FCPA Scorecard Blog

SEC declines enforcement against Cobalt in FCPA investigation for second time

Houston-based Cobalt International Energy, Inc. announced in a January 29, 2018 8-K filing that the SEC had concluded its second investigation relating to the company’s operations in Angola, and that SEC staff did not intend to recommend an enforcement action. The SEC’s investigation began in March 2017. As detailed in previous FCPA Scorecard posts, this follows the DOJ’s February 2017 declination and the SEC’s January 2015 declination following other investigations of the company’s Angola operations.

SEC Cobalt International Energy Angola

Wal-Mart Sets Aside $283 Million for Potential Resolution of FCPA Allegations

On Thursday, November 16, 2017, Wal-Mart Stores, Inc. (“Wal-Mart”) disclosed in an SEC filing that it has set aside $283 million for a potential resolution with DOJ and SEC of alleged FCPA violations. The investigation into possible FCPA violations in Mexico was first disclosed in Wal-Mart’s December 2011 SEC filing and, in subsequent filings, Wal-Mart stated that the allegations had been expanded to include possible violations in Brazil, China, and India, among others.

In its November 16 filing, Wal-Mart reiterated that it has been cooperating with the DOJ and SEC in their investigations, and the discussions with these government agencies has progressed such that Wal-Mart can reasonably estimate a probable loss of $283 million, although it noted that the company cannot assure that its efforts to resolve these matters will ultimately succeed as anticipated.

Click here for FCPA Scorecard’s prior coverage of this matter.

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Charles Cain Named New SEC FCPA Chief

After serving as Acting Chief of the SEC’s Enforcement Division’s Foreign Corrupt Practices Act Unit for more than six months, SEC veteran Charles Cain will now officially take on the position of head of the FCPA Unit. According to an SEC press release, Cain intends “to build[] upon the important work the unit has done to combat corruption and level the playing field globally.” The SEC named Cain to the Acting Chief role in April 2017 after his predecessor, Kara Brockmeyer, left the agency. 

After graduating with honors from The George Washington University Law School, Cain spent two years in the private sector before joining the SEC in 1999. In addition to serving as Deputy Chief of the FCPA Unit since 2011, Cain co-authored A Resource Guide to the U.S. Foreign Corrupt Practices Act, an effort for which he received the Irving M. Pollack Award.

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SAP Self-Discloses Approximately $6.8 Million in Payments to Gupta Family-Related South African Entities

On October 26, SAP, a German multinational software corporation, announced that it has voluntarily disclosed commission payments of approximately $6.8 million to Gupta family-related entities to the U.S. Department of Justice and the Securities and Exchange Commission.  The voluntary disclosure in July has led to an ongoing DOJ and SEC investigation into SAP’s conduct. 

SAP acknowledged that between December 2014 and June 2017, contracts with Transnet and Eskom, both South African state-owned companies, were closed with the assistance of Gupta family-related entities.   SAP’s internal investigation has also led to the initiation of disciplinary proceedings against three employees in South Africa.  The Gupta family, which is connected to South African president Jacob Zuma, has previously denied wrongdoing associated with receiving such kickbacks.  While acknowledging cooperation with the DOJ and the SEC, SAP stated that it has had no interaction with South African authorities and has not decided whether the company will approach South African authorities in the future.  The U.S. investigation is ongoing and SAP has acknowledged that it has begun the process of sharing documents with authorities.

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Alere Settles FCPA Violations With SEC for $13 Million

On September 28, the SEC announced that diagnostic test manufacturer Alere Inc. had settled a variety of FCPA books and records and internal control allegations stemming from its sales practices in Africa, Asia, and Latin America, including the failure to improperly characterize and record payments made to government officials in Columbia and India. In concluding the more than two year investigation, Alere agreed to pay a civil monetary penalty of $9.2 million, and disgorgement and interest of approximately $3.8 million. As part of the settlement agreement, Alere did not admit or deny the SEC’s findings of fact. As discussed in a previous FCPA Scorecard post, the DOJ announced in March 2016 that it is also investigating the company’s foreign sales practices. That investigation is ongoing. 

Ongoing FCPA investigations can of course have costly business implications beyond reputational damage; the ongoing FCPA investigation of Alere appears to have taken a toll, likely playing a role in the reduced price paid by Abbott Laboratories in April 2017 to acquire Alere.

SEC Alere Inc. FCPA

Halliburton Agrees to Settle FCPA Claim for $29 Million in Disgorgement and Penalties

Halliburton Company recently settled allegations that the company improperly steered business to the friend of an Angolan official in exchange for that official awarding various oil contracts to the company. In total, Halliburton agreed to pay the SEC $29.2 million, comprising $14 million in disgorgement, $1.2 million in prejudgment interest, and a $14 million penalty. Halliburton’s former vice president also agreed to pay the SEC a $75,000 penalty related to these violations and other accounting irregularities.  

This is the most recent settlement in a series of FCPA enforcement actions focusing on Halliburton’s procurement processes and operations in various countries. Former Halliburton subsidiary KBR settled similar FCPA allegations in 2009 related to alleged bribes paid to Nigerian officials to procure contracts in that country.    

This settlement also highlights the role of whistleblowers in driving FCPA and other enforcement actions. A Halliburton whistleblower first alerted the company to potential FCPA issues in 2010, which resulted in the launching of an investigation into the allegations.

SEC FCPA Enforcement Action Angola Disgorgement Bribery Nigeria Whistleblower

SFO Announces Charges Against a Global Bank and Four Former Executives in Qatar Capital Raising Matter

On Tuesday, June 20, the UK Serious Fraud Office (“SFO”) announced charges against a global bank and four former executives for conspiracy to commit fraud and provision of unlawful financial assistance in violation of the Companies Act 1985. These charges relate to the bank’s capital raising arrangements with Qatar Holding LLC and Challenger Universal Ltd in June and October 2008, as well as to a $3 billion loan facility made available to the State of Qatar acting through the Ministry of Economy and Finance in November 2008. According to the SFO press release, the investigation was first announced in 2012, and the individuals charged include a former Chief Executive Officer of the bank, a former Executive Chairman of the bank's Capital Investment Banking and Investment Management in Middle East and North Africa, a former Chief Executive of the bank's Wealth and Investment Management, and a former European Head of the bank’s Financial Institutions Group.

While no US-based charges have been announced, the SFO’s announcement comes on the heels of the bank’s March 2017 disclosure to the SEC in which the company stated that “the DOJ and SEC are undertaking an investigation into whether the Group’s relationships with third parties who assist the bank to win or retain business are compliant with the U.S. Foreign Corrupt Practices Act.”

SEC UK Serious Fraud Office Fraud Qatar Holding Challenger Universal

Supreme Court Limits SEC Disgorgement

On June 5, the Supreme Court ruled in Kokesh v. SEC that the SEC’s authority to disgorge profits from defendants is subject to the five-year statute of limitations applicable to penalties and fines. The Court rejected the SEC’s position that disgorgement is an equitable remedy and not a penalty, resolving a circuit split on the issue. Writing for the unanimous Court, Justice Sotomayor said that disgorgement “bears all the hallmarks of a penalty,” reasoning that it “is intended to deter, not to compensate.” The defendant in Kokesh was an investment adviser who had been ordered to disgorge approximately $35 million for allegedly misappropriating investor funds.

The SEC routinely seeks disgorgement in FCPA enforcement actions. The Kokesh decision may lead the SEC to seek tolling agreements sooner and in more circumstances, particularly where the alleged conduct occurred over a long period of time. The decision may also impact defendants’ ability to claim insurance coverage for disgorgement because insurers might deny coverage for payment of penalties.

SEC FCPA Enforcement Action Kokesh

Reports: Wal-Mart Nearing Resolution of Bribery Probe

Bloomberg reports that Wal-Mart is nearing a resolution of a five-year old joint inquiry by the DOJ and SEC. Citing an unnamed source familiar with the matter, Bloomberg reports that the company is preparing to pay $300 million to settle allegations that company employees paid bribes in Mexico, China, and India. The same source reported that the resolution will also include at least one guilty plea by a Wal-Mart subsidiary, a non-prosecution agreement for the parent company, and a monitorship.

In March of 2015, a federal district court in Arkansas dismissed with prejudice a consolidated shareholder derivative suit accusing Wal-Mart Stores Inc.’s (Wal-Mart) board of directors of concealing Mexican bribery claims from investors. The lawsuit was filed 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. See previous Scorecard coverage here. The same article is believed to have touched off the DOJ’s and SEC’s inquiry. If true, a $300 million resolution would not be near the top end of FCPA resolutions.

DOJ SEC Score Card Bribery Wal-Mart

Former Guinean Mining Minister Convicted on Bribery and Money Laundering Charges

A former Guinean mining minister was found guilty earlier this week on bribery and money laundering charges following a seven-day jury trial in Manhattan federal court. He was charged with receiving and laundering $8.5 million in bribes allegedly for securing mining rights for two Chinese companies. 

The conviction came one day after the former minister took the stand in his own defense and admitted to lying to banks about his status as a government official, as well as failing to report the payments on his IRS tax return.

The conviction also follows other notable enforcement actions involving the mining industry in the Republic of Guinea. Earlier this year, the SEC charged former Och-Ziff executives with bribing government officials across Africa to secure mining deals, including in Guinea.

SEC Guinea Africa China Och-Ziff Bribery Anti-Money Laundering