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Jury acquits former metal industry supplier executives of U.K. SFO bribery charges
On July 16, a London jury acquitted three former metal industry supplier executives who had been charged with foreign bribery by the U.K. Serious Fraud Office (SFO). The SFO reportedly failed to prove that the former executives – a managing director, sales head, and project manager – had paid bribes to secure overseas contracts. The acquittal comes three years after the company entered into the SFO’s second-ever deferred prosecution agreement (DPA). The July 2016 DPA resolved, at a corporate level, some of the same bribery allegations that the executives faced at trial, and resulted in the company paying a £6.5 million fine. The company’s identity in the DPA was not publicly known until restrictions were lifted at the conclusion of the trial.
SEC charges former senior executives of in-flight entertainment company
On December 18, the former CEO and CFO of U.S.-based in-flight entertainment company settled SEC charges that they knowingly violated books and records and internal accounting controls provisions of the federal securities laws and caused similar violations by the company’s parent company. As detailed in prior FCPA Scorecard coverage, the parent company and the entertainment company settled related FCPA charges in April and agreed to pay a combined $280 million to the DOJ and SEC.
The company’s former President and CEO and its former CFO consented to the entry of their administrative orders without admitting or denying the findings and agreed to pay penalties of $75,000, and $50,000, respectively.
The SEC alleged the former CEO authorized the use of a third-party to pay more than $1.76 million to several consultants who provided little to no services. One of these consultants, a Middle East government official, was paid $875,000 to help secure over $700 million in business from a state-owned airline, but the position “required little to no work.” The bribery scheme involving this foreign official was previously described in the DPA with DOJ and the SEC Settlement Order. The former CEO was also charged with making false representations to the company’s auditor regarding internal accounting controls, and books and records.
The SEC charged the former CFO in connection with a backdating scheme that resulted in the parent company improperly recording $82 million in revenue. The former CFO was charged with making false representations to the company’s auditor regarding the company’s financial statements, internal accounting controls, and books and records. The order against him suspends him from appearing or practicing before the Commission as an accountant for at least five years.
The former CEO and CFO were previously described in the SEC Settlement Order as the company's Executive 1 and the company's Executive 2, respectively. The DOJ has not brought any criminal charges against any individuals in this matter.
UK Serious Fraud Office ends first deferred prosecution agreement with a South African bank
On November 30, the United Kingdom’s Serious Fraud Office (SFO) announced the successful conclusion of the deferred prosecution agreement entered into in 2015 with a South African bank, which had followed allegations that payments were made by two former employees to bribe members of the Tanzanian government. This deferred prosecution agreement was the first ever entered into by the SFO and also marked the first use of Section 7 of the Bribery Act of 2010—failure of commercial organizations to prevent bribery—by any U.K. prosecutor. Upon entering into the deferred prosecution agreement in 2015, the bank had also settled related charges with the SEC. See previous Scorecard coverage here.
The DPA required the bank to pay fines and disgorgement totaling almost $26 million, pay an additional $6 million to compensate the government of Tanzania, and hire an external compliance consultant. On the basis that the bank had fully complied with the terms of the agreement, the SFO announced that it had advised the relevant UK court that it will conclude the DPA without restarting proceedings against the bank. The SFO’s announcement also promised that a “Details of Compliance” document outlining how the bank met the terms of the deferred prosecution agreement would be published on the SFO’s website in the future. Because this is the SFO’s first deferred prosecution agreement, this document could be very useful guidance for companies to understand what measures will be expected to satisfy the SFO.
Japanese electronics corporation settles parallel FCPA actions for $280 million
On April 30, a DOJ deferred prosecution agreement and SEC settlement with Japan-based electronics corporation and a subsidiary were announced, with the company agreeing to pay $280 million in total. The resolutions related to the company’s U.S.-based subsidiary, and allegations that senior management of the subsidiary orchestrated a bribery scheme to help secure over $700 million in business from a state-owned airline, in which the subsidiary paid a Middle East government official nearly $900,000 for a “purported consulting position, which required little to no work,” and concealed the payment “through a third-party vendor that provided unrelated services to [the subsidiary].” The subsidiary is then alleged to have falsely recorded the payments in its books and records, as well as similar payments made to other purported consultants and sales agents in Asia.
Under the DPA with the subsidiary, they agreed to pay the DOJ a $137.4 million criminal penalty for knowing and willful violations of the FCPA’s accounting provisions. The DOJ gave the subsidiary a 20 percent discount off the low end of the U.S. Sentencing Guidelines fine range because of its cooperation and remediation, which, although untimely in certain respects, did include causing several senior executives who were either involved in or aware of the misconduct to be separated from [the subsidiary] or [the company].” However, because many of the company's remediation efforts were “more recent, and therefore have not been tested,” the deferred prosecution agreement subjects the company to two years of scrutiny by an independent compliance monitor, followed by a year of self-reporting. The SEC‘s simultaneous settlement included violations of the anti-bribery as well as accounting provisions, and the payment of $143 million to the SEC.
As FCPA Scorecard previously reported, the company disclosed the investigations in February 2017, though they were first reported as early as 2013.
Chilean Chemical Company Settles FCPA Charges With SEC and DOJ
On January 13, Chilean chemical and mining company agreed to pay nearly $30.5 million to resolve criminal and civil FCPA charges in connection with payments to politically-connected individuals in Chile. The company admitted that, from at least 2008 to 2015, it made approximately $15 million in payments to Chilean politicians, political candidates, and individuals connected to them. Many of the payments violated Chilean tax law and/or campaign finance limits and were not supported by documentation. Rather, the company made many of these payments to third-party vendors associated with the politically-connected individuals based on fictitious contracts and invoices for non-existent services. The company falsely recorded many of these payments in its books and records.
The company agreed to a three-year deferred prosecution agreement (DPA) with the DOJ, including a $15,487,500 criminal penalty, and agreed to retain an independent compliance monitor for two years. The criminal penalty reflected a 25 percent discount from the low end of the U.S. Sentencing Guidelines fine range due to the company’s full cooperation and substantial remediation. The company also agreed to pay a $15 million penalty to the SEC pursuant to an Administrative Order Instituting Cease-and-Desist Proceedings to settle the SEC’s charges that the company violated the books and records and internal controls provisions of the FCPA.
This settlement demonstrates the jurisdictional-reach of the U.S. government in enforcing the FCPA. The Chilean company with no U.S. operations, agreed to settle both the SEC’s and DOJ’s charges even though the entirety of the conduct occurred outside of the United States and was committed by foreign nationals. The only tie to the United States referenced in the SEC and DOJ settlement papers is that the company is registered with the SEC as a foreign private issuer (its Series B shares have been listed on the NYSE since 1993).
UK-based Manufacturer Settles FCPA Charges As Part of $800 Million Global Bribery Investigation Resolution
On January 17, a UK-based manufacturer and distributor for the civil aerospace, defense aerospace, marine, and energy sectors worldwide, agreed to pay nearly $170 million to the DOJ to resolve charges that it conspired to violate the anti-bribery provisions of the FCPA around the world. The settlement with the DOJ (via a three-year deferred prosecution agreement (DPA)), was a fraction of the company's $800 million global resolution in connection with bribes paid to government officials in exchange for government contracts in China, India, Indonesia, Malaysia, Nigeria, Russia, Thailand, Brazil, Kazahkstan, Azerbaijan, Angola, and Iraq.
In addition to settling with the DOJ, the company resolved charges with the UK SFO by entering into a DPA and agreeing to pay a fine of $604,808,392. The company entered into a leniency agreement with the Brazilian Ministério Público Federal (MPF) and agreed to pay a penalty of $25,579,170.
According to the DPA Statement of Facts, the company admitted that between 2000 and 2013, it conspired to violate the anti-bribery provisions of the FCPA by paying more than $35 million in bribes to foreign officials in exchange for confidential information and/or government contracts. Many of these contracts benefited RRESI, the company’s indirect U.S. subsidiary. The company made the majority of the bribes by inflating commission payments to third-party intermediaries, who then paid part of the commission as bribes to government officials.
The DOJ lauded the company’s cooperation in its investigation and as a result, the company received a 25 percent reduction from the low end of the U.S. Sentencing Guidelines fine range due. However, the DOJ refused to award the company any voluntary disclosure credit. The DOJ has been transparent that it only will award voluntary disclosure credit when the disclosure occurs prior to an imminent threat of disclosure or government investigation. Here, that test was not satisfied because the company did not disclose the conduct until after media reports and the related SFO inquiry began.