contract-level governance; iii. assessing and reissuing Serco Group's framework of management control to include more prescriptive guidance on required operational processes and procedures; iv. Strengthening risk management compliance and internal audit processes and capabilities; and v. creating new Board-level committees to formalize the process of guidance and decision-making on ethical, compliance, and compliance assurance issues." Also noteworthy is the fact that under the DPA the company is required to submit annual reports on the group-wide assurance program to the authority.
Upcoming Speaking Engagements
|12.06.19||ACI 36th International Conference on the Foreign Corrupt Practices Act (Matteson Ellis)|
|12.12.19||Houston Compliance Counsel Exchange Workshop and Document Exchange (James G. Tillen)|
|01.07.20||Strafford Webinar: Foreign Corrupt Practices Act Compliance in Joint Ventures and Consortia: Minimizing FCPA Risk (James G. Tillen)|
|01.30.20||ACI 14th Forum on the Foreign Corrupt Practices Act (James G. Tillen)|
|11.12.19||Money Laundering Enforcement Trends: Fall 2019 (Ann Sultan, William P. Barry, Kirby D. Behre, Collmann Griffin, Nina C. Gupta, Ian A. Herbert, Ivo K. Ivanov, Elizabeth J. Jonas, Maryna Kavaleuskaya, Bruno Pandini,* Chervonne Colón Stevenson)|
|11.11.19||DOJ Launches Strike Force Targeting Antitrust Crimes in Government Procurements (Abigail T. Stokes, Lauren E. Briggerman, Alejandro L. Sarria, Jason N. Workmaster)|
|11.07.19||The Intersection of the Investment Advisers Act Rules and OFAC Guidance: A Practical Guide for Investment Advisers (William P. Barry, Brian J. Fleming, Margot Laporte)|
|10.22.19||Trade Compliance Flash: USTR Announces Product-Specific Tariff Exclusion Process for List 4A (Richard A. Mojica, Nicole Gökçebay, Adam R. Harper)|
|10.08.19||Executives at Risk: Summer/Fall 2019 (Katherine E. Pappas, Lauren E. Briggerman, Kirby D. Behre, Nina C. Gupta, Amelia Hairston-Porter, Ian A. Herbert, Aiysha S. Hussain, Margot Laporte, Calvin Lee, Abigail T. Stokes)|
|10.04.19||Trade Compliance Flash: Q&A on the 2019 Miscellaneous Tariff Bill (MTB) Petition Process – A Duty-Saving Opportunity for U.S. Companies (Richard A. Mojica, Nicole Gökçebay, Adam R. Harper, P. Welles Orr, Claire Rickard Palmer)|
|10.01.19||Trade Compliance Flash: New Proposed Regulations Significantly Expand CFIUS Jurisdiction; Certain Non-Controlling Investments and Real Estate Transactions Now Within Scope of CFIUS Review (Brian J. Fleming, Timothy P. O'Toole, Collmann Griffin, Caroline J. Watson, Adam R. Harper)|
|09.18.19||A Guide to Recent Prosecutions Related to the PetroEcuador Scandal (James G. Tillen, Nicole Gökçebay)|
Contributors: Gregory W. Bates, Collmann Griffin,* Nina C. Gupta,* Amelia Hairston-Porter,* Ian A. Herbert, Alice C. Hsieh,* Maryna Kavaleuskaya,* Leah Moushey, Katherine E. Pappas, Chervonne Colón Stevenson,* Caroline J. Watson, Adam R. Harper,** and Bruno Pandini**
*Former Miller & Chevalier attorney
**Former Miller & Chevalier law clerk
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