Subscribe to our FinCrimes Update for news about the Foreign Corrupt Practices Act and related prosecutions and enforcement actions.
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
Sector Sweep Continues: Medical Device Manufacturer Orthofix Resolves FCPA Violations Related to Conduct in Mexico
On July 10, 2012, medical device manufacture Orthofix International N.V. became the latest in a string of companies in the sector to resolve an FCPA matter with the U.S. government. The Orthofix FCPA resolution calls for the company to pay a criminal fine to the U.S. Department of Justice (DOJ) of $2.22 million, and a civil monetary sanction (including disgorgement and interest) of $5.2 million to the U.S. Securities and Exchange Commission (SEC). The DOJ resolved the matter through a Deferred Prosecution Agreement, which was attached to the company's 8-K of July 10, 2012, reporting the resolution. According to the allegations in the SEC's Complaint, Promeca S.A. de C.V, a subsidiary based in Mexico, paid bribes to employees of the government-operated health care system, referring to the payments as "chocolates" and booking inaccurate reimbursement requests as meals, car tires or training expenses. The Mexico subsidiary made approximately $317,000 in improper payments over a 7-year period, according to the SEC. As initially reported in an August 31, 2010 8-K, the company disclosed to the DOJ and the SEC that it was investigating certain conduct at Promeca. The FCPA resolution follows a June 7, 2012 guilty plea by the U.S. subsidiary, Orthofix Inc., on a False Claims Act-related matter, resulting in $7.8 million fine and payment of over $34 million to resolve a civil action (see DOJ Press Release). The settlement adds Orthofix to the list of device manufacturers that have settled FCPA matters in 2012, along with Smith & Nephew and Biomet, which settled in February and March 2012, respectively.
On March 14, 2012, aircraft maintenance, repair and overhaul ("MRO") provider, BizJet International Sales and Support, Inc., resolved an FCPA matter with the US DOJ related to conduct in Latin America, including Mexico and Panama. The deferred-prosecution agreement calls for an $11.8 million penalty. BizJet is an indirect subsidiary of the German company, Lufthansa Technik AG, which also entered a DPA.
- Jeffrey P. Naimon to discuss "Post-pandemic CFPB exam preparation" at the Mortgage Bankers Association Spring Conference & Expo
- Jonice Gray Tucker to discuss "Making fair lending work for you" at the Mortgage Bankers Association Spring Conference & Expo
- Jonice Gray Tucker to discuss "Reading the tea leaves of President Biden’s initial financial appointees" at LendIt Fintech
- APPROVED Webcast: Staying in the know with Buckley regtech solutions
- Moorari K. Shah to discuss “CA, NY, federal licensing and disclosure” at the Equipment Leasing & Finance Association Legal Forum
- Jonice Gray Tucker to discuss "Compliance under Biden" at the WSJ Risk & Compliance Forum
- Sherry-Maria Safchuk to discuss UDAAP 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