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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 Buckley Sandler 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.
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.
In Fall 2012 the US DOJ issued FCPA Opinion Release 12-02, regarding whether US adoption agencies could pay for and host foreign government officials visiting the US. The trip would involve the officials interviewing the adoption agencies staff and meeting with US families who had previously adopted children from the foreign country. Payment would be made directly to service providers, with no money, including per diems, given to the officials. The DOJ opined that under the circumstances, the trips were reasonable and bona fide expenditures directly related to the promotion, demonstration, or explanation of the adoption agencies products or services, and therefore permissible under the FCPA.
In Fall 2012, the former CFO of Digi International, Inc., Subramanian Krishnan, partially settled an SEC enforcement action stemming from the use of Divi funds to pay for unauthorized travel and entertainment expenses. The amount of any disgorgement, interest, and civil penalty is still to be determined.
In November 2011, Assistant Attorney General for the Criminal Division Lanny Breuer announced that the U.S. Department of Justice would issue "detailed new guidance on the [US FCPA's] criminal and civil enforcement provisions" at some point in 2012. Here is our prior post on the announcement. While the guidance has not yet been released, recent enforcement activity – most notably the August 2012 Pfizer resolution – allows insight into possible directions that the guidance may go. We believe that the DOJ has, through these prior settlements, essentially set the stage for the guidance.
Drumbeat of Compliance Undertakings
In December 2011, Deutsche Telekom and its majority-owned Hungarian affiliate, Magyar Telekom Plc., settled an FCPA enforcement action for a total sanction exceeding $95 million. Part of the resolution called for the companies to undertake a series of compliance measures. The undertakings (here in table/checklist format) allow a look at the FCPA compliance program the DOJ wanted those companies to construct as part of the resolution. Settlements in February (Smith & Nephew), March (BizJet and Biomet), and July (Nordham Group) each contained some form of compliance undertakings, but in many cases, these did little more than repeat the elements of an “effective compliance and ethics program” as set forth at Chapter 8B2.1 of the U.S. Sentencing Guidelines, and did not specify the application of those elements in the anti-corruption context.
Pfizer Settlement: FCPA-Specific “Enhanced Compliance Obligations”
More recently, Pfizer and two components – Wyeth and Pfizer H.C.P. Corp. – resolved an FCPA action for a combined sanction exceeding $60 million. In the deferred prosecution agreement, Pfizer agreed to a detailed series of FCPA-specific compliance undertakings, augmenting the more general rendition of program elements. In part, the enhancements:
- Detail the structure of the company’s compliance program staffing and oversight;
- Mandate the maintenance and content of certain anti-corruption policies and procedures;
- Provide mechanisms and resources for internal compliance reporting;
- Require annual company-wide, corruption-related risk assessments and five market-specific proactive compliance reviews annually;
- Call for acquisitions to be made only after thorough corruption-risk diligence;
- Describe a program of third party diligence and control; and
- Direct a program of biennial FCPA training for specified personnel and directors, and a three-year training rotation for certain third parties.
The entire list of “Enhanced Compliance Obligations” is available on the BuckleySandler website in a table/checklist format, allowing compliance counsel to conduct a quick cross-check of their company’s existing compliance program elements.
Possible Preview of DOJ FCPA Compliance Guidance
When the DOJ releases its FCPA compliance guidance – expected soon – FCPA practitioners will evaluate the guidance to confirm whether existing anti-corruption compliance programs are in line with the DOJ’s announced expectations. Reviewing the “Enhanced Compliance Obligations” contained in the Pfizer deferred prosecution agreement should allow compliance counsel a head start on where the DOJ’s FCPA guidance will lead. When the guidance is issued, we will provide an update and analysis.
In Fall 2012 the US DOJ issued FCPA Opinion Release 12-01, regarding whether a member of a royal family qualifies as a "foreign official" under the FCPA. A US lobbying firm hoped to engage a consulting company to help it obtain and conduct a lobbying representation of certain foreign governmental entities. One of the partners of the consulting company was a member of the royal family of the same foreign country. The DOJ opined that under the circumstances, a royal family member who has no position in the foreign government is not a foreign official under the FCPA, as long as he is not representing that he is acting on behalf of the royal family or as a member of the royal family.
Pfizer resolve FCPA matter with US DOJ and SEC related to conduct of subsidiaries in Bulgaria, China, Croatia, the Czech Republic, Italy, Kazakhstan, Russia and Serbia; total sanction exceeds $60 million.
- SEC Complaint, Pfizer
- SEC Complaint, Wyeth
- Pfizer Deferred Prosecution Agreement
- Pfizer DPA Excerpt: Enhanced Compliance Obligations
On July 18, 2012, aircraft maintenance, repair and overhaul ("MRO") provider, Nordam Group, Inc., resolved an FCPA matter with the US DOJ related to conduct in China. The non-prosecution agreement calls for a $2 million penalty, and makes this the second aviation services FCPA matter this year, joining Lufthansa Technik AG's MRO subsidiary, BizJet International Sales and Support, Inc.
- Non-Prosecution Agreement
- NPA Attachment A - Statement of Facts
- NPA Attachment B - Compliance Undertakings
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