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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.
- Kathryn L. Ryan to discuss "NMLS usage" at the NMLS Annual Conference & Training
- Jeffrey S. Hydrick to discuss "State legislative update" at the NMLS Annual Conference & Training
- Kathryn L. Ryan to speak at the "Business model primer" at the NMLS Annual Conference & Training
- Daniel P. Stipano to discuss "Dynamic customer due diligence and beneficial ownership from KYC to ongoing CDD and the new rule implementation" at the Puerto Rican Symposium of Anti-Money Laundering
- Michelle L. Rogers to discuss "Preparing for servicing exams in the current regulatory environment" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Jon David D. Langlois to discuss "Regulatory risks of convenience fees" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- APPROVED Webcast: NMLS Annual Conference & Ombudsman Meeting: Review and recap
- Brandy A. Hood to discuss "Keeping your head above water in flood insurance compliance" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Melissa Klimkiewicz to discuss "Servicing super session" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Jessica L. Pollet to discuss "Law & compliance speedsmarts" at the American Financial Services Association Law & Compliance Symposium
- Daniel P. Stipano to discuss "Lessons learned from recent high profile enforcement actions" at the Florida International Bankers Association AML Compliance Conference
- Moorari K. Shah to provide "Regulatory update – California and beyond" at the National Equipment Finance Association Summit
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Aaron C. Mahler to discuss "Regulation B/fair lending" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Heidi M. Bauer to discuss "'So you want to form a joint venture' — Licensing strategies for successful JVs" at RESPRO26
- Jonice Gray Tucker to to discuss "DC policy: Everything but the kitchen sink" at CBA Live
- Jonice Gray Tucker to discuss "Small business & regulation: How fair lending has evolved & where are we heading?" at CBA Live
- Daniel P. Stipano to discuss "Lessons learned from ABLV and other major cases involving inadequate compliance oversight" at the ACAMS International AML & Financial Crime Conference
- Daniel P. Stipano to discuss "A year in the life of the CDD final rule: A first anniversary assessment" at the ACAMS International AML & Financial Crime Conference
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program