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On June 6, the DOJ filed a status report with the U.S. District Court for the District of Columbia stating that medical device manufacturer Biomet had violated its 2012 deferred prosecution agreement (DPA) related to FCPA charges. Specifically, the DOJ stated that it notified Biomet on April 15, 2016 that "the government had determined that Biomet had breached the DPA based on the conduct in Mexico and Brazil and based on Biomet's failure to implement and maintain a compliance program as required by the DPA." Biomet had settled FCPA charges with the DOJ and SEC in 2012 related to the company's conduct in Argentina, Brazil, and China. As previously reported in the FCPA Scorecard, Biomet's DPA had been extended twice since 2012: once in March 2015 because the company had discovered additional potential FCPA violations in Brazil and Mexico, and again in March 2016. According to the DOJ, Biomet and the DOJ are in discussions to resolve the matter without a trial.
SEC Reaches Non-Prosecution Agreements for Bribes of Chinese Officials; DOJ Declines to Pursue FCPA Enforcement Actions
On June 7, the SEC announced it had entered into non-prosecution agreements with two unrelated companies in connection with bribes paid to Chinese officials by foreign subsidiaries. First, Akamai Technologies, a Massachusetts-based internet services provider, agreed to pay $652,000 in disgorgement and $19,433 in interest. According to its agreement, Akamai's foreign subsidiary had paid bribes to induce Chinese government-owned entities to purchase more services than they needed. Second, Nortek Inc., a Rhode Island-based residential and commercial building products manufacturer, agreed to pay $291,000 in disgorgement and $30,000 in interest. According to that agreement, Nortek's subsidiary made improper payments and gifts to Chinese officials in exchange for preferential treatment, relaxed regulatory oversight, and reduced customs duties, taxes, and fees. The agreements each stipulate that the companies are not charged with violations of the FCPA and will not pay any additional monetary penalties. In support of the agreements, the SEC noted that both companies promptly self-reported the conduct and cooperated extensively with the ensuing investigations. Kara Brockmeyer, Chief of the SEC Enforcement Division's FCPA Unit, praised the companies for "promptly tighten[ing] their internal controls after discovering the bribes and [taking] swift remedial measures to eliminate the problems." Also on June 7, Akamai and Nortek each released letters from the DOJ declining to pursue enforcement actions against the companies. The letters are the first public declinations issued by the DOJ under its FCPA Pilot Program announced in April 2016. The one-year Pilot Program is designed to encourage companies to voluntarily self-report potential FCPA-related misconduct and cooperate with federal investigations. DOJ declined to pursue enforcement actions based on several factors, including that the companies identified the misconduct themselves, promptly self-disclosed the misconduct, thoroughly investigated the misconduct, enhanced their compliance programs and internal accounting controls, terminated the employees responsible for the misconduct, disgorged any ill-gotten gains, fully cooperated with the federal investigations, and agreed to cooperate with any future investigations.
According to a June 1 news report, the DOJ has named Daniel Kahn to lead the Fraud Sections FCPA unit. Mr. Kahn has led the FCPA unit on an interim basis since March of this year. He was previously the Assistant Chief of the FCPA Unit since 2013. Mr. Kahn has led significant recent FCPA prosecutions including the Alstom case, which led to a record $772 million fine, and the Esquenazi case, which generated case law on the FCPAs definition of a foreign official. (See previous FCPA Scorecard coverage of those cases here and here.)
On May 13, a Delaware Chancery Court judge dismissed a shareholder derivative suit accusing Wal-Mart Stores Inc.'s (Wal-Mart) board of directors of failing to conduct an adequate investigation of Mexican bribery allegations. The lead plaintiffs in the suit, two large state employee pension funds, alleged that the Wal-Mart board of directors also covered up the bribery allegations, which were exposed after a 2012 article by the New York Times reported that top officials at Wal-Mart's Mexican subsidiary oversaw millions of dollars in bribes in connection with the company's expansion in Mexico. The Delaware judge found that an earlier case filed in Federal Court in Arkansas involved the same facts as the Delaware action and had been full y litigated before it was dismissed with prejudice in April 2015. The Arkansas Court had found that the plaintiffs failed to establish that a pre-suit demand on the directors to take action would have been futile, and that holding "preclude[d] re-litigation of the issue" in the Delaware action. See previous FCPA Scorecard coverage of the Arkansas action here. In 2014, the plaintiffs had won the right to access various Wal-Mart internal documents, but they were denied the right to use other Wal-Mart documents that were allegedly provided by an anonymous whistleblower. See previous FCPA Scorecard coverage here.
On June 1, the Wall Street Journal reported that Las Vegas Sands, the Nevada-based operator of numerous hotel, resort, and casino properties in the United States and Asia, had agreed to settle a civil lawsuit originally filed in 2010 by a former executive. In the suit, the plaintiff had made various allegations about Las Vegas Sands CEO exerting allegedly improper leverage over government officials in Macau. While no independent verification of the settlement amount is available, the Wall Street Journal reported that Sands will pay between $75 and $100 million to settle the civil suit. In April of 2016, Sands settled with the SEC over allegations that the company had violated the FCPAs internal controls and books and records provisions related to activities in China and Macau, and agreed to pay a $9 million penalty and obtain an independent monitor for two years. See previous FCPA Scorecard coverage of the settlement here.
Unaoil Alleges Extortion Following Media Reports of Mass Bribery; Third Company Announces Government Inquiry Related to Relationship with Unaoil
On May 16, Unaoil released a statement denying claims made in a media report that linked the company to allegations of bribing foreign government officials to secure contracts within the oil and gas industry. The company stated it has "been the victim of a four-month extortion attempt by criminals," and that it is currently engaged with UK authorities. Separately, Core Labs, an Amsterdam-based oil services company, disclosed in a May 11 S-3 filing that the DOJ has questioned the company in relation to the Unaoil investigation. The company stated that it is cooperating with the DOJ's inquiries. Core Labs is the third company to disclose DOJ inquires as a result of the Huffington Post's investigation surrounding Unaoil and the companies that used its services. Previous Scorecard coverage on the Unaoil investigations can be found here.
The Huffington Post's recently-published multi-part investigation centering on Monaco-based Unaoil and allegations of bribing foreign government officials to secure contracts within the oil and gas industry is starting to generate FCPA repercussions. Two companies that used Unaoil's consulting services and were identified in the investigative pieces, KBR and FMC Technologies, announced in late April U.S. securities filings that they each have received inquiries from the DOJ in connection with an FCPA investigation into Unaoil's activities. Both KBR and FMC Technologies also stated that they are cooperating with the DOJ's inquiries. In late March, the Huffington Post reported that "[h]undreds of major international corporations," including KBR, FMC Technologies, Rolls-Royce, Halliburton, Samsung, and Hyundai, among many others, utilized Unaoil's services to win contracts in the Middle East, Africa, and the former Soviet Union. The Huffington Post alleged that Unaoil engaged in widespread foreign bribery to achieve results for its clients: "The Monaco-based company specialises in paying bribes for multinational clients on the basis that it can deliver a valuable edge in bidding for oil and gas contracts worth hundreds of millions of dollars." Unaoil has said that it is "shocked" by the "unfounded" allegations and has said that it will defend itself and its management "vigorously." Houston-based KBR is no stranger to FCPA investigations. In 2009, KBR and its former parent Halliburton paid a then-record $579 million to resolve charges that KBR participated in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement, and construction contracts. This time around, the Huffington Post alleged that KBR utilized Unaoil "to help it win oil and gas contracts in Kazakhstan." The alleged activity in Kazakhastan was occurring while the DOJ was investigating KBR's activities in Nigeria, according to the Huffington Post.
On April 7, 2016, the SEC settled FCPA allegations with Las Vegas Sands, the Nevada-based operator of numerous hotel, resort, and casino properties in the United States and Asia. In a cease and desist order, the SEC found that Las Vegas Sands violated the FCPA's internal controls and books and records provisions related to activities in China and Macau. The SEC order alleged that Las Vegas Sands made more than $62 million in payments to a consultant in Asia, without supporting documentation or appropriate authorizations, and at times continued to make payments to the consultant without being able to account for prior transfers. Las Vegas Sands consented to the SEC's order without admitting or denying the charges and agreed to pay a $9 million dollar penalty. In addition to the penalty, Las Vegas Sands agreed to obtain an independent monitor for two years to "review its FCPA-related internal controls, recordkeeping, and financial reporting policies and procedures and its ethics and compliance functions."
On March 29, the UK Serious Fraud Office charged another Alstom S.A. employee, Terence Stuart Watson, in its ongoing corruption investigation of the beleaguered French power and transportation company. The SFO has previously charged 6 other individuals in this investigation. The charges against Watson, the Alstom Country President for the UK and Managing Director of Alstom Transport UK & Ireland, are related to alleged bribery in Hungary concerning the companys supply of trains to the Budapest Metro between 2003 and 2008. The SFOs prior charges have involved alleged corruption spanning Hungary, India, Poland, and Tunisia, and included charges against the former Senior Vice President of Ethics and Compliance related to alleged bribery in Hungary. In late 2014, the company pleaded guilty to FCPA charges brought by the US Department of Justice, and agreed to pay a record $772 million fine to resolve those charges.
On March 25, medical device manufacturer Biomet announced that the deferred prosecution agreement it entered into with the DOJ to settle FCPA charges in 2012 would be extended a second time. The company reported that the DOJ and SECs investigation into alleged misconduct in Brazil and Mexico, and into the companys compliance program, was still ongoing. Biomet settled FCPA charges with the DOJ and SEC in 2012 related to the companys conduct in Argentina, Brazil and China. As previously reported, Biomet disclosed in March 2015 that the deferred prosecution agreement it had agreed to as part of the settlement would be extended for one year because the company had discovered additional potential FCPA violations in Brazil and Mexico.
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Benjamin W. Hutten to discuss "BSA program reporting, management and board of directors responsibilities" at the Georgia Bankers Association BSA Experience Program
- Hank Asbill to discuss "Ethical guidance in conducting internal investigations – The intersection of Yates and Upjohn" at the American Bar Association Southeastern White Collar Crime Institute
- H Joshua Kotin to discuss "Recent developments in fair lending and avoiding the pitfalls" at the Arkansas Community Bankers/Bankers Assurance 2019 Compliance Conference
- Brandy A. Hood to discuss "RESPA Section 8/referrals: How do you stay compliant?" at the New England Mortgage Bankers Conference
- Daniel P. Stipano to discuss "Risk management in enforcement actions: Managing risk or micromanaging it" at the American Bar Association Business Law Section Annual Meeting
- Valerie L. Hletko to discuss "Banking on guns ‘n drugs: Social policy meets financial services" at the American Bar Association Business Law Section Annual Meeting
- Daniel P. Stipano to discuss "Navigating the conflicting federal and state laws for doing business with cannabis companies" at the American Bar Association Business Law Section Annual Meeting
- Tim Lange to discuss "Services and value" at the North American Collection Agency Regulatory Association Annual Conference
- Katherine L. Halliday to discuss "UDAP, UDAAP & the Map rule compliance basics" at the Mortgage Bankers Association Regulatory Compliance Conference
- Brandy A. Hood to discuss "How to ace your TRID exam" at the Mortgage Bankers Association Regulatory Compliance Conference
- Amanda R. Lawrence to discuss "Data privacy litigation" at the Mortgage Bankers Association Regulatory Compliance Conference
- Melissa Klimkiewicz to discuss "Navigating FHA rules and regs" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jeffrey P. Naimon to discuss "Washington regulatory overview" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "HMDA data is out, now what?" at the Mortgage Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano to discuss "Assessing the CDD final rule: A year of transitions" at the ACAMS AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions and CMPs" at the ACAMS AML & Financial Crime Conference
- Kathryn L. Ryan to discuss "The state’s role in fintech: Providing an industry framework for innovation" at Lend360
- Jeffrey P. Naimon to discuss "Truth in lending" at the American Bar Association National Institute on Consumer Financial Services Basics
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions" at the Institute of International Bankers Risk Management and Regulatory Examination/Compliance Seminar
- Jonice Gray Tucker to discuss "Fintech regulatory developments, crypto-assets, blockchain and digital banking, and consumer issues" at the Practising Law Institute Banking Law Institute
- Amanda R. Lawrence to discuss "How to balance a successful (and stressful) career with greater personal well-being" at the American Bar Association Women in Litigation Joint CLE Conference