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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.
Dmiitry Firtash, the Ukrainian billionaire indicted in 2013 for his alleged role in a conspiracy to bribe government officials in India to permit the mining of titanium minerals, filed a motion to dismiss the indictment on May 9 in a federal district court in Illinois. Firtash also faces money laundering and RICO charges along with five alleged coconspirators. In 2015, an Austrian court denied the United States’ extradition request, but that decision was eventually reversed and Firtash was extradited earlier this year. See previous Scorecard coverage here.
Firtash’s motion to dismiss focuses on the lack of jurisdictional contact between the charged conduct and the United States. It vigorously challenges the jurisdictional basis alleged in the indictment, which was that Firtash’s coconspirators, but not Firtash himself, transferred money through United States correspondent banks, traveled to the United states, and used email accounts and cellular phones hosted on servers in the United States. However, Firtash claims that the indictment fails to allege that any of these contacts have any connection to the alleged bribery scheme and that Firtash himself never entered the United States in connection with the charged conduct, and never made or received any phone calls or sent or received any emails regarding the allegations in the indictment.
The amount and quality of contacts with the United States required to support jurisdiction under the FCPA is a frequently contested issue. The United States has repeatedly taken the position that jurisdiction is proper even where the wrongful conduct took place outside the United States and did not involve any United States companies or citizens, so long as there was some contact with the United States. For example, in the recent Magyar Telekom cases, emails sent through servers hosted in the United States were held to be sufficient to support jurisdiction. See previous Scorecard coverage here. The outcome of Firtash’s motion to dismiss will shed further light on the jurisdictional standard.
Anheuser-Busch InBev Settles FCPA Civil Charges with SEC, Including Charges of Improper Whistleblower Restrictions
On September 28, Anheuser-Busch InBev (AB InBev) agreed to pay $6 million to the SEC to settle FCPA civil charges in connection with payments to government officials in India through third-party sales promoters. AB InBev entered into an Administrative Order Instituting Cease-and-Desist Proceedings to settle charges that it violated the books and records and internal controls provisions of the FCPA. AB InBev did not admit or deny the charges.
According to the SEC’s Order, Belgium-based brewing company AB InBev made improper payments to Indian government officials via third-party sales promoters in order to obtain beer orders and increase brewery hours (which would increase sales and production). The Order found that AB InBev had inadequate internal accounting controls to detect and prevent these payments and to ensure that transactions were recorded properly.
The SEC’s Order also includes allegations that AB InBev violated Dodd-Frank’s whistleblower provisions by impeding an individual from communicating directly with the SEC. The Order describes an individual who told AB InBev about the improper payments and thereafter entered into a Separation Agreement with AB InBev. This individual had previously been communicating voluntarily with the SEC about the improper payments in India. However, believing that language in the Separation Agreement impeded his communications with the SEC, the SEC alleged that the individual thereafter stopped communicating with the Commission until receiving a subpoena for testimony. According to the Order, the employee feared that communications with the SEC would trigger the liquidated damages provision of the agreement, requiring him to pay $250,000 for violating the deal’s confidentiality terms.
Snack food company Mondelez International announced in its 10-K on Friday that it had received a Wells notice from the SEC regarding potential violations of the FCPA at an Indian factory. The Wells notice marks the latest development in a long-running FCPA investigation dating back to 2011, when Mondelez first received a subpoena from the SEC. The Indian operations were integrated into Mondelez following its 2010 acquisition of Cadbury; the SEC's allegations relate to interactions "with Indian governmental agencies and officials to obtain approvals related to the operation of that facility." The Wells notice indicated an intent by the SEC staff to recommend the filing of an enforcement action for violations of the FCPA's books and records and internal controls provisions. Mondelez has noted that it is cooperating with both the U.S. and Indian governments in various investigations.
Recently, General Cable Corp. disclosed in an 8-K/A that it had accrued a $24 million reserve related to potential disgorgement the company anticipates having to pay the SEC related to an investigation of its sales activities in Angola. The reserve did not include any provision for potential fines or penalties. General Cable previously announced both the inception and near resolution of its internal investigation into potential FCPA concerns in Angola, Thailand, India, and Portugal (see prior FCPA Scorecard coverage).
Just a month after announcing its internal investigation of possible FCPA violations, news reports indicate that General Cable Corporation's review will be completed or substantially completed by the first quarter of 2015. The company also announced that it "plans to exit all of its Asia Pacific and African manufacturing operations," although it did not link the exit — which affects nine plants in Asia and five plants in Africa, and approximately 17% of its total sales — to its FCPA investigation. In September, the Kentucky-based cable manufacturer announced that it was investigating its payment practices with respect to employees of public utility companies in Angola, Thailand, India and Portugal due to possible FCPA concerns. News reports indicate that, to date, the company has spent millions on the review, which has included a review of over 450,000 documents and interviews of over 20 individuals. The company also disclosed that it was cooperating with investigations by the DOJ and SEC.
In a Form 8-K filed on September 22, General Cable Corporation stated that it is reviewing its payment practices with respect to employees of public utility companies in Angola, Thailand, India and Portugal due to possible FCPA concerns. The cable manufacturer, which is based in Kentucky, determined that "certain employees in [its] Portugal and Angola subsidiaries directly or indirectly made payments at various times from 2002 through 2013 to officials of Angola government-owned public utilities that raise concerns under the FCPA and possibly under the laws of other jurisdictions." The investigation also covers General Cable's use and payment of agents in Thailand and India, which the company also believes may have implications under the FCPA or other laws. According to General Cable's filing, it voluntarily disclosed the issues to the SEC and the DOJ, whose investigations are ongoing.
- 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.
- Jonice Gray Tucker to discuss “How the new administration sets the tone for 2021” at the American Conference Institute Legal, Regulatory and Compliance Forum on Fintech & Emerging Payment Systems
- Sherry-Maria Safchuk to discuss UDAAP in consumer finance at an American Bar Association webinar
- Jeffrey P. Naimon to discuss "What to expect: The new administration and regulatory changes" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss “The future of fair lending” at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Steven R. vonBerg to discuss "LO comp challenges" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss "Major litigation" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss “The False Claims Act today” at the Federal Bar Association Qui Tam Section Roundtable