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As a follow up to its March 2016 reporting about the Unaoil bribery scandal, the Huffington Post recently published an interview with a former Unaoil employee who has admitted to paying bribes to a manager in Libya’s state-owned oil company in order to win a government contract. Lindsey Mitchell, a former Unaoil manager, told the Huffington Post and the Australian newspaper The Age that in the summer of 2009 he was summoned to a meeting with a production manager at Waha, a subsidiary of the Libyan National Oil Company. At the meeting, the production manager provided Mitchell with details relating to an upcoming bid for a $45 million Libyan government contract. Huffington Post reports that “[t]he next morning, Mitchell called Ata, Cyrus and Saman Ahsani, the father and two sons who ran Unaoil. They were pleased. That afternoon, Martin Abram, a Unaoil manager, met Mitchell at the Unaoil staffhouse to deliver an envelope full of cash” which Mitchell delivered to the Waha manager. A few days later, Mitchell resigned. It is unclear whether Unaoil ever won the contract though the manager told Mitchell that “he expected a 5-10 percent kickback ― about $2-4 million ― if Unaoil won the contract.” According to the interview, Mitchell has recently been cooperating with U.S., U.K., Australian, and Canadian law enforcement authorities. Unaoil has denied Mitchells’ allegations and denies paying bribes to foreign officials in order to win deals for its multinational clients. Previous Scorecard coverage on the Unaoil investigations can be found here.
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 February 8, 2013, a federal judge denied the motion to dismiss of several Magyar Telekom executives facing civil FCPA allegations, holding that the SEC had adequately alleged personal jurisdiction because the defendants' alleged conduct was “designed to violate” U.S. securities laws and thus was “directed toward the United States.” On February 22, the Defendants filed a motion to certify the order for interlocutory appeal to the Second Circuit, which was denied on procedural grounds without prejudice to re-file.
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.
The SEC has posted a complete list of FCPA enforcement actions. Click here to view the list at www.sec.gov.
- The SEC charged Diageo PLC, one of the worlds largest producers of premium alcoholic beverages, with widespread FCPA violations for more than six years of actions in India, Thailand, and South Korea.
- Sherry-Maria Safchuk to discuss "Final CCPA regulations: Compliance considerations" at a CUCP virtual meeting
- H Joshua Kotin to discuss "Servicing GSE payment deferrals" at a Mortgage Bankers Association webinar
- Daniel R. Alonso to discuss "When can trial lawyers take their case to the public? The Harvey Weinstein case and beyond" at a New York City Bar Association webcast
- Daniel P. Stipano to discuss "Cram for the exam: Best prep strategies for a regulatory examination" at an ACAMS webinar
- Melissa Klimkiewicz to discuss "Flood insurance basics" at the NAFCU Virtual Regulatory Compliance School
- Sasha Leonhardt to discuss "Privacy laws clarified" at the National Settlement Services Summit (NS3)