ELIG Gürkaynak Attorneys-at-Law | View firm profile
Overall, 2018 was a more
active year in terms of Foreign Corrupt Practices Act ("FCPA") enforcement
actions compared to 2017.
In
2018, the Department of Justice ("DOJ") took a total of 40 enforcement actions,[1] and the
Securities and Exchange Commission[2]
("SEC") took a total of 14 enforcement actions.
According
to the FCPA Blog's 2018 FCPA Enforcement Index, 16 companies paid a total of
$2.89 billion to resolve FCPA cases in 2018, including resolutions with the DOJ
and the SEC, as well as DOJ declinations with disgorgement.[3] As
anticipated over the past few years, the Yates Memo might have arguably shown
its effect, as 32 out of the 40 enforcement actions taken by the DOJ were
related to real persons, most of which were related to multiple bribery schemes
involving PDVSA, a Venezuelan state-owned oil and natural gas company. In terms
of the sectoral concentration of FCPA enforcement actions in 2018, we observe that
a wide array of sectors were affected by these actions, including the investment
banking, petroleum and technology sectors.
DOJ Declination
Decisions
In April 2018, the DOJ closed its
investigation with regard to the Insurance
Corporation of Barbados Limited ("ICBL"). According to the DOJ, ICBL had
paid approximately $36,000 in bribes to Donville Innis, a member of the
Parliament of Barbados and the Minister of Industry, International Business,
Commerce and Small Business Development of Barbados, in exchange for government
contracts worth $93,000 in profits. Under the terms of the declination pursuant
to the DOJ's Corporate Enforcement Policy, ICBL paid the DOJ about $93,900 in
disgorged profits.
In April 2018, the DOJ closed its
investigation with regard to Dun &
Bradstreet, which is a company that provides commercial data and analytics
services for businesses. According to the U.S. government, two Dun &
Bradstreet subsidiaries in China made bribery payments to Chinese government
officials. In its resolution with the SEC, Dun & Bradstreet agreed to pay
over $9 million in disgorgement. According to the DOJ, the declination decision
was based on, among other factors, (i) Dun & Bradstreet's identification of
the misconduct, (ii) its prompt and voluntary self-disclosure, (iii) thorough
investigation, (iv) full cooperation, and (v) the fact that it had agreed with
the SEC to disgorge profits, despite the acts of bribery committed by the
employees of Dun & Bradstreet's subsidiaries in China.
In August 2018, the DOJ closed its
investigation with regard to Guralp
Systems Limited ("GSL"), an engineering company based in the U.K., even
though there was evidence of violations of the FCPA arising from the payment
made by GSL to Heon-Cheol Chi, the director of the Earthquake Research Center
at the Korea Institute of Geoscience and Mineral Resources. According to the
DOJ, several reasons lead to the declination decision, such as GSL's (i)
voluntary disclosure of the misconduct, (ii) significant remedial efforts, and
(iii) being the subject of an ongoing parallel investigation by the U.K.'s
Serious Fraud Office for violations of law relating to the same conduct, and its
commitment to accepting responsibility for that conduct with the Serious Fraud
Office.
DOJ Enforcement
Actions
In March 2018, Transport Logistics International Inc. ("TLI"), a company providing
services in the field of transportation of nuclear materials, agreed to resolve
criminal charges in connection with a conspiracy involving the bribery of an official
at a subsidiary of Russia's State Atomic Energy Corporation for awarding
uranium transportation contracts, and also to pay a $2 million criminal penalty.
TLI entered into a three-year deferred prosecution agreement ("DPA") with the DOJ.
As per the DPA, the $2 million penalty amount is based on TLI's financial
inability to pay the penalty set forth under the U.S. Sentencing Guidelines.
TLI also committed to cooperate fully with the ongoing investigation, and to
continue to implement a "compliance and ethics" program, designed to prevent
and detect violations of the FCPA and other anti-corruption laws throughout its
operations.
In March 2018, Eberhard Reichert, a former Siemens AG executive who worked for the
company between 1964 and 2001, pleaded guilty and entered into a plea deal with
the DOJ, for conspiring to violate the FCPA's anti-bribery, internal controls,
and books and records provisions. The charges in this case involved making bribery
payments to officials in ten countries, including to Argentine government
officials, for $1 billion worth of contracts in order to create national
identity cards, and using shell companies controlled by intermediaries to
disguise and launder the funds.
In April 2018, Panasonic Avionics Corporation ("Panasonic Avionics"), a subsidiary
of the multinational electronics company, Panasonic Corporation ("Panasonic"),
agreed to pay a criminal penalty of $137,400,000 to resolve charges arising out
of a scheme to retain consultants of its U.S. in-flight entertainment unit in
the Middle East and Asia for improper purposes and to conceal payments to
third-party sales agents between 2007 and 2016, in violation of the accounting
provisions of the FCPA. According to the investigated party's admissions and
court documents, Panasonic Avionics had knowingly and willfully caused
Panasonic to falsify its books and records with respect to Panasonic Avionics'
retention of consultants for improper purposes. Panasonic Avionics also entered
into a DPA with the DOJ, which requires the company to be supervised by an
independent monitor for at least two years.
In June 2018, Société Générale S.A. ("Société Générale"), a global financial
services company based in Paris, France, and its subsidiary, SGA Société
Générale Acceptance N.V., agreed to pay a combined total penalty of more than
$860 million to settle with criminal authorities in the United States and in France,
to resolve charges arising out of bribery payments to government officials in
Libya. Société Générale entered into a DPA with the DOJ and it also reached a
settlement with the Parquet National Financier ("PNF") in Paris. The United
States will credit $292,776,444 that Société Générale will pay to the PNF under
its agreement, equal to 50 percent of the total criminal penalty payable to the
United States. According to the DOJ, this is the first coordinated resolution
with French authorities in a foreign bribery case.[4]
In August 2018, Legg Mason Inc. ("Legg Mason"), an investment management firm based
in Maryland, entered into a non-prosecution agreement ("NPA") with the DOJ by
agreeing to pay $64.2 million to resolve charges relating to violations of the
FCPA in Libya, as well as a civil penalty of $34 million to the SEC, in order to
disgorge $27.6 million of ill-gotten gains and pay $6.9 million in prejudgment
interest to settle the SEC's case. According to the DOJ and the SEC, Permal Group
Inc., a former subsidiary of Legg Mason, partnered with a French financial
services company to solicit investment business from Libyan state-owned
financial institutions and engaged in a scheme to pay bribes to Libyan
government officials through a Libyan middleman in order to secure investments.
As a result of the bribery scheme, Legg Mason was awarded investments by the
Libyan financial institutions, in the amount of $1 billion.
In September 2018, Petróleo Brasileiro S.A. ("Petrobras"), a Brazilian state-owned and
state-controlled energy company, entered into an NPA with the DOJ, and also reached
an agreement with the Brazilian authorities, agreeing to pay a combined total
of $853.2 million in penalties to resolve charges relating to violations of the
FCPA. To resolve the SEC investigation, Petrobras agreed to pay an additional
$933 million in profit disgorgement and prejudgment interest. According to the
DOJ and the SEC, Petrobras executives, who
consisted mostly of company board members, facilitated bid-rigging and bribery
schemes by enabling their contractors to inflate the contracts for their
infrastructure projects, where the contractors made facilitating payments to the
Brazilian politicians and political parties responsible for appointing the
Petrobras executives to their positions in exchange for the inflated contracts.
SEC Enforcement
Actions
In March 2018, Kinross Gold Corporation ("Kinross Gold"), a Canada-based gold and
silver mining company, paid a civil penalty of $950,000 to settle the SEC's
charges for violating the FCPA's books and records and internal accounting controls
provisions, arising from the company's repeated failure to implement adequate
accounting controls for two African subsidiaries. According to the SEC, Kinross
had acquired two African mining companies in 2010, operating in Mauritania and
Ghana, which lacked the requisite anti-corruption compliance programs and
internal accounting controls. Kinross Gold was able to implement adequate
controls in three years; however, the company failed to subsequently maintain these
controls. For example, Kinross Gold awarded a logistics contract to a company
preferred by Mauritanian government officials. Furthermore, it paid vendors and
consultants without making sure that the payments were consistent with its
anti-bribery compliance policies.
In March 2018, Elbit Imaging Ltd. ("Elbit"), an Israel-based company operating in the
real estate, medical imaging, hotels, shopping malls, and retail sectors,
agreed to pay a $500,000 penalty to the SEC to resolve charges relating to violations
of the FCPA's books and records and internal accounting controls provisions.
According to the SEC, Elbit and its indirect subsidiary, Plaza Centers N.V., made
large amounts of payments to third-party offshore consultants and a sales
agent, for services related to a real-estate development project in Romania and
the sale of a large portfolio of real-estate assets in the U.S., without
knowing if the contracted services were actually provided. The companies also
failed to accurately record these payments in their books and records, in a
manner that fairly reflected their true nature.
In July 2018, Beam Suntory Inc. ("Beam"), a subsidiary of Suntory Beverage &
Food Ltd., based in Chicago, which is a subsidiary of Suntory Holdings of
Osaka, Japan, paid the SEC $8.2 million to resolve charges relating to violations
of the FCPA, stemming from the improper payments made by its Indian subsidiary
to government officials in India. According to the SEC, Beam's Indian
subsidiary had used third-party sales promoters and distributors to make
illicit payments to government employees between 2006 and 2012, in order to (i)
increase sales orders, (ii) process license and label registrations, and (iii) facilitate
the distribution of Beam's distilled spirit products.
In September 2018, one of the biggest
pharmaceutical companies in the world, Sanofi
S.A. ("Sanofi"), based in Paris, France, agreed to pay $25.2 million (comprising
a civil penalty of $5 million, $17.5 million in disgorgement payments and $2.7
million in prejudgment interest) to resolve charges relating to violations of the
FCPA's books and records and internal accounting controls provisions, as a
result of its subsidiaries in Kazakhstan and the Middle East bribing officials to
win business contracts. According to the SEC, the bribery schemes spanned
multiple countries and involved illicit payments to government procurement
officials in Jordan, Lebanon, Syria, Bahrain, Kuwait, Qatar, Yemen, Oman, and
the United Arab Emirates, in order to be awarded tenders and to increase
prescriptions of its products. In March 2018, the DOJ had closed its four-year
FCPA investigation without deciding to bring an enforcement action.
In September 2018, United Technologies Corporation ("United Technologies"), a
Connecticut-based company providing high-technology products and services to
the building systems and aerospace industries, settled charges with the SEC
that it had violated the FCPA by making illicit payments in its elevator and
aircraft engine businesses. United Technologies agreed to pay $13.9 million to
resolve charges that its actions had violated the FCPA. According to the SEC,
its subsidiary, Otis Elevator Co., had made payments in bribes to Azerbaijani
officials to facilitate elevator equipment sales in Baku, and had also paid a
Chinese sales agent in order to obtain confidential information from a Chinese
official to help win engine sales contracts from a state-owned Chinese airline.
In September 2018, Stryker Corporation, a company based in Michigan operating in the
medical device sector, agreed to settle with the SEC and pay a $7.8 million
penalty to resolve charges
relating to the FCPA's books and records and internal accounting controls provisions.
According to the SEC, Stryker's internal accounting controls were not
sufficient to detect the risk of improper payments in sales of Stryker products
in India, China, and Kuwait, and Stryker's Indian subsidiary had failed to
maintain complete and accurate books and records. Stryker had also been charged
by the SEC back in October 2013, with respect to bribery payments made by its
subsidiaries in five different countries to doctors, health care professionals,
and other government-employed officials in order to obtain new business or
retain existing business relationships.
On November 19, 2018, Vantage Drilling Company ("Vantage") agreed to pay $5 million to
the SEC in disgorgement for violations of the FCPA's internal accounting
controls provisions, regarding its failure to properly implement and maintain a
system of internal accounting controls related to its use of third-party marketing agents.
According to the SEC, Vantage lacked sufficient internal accounting controls in
relation to the heightened risk of conducting business in the oil and gas
industry in Brazil.
Authors: Gönenç Gürkaynak, Esq., Ceren Yıldız and
Nazlı Gürün, ELIG Gürkaynak Attorneys-at-Law
(First published
by Mondaq on January 16, 2019)