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On September 14, Braskem SA, a Brazilian petrochemical company, agreed to pay its U.S. investors $10 million for concealing its role in a corruption scandal involving Petrobras. The settlement resolves a 2015 lawsuit brought by U.S. investors against Braskem, which alleged the company had misled investors into believing its operations were legitimate. The settlement follows the December 2016 guilty plea by the company and its affiliated construction firm Odebrecht SA to violating the Foreign Corrupt Practices Act. Together, the companies agreed to pay $3.5 billion in a combined global settlement with U.S., Brazilian, and Swiss authorities.
On August 29, the Wall Street Journal reported that a California-based ride sharing company is facing scrutiny from the DOJ, which has taken preliminary steps to investigate potential FCPA violations at the company. The company has expanded into more than 70 countries. A company spokesman confirmed the DOJ’s inquiry. The Wall Street Journal report stated that it was unclear whether DOJ would open a formal investigation.
On August 7, MTS Systems announced in its Form 10-Q the closure of DOJ and SEC FCPA investigations related to gift, travel, entertainment, and other expenses incurred in connection with its Asia-Pacific operations. Minnesota-based MTS Systems initially informed the DOJ and SEC about this matter in 2012 and thereafter provided the government periodic updates. According to MTS Systems’ 10-Q, the government’s investigations were closed “without further action taken by either [the SEC or DOJ].”
On August 4, Ohio-based Teradata Corporation disclosed in its 10-Q that the DOJ and SEC are conducting investigations concerning potential violations of the FCPA related to a subsidiary’s operations in Turkey. Teradata operates in more than 70 countries and develops and sells technology-enabled solutions, including data warehouse management and database technologies.
According to Teradata’s 10-Q, the company “discovered certain questionable expenditures for travel, gifts and other expenses at one of its international subsidiaries” doing business in Turkey. Teradata stated that it promptly launched an internal investigation and, in February 2017, self-disclosed the investigation to the SEC and DOJ. According to its 10-Q, Teradata has periodically updated the government about its investigation and plans to “continue to cooperate fully.” Teradata also noted that it already has “taken remedial actions,” including terminations, and that the FCPA issues “involved specific individuals who are no longer with the Company.”
It appears that Teradata is making a case for full cooperation credit under the DOJ’s Pilot Program, which encourages companies to “voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.”
During the week of July 24, 2017, three different companies announced the closure of DOJ and/or SEC FCPA investigations: IBM, Net 1 UEPS Technologies, Inc. (“Net 1”), and Newmont Mining.
In a Form 10-Q filed with the SEC on July 25, 2017, IBM disclosed that the DOJ and SEC had each informed the company in June 2017 of the closure of their respective investigations into “alleged illegal activity by a former IBM Poland employee in connection with sales to the Polish government.” The company initially informed the SEC in 2012 that the Polish Central Anti-Corruption Bureau was looking into the matter, and the DOJ followed up with its own investigation in April of 2013. The DOJ expanded the investigation from Poland to Argentina, Bangladesh, and Ukraine. The 2012 issues came on the heels of a 2011 settlement in which IBM paid the SEC $10 million to settle separate FCPA allegations for alleged cash payments to Chinese and Korean officials.
South African alternative payment systems provider Net 1 made a similar announcement on July 27, stating that the DOJ had written a letter to the company closing its investigation of alleged FCPA and disclosure violations. According to the announcement, the DOJ, along with the SEC and South African authorities, began looking into a 2012 contract award process involving a Net 1 subsidiary, Cash Paymaster Services Proprietary Limited, after an unsuccessful bidder for the same contract “refer[ed] unsubstantiated South African press articles to the DOJ.” The SEC was the first to bow out of the investigation, closing its inquiry through a letter in 2015, followed six months later by the South African government. Net 1 is traded on NASDAQ’s Global Select Market, providing a jurisdictional hook into a case otherwise about payments made by a South African company in South Africa to South African citizens who were South African government employees. Our additional coverage of this matter can be viewed here.
In a Form 10-Q filed on July 25, 2017, Newmont Mining also announced the end of a DOJ investigation into alleged violations of the FCPA “relating to certain business activities of [Newmont Mining] and its affiliates and contractors in countries outside the U.S.” According to the announcement, the Colorado company had already received a similar declination from the SEC earlier this year. Our additional coverage of this matter can be viewed here.
The DOJ simultaneously reportedly confirmed to the Wall Street Journal that the agency was still actively enforcing the FCPA. The Journal cited an anonymous source at the DOJ for assurances that “though there haven’t been any new corporate FCPA cases since mid-January, there is no letup in U.S. enforcement efforts.”
On July 27, 2017, a federal jury in the Southern District of New York convicted Ng Lap Seng of Macau of bribery, money laundering, and conspiracy, for his role in a widespread plan to bribe United Nations officials in order to establish a new conference facility in Macau. Five other defendants have also been charged; four have pleaded guilty, and one passed away. A sentencing date has not yet been set.
As pointed out on the FCPA Professor, this is a significant win for the DOJ because it marks the first time since 2011 that the DOJ has successfully taken an FCPA case to verdict. Our additional coverage of this matter can be viewed here.
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.
On June 21, the DOJ issued a declination letter to attorneys for CDM Smith, Inc., in which the DOJ declined prosecution and closed an investigation of CDM regarding potential FCPA violations that occurred in India between 2011 and 2015. CDM, a Boston-based privately held engineering and construction firm, agreed to pay DOJ approximately $4 million in disgorgement. The DOJ announced the declination on June 29 with a link posted on its website, making it the second FCPA declination that the DOJ announced in June 2017. Prior to June, the DOJ had last issued an FCPA declination letter in September 2016.
According to the DOJ Letter, CDM paid approximately $1.18 million in bribes to India government officials in exchange for contracts that resulted in approximately $4 million in net profits (the disgorgement amount). The payments were made by CDM’s division responsible for India operations and by CDM’s wholly-owned subsidiary in India through fraudulent subcontractors and generally equaled two to four percent of the contract price.
The DOJ’s letter stated that its decision to close its investigation is consistent with the FCPA Pilot Program, launched in April 2016 to encourage companies to “voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.” Accordingly, the DOJ determined that CDM had, among other things, made a “timely and voluntary self-disclosure” of potential FCPA violations, conducted and “thorough and comprehensive investigation,” fully cooperated with the DOJ, and performed full remediation, including the termination of all of the executives and employees involved in the conduct at issue. However, the letter provides little detail about these factors.
The DOJ letter makes clear that it does not foreclose future prosecution of any individuals connected to this matter, whether affiliated with CDM or otherwise.
On June 20, 2017, a former banker at the European Bank for Reconstruction and Development (EBRD) in London received a six year prison sentence for accepting more than $3.5 million in bribes. According to the Crown Prosecution Service, Andrey Ryjenko also received two years (to run concurrently) for "concealing, disguising, converting and transferring criminal property."
Reuters reports that Ryjenko conspired with a U.S. consultant to direct EBRD investments towards certain companies in exchange for bribes deposited into a bank account in the name of Ryjenko's sister. The consultant, Dmitrji Harder, pleaded guilty in 2016 in the U.S. to two counts of violating the FCPA. For additional coverage and analysis of the U.S. Department of Justice's enforcement action against Harder, see the previous posts here.
Both the Harder case and the Ryjenko prosecution were the result of a multinational investigation with cooperating agencies in several countries. Indeed, the CPS praised the cooperation, stating that Ryjenko's "conviction was made possible through effective cross-border partnerships between a number of jurisdictions, including the United States." According to Reuters, it was the bank that first contacted authorities in 2010 when its internal systems identified irregularities.
The Ryjenko conviction is part of a growing trend of foreign jurisdictions taking action against bribe recipients, who are not covered under the FCPA’s prohibitions in the U.S. (although U.S. authorities can sometimes try to pursue those bribe recipients under money laundering and other theories, if the bribe recipients can be brought under U.S. jurisdiction).
On Friday, June 16, the DOJ issued a declination letter to attorneys for Linde North America Inc. and Linde Gas North America LLC (collectively, “Linde”), in which the DOJ declined prosecution and closed an investigation of Linde and certain of its subsidiaries and affiliates regarding potential FCPA violations that occurred between November 2006 and December 2009. Linde, part of Germany’s Linde Group, which trades only on German stock exchanges and which has no securities registered with the SEC, agreed to pay DOJ a combined $11.2 million in disgorgement and forfeiture.
According to the DOJ letter, Spectra Gases, a New Jersey-based company acquired by Linde in October 2006, made corrupt payments to officials at and related to a Republic of Georgia state-owned and controlled entity to ensure continuity of business. Upon discovering this conduct, Linde initiated an internal investigation and subsequently withheld monies earmarked for a company controlled by the Georgian entity. These monies comprise the approximately $3.4 million that Linde agreed to forfeit.
The DOJ letter stated that its decision is consistent with the FCPA Pilot Program, launched in April 2016 to encourage companies “to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.” Accordingly, the DOJ determined that Linde had, among other things, voluntarily self-reported potential FCPA violations, conducted a thorough and proactive internal investigation, and continues to cooperate fully and remediate its compliance program and internal controls. Notably, the DOJ letter does not foreclose future prosecution of any individuals, and the letter explicitly delineates DOJ’s expectation that Linde will continue cooperating fully in any ongoing investigation of individuals.
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