James Tillen Assesses the Resolution of Honeywell's Settlement in Anti-Corruption Report
"Honeywell’s Well-Done Damage Control? Assessing the Resolution"
In this second article of a two-part series on Honeywell’s resolution, James Tillen discusses Honeywell's three-year deferred prosecution agreement with the government to resolve allegations that the company conspired to violate the Foreign Corrupt Practices Act (FCPA) by offering a $4 million bribe to a former Petrobras executive. In March 2022, Assistant Attorney General Kenneth A. Polite, Jr. announced the U.S. Department of Justice's (DOJ) new requirement that the CEO and CCO certify that the company's compliance program is designed in a way to prevent and remediate future violations of applicable laws, focused on anti-corruption and anti-fraud laws. This policy would then empower and increase the authority of CCOs within the business organization to drive the changes required by dispositions. "There are concerns that the certification requirement could create personal liability for, or put undue pressure on, CCOs," Tillen said, adding that "[i]t is also odd that the certification requirement doesn't include CFOs, when internal accounting controls are required by the FCPA and considered by the DOJ as a key component of an effective compliance program."
In a 2019 filing with the U.S. Securities and Exchange Commission (SEC), Honeywell disclosed the Petrobras and Unaoil investigations. Getting global government agencies to cooperate with one another and to agree to a settlement is a challenge. Tillen maintained that "[t]hree and a half years to resolve the matter is not unusual given the factors involved…[t]he resolutions involved an investigation spanning at least three countries, collection of overseas evidence, and the coordination with domestic authorities (DOJ, SEC, IRS, FBI) and Brazilian authorities (MPF, CGU, and AGU)."
In addition to its late 2022 settlements with the SEC, the DOJ and government entities in Brazil, in 2021, Honeywell settled a separate matter with the U.S. State Department and agreed to a $13 million civil penalty for allegedly violating the Arms Export Control Act and the International Traffic in Arms Regulations (ITAR). When discussing the impact that the size of the company has on compliance problems, Tillen noted that “[t]he larger the company, the more risks it faces based on the scope of potential interactions with officials and the more challenges it faces in governing the activities of employees and third parties…Just because a larger company may encounter more issues, including violations, does not mean that the compliance program is ineffective, as long as the program is identifying the problems quickly and has ability to investigate and remediate." In the Honeywell case, the company's compliance program "was considered sufficiently effective by the agencies such that they chose not to impose a monitor," Tillen said.
See Honeywell’s Well-Done Damage Control? How It Settled the Petrobras Problem and Dodged a Monitor for the first article in this two-part series on the resolution.