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DOJ Charges 16 Additional Individuals with FIFA-Related Corruption; Swiss Authorities Arrest Two High-Ranking FIFA Members
On December 3, 2015 the DOJ charged an additional 16 individuals in connection with the DOJs ongoing corruption investigation into FIFA. The new indictment included a number of high ranking FIFA members, including Alfredo Hawit, the president of the Confederation of North, Central America and Caribbean Association Football (CONCACAF) and vice-president of FIFA, and Juan Angel Napout, the president of the South American Football Confederation (CONMEBOL) and a member of the FIFA executive committee. Both of these individuals were arrested by Swiss authorities in Zurich and are opposing extradition to the United States. With the additional 16 individuals, a total of 41 people and entities have now been charged as part of the DOJs ongoing investigation. Previous FCPA Scorecard coverage of the FIFA investigations can be found here.
The Department of Justice recently posted revisions to the United States Attorneys' Manual (USAM) regarding its corporate cooperation policy. Under the revisions, the USAM now requires that companies provide all relevant facts about individual misconduct in order to be eligible for any cooperation credit. According to Deputy Attorney General Sally Quillian Yates, the revisions were meant to codify the policy outlined in the DOJ memorandum on individual liability issued earlier this year, specifically the policy that in any corporate case the primary focus should be on "holding individual wrongdoers accountable." Other revisions to the USAM include that a corporation's voluntary disclosure and its willingness to cooperate will now be considered as two separate factors weighing in the company's favor, whereas before they had been combined into a single factor. Additionally, the USAM will now require civil attorneys, as with prosecutors, to focus on pursuing individuals from the beginning of an investigation.
On November 13 a federal district judge sentenced Alstom S.A., a French power and transportation company, to pay a record $772 million fine to resolve FCPA charges. The fine, agreed on by Alstom and various subsidiaries in December 2014 as part of its guilty plea, is the largest criminal FCPA fine ever paid. For other prior coverage on Alstom, please see here.
On November 2, Alexion Pharmaceutical Inc. disclosed that the Department of Justice had requested documents and other information related to the companys compliance with the FCPA. The Securities and Exchange Commission is also investigating the companys compliance with the FCPA, a fact that Alexion disclosed in May. The SECs subpoena sought information about Alexions grant-making activities worldwide, specifically naming Japan, Brazil, Turkey and Russia in its request, and also addressed non-FCPA items. The drugmaker said that it planned to cooperate with DOJs investigation.
On November 9, Crawford & Co., an Atlanta-based claims management firm, disclosed that it had reported possible FCPA violations to DOJ and SEC. The company discovered the possible violations during an internal audit and has since launched an investigation, using outside counsel and external forensic accountants. The company stated that it intends to cooperate with the SEC and the DOJ in this matter, but the filing did not elaborate on the nature or location of the potential violations.
Assistant Attorney General Caldwell Provides Insight on Corporate Compliance and the Fraud Sections New Compliance Expert
On November 2, at a speech at the Securities Industry and Financial Markets Association (SIFMA) Compliance and Legal Society New York Regional Seminar, Assistant Attorney General Leslie Caldwell discussed compliance issues and the Fraud Section's hiring of Hui Chen, the former head of compliance for Standard Chartered Bank, as its first full-time compliance expert. Caldwell spoke about how critically important it is for companies to have strong and broad-based compliance programs that receive "adequate resources and management attention." She noted that companies should stay away from a "narrow, cramped view of compliance that requires only adherence to specific regulations." As an example, she pointed to the government's foreign currency manipulation investigation and how a target bank's compliance program did not address certain clear risks in the F/X business because the bank believed the market was largely unregulated by the SEC and CFTC. Caldwell stated that the bank's narrowly-tailored compliance program resulted in the bank pleading guilty and paying millions of dollars in fines when it turned out that the bank's traders were colluding with others to manipulate the foreign currency markets. Caldwell also provided insight into the DOJ's recent hiring of a compliance expert, Chen, and how Chen will assist prosecutors in the Fraud Section. Caldwell stated that Chen will help the DOJ assess a company's compliance program, "as well as test the validity of [the company's] claims about its program, such as whether the compliance program truly is thoughtfully designed and sufficiently resourced to address the company's compliance risks, or essentially window dressing." Moreover, Chen "will help guide Fraud Section prosecutors when they are seeking remedial compliance measures as part of a resolution with a company, whether by prosecution or otherwise." Caldwell noted that the DOJ's retention of a compliance expert is not an indication that it is moving toward recognizing or instituting a "compliance defense." But the government's evaluation of a company's compliance program will be among the "many factors" considered when deciding whether to criminally charge a company or how to resolve a criminal charge. Caldwell listed certain hallmarks of an effective compliance program such as whether the program receives support from directors and senior managers, whether policies are clear and in writing and effectively communicated to all employees, whether those policies are kept up to date with evolving risks and circumstances, and whether a company, once investigated, is candid with regulators. It remains to be seen how exactly the Department uses Chen's expertise. Caldwell's speech emphasized the important role the DOJ's new compliance counsel will play in its investigations, including FCPA investigations. While Caldwell rejected the notion that the DOJ is recognizing a compliance defense, the DOJ's hiring of a compliance expert may lead to better informed prosecutors, which may help companies make their case that any FCPA violations were not a result of institutional failures. However, companies should also be ready for the DOJ to more critically examine their compliance efforts and claims that their compliance and training programs are truly as effective and far reaching as advertised.
Former President of Brazilian Football Confederation Waives Extradition and Pleads Not Guilty in U.S. FIFA Investigation
On October 28, the Swiss Federal Office of Justice announced that Jose Maria Marin, former President of the Brazilian Football Confederation, had agreed to be extradited from Switzerland to the United States as part of the U.S. governments investigation of alleged money laundering and bribery at FIFA. Marin is accused of having taken bribes worth millions of dollars from sports marketing companies in connection with the sale of marketing rights for Copa America and Copa do Brasil tournaments, and to have shared these bribes with other soccer officials. Marin previously had opposed extradition. On November 3, Marin appeared before Judge Raymond Dearie of the United States District Court in of the Eastern District of New York. Marin pleaded not guilty to an array of federal charges including conspiracy to commit racketeering, wire fraud, and money laundering. He was released on a $15 million personal recognizance bond with home detention and electronic monitoring. Marin is the second FIFA official to waive extradition. As noted in a previous post, Jeffrey Webb, a former vice president of FIFA, agreed to be extradited to the United States in July. Several other defendants are currently fighting extradition efforts.
On October 9, James Rama, a former Vice President of Florida-based defense contractor IAP Worldwide Services, Inc., was sentenced in the U.S. District Court for the Eastern District of Virginia to 120 days in prison for conspiracy to violate the anti-bribery provisions of the FCPA. Rama pleaded guilty to the conspiracy charge on June 16 for his role in a scheme by IAP to pay more than $1.7 million in bribes to Kuwaiti officials to win a government contract intended to provide nationwide surveillance capabilities for several Kuwaiti government agencies. Rama had faced a recommended sentence under the Sentencing Guidelines of between 57 and 60 months, but received a substantially shorter sentence in part due to his cooperation with authorities during their investigation. Prosecutors had recommended that Rama received a one year sentence, while the defense had requested just supervised release. IAP previously? entered into a non-prosecution agreement with the DOJ and agreed to pay $7.1 million to resolve the allegations against the company.
On October 5, the SEC announced a settlement with Bristol-Myers Squibb to resolve allegations that the pharmaceutical companys Chinese joint venture, BMS China, gave cash, jewelry, and other benefits to health care providers in order to boost prescription sales at state-owned or controlled hospitals. The SEC proceeded via an administrative cease and desist order. The SECs order found that the company violated the internal controls and books and records provisions of the FCPA. Bristol-Myers consented to the SECs order without admitting or denying the findings, and agreed to disgorge profits of $11.4 million plus $500,000 in pre-judgment interest and pay a civil penalty of $2.75 million. Bristol-Myers also agreed to report to the SEC for two years regarding the status of its efforts to implement anti-corruption compliance controls. The SECs order states that Bristol-Myers failed to investigate red flags and claims by terminated BMS China employees that raised the possibility that sales personnel were making improper payments. The order also states that Bristol-Myers was too slow to fill gaps in its internal controls regarding interactions with health care providers.
After months of speculation about potential legal ramifications for FIFA President Joseph ("Sepp") Blatter, the Office of the Attorney General of Switzerland announced that Mr. Blatter is the subject of criminal proceedings in that country. The allegations include criminal mismanagement related to a contract with the Caribbean Football Union that was purportedly against the interests of FIFA, as well as misappropriation related to a payment to the President of the Union of European Football Associations (UEFA). The Office of the Attorney General also reported that Mr. Blatter was interrogated and his offices were searched. Previous FCPA Scorecard coverage of this investigation can be found here.