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On September 8, Cisco Systems Inc. disclosed in its annual statement that following an investigation into its operations in Russia and certain of the Commonwealth of Independent States, the DOJ and SEC have both declined to bring enforcement actions under the FCPA. An announcement of possible violations was first disclosed in the December 2013 blog post by Roxane Marenberg, Vice President and Deputy General Counsel in Cisco’s Global Compliance Enablement division. In the post, Marenberg stated that the company was conducting an investigation into alleged FCPA violations at the request of the SEC and DOJ in response to a communication those agencies had received concerning the company’s operations and discounting practices. Cisco’s disclosures did not provide any further detail about the nature of the business activities being investigated.
In conjunction with the SEC’s recent settlement AstraZeneca, the U.K.-based pharmaceutical company announced on August 30 that the DOJ has closed its parallel foreign bribery investigation. As detailed here, the SEC settled charges against Astrazeneca for allegedly improper payments made by the company’s wholly owned subsidiaries in China and Russia. Under the SEC settlement, the company agreed to disgorge $4.325 million and pay a $375,000 civil penalty with $822,000 in prejudgment interest. As reported by Reuters, the company issued a public statement stating it was “pleased to have resolution of these matters.”
On August 8, 2016, medical device manufacturer Biomet announced in an SEC filing that it is “probable” that the company will incur additional liabilities in connection with the company’s 2012 deferred prosecution agreement (DPA) related to FCPA violations in Mexico and Brazil. The company stated that it had set aside funds for this purpose, but did not specify the amount. Biomet’s SEC filing stated that the company “expects to continue discussions with the SEC and DOJ but the terms of a potential resolution were not certain.”
Two months ago, DOJ stated in a court filing that Biomet had breached the DPA by failing to implement and maintain a compliance program. See previous FCPA Scorecard coverage of that filing here.
On July 29, the DOJ announced that Brayan Jiménez, former president of the Guatemala soccer federation, pleaded guilty to racketeering conspiracy and wire fraud conspiracy charges. Jiménez was the president of the Guatemala soccer federation from 2009 to 2015. His guilty plea came in response to allegations that Jiménez received bribes in exchange for awarding media and marketing rights to a Florida company for the Guatemalan national soccer team’s World Cup qualifying games. The bribes, totaling hundreds of thousands of dollars, were transmitted from U.S. bank accounts. As part of the plea, Jiménez agreed to forfeit $350,000 and could be sentenced to a maximum of 20 years for each count.
The guilty plea came as part of the U.S. government’s investigation into corruption in international soccer. 42 individuals and entities have been charged thus far in the investigation, which has been ongoing since May 2015, and Jiménez is the sixteenth person to plead guilty.
Previous FCPA Scorecard coverage of the FIFA investigation can be found here.
On July 25, LATAM Airlines Group S.A. (LATAM), a Chile-based airline, agreed to settle parallel criminal and civil FCPA matters relating to alleged bribery of Argentine labor union officials through a sham consulting contract with a third party in exchange for the union accepting lower wages and other concessions. LATAM agreed to pay a total of more than $22 million, including a $12.75 million penalty as part of a three-year Deferred Prosecution Agreement (DPA) with DOJ.
As part of the DPA, LATAM agreed to continue cooperating with DOJ’s investigation, to make improvements to its compliance program, and to retain a compliance monitor for a period of more than two years. In the DPA and in its press release regarding the settlement, DOJ noted that it took into account certain factors that weighed against LATAM, including that LATAM did not voluntarily disclose the alleged misconduct (which came to light through Argentinian press reports) or discipline the responsible employees. However, DOJ did note that LATAM cooperated with DOJ’s investigation once the press reports became public, and “provided all relevant facts known to it, including about individuals involved in the misconduct.”
Because of the factors weighing against LATAM, the penalty was within the U.S. Sentencing Guidelines range, and the Company did not receive a discount off the bottom of the range as suggested in DOJ’s recent guidance regarding its FCPA pilot program. As stated in the guidance, in order to be eligible for full mitigation credit, a company must voluntarily disclose the FCPA violations, and the DOJ considers such disclosure as a factor separate and apart from the company’s cooperation in the subsequent investigation. The company must also engage in timely and appropriate remediation, which includes appropriate discipline of employees identified by the company as responsible for the misconduct. The guidance specifically states that a monitor should not be required if the company “has, at the time of resolution, implemented an effective compliance program.”
In this case, one of the first under the FCPA pilot program, DOJ followed its guidance by refusing to give mitigation credit when the company did not voluntarily self-disclose and did not fully remediate. It is difficult to say what, if any, credit LATAM received for its extensive cooperation once the investigation began – cooperation that included turning over to DOJ “all relevant facts known to [the Company], including about individuals involved in the misconduct.”
At the same time, LATAM also settled an SEC administrative enforcement action by agreeing to pay $6.74 million in disgorgement and $2.7 million in prejudgment interest Earlier this year, the Company’s CEO separately settled with the SEC regarding the same scheme, and agreed to pay a $75,000 penalty and attend anti-corruption training.
On April 5, 2016, the DOJ announced a one-year pilot program designed to encourage corporations to voluntarily self-report FCPA-related misconduct and cooperate with the DOJ. The program emerges from the DOJ’s heightened focus on individual accountability as highlighted in the Yates Memo. For corporations that (i) voluntarily disclose the misconduct and all relevant facts related to the misconduct “within a reasonably prompt time after becoming aware of the offense,” (ii) fully cooperate with the DOJ investigation, and (iii) take appropriate actions towards remediation, DOJ may offer up to a 50% fine reduction from the bottom of the applicable Sentencing Guidelines fine range calculation, and will generally not require the appointment of a monitor if the corporation has already implemented an effective compliance plan. Furthermore, DOJ notes that in certain circumstances, the Department will consider declining prosecution altogether.
While the pilot program ends in one year, any corporation that voluntarily self-reports or cooperates in FCPA matters during the pilot period will be eligible for the benefits, even if the pilot period expires during the investigation. More details and specific requirements can be found in the DOJ’s Foreign Corrupt Practices Act Enforcement Plan and Guidance.
On November 30, 2015 the United Kingdom’s Serious Fraud Office (SFO), working with the DOJ and SEC, entered into a deferred prosecution agreement (DPA) with Standard Bank under the U.K.’s Bribery Act of 2010 regarding payments by two former employees that were allegedly made to bribe members of the Tanzanian government. The DPA represents the SFO’s first-ever DPA and the first use of Section 7 of the Bribery Act, failure of commercial organizations to prevent bribery, by any U.K. prosecutor. As part of this DPA, Standard Bank has agreed to pay a combined $32.2 million in sanctions to the U.K. and Tanzania, and to cover the SFO’s litigation and investigation costs. The DPA also requires Standard Bank’s continued cooperation with authorities and the implementation of certain recommendations from its independent compliance consultants.
In addition to the DPA, Standard Bank agreed to pay $4.2 million to the SEC to settle charges related to the failure to disclose the underlying bribe payments in the bank’s offering documents and statements to potential investors. In light of Standard Bank’s cooperation with the SFO and the DPA, the DOJ reportedly closed its own investigation without bringing independent charges.
Notably, in one of the first examples of the SEC implementing its plan to make more defendants admit to the allegations against them as part of resolutions, Standard Bank agreed to the facts underlying the SEC charges.
On September 29, the United States District Court for the Southern District of New York dismissed a putative securities class action lawsuit against Avon Products Inc. (“Avon”) and two senior executives in which shareholders had accused the cosmetics company and its senior management of issuing materially false and misleading statements concerning Avon’s compliance with the FCPA in China. The class action had been pending since mid-2011. The dismissal was without prejudice.
Following a June 2008 internal investigation, Avon disclosed that it was conducting an internal investigation focused on compliance issues related to the FCPA in connection with the company’s conduct in China and other countries. The plaintiffs alleged that this misconduct, detailed in press reports suggesting bribery of Chinese officials, ultimately affected the company’s share price. Company shareholders filed a putative class action in July 2011 under Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, 25 U.S.C. §§ 78j(b) and 78t(a). The plaintiffs alleged that Avon made more than 60 materially false and misleading statements, including statements regarding the company’s ethics code and corporate responsibility reports which prohibited the offering or payment of bribes to foreign government officials. Plaintiffs claimed those statements were misleading because at the time, senior management was aware of “material weaknesses in Avon’s system of internal controls” and those failings were not disclosed to investors. The court ruled that general statements proclaiming compliance with ethical and legal standards are not material and actionable because “[a] reasonable investor would not rely on the statements…as a guarantee that Avon would, in fact, maintain a heightened standard of legal and ethical compliance.” Plaintiffs also alleged that several statements concerning Avon’s business success in China and other developing markets was misleading because the statements did not attribute Avon’s success to the bribery of foreign officials or disclose the attendant risks and potential liabilities when such information would become public. The court rejected those allegations for failure to plead the heightened scienter required under the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4(b).
Avon had previously settled with the DOJ and SEC in May 2014 regarding investigations into the same allegations of bribery. That settlement, for alleged violations of the books and records and internal control provisions of the FCPA, totaled $135 million and included a 3-year deferred prosecution agreement and Avon’s retaining of a compliance monitor for 18 months.
On November 14, 2012, the US DOJ and SEC released A Resource Guide to the Foreign Corrupt Practices Act, almost a year to the day that Assistant Attorney General Lanny Breuer announced that the SEC and DOJ would prepare an FCPA Guidance document (click here and here for previous BuckleySandler posts on this issue). Overall, the FCPA Guide is a helpful compilation of previously-issued guidance and litigation positions set forth by the DOJ and SEC, and a useful starting point for constructing, testing or revising an FCPA compliance program.
- Jonice Gray Tucker to discuss “Getting your company ready: Managing fair lending for IMBs” at the Mortgage Bankers Association Independent Mortgage Bankers Conference
- Jonice Gray Tucker to discuss “Be Your Compliance Best in 2022” at the California Mortgage Bankers Association webinar
- Lauren R. Randell to discuss “Significant legal developments in the Northeast” at the 37th Annual National Institute on White Collar Crime
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- Jonice Gray Tucker and Kari Hall to discuss “Equity, equality, regulation and enforcement – The evolving regulatory landscape of fair lending, redlining, and UDAAP” at the ABA Business Law Committee Hybrid Spring Meeting