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Nutrition company settles DOJ, SEC FCPA charges for over $123 million

Financial Crimes DOJ SEC FCPA Of Interest to Non-US Persons

Financial Crimes

On August 28, the DOJ and the U.S. Attorney’s Office for the Southern District of New York announced (see here and here) they had entered into a deferred prosecution agreement with a multinational nutrition company headquartered in Los Angeles, in which the company agreed to pay a criminal fine of over $55.7 million related to violations of the FCPA’s books and records provisions. According to the DOJ, the company “knowingly and willfully conspired with others in a scheme to falsify its books and records and provide corrupt payments and benefits to Chinese government officials.” Between 2007 and 2016, the company’s books showed that its Chinese subsidiary reimbursed its employees “more than $25 million for entertaining and giving gifts to Chinese government officials and Chinese media personnel. . ., some of which was used for improper purposes,” which the DOJ said was part of a scheme to obtain, retain, and increase business in China and remove negative media reports about the subsidiary. The payments were used to obtain and retain “certain direct selling licenses for its wholly-owned subsidiaries in China” and to “improperly influenc[e] certain Chinese governmental investigations into [the subsidiary’s] compliance with Chinese laws,” as well as to influence state-owned or controlled media.

As part of the deferred prosecution agreement, the company agreed to cooperate with the DOJ’s ongoing or future criminal investigations and to enhance its compliance program. The company received credit for cooperating with the investigation and taking remedial measures such as “terminating and disciplining individuals who orchestrated the misconduct, adopting heightened controls and anti-corruption protocols, and significantly increasing the resources devoted to compliance.”

The SEC simultaneously announced a resolution in which the company agreed to pay over $58.6 million in disgorgement and more than $8.6 million in prejudgment interest to settle allegations that the company violated the FCPA’s books and records and internal accounting controls provisions.

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