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Foreign Corrupt Practices Act & Anti-Corruption

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  • SEC Charges Bruker with FCPA Violations Related to Travel Expenses

    On December 15, 2014, the SEC charged Bruker Corporation (Bruker) with violating the FCPA by making improper payments and paying for non-business-related travel expenses for Chinese government officials. Bruker, a Massachusetts-based global manufacturer of scientific instruments, paid approximately $2.4 million to settle the SEC's charges. The SEC used an administrative cease-and-desist order to settle the case. According to the SEC's order, Bruker's China subsidiaries made unlawful payments of approximately $230,000 to Chinese government officials who were employed by state owned entities that were Bruker customers. These payments included payments (i) for non-business travel (reimbursements to Chinese government officials for leisure travel to the United States and numerous European countries) and (ii) pursuant to collaboration and research agreements for which there was no legitimate business purpose. The SEC order found that Bruker violated the internal controls and books and records provisions of the FCPA. Bruker self-reported its misconduct and provided "significant" cooperation to the SEC.

    China Bruker Corporation

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  • Avon Enters DPA and Subsidiary Pleads Guilty to Resolve DOJ and SEC FCPA Investigations

    On December 17, 2014, Avon and its China subsidiary resolved the DOJ’s FCPA investigation into the New York-based cosmetics company’s operations in China and agreed to pay $68 million.  Avon Products (China) Co. Ltd. (Avon China), a wholly owned subsidiary of Avon, pleaded guilty to a criminal information charging it with conspiring to violate the FCPA’s books and records provisions. Avon entered into a deferred prosecution agreement (DPA) and admitted its criminal conduct, including its role in the conspiracy and failure to implement internal controls.  Under the terms of the DPA, the DOJ will defer criminal prosecution of Avon for a period of three years and the company will appoint a compliance monitor.    According to the companies’ admissions, from at least 2004 through 2008, Avon and Avon China conspired to falsify Avon’s books and records by falsely describing the nature and purpose of certain Avon China transactions, including disguising $8 million in gifts, cash and non-business travel, meals and entertainment that Avon China executives and employees gave to government officials in China in order to obtain and retain business benefits for Avon China. Also on Dec. 17 in related civil proceedings, the SEC charged Avon with violations of the Corporate books and records and internal control provisions of the FCPA and announced that Avon agreed to pay more than $67 million in disgorgement and prejudgment interest to settle the charges. The settlement has not yet been approved by the Court.

    China Avon

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  • Parker Drilling’s Scotland-Based Unit Pays Over £170,000 to Resolve Bribery and Corruption Charges in Scotland

    On Dec. 17, 2014, International Tubular Services (ITS), an oil and gas services firm based in Scotland that was acquired by Houston-based Parker Drilling (Parker) in 2013, agreed to pay £172,200 to resolve bribery and corruption charges. ITS admitted to benefiting from corrupt payments made by a former Kazakhstan -based employee to secure additional contractual work from a customer in Kazakhstan. Scotland’s Prosecution Service noted that the bribery and corruption was discovered when the company was being sold to Parker and that Parker has taken steps to implement comprehensive anti-bribery policies and training. In 2013 in an unrelated investigation, Parker paid nearly $16 million to resolve DOJ and SEC FCPA charges related to bribery of Nigerian officials.

    Kazakhstan Parker Drilling International Tubular Services Scotland

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  • Dallas Airmotive Settles FCPA Charges for $14 Million

    On December 10, 2014, the DOJ announced that it was settling FCPA charges with Dallas Airmotive, a company that provides aircraft engine maintenance services, after the company admitted to having violated the FCPA and agreed to pay a $14 million fine. A criminal information filed as part of the settlement charged the company with bribing government officials in Brazil, Peru and Argentina from 2008 to 2012 in exchange for contracts to provide maintenance and repair services on state-owned aircraft engines.  According to the criminal information, Dallas Airmotive used "front" companies and third parties to pay bribes, and also directly provided things of value, such as paid vacations, to government officials. As part of the settlement, the company entered into a deferred prosecution agreement with DOJ.  The company admitted to paying the bribes in a statement of facts accompanying the deferred prosecution agreement. In comments to the Wall Street Journal, Dallas Airmotive announced that the individuals responsible for the improper payments are no longer with the company. The settlement with Dallas Airmotive follows the recent FCPA-related settlement between the DOJ and BizJet, a subsidiary of Lufthansa Technik AG, which also concerned allegedly improper payments to government officials in Latin America in exchange for business related to aircraft maintenance and repair.  In 2012, BizJet entered into a deferred prosecution agreement and agreed to pay an $11.8 million fine as part of the settlement, while Lufthansa entered into a non-prosecution agreement.

    Argentina Brazil BizJet Lufthansa Technik AG Dallas Airmotive Peru

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  • Bio-Rad Settles FCPA Claims With SEC and DOJ

    On November 3, Bio-Rad Laboratories Inc. agreed to pay a total of $55 million to settle DOJ and SEC allegations that the company violated the FCPA in Russia, Thailand, and Vietnam.  According the SEC's cease-and-desist order, subsidiaries of the bio-medical instrument manufacturer paid $7.5 million in bribes in Russia, Thailand, and Vietnam from 2005 to 2010 in order to win business in violation of Section 30A of the FCPA, which resulted in $35 million in improper profits for the company.  Some of the payments were disguised as commissions to foreign agents, in situations where the "agents had no employees and no capacity to perform the purported services for Bio-Rad."  The company also allegedly had an "atmosphere of secrecy."  Bio-Rad self-disclosed the violations to the government in 2010. As part of the resolution, the company reached a Non-Prosecution Agreement with the DOJ regarding activities in Russia and agreed to a $14.35 million criminal penalty related to books and records and internal controls violations.  The resolution with the SEC involved the payment of $40.7 million in disgorgement and pre-judgment interest regarding anti-bribery, books and records, and internal controls violations related to Russia, Thailand, and Vietnam. Of note, and continuing the trend of cross-border cooperation, the SEC in its press release disclosed that numerous international entities had assisted its investigation, including the "Bank of Lithuania, Financial and Capital Market Commission of Latvia, and British Virgin Islands Financial Services Commission."  Underscoring the issue, following public disclosure of Bio-Rad's settlement with the SEC regarding alleged payments in Vietnam, news reports indicate that Vietnam's Ministry of Health has ordered a review of hospital purchases from Bio-Rad, and asked for information and assistance from US authorities.

    Thailand Russia Bio-Rad Vietnam

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  • General Cable Announces FCPA Internal Investigation Near Completion

    Just a month after announcing its internal investigation of possible FCPA violations, news reports indicate that General Cable Corporation's review will be completed or substantially completed by the first quarter of 2015.  The company also announced that it "plans to exit all of its Asia Pacific and African manufacturing operations," although it did not link the exit — which affects nine plants in Asia and five plants in Africa, and approximately 17% of its total sales — to its FCPA investigation. In September, the Kentucky-based cable manufacturer announced that it was investigating its payment practices with respect to employees of public utility companies in Angola, Thailand, India and Portugal due to possible FCPA concerns.  News reports indicate that, to date, the company has spent millions on the review, which has included a review of over 450,000 documents and interviews of over 20 individuals.  The company also disclosed that it was cooperating with investigations by the DOJ and SEC.

    India Thailand Africa Angola General Cable Portugal Internal Investigation

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  • SEC Settles FCPA Claims Against Water Management Company

    On October 27, the SEC settled administrative proceedings via a cease and desist order against Layne Christensen Co., a Texas-based water management company, related to FCPA violations from operations in Africa.  The SEC's order cited over $800,000 in improper payments to officials in Mali, Guinea, the Democratic Republic of the Congo, Burkina Faso, and Tanzania, related to tax liabilities, customs clearance, expatriate work permits, and border entry.  Some of those payments were as small as $4.  The company agreed to pay over $4,750,000 in disgorgement and prejudgment interest, and a $375,000 penalty.  The SEC cited the company's self-disclosure, remediation, and "significant cooperation" as reasons for a smaller penalty.  In August, the company announced that the DOJ had declined to file charges related to the alleged FCPA violations. Of note, the company has in the past tied its discovery of the irregular payments to an update of its FCPA policy.  Periodic evaluations and updates of FCPA policies are a necessary component of any compliance program, but also represent opportunities to evaluate past conduct and uncover issues.

    Africa Settlement Layne Christensen Co.

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  • District Court Allows Wal-Mart Securities Fraud Class Action Lawsuit to Proceed

    On September 26, the United District Court for the Western District of Arkansas adopted a magistrate judge’s recommendation denying Wal-Mart’s motion to dismiss a securities fraud class action arising out of allegations of bribery in Mexico.  Plaintiffs had alleged that certain company officials at Wal-Mart’s Mexican subsidiary paid bribes to obtain permits for new stores in Mexico, and that Wal-Mart had deceived investors by claiming in an SEC filing in December 2011 that its investigation of the alleged bribery had taken place in fiscal year 2012.  Plaintiffs alleged that Wal-mart actually learned of the suspected corruption in 2005 and conducted an internal investigation in 2006, much earlier than disclosed.  The plaintiffs alleged violations of Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, 25 U.S.C. §§ 78j(b) and 78t(a), and violations of SEC Rule 10b-5, 17 C.F.R. § 240.10b-5.  The court held that the plaintiffs had met the heighted pleading standard required by the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4(b). The court found, among other things, that the plaintiffs sufficiently alleged that Wal-Mart’s omission from its 2011 filing of the prior 2005 investigation rendered the filing misleading and that the allegations in the complaint, taken collectively, meet the requisite scienter requirement because they alleged that Wal-Mart knew it was omitting material information that led the statement as a whole to be misleading. Wal-Mart is still under investigation by the DOJ and SEC related to possible FCPA violations in its foreign subsidiaries, and has disclosed continued cooperation with authorities and strengthening of its global anti-corruption measures. In its fiscal 2014 Global Compliance Program Report, Wal-Mart said it spent a total of $439 million in legal fees and other costs associated with investigations of alleged FCPA violations and to restructure its global compliance policies and procedures.

    Mexico Wal-Mart

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  • Brazil Charges Embraer Executives with Bribery

    According to media reports, the Brazilian government has filed a criminal complaint against eight Embraer SA executives, alleging bribery of foreign officials.  This is one of the first criminal prosecutions that Brazil has undertaken against its citizens for foreign bribery.  The complaint alleged that Embraer sales executives agreed to pay a $3.5 million bribe to a retired Dominican Air Force colonel and then-director of special projects for the Dominican Republic’s armed forces, who – in exchange – influenced legislators to approve a $92 million contract and financing agreement for aircraft.  The deal provided the Dominican Republic with eight Embraer Super Tucanos, which is an attack support aircraft.  The complaint indicated that part of the bribe was to be paid to a Dominican senator, but the senator was not named in the complaint.  The executives attempted to make the payments through three shell companies, but Embraer’s compliance department blocked the full transfer in 2009.  The rest of the bribe payments were concealed by booking them as consulting fees to a middleman in a separate deal with Jordan that never happened.  The complaint charges the Embraer executives with corruption in international transactions, which carries a maximum sentence of eight years in prison, and money laundering. According to The Wall Street Journal, who reviewed the complaint that was filed under seal, the U.S. DOJ and the U.S. SEC assisted the Brazilian prosecutors by providing evidence from the U.S. agencies’ investigations.  In 2011, Embraer disclosed that it was under investigation in the United States for potential violations of the FCPA, and those investigations are ongoing.

    Brazil Embraer Dominican Republic

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  • General Cable Investigates its Angola, Thailand, Indian, and Portugal Operations

    In a Form 8-K filed on September 22, General Cable Corporation stated that it is reviewing its payment practices with respect to employees of public utility companies in Angola, Thailand, India and Portugal due to possible FCPA concerns.  The cable manufacturer, which is based in Kentucky, determined that "certain employees in [its] Portugal and Angola subsidiaries directly or indirectly made payments at various times from 2002 through 2013 to officials of Angola government-owned public utilities that raise concerns under the FCPA and possibly under the laws of other jurisdictions."  The investigation also covers General Cable's use and payment of agents in Thailand and India, which the company also believes may have implications under the FCPA or other laws.  According to General Cable's filing, it voluntarily disclosed the issues to the SEC and the DOJ, whose investigations are ongoing.

    India Thailand Angola General Cable Portugal

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