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U.S. FCPA Guidance Expected Soon
The DOJ is expected to release soon guidance on compliance with the FCPA, which originally was promised in November 2011 by Assistant Attorney General for the Criminal Division Lanny Breuer. Recent FCPA settlements obtained by the DOJ set the stage for the guidance and provide companies with insight as to what the guidance likely will include. For example, as part of its recent $60 million FCPA settlement, Pfizer agreed to a detailed series of FCPA-specific compliance undertakings, augmenting the more general rendition of program elements. The Pfizer deferred prosecution agreement (i) details the structure of the company’s compliance program staffing and oversight, (ii) mandates the maintenance and content of certain anti-corruption policies and procedures, (iii) provides mechanisms and resources for internal compliance reporting, (iv) requires annual company-wide, corruption-related risk assessments and five market-specific proactive compliance reviews annually, (v) requires thorough corruption-risk diligence prior to acquisitions, (vi) describes a program of third-party diligence and control, and (vii) directs a program of biennial training for specific personnel and directors, and a three-year training rotation for certain third parties. The BuckleySandler FCPA Team has prepared a Client Update and a checklist of the entire list of “Enhanced Compliance Obligations”, allowing compliance counsel to conduct a quick cross-check of their company’s existing compliance program elements.
Pharmaceutical Companies Resolve DOJ and SEC FCPA Charges
On August 7, the DOJ and the SEC announced the resolution of FCPA allegations against Pfizer Inc. (Pfizer) and two of its subsidiaries, Pfizer H.C.P. and Wyeth LLC. The DOJ announced that it filed a criminal information in the U.S. District Court for the District of Columbia, as well as a deferred prosecution agreement pursuant to which Pfizer H.C.P. admitted to making improper payments to public officials in Russia and other eastern European countries in attempts to influence decisions to approve and register certain pharmaceutical products. Pfizer H.C.P. must pay a $15 million penalty, but the agreement acknowledges Pfizer’s efforts to investigate and self-report the matter, as well as the company’s “significant cooperation” and extensive remedial efforts. Civil charges brought by the SEC through separate complaints against Pfizer and Wyeth involve similar allegations regarding the companies’ conduct in numerous countries. While Wyeth neither admitted nor denied the SEC allegations, the two parties resolved the cases by agreeing to pay a combined $45 million, committing to certain remedial actions, and reporting to the SEC. Like the DOJ, the SEC notes Pfizer’s voluntary disclosure and cooperation. The SEC complaints and the DOJ deferred prosecution agreements are available on BuckleySandler’s FCPA Score Card.
Medical Device Manufacturer Resolves FCPA Violations Related to Conduct in Mexico
On July 10, medical device manufacture Orthofix International N.V. became the latest in a string of companies in the medical device sector to resolve an FCPA matter with the U.S. government. The settlement adds Orthofix to the list of device manufacturers that have settled FCPA matters in 2012, along with Smith & Nephew and Biomet, who settled in February and March 2012, respectively. The Orthofix FCPA resolution calls for the company to pay a criminal fine to the DOJ of $2.22 million, and a civil monetary sanction (including disgorgement and interest) of $5.2 million to the 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. 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.
DOJ Reaches FCPA Settlement With Medical Device Company
On March 26, the U.S. Department of Justice (DOJ) announced it had reached a settlement with a medical device company to resolve allegations that the company and its subsidiaries made improper payments in violation of the Foreign Corrupt Practices Act (FCPA). DOJ alleges that Biomet, its subsidiaries, employees, and agents made illegal payments to publicly-employed health care providers in Argentina, Brazil, and China in exchange for business with certain hospitals in those countries and then falsely recorded the payments on its books to conceal the true nature of the payments. The deferred prosecution agreement requires Biomet (i) to pay a $17.28 million criminal penalty, (ii) to implement a robust compliance program and internal controls, and (iii) to retain an outside compliance monitor for 18 months. Separately, Biomet agreed to disgorge $5.4 million of profits and interest to resolve parallel civil charges brought by the SEC.
DOJ Obtains Guilty Verdict in Haitian Money Laundering and FCPA Case
On March 12, the Department of Justice announced a guilty verdict in the case of a foreign official accused of laundering bribes paid to him by two Miami-based telecommunications companies. Following a week-long trial, the jury convicted the former director of Haiti’s state-owned telecommunications company on all counts, including nineteen counts of money laundering and two counts of conspiracy to commit money laundering. The laundered funds were alleged to be proceeds of bribes paid by U.S. companies to the defendant to obtain a preference in telecommunications rates and other favorable treatment in violation of the Foreign Corrupt Practices Act. The jury found that the defendant concealed the payments through subsequent transactions and by falsely characterizing the nature of the payments as “commissions” and “payroll.”
Buckley Sandler Litigators Obtain Dismissal in FCPA Sting Criminal Trial
Today, U.S. federal prosecutors abandoned one of the highest profile Foreign Corrupt Practices Act cases ever brought by the DOJ. Judge Richard Leon of the U.S. District Court for the District of Columbia granted the government’s motion to dismiss foreign bribery charges against all remaining defendants facing charges from an FBI sting operation. The defendants were charged with paying bribes to a purported government official from the country of Gabon in connection with contracts to supply Gabon with military and law enforcement products. The government sting operation resulted in the arrests of twenty-two individuals at an industry trade show in Las Vegas in 2010.
BuckleySandler represented John Mushriqui in the case, and in January successfully obtained a mistrial for Mr. Mushriqui following a nearly four-month jury trial after a federal jury failed to reach a unanimous verdict for Mr. Mushriqui and two other defendants, including his sister Jeana Mushriqui.
The mistrial ruling followed the same jury’s acquittal of two other defendants, Judge Leon’s acquittal of another defendant in December 2011, and a July 2011 mistrial involving four other defendants involved in the sting. Between the two Gabon sting trials to date, three defendants were acquitted and seven proceeded to a hung jury. In the face of these outcomes, the government decided to abandon the case with regard to all remaining defendants and will not seek to re-try the defendants whose previous trials ended in a mistrial. The government stated in its motion that it had "carefully considered (1) the outcomes of the first two trials in which, after extensive deliberations, the juries remained hung as to seven defendants and acquitted two defendants, and one defendant was acquitted on the sole charge against him pursuant to Fed. R. Crim. P. 29; (2) the impact of certain evidentiary and other legal rulings in the first two trials and the implications of those rulings for future trials, including with respect to Rule 404(b) and other knowledge and intent evidence the government proposed to introduce; and (3) the substantial governmental resources, as well as judicial, defense, and jury resources, that would be necessary to proceed with another four or more trials, given that the first two trials combined lasted approximately six months. In light of all of the foregoing, the government respectfully submits that continued prosecution of this case is not warranted under the circumstances."
BuckleySandler’s David Krakoff, who represented Mr. Mushriqui at trial along with counsel Lauren Randell, responded to the dismissal stating, “We are extremely pleased that the Department of Justice has decided to do the right thing by moving to dismiss the Indictment against our client John Mushriqui, ending his two year nightmare. We recognize that this was a difficult decision given the substantial resources that the government invested in this case. It's really hard to take on the government, but when you believe in your innocence and fight for your freedom, these cases can be won. Ultimately, the system worked for John Mushriqui. John can start the rest of his life today with his good name intact.”
Medical Device Manufacturer Resolves FCPA Enforcement Actions for $22.2 Million
On February 6, the U.S. Department of Justice and Securities and Exchange Commission announced resolved FCPA enforcement actions against a domestic medical device manufacturer and its UK-based parent company. The combined monetary sanction totals $22.226 million, and the UK parent must retain an independent compliance monitor for a period of eighteen months. The conduct in question, as alleged in the SEC Complaint, involved the use of three UK shell companies created by a distributor in Greece for use as conduits to make payments to physicians in Greece working “at publicly-owned hospitals [and who were] government employees, providing healthcare services in their official capacities.” The commercial relationship between the device manufacturer and the distributor ended in 2008. More details are available in an update from BuckleySandler’s FCPA Team. To remain current on FCPA and anti-corruption developments, please view BuckleySandler’s FCPA Score Card.
D.C. Federal Judge Declares Mistrial For Three Remaining Defendants In Second FCPA Sting Case Trial
On January 31, Judge Richard Leon of the U.S. District Court for the District of Columbia declared a mistrial after a federal jury failed to reach a unanimous verdict on foreign bribery charges against John Mushriqui, Jeana Mushriqui, and Marc Morales, in one of the highest profile Foreign Corrupt Practices Act (FCPA) cases ever brought by the DOJ. BuckleySandler represented John Mushriqui at the nearly four-month jury trial. One day prior to the court declaring a mistrial, the jury acquitted two other defendants of the same charges. At the end of 2011, following the close of the prosecution's evidence, Judge Leon acquitted all defendants of related conspiracy charges, sending one defendant home entirely, and acquitted the Mushriquis of two of the five substantive FCPA charges pending against them. The defendants were charged with paying bribes to a purported government official from the country of Gabon, in connection with contracts to supply Gabon with military and law enforcement products. The Federal Bureau of Investigation's sting operation resulted in the arrests of twenty-two individuals at an industry trade show in Las Vegas in 2010. The first trial of four other defendants also ended in a mistrial in July 2011. Between the two trials regarding the Gabon deal sting, three defendants have been acquitted and seven have proceeded to a hung jury.
DOJ Obtains Settlement of FCPA Charges Against Japanese Trading Company, Loses Trial on FCPA Charges Related to Mexican Electricity Contract
On January 17, the Department of Justice (DOJ) announced the settlement of Foreign Corrupt Practices Act (FCPA) charges against a Japanese trading company for a bribery scheme involving Nigerian government officials in connection with a liquid natural gas project. The company agreed to pay a $54.6 million criminal penalty to resolve the charges. Concurrently, the DOJ filed a deferred prosecution agreement (DPA), as well as a criminal information that will be dismissed if the company abides by the terms of the DPA for two years.
On the same day, following a four-day jury trial, the U.S. District Court for the Southern District of Texas acquitted a former power company executive of multiple FCPA charges related to alleged bribes paid to Mexican officials in connection with an electrical equipment and services contract. The defendant still faces non-FCPA criminal charges, which previously were severed. In 2010, the company settled related charges it faced.
Final FCPA Enforcement Action for 2011 Provides Useful Benchmarks for Anti-corruption Compliance Program Reviews
On December 29, Deutsche Telecom and Magyar Telekom settled FCPA enforcement matters with the US DOJ and SEC for a combined sanction exceeding $95 million. Part of the resolution recited specified minimum compliance program elements that Magyar Telekom is required to institute. BuckleySandler's most recent FCPA Update describes the settlement fully and links to a list of these anti-corruption program elements, which are useful for counsel structuring a corruption risk assessment or compliance program review.