The Anti-Corruption Report

The definitive source of actionable intelligence covering anti-corruption laws around the globe

Articles By Topic

By Topic: Books and Records

  • From Vol. 7 No.22 (Oct. 31, 2018)

    Will the FCPA Be Used to Prosecute Domestic Bribery Cases?

    In 2016, the U.S. Supreme Court reined in the scope of the federal domestic bribery statute, holding in McDonnell v. United States that a bribe paid to a public official does not violate the statute unless it was paid in exchange for a narrowly defined “official act.” While it may seem that this decision would restrict the DOJ’s use of the anti-bribery provisions of the FCPA as well, David Bitkower, a partner at Jenner & Block, Nicholas Barnaby, assistant general counsel at General Dynamics Corporation, and Karthik Reddy, an associate at Jenner & Block, argue in this guest article that there are signs – including Panasonic’s recent DPA covering both foreign and domestic books and records issues – that the DOJ is envisioning a shift in the opposite direction: using the FCPA to more aggressively prosecute domestic bribery cases. See “Big Deals? Panasonic and Subsidiary Settle FCPA and Exchange Act Charges for $280 Million” (May 16, 2018).

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  • From Vol. 7 No.19 (Sep. 19, 2018)

    Sanofi SEC Settlement Offers Lessons on Pharma Discounts, Samples and Receipts

    French pharmaceutical giant Sanofi recently settled books-and-records and internal controls issues with the SEC, months after receiving a DOJ declination. “Bribery in connection with pharmaceutical sales remains as a significant problem despite numerous prior enforcement actions involving the industry and life sciences more generally,” Charles Cain, FCPA Unit Chief at the SEC, observed in a press release. “While bribery risk can impact any industry, this matter illustrates that more work needs to be done to address the particular risks posed in the pharmaceutical industry,” he said. The company used common techniques to funnel bribes to officials in Kazakhstan and the Middle East, and the settlement provides lessons about how to properly manage discounts, samples and GT&E expenses. See “Teva’s $519 Million FCPA Settlement Highlights Hazards of Local Production Requirements” (Jan. 18, 2017).

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  • From Vol. 7 No.15 (Jul. 25, 2018)

    Beam Suntory Is the Latest Victim of the Beverages Industry in India

    Beam Inc., now known as Beam Suntory Inc., has settled SEC charges that its Indian subsidiary made improper payments to government officials. While the settlement amount is relatively small – a little over $8 million – the case highlights just how risky the alcoholic beverage industry in India is, as well as the importance of M&A anti-corruption due diligence even if the deal is between a non-U.S. acquiror and a U.S target. See “Ten Tips for Performing Effective Anti-Corruption Investigations in India” (May 24, 2017).

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  • From Vol. 6 No.15 (Aug. 2, 2017)

    Content Requirements in Angola Cost Halliburton More Than $29 Million in SEC Disgorgement and Penalties

    In the SEC’s first FCPA settlement of the Trump administration, Halliburton has agreed to pay disgorgement and penalties of more than $29 million for books and records and internal controls violations related to a local partner in Angola. The case may signal that SEC enforcement under Jay Clayton will continue in a similar vein as it did under the Obama administration. A former vice president at the company who circumvented numerous internal controls to close a deal settled individually as well. We spoke with a number of anti-corruption experts to digest the case and find out what companies can do to avoid similar problems. See “First FCPA Actions Under Sessions’ DOJ Are Declinations With Disgorgement” (Jul. 19, 2017).

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  • From Vol. 6 No.11 (Jun. 7, 2017)

    Anti-Corruption Provisions in Third-Party Contracts in China

    Like in most countries, anti-corruption enforcement actions in China are often triggered by third-party misconduct. As more and more multinational companies start to enforce the anti-corruption provisions in their Chinese third-party contracts, practical issues emerge. For example, a third party may not cooperate with an audit because it claims the audit provision is vague. In a guest article, Kate Yin and Samuel Yu, from the Chinese firm Fangda Partners, advise on how a company can anticipate these issues and effectively protect itself using anti-corruption provisions in third-party contracts. See The FCPA Report’s series on third-party contracts, “A Guide to Anti-Corruption Representations in Third-Party Contracts: Nine Clauses to Include (Part One of Two)” (Jun. 25, 2014); “Clauses for High-Risk Situations and Enforcement Strategies (Part Two)” (Jul. 9, 2014).

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  • From Vol. 6 No.6 (Mar. 29, 2017)

    Managing Subsidiary Risks: Setting Things Up for Success (Part One of Three)

    A common theme of many anti-corruption settlements is the involvement of foreign subsidiaries. A parent company may have little oversight of its far-flung subsidiaries, but can still be on the hook if bribes are paid or books and records are not kept properly. In this three-part series, The FCPA Report will look at the different ways companies can minimize and mitigate anti-corruption risks at their subsidiaries. In this first part, we discuss how companies can be held liable for the actions of their subsidiaries and how subsidiaries can be set up for success from the beginning – both when building one from scratch and when acquiring an already existing company. The subsequent articles will discuss how companies can use culture, communication and internal controls to keep subsidiary risks in check. See “How to Mitigate FCPA Risk Before and After an Acquisition” (Feb. 18, 2015).

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  • From Vol. 6 No.3 (Feb. 15, 2017)

    SEC Brings Civil Enforcement Action Against Two Och-Ziff Employees 

    In the wake of the SEC’s September 2016 settlements with Daniel S. Och, Joel M. Frank, Och-Ziff Capital Management LLC (OZ) and OZ Management LP, the SEC has taken aim at two additional OZ employees – senior executive Michael L. Cohen and analyst Vanja Baros. In a Complaint filed in the U.S. District Court for the Eastern District of New York, the SEC alleges that Cohen and Baros arranged to pay tens of millions of dollars in bribes to numerous government officials in Africa to secure lucrative deals for OZ funds and misled an OZ investor in the process. For our full coverage of the OZ settlement, see “Och-Ziff’s Settlement Offers Five Compliance Lessons for Hedge Fund Managers and Private Equity Investors” (Nov. 9, 2016); and “Dirty Dealings in Africa Result in SEC and DOJ Settlements for Och-Ziff and Two Executives” (Oct. 26, 2016).

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  • From Vol. 6 No.2 (Feb. 1, 2017)

    Successor Liability in the Spotlight With Mondelēz’s $13M FCPA Settlement After Purchase of Cadbury India 

    Mondelēz International, Inc., has settled anti-corruption allegations with the SEC stemming from subsidiary Cadbury Limited’s expansion of a chocolate plant in India. U.S.-based Mondelēz, which acquired U.K.-based Cadbury in 2010, agreed to pay a civil penalty of $13 million to settle the allegations concerning payments made to a third-party agent retained by Cadbury India. The deal is notable for its illumination of acceptable levels of pre-acquisition due diligence and for the fact that only civil penalties were incurred, with no mention of disgorgement, practitioners told The FCPA Report. For more on anti-corruption in India, see “Experts Discuss the Corruption Climate in India and Give Six Practical Tips to Mitigate Risk” (Mar. 9, 2016); “Regional Risk Spotlight: Jay Holtmeier of WilmerHale Explains How to Navigate Bureaucratic Corruption Risks in India” (Sep. 23, 2015) and “Doing Business in India: Avoiding Corruption Risks and Monitoring Compliance Programs” (Jun. 11, 2014).

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  • From Vol. 6 No.1 (Jan. 18, 2017)

    Teva’s $519 Million FCPA Settlement Highlights Hazards of Local Production Requirements 

    The DOJ and the SEC recently announced a $519 million settlement with Israel-based Teva Pharmaceutical Industries and its Russian subsidiary Teva LLC over claims the company violated the FCPA by bribing government officials in Mexico, Russia and Ukraine. The settlement was announced as the “largest criminal fine imposed against a pharmaceutical company for violations of the FCPA” in the DOJ press release. The deal shows how complying with laws requiring local production can get a company in trouble and how tricky properly scaling an investigation can be. See “Familiar Schemes Land AstraZeneca $4 Million of Disgorgement and Small Penalty” (Sep. 14, 2016).

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  • From Vol. 5 No.20 (Oct. 12, 2016)

    Subsidiary Corruption, a Troublesome Joint Venture and a Fired Whistleblower: AB InBev’s Route to a $6 Million SEC Settlement

    Anheuser-Busch InBev (AB InBev) recently settled with the SEC to resolve FCPA books and records violations relating to the actions of its Indian joint venture and internal controls violations relating to its Indian subsidiary. The brewing company’s settlement highlights, once again, that companies operating in high-risk markets cannot be complacent about the activities of their foreign cohorts, whether that be subsidiaries, joint venture partners or third parties operating on behalf of the company. The settlement also highlights the dangers of interfering with whistleblowers. AB InBev was charged with impeding a whistleblower through the provisions of an employee separation agreement. See “Regional Risk Spotlight: Jay Holtmeier of WilmerHale Explains How to Navigate Bureaucratic Corruption Risks in India” (Sep. 23, 2015).

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  • From Vol. 5 No.19 (Sep. 28, 2016)

    Experts from PwC Discuss Compliance Audits and Common Missteps

    Compliance auditing is a critical component of an effective anti-corruption compliance program, recognized both by the U.S. Sentencing Guidelines and the government’s FCPA Resource Guide. A recent Strafford program, “FCPA Compliance Audits: Lessons From Recent Investigations,” discussed regulators’ expectations regarding compliance auditing, the process for scoping and conducting a compliance audit and common audit pitfalls. David A. Wilson, a partner at Thompson Hine, led the discussion, which featured Sulaksh Shah, a partner at PwC, and James Gargas, a director at that firm. This article discusses some of the key takeaways from the program. See also our interview series, “Best Practices for Performing Compliance Program Assessments: Pamela Passman of CREATe.org” (Apr. 6, 2016); “Susan Markel of AlixPartners” (Feb. 24, 2016); and “Jeffrey Kaplan of Kaplan & Walker” (Nov. 4, 2015).

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  • From Vol. 5 No.18 (Sep. 14, 2016)

    Familiar Schemes Land AstraZeneca $4 Million of Disgorgement and Small Penalty

    Global pharmaceutical company AstraZeneca quietly settled FCPA-related books-and-records allegations with the SEC recently. According to the Commission’s bare-bones cease-and-desist order, the company failed to devise and maintain internal controls relating to interactions with health care practitioners in China and Russia. While details were sparse, familiar schemes such as fapiao fraud and sham speaker contracts played a role in China. To settle the charges, the company agreed to pay disgorgement of more than $4 million as well as a $375,000 penalty. See “Travel Agency Abuse, Falsified Expense Reports and Other Hospitality Blunders Lead to $25 Million Novartis Settlement” (Apr. 6, 2016).

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  • From Vol. 5 No.8 (Apr. 20, 2016)

    A Shady Consultant and Lackluster Accounting in China Wins Sands a $9 Million Penalty

    Las Vegas Sands Corp. (LVSC), a casino and resort giant, agreed on April 7, 2016 to pay a $9 million SEC penalty to settle FCPA charges stemming from its activities in China and Macao. According to the SEC, LVSC transferred funds totaling more than $62 million to a consultant in China without supporting documentation or appropriate authorization for the transfer of those funds. Furthering LVSC’s troubles, the majority of the transfers were made even though senior LVSC management knew significant funds that had previously been transferred to the consultant couldn’t be accounted for. In addition to the transfers to the consultant, LVSC’s Chinese operations were rife with internal controls failures and shady accounting. The case demonstrates that such controls are “of the utmost importance,” said Susan Divers, a senior advisor at LRN Advisory Services Group. See “How Companies Can Use Enhanced Auditing Techniques to Address the Government’s Increasing Focus on Internal Controls” (May 13, 2015).

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  • From Vol. 5 No.5 (Mar. 9, 2016)

    Canadian Health Science Company and Employee Settle Civil FCPA Charges in Failed Quest for Drug Distribution in Russia

    Hiring the purported friend of a company employee to facilitate the distribution of a liver treatment drug in Russia is behind the SEC’s FCPA settlements with Nordion (Canada) Inc. and employee Mikhail Gourevitch. Gourevitch allegedly orchestrated a scheme for his “friend” to pay bribes to Russian officials to get the approval, hid the extra costs from the company and received a kickback. The SEC said weak internal controls at Nordion (the predecessor-in-interest to Nordion (Canada), which purchased Nordion during this investigation) allowed the scheme to go undetected, including payments to offshore bank accounts. Nordion ultimately was unable to distribute the drug and made no profits. See “Ten Steps A Company Can Take to Mitigate Corruption Risk When Entering a New Market (Part One of Two)” (Jun. 24, 2015); Part Two (Jul. 8, 2015).

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  • From Vol. 5 No.4 (Feb. 24, 2016)

    VimpelCom Settlement Highlights U.S. Government’s New Holistic Approach to Anti-Corruption Enforcement

    VimpelCom, a Russian-owned, Amsterdam-based telecommunications company, and its wholly owned Uzbek subsidiary Unitel, have come to a global agreement to settle allegations that VimpelCom bribed its way into the Uzbek cable market. Unitel pled guilty to bribery charges, while VimpelCom entered into a criminal DPA and reached a civil settlement with the SEC. Altogether, VimpelCom agreed to pay more than $795 million to the SEC, DOJ and Dutch authorities, and agreed to take on a compliance monitor for three years. The investigation involved more than 17 jurisdictions and was accompanied by a civil forfeiture case seeking the funds paid to the corrupt foreign official in Uzbekistan that are squirreled away in Swiss bank accounts. Here we dissect the settlement and VimpelCom’s significant discounts for cooperation, despite its failure to self-report. In our next issue we will explore how VimpelCom’s blasé attitudes about corruption at its highest levels led to this historic settlement. See “From Discounts to Slush Funds: Red Flags to Heed and Eight Steps to Take to Avoid SAP’s $3.9 Million Mistakes” (Feb. 10, 2016).

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  • From Vol. 5 No.3 (Feb. 10, 2016)

    Travel Agencies, Fapiao and Hospitality: $12.8 Million SciClone Settlement Highlights Diversity of Risk in China

    The allegations in the recent SciClone Pharmaceuticals’ FCPA settlement read like a “how to” manual for bribing foreign officials in China. SciClone employees paid for foreign officials to attend a beer festival, gave officials language classes as gifts, used travel agencies to disguise entertainment as legitimate conferences, submitted fake fapiao to falsify expense reports and more. To resolve these widespread bribery schemes at SciClone’s Chinese subsidiaries, the company, a U.S.-based, China-focused, specialty pharmaceutical company, agreed to pay $12.8 million and self-report to the SEC for a period of three years. We analyze the key compliance takeaways from the settlement. See also “The Emperor Is Far Away: The Evolving Nature of Third-Party Risk in China” (Sep. 9, 2015).

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  • From Vol. 5 No.3 (Feb. 10, 2016)

    CEO of LAN Airlines Settles FCPA Charges With SEC Over Union Dispute

    In a rare individual FCPA settlement with a sitting CEO, the SEC has resolved books and records allegations against Ignacio Cueto Plaza for $75,000. Cueto, the head of LAN Airlines, neither admitted nor denied the allegations in the SEC’s order regarding the funneling of $1.15 million to an Argentinian consultant in 2006 to pay off union leaders during a labor dispute. We dissect the settlement, which includes a surprising level of detail about training and may be a precursor to future actions related to LAN’s compliance program breakdown. See also “SEC Sanctions Two FLIR Systems Employees for Bribing Saudi Officials” (Nov. 19, 2014).

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  • From Vol. 5 No.2 (Jan. 27, 2016)

    Hiring Practices and FCPA Compliance in the Wake of the BNY Settlement (Part Two of Two)

    Adding to the list of creative ways to accomplish bribery, the SEC’s recent settlement with BNY demonstrated that, at least in the SEC’s opinion, a job can be a “thing of value” that can lead to an FCPA violation. The government made it clear that to avoid such violations, any robust anti-corruption program must integrate policies about hiring practices. Going forward, companies can use the settlement documents as a helpful roadmap for updating their compliance program to meet the SEC’s maturing expectations. The FCPA Report spoke to a number of experts in the field (including the chief compliance officer of a multinational company) who together identified three key aspects of a hiring policy and discussed how companies should be updating their training program. In the first article in this two-article series, we considered the expansion of FCPA liability and its broader implications for FCPA enforcement. See “BNY Mellon Settles Nepotism-Related Charges for $14.8 Million” (Aug. 19, 2015).

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  • From Vol. 5 No.1 (Jan. 13, 2016)

    Hiring Practices and FCPA Compliance in the Wake of the BNY Settlement (Part One of Two)

    In August of 2015, the SEC settled its first FCPA case based solely on hiring relatives of foreign officials. Stemming from a series of investigations of hiring practices at banks, the settlement with BNY Mellon illuminated how the SEC views the FCPA and the types of practices that can violate it. In the wake of this first for the SEC, companies may need to reassess and retool their compliance programs. In this installment of our two-part article series, we discuss how the BNY settlement clarifies what can be an FCPA violation. The second part will explore what changes companies should be making to their hiring policies, compliance programs and training curricula. See “BNY Mellon Settles Nepotism-Related Charges for $14.8 Million” (Aug. 19, 2015).

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  • From Vol. 4 No.23 (Nov. 4, 2015)

    Customs Corruption Risks: Four Ways to Limit the Risks of Working with Customs Brokers, Freight Forwarders and Other Third Parties (Part Two of Three)

    Importing and exporting goods across borders exposes companies to corruption risks on a number of fronts.  Third-party risks are particularly prevalent because international trade often requires that a company work with agents such as customs brokers and freight forwarders.  This second article in The FCPA Report’s series on customs risks examines the risks posed by third parties in the customs process and identifies four key strategies for mitigating those risks.  The first article in the series examined how the customs system works and the risks associated with that system, including books and records violations for inaccurate customs forms and the temptation for employees to make illegal payments to customs officials to ensure that their paperwork is approved as quickly as possible.  The third article will discuss facilitation payments in the customs context, including whether companies should allow such payments and, if so, how they can structure their compliance policies to minimize risks.  See also “Anti-Corruption and Trade Regulations: Identifying Common Elements and Streamlining Compliance Programs (Part One of Two),” The FCPA Report, Vol. 3, No. 14 (Jul. 9, 2014); and Part Two, Vol. 3, No. 15 (Jul. 23, 2014).

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  • From Vol. 4 No.21 (Oct. 21, 2015)

    Customs Corruption Risks: Identifying the Problem Areas (Part One of Three)

    Moving goods from one country to another – a staple of many businesses – exposes companies to various points of bribery risk as employees try to navigate different customs regimes and expedite shipments.  In this three-article series, we explore customs-related hurdles and FCPA risks.  This, the first article in the series, examines how the customs system works and the risks associated with that system, including books and records violations for inaccurate customs forms and the temptation for employees to make illegal payments to customs officials to ensure that their paperwork is approved as quickly as possible.  The article also outlines four ways to mitigate customs risks.  The second article in the series will take a closer look at how to address the risks arising from working with customs brokers, freight forwarders and other third-party vendors.  The third article will discuss facilitation payments in the customs context, including whether companies should allow such payments and, if so, how they can structure their compliance policies to minimize risks.  See also “Training, Certification, Due Diligence, Customs Clearance and Facilitation Payments: An Interview with Leaders of Ernst & Young’s Fraud Investigation & Dispute Services Practice,” The FCPA Report, Vol. 1, No. 2 (Jun. 6, 2012).

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  • From Vol. 4 No.20 (Oct. 7, 2015)

    Lack of Training and Due Diligence Leads to $19 Million Penalty for Hitachi

    Japanese conglomerate Hitachi has agreed to pay $19 million to resolve the SEC’s claims that it bribed foreign officials to obtain contracts related to two multi-billion dollar construction projects in South Africa.  The settlement highlights the risks companies face when working with local partners and the necessity of thorough, well-documented due diligence and in-country compliance training programs.  Experts also told The FCPA Report that the settlement raises questions as to what level of “corruption” is necessary to incur an FCPA violation and why, in light of other recent SEC actions, cases with similar fact patterns can have wildly divergent outcomes.  See “Top FCPA Officials Talk Compliance Tips and the Defense Bar Weighs In,” The FCPA Report, Vol. 3, No. 25 (Dec. 17, 2014).

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  • From Vol. 4 No.20 (Oct. 7, 2015)

    Remediation, Cooperation and No Bribery Allegations Net Hyperdynamics a $75,000 Civil FCPA Settlement

    A few months after the DOJ declined to prosecute, the SEC announced that it has resolved its FCPA charges against Hyperdynamics for a $75,000 penalty.  On September 29, 2015, the SEC issued a Cease-and-Desist Order finding that the small oil and gas exploration company’s insufficient internal controls resulted in payments to third parties owned by a Guinean employee of the company. The penalty reflects Hyperdynamics cooperation and remediation efforts and perhaps the lack of any bribery allegations, but that number is dwarfed by the $12.7 million Hyperdynamics’ reported that it spent on the FCPA investigation of its African operations.  Scott Wilson, a partner at Boies, Schiller & Flexner, told The FCPA Report that this settlement “highlights that there are anti-corruption compliance risks even for a very small firm,” and Daniel Fetterman, a partner at Kasowitz, Benson, Torres & Friedman, emphasized that the lack of direct bribery allegations is not all that unusual.  See also “How Can Companies Capture the Telecom, Energy and Resources Opportunity in Africa While Mitigating the Risk?,” The FCPA Report, Vol. 2, No. 20 (Oct. 9, 2013).

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  • From Vol. 4 No.17 (Aug. 19, 2015)

    James Tillen of Miller & Chevalier Talks 2015 Enforcement Trends and Predictions

    The first half of 2015 is behind us, providing an opportunity to reflect on new trends in anti-corruption enforcement and what companies can expect going forward.  A number of FCPA actions have made the news this year, but identifying trends and making predictions requires a more careful look at the numbers.  As part of its FCPA Summer Review 2015, Miller & Chevalier has analyzed enforcement data and identified several trends in the first half of 2015, including a noticeable increase in the number of declinations by the DOJ.  The FCPA Report spoke with James Tillen, a member of M&C and vice chair of the firm’s international department, about these trends, how companies should use them to improve their compliance programs and their negotiating strategies with the government and his predictions for the second half of 2015.  See also “Government Officials and Defense Bar Offer Insights on FCPA Enforcement, Voluntary Disclosure and Cooperation,” The FCPA Report, Vol. 4, No. 14 (Jul. 8, 2015).

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  • From Vol. 4 No.8 (Apr. 15, 2015)

    $9.5 Million SEC FLIR Settlement Emphasizes Benefits of Self-Reporting and Importance of Internal Controls

    Employees often ask compliance officers about what is acceptable when entertaining or providing gifts to foreign officials.  How much is too much?  The FLIR fact pattern provides a clear case of “too much.”  Months after two of its employees had been sanctioned for the same behavior, FLIR Systems, Inc., an Oregon-based company that develops infrared technology, has resolved SEC charges that it took key officials of the Saudi Arabia Ministry of Interior on an extensive “world tour” and bought them luxury gifts.  “FLIR’s deficient financial controls failed to identify and stop the activities of employees who served as de facto travel agents for influential foreign officials to travel around the world on the company’s dime,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit.  Despite the extravagant travel and gifts, FLIR did escape a DOJ enforcement action.  We discuss the details and takeaways from the case.  See also “A Guide to Preventing and Detecting Travel Agency Corruption (Part One of Three),” The FCPA Report, Vol. 3, No. 1 (Jan. 8, 2014); Part Two of Three, Vol. 3, No. 2 (Jan. 22, 2014); Part Three of Three, Vol. 3, No. 3 (Feb. 5, 2014).

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  • From Vol. 4 No.3 (Feb. 4, 2015)

    In Rare DPA, SEC Resolves FCPA Claims with PBSJ over Middle-Eastern Bribes

    Florida-based engineering and construction firm PBSJ Corporation (now the Atkins North America Holding Corporation) has agreed to pay $3.4 million to resolve FCPA claims with the SEC relating to bribes in Qatar and Morocco.  The claims were resolved via a Deferred Prosecution Agreement – an unusual settlement tool for the SEC.  The SEC also settled claims with Walid Hatoum, PBSJ’s former international marketing director, through an administrative proceeding.  We summarize the case and draw compliance lessons.  See also “SEC’s NPA with Ralph Lauren, the Agency’s First Ever, Modifies the M&A Due Diligence Requirements Traditionally Included in DOJ DPAs, and Outlines Specific Actions That Constitute Effective Self-Reporting,” The FCPA Report, Vol. 2, No. 9 (May 1, 2013).

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  • From Vol. 4 No.1 (Jan. 7, 2015)

    Anti-Corruption Compliance Lessons from the Avon Settlements

    After a six-year investigation that cost the company upwards of $344 million, Avon has resolved FCPA charges with the DOJ and SEC, agreeing to pay $135 million in penalties.  In a guest article, Michelle J. Shapiro and Kiran Patel, partner and associate, respectively, at Dentons, analyze the settlements and draw three anti-corruption compliance lessons from the saga.  See also “Avon Class Action Dismissal Illustrates Challenges of FCPA-Related Shareholder Derivative Suits,” The FCPA Report, Vol. 3, No. 21 (Oct. 22, 2014).

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  • From Vol. 3 No.25 (Dec. 17, 2014)

    Scientific Instrument Company Bruker Settles Civil FCPA Action for $2.4 Million, Raising Recurrent FCPA Themes

    Sightseeing trips around the world for employees of Chinese state-owned enterprises and sham collaboration agreements with those SOEs form the basis the SEC’s FCPA settlement with Bruker Corp., a Massachusetts-based manufacturer of scientific instruments.  The case features many of the recurring elements from past enforcement actions: employees of state-owned entities who may not intuitively be thought of as foreign officials; all-expenses-paid leisure trips disguised as business trips for officials responsible for purchasing decisions; weak compliance measures, including a failure to translate training presentations and hotlines into Chinese and the lack of an independent compliance or internal audit function in China; and no charges based on the anti-bribery provisions of the FCPA.

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  • From Vol. 3 No.18 (Sep. 10, 2014)

    Mitigating Bribery Risks Using Financial Controls, Risk Assessments and Leveraging Internal Resources

    A recent program presented by The Knowledge Group brought together experts from investigative and consulting firm Kroll, law firm Alston & Bird and defense company Leidos to discuss best practices in mitigating FCPA risk.  The panelists analyzed the current enforcement climate and shared how they have structured and implemented systems at their companies for financial controls, risk assessments and the vetting of third parties, including how they leverage existing resources to enhance their compliance programs.  They also highlighted compliance lessons from recent Kroll global fraud surveys.  See also “Kroll Managing Director Extracts Practical Lessons from 2013 Anti-Bribery and Corruption Benchmarking Survey,” The FCPA Report, Vol. 2, No. 13 (Jun. 26, 2013).

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  • From Vol. 3 No.8 (Apr. 16, 2014)

    A Guide to Detecting and Preventing Expense-Reimbursement Fraud (Part One of Three)

    Employee expense reports can be prime vehicles for bribery schemes, and failing to maintain adequate controls over such reports can put a company in serious FCPA jeopardy.  Employees can manipulate, and have manipulated, expense reports in order to provide improper benefits to government officials in the form of gifts, hospitality or charitable contributions – or simply to generate pools of cash from which employees can pay bribes.  Implementing a risk-based expenditures program, defining appropriate expense limits and training employees can help to limit a company’s risk.  Such policies “help to set the framework for employees regarding company expectations for compliance and ethical business practices,” said Tara Giunta, a partner at Paul Hastings.  The FCPA Report is publishing a three-part series to help companies identify and prevent expense-report fraud.  The series will provide advice from FCPA experts regarding: spotting expense-report fraud, setting appropriate expense-report policies, monitoring expense reports and addressing anti-corruption issues raised by the monitoring process.  This, the first article in the series, will discuss the risks associated with expense reports; provide advice on using travel and entertainment policies to limit expense-report fraud; and provide strategies for utilizing the training process to decrease expense-report fraud.  See also “Ten Strategies for Avoiding FCPA Violations When Making Charitable Donations,” The FCPA Report, Vol. 1, No. 3 (Jul. 11, 2012).

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  • From Vol. 3 No.8 (Apr. 16, 2014)

    Three Regions, Four Settlement Tools and $108 Million: HP Entities Resolve Criminal and Civil FCPA Charges 

    Hewlett-Packard and three of its subsidiaries in Russia, Mexico and Poland have resolved FCPA charges, paying $108 million in penalties.  The schemes involved bribes to obtain contracts with various government sectors and encompass different risk areas, such as third-party payments and gifts.  The entities resolved the actions through a guilty plea (for HP Russia), a deferred prosecution agreement (for HP Poland), a non-prosecution agreement (for HP Mexico) and a cease and desist order (for HP, the California-based parent company).  The criminal fines represent discounts from the low end of the Sentencing Guidelines range, unlike the recent Marubeni case, and no compliance monitor was imposed.  For insights from HP on its current compliance program, see “Conducting Effective Anti-Corruption Due Diligence on Third Parties: An Interview with Gwen Romack, Director of Global Anti-Corruption at Hewlett-Packard Company,” Vol. 2, No. 20 (Oct. 9, 2013). 

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  • From Vol. 2 No.24 (Dec. 4, 2013)

    Oil and Gas Company Weatherford Settles Civil and Criminal FCPA Charges for $153 Million

    Weatherford International, a Geneva-based oilfield services company with significant operations in Texas, has agreed to settlements with both the SEC and DOJ to resolve government investigations into a number of matters, including charges that it violated the FCPA, sanctions and export controls.  The total fine was $253 million.  The $153 million fine for the FCPA portion makes this the eighth largest FCPA fine to date, and this is the first time the SEC has used books and records charges to allege the violation of export control and sanctions laws.  Weatherford announced a tentative deal last month.  For insight on FCPA training from Weatherford’s chief compliance officer, hired after the government probe began, see “FCPA Training That Works: An Interview with Billy Jacobson, Chief Compliance Officer of Weatherford International,” The FCPA Report, Vol. 2, No. 8 (Apr. 17, 2013).

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  • From Vol. 2 No.16 (Aug. 7, 2013)

    After a Protracted Battle About Reporting Requirements, Judge Leon Approves a $10 Million FCPA Settlement Between IBM and the SEC

    One of the most judicially contested civil settlements in FCPA history reached a conclusion on July 25, 2013, when U.S. District Judge Richard J. Leon of the U.S. District Court for the District of Columbia signed off on a $10 million agreement between IBM and the SEC.  The agreement resolves civil FCPA charges arising from IBM’s alleged bribery schemes in China and Korea.  The settlement agreement has been pending for more than two years, with Judge Leon accusing the SEC of “rolling over” during negotiation of the reporting requirements in the agreement, and warning IBM that if corruption problems arise in the future, it “won’t be a happy day.”  See also “Judge’s Refusal to Approve Civil FCPA Settlement Raises Concerns for Future FCPA Settlements with the SEC,” The FCPA Report, Vol. 2, No. 1 (Jan. 9, 2013); “District Court Judge Modifies Demands in Push for Stricter Judicial Review of Civil FCPA Settlements,” The FCPA Report, Vol. 2, No. 3 (Feb. 6, 2013).

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  • From Vol. 2 No.12 (Jun. 12, 2013)

    How Forensic Accountants Help Identify Corruption Risk and Delve into the Details of Books and Records

    Forensic accountants are an integral part of anti-corruption compliance.  From proactive risk assessments to reactive investigations, forensic accountants can probe the details of a company’s books and records, assisting compliance officers and in-house and outside counsel.  This guest article by Lindi Jarvis and Javier Alvarez of FTI Consulting provides insight on the steps forensic accountants can take to prevent, detect and remediate corruption, highlighting best practices and including examples such as a “heat map” to help focus resources in high-risk areas.  See also “SEC’s FCPA Unit Chief and Top Practitioners Address the Role of Financial Controls in FCPA Compliance Policies, Internal Investigations, Self-Reporting and Related Topics,” The FCPA Report, Vol. 2, No. 7 (Apr. 3, 2013).

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  • From Vol. 2 No.8 (Apr. 17, 2013)

    Civil FCPA Settlement by Dutch Electronics Giant Philips Continues Trend of “No-Charged Bribery Disgorgement” Cases

    In the first FCPA settlement made public in 2013, Koninklijke Philips Electronics N.V. (Philips), a Dutch electronics company, has agreed to pay $4.5 million in disgorgement and prejudgment interest to resolve the SEC’s allegations that one of Philips’ subsidiaries that sells medical equipment, Philips Polska s.p z.o.o., violated the books and records provisions of the FCPA when its employees bribed Polish health care facility officials and failed to properly record the payments.

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  • From Vol. 2 No.7 (Apr. 3, 2013)

    SEC’s FCPA Unit Chief and Top Practitioners Address the Role of Financial Controls in FCPA Compliance Policies, Internal Investigations, Self-Reporting and Related Topics

    In a recent panel discussion held at the New York City Bar, Kara Brockmeyer, Chief of the SEC’s FCPA Unit, and Mark Schonfeld, a partner at Gibson Dunn & Crutcher LLP, discussed the SEC’s role in civil FCPA enforcement from a private and public perspective.  The panel was moderated by Wayne Carlin, a partner at Wachtell, Lipton, Rosen & Katz.  The three experts shared useful insights regarding managing the costs of FCPA investigations, creating strong compliance programs, negotiating with the SEC and deciding whether to voluntarily disclose a violation to the government.

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  • From Vol. 2 No.6 (Mar. 20, 2013)

    Structuring FCPA Books and Records Controls to Withstand SEC Scrutiny Without Impairing Sales

    Although the FCPA is commonly known as an “anti-bribery” law, it is frequently difficult for the SEC and DOJ to prove that a suspect payment was made with the requisite “corrupt” intent to establish a violation of FCPA Section 78dd-a.  However, investigations of suspect payments often reveal violations of FCPA Section 78m, which requires a company to maintain appropriate internal accounting controls and accurate books and records (the Accounting Provisions).  Even if a payment to a government official does not constitute an impermissible bribe, if that payment is recorded as a sales commission, then the company can still be held liable for an FCPA Accounting Provisions violation.  A recent webinar shed light on SEC enforcement and investigative priorities with regard to the Accounting Provisions and on how companies can approach the development of suitable accounting controls.  This article catalogues the noteworthy insights from the webinar.

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  • From Vol. 2 No.6 (Mar. 20, 2013)

    The Essentials of the New Canadian Anti-Corruption Requirements

    The anti-corruption regime in Canada is likely about to get a lot stronger, significantly impacting the enforcement risks for Canadian companies operating at home and abroad.  In February of this year, a bill was introduced in the Canadian Parliament to significantly amend Canada’s Corruption of Foreign Public Officials Act (CFPOA).  The decision to strengthen the CFPOA comes on the heels of significant criticism leveled against the Canadian government over the past several years for its lack of anti-corruption enforcement.  The amendments are expected to pass the legislature in the near future.  In a guest article, Mara V.J. Senn and Mauricio Almar, partner and associate, respectively, at Arnold & Porter LLP, discuss the proposed amendments, how they will impact Canadian companies and others subject to the CFPOA, and draw comparisons and contrasts with the FCPA.

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  • From Vol. 2 No.5 (Mar. 6, 2013)

    Facilitation Payments, Foreign Officials, Bona Fide Expenditures and More: Actionable Insight from the Authors of “Defending Clients in FCPA Investigations”

    Mark P. Goodman and Bruce E. Yannett, partners at Debevoise & Plimpton LLP, and Daniel J. Fetterman, a partner at Kasowitz, Benson, Torres & Friedman LLP, are the FCPA experts behind “Defending Clients in Foreign Corrupt Practices Investigations,” a chapter in the 2012 treatise “Defending Corporations and Individuals in Government Investigations.”  Their chapter addresses the hot button issues companies are facing today as the SEC and DOJ continue to increase the pressure on global companies to implement and enforce best of breed FCPA compliance programs.  Goodman and Fetterman recently shared their insight on some of these pressing issues with The FCPA Report.  In our interview, they discussed how far the FCPA’s jurisdiction reaches in light of recent case law and the FCPA Guidance, including the jurisdictional implications for aiders, abettors and conspirators; details regarding rewards under the new Dodd-Frank whistleblower provisions; who is a foreign official and whether it matters; how companies should handle facilitation payments; advice on reasonable business expenses after the Guidance; the concept of virtual strict liability in accounting violations of the FCPA; how judicial review will impact settlements; the collateral effects of an FCPA settlement; and when to self-report an FCPA violation.

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  • From Vol. 2 No.5 (Mar. 6, 2013)

    Major Chinese Petrochemical Company, Formed by Reverse Merger, Resolves Insider Trading and FCPA Charges with the SEC

    It’s an insider trading case with an FCPA twist: the SEC has announced that China-based Keyuan Petrochemicals, and its former CFO, Aichun Li, have resolved charges of violations of anti-fraud and reporting provisions of federal securities laws for failing to disclose related party transactions (a form of insider trading) as well for giving gifts to Chinese officials from a secret account.  The settlement must be approved by a judge.  See “Judge’s Refusal to Approve Civil FCPA Settlement Raises Concerns for Future FCPA Settlements with the SEC,” The FCPA Report, Vol. 2, No. 1 (Jan. 9, 2013); “District Court Judge Modifies Demands in Push for Stricter Judicial Review of Civil FCPA Settlements,” The FCPA Report, Vol. 2, No. 3 (Feb. 6, 2013).

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  • From Vol. 2 No.3 (Feb. 6, 2013)

    District Court Judge Modifies Demands in Push for Stricter Judicial Review of Civil FCPA Settlements

    A federal judge continues to exercise significant control over FCPA settlement agreements in his courtroom, with the potential to change the way the SEC and corporate defendants settle FCPA cases.

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  • From Vol. 2 No.1 (Jan. 9, 2013)

    Judge’s Refusal to Approve Civil FCPA Settlement Raises Concerns for Future FCPA Settlements with the SEC

    A federal judge’s frustration with the SEC’s enforcement policies could have important consequences for companies subject to the civil provisions of the FCPA.  U.S. District Judge Richard J. Leon of the U.S District Court for the District of Washington, D.C. announced in open court in late December that he will not “rubber stamp” a settlement agreement resolving civil FCPA charges brought by the SEC against IBM in 2011, and accused the SEC of “rolling over.”  Judge Leon insisted that IBM agree to more rigorous reporting than the settlement requires.  Judge Leon’s active involvement in the settlement and his imposition of additional reporting demands on IBM could affect how other companies negotiate FCPA (and other) settlements with the SEC.  Sources told The FCPA Report that Judge Leon’s demands could lead to, among other things, more widespread judicial scrutiny of settlements, and ultimately more enforcement actions settled administratively.

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  • From Vol. 2 No.1 (Jan. 9, 2013)

    Pharma Giant Eli Lilly Agrees to $29.4 Million Consent Judgment to Settle SEC Charges of FCPA Violations Arising Out of Its Operations in Russia, China, Brazil and Poland

    Eli Lilly and Company (Lilly), a major pharmaceutical company, has consented to the entry of a final judgment against it to settle SEC charges that Lilly subsidiaries violated the FCPA in connection with their operations in China, Brazil, Poland and Russia.  The consent judgment, which includes an injunction against future FCPA violations, calls for an independent review of Lilly’s internal controls and requires Lilly to pay disgorgement, interest and civil penalties of almost $29.4 million.  In its Complaint, the SEC provides insight into its expectations for internal controls.  The Lilly settlement resolves another case in what has been considered an “industry sweep” of pharmaceutical companies by the SEC.  See also “LeClairRyan Webinar Highlights Ten Anti-Corruption Risks for Pharmaceutical and Medical Device Companies and Outlines the Elements of an Effective FCPA Compliance Program,” The FCPA Report, Vol. 1, No. 9 (Oct. 3, 2012).

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  • From Vol. 2 No.1 (Jan. 9, 2013)

    Germany-Based Insurer Allianz Pays $12.3 Million to Resolve SEC’s Books and Records and Internal Controls FCPA Charges

    Allianz, a German insurance and asset management company that previously had bonds registered with the SEC, recently resolved charges that an Indonesian joint venture in which Allianz’s Indonesian subsidiary invested made improper payments to employees of state-owned entities between 2001 and 2008.  Allianz agreed to pay $12.3 million.  The case demonstrates the government’s interpretation of the jurisdictional reach of the FCPA, the importance of whistleblowers and the increasing prevalence of FCPA cases that do not implicate the FCPA’s anti-bribery provisions.  See also “Five Themes for General Counsel to Monitor with Respect to Dodd-Frank Whistleblowers and the FCPA,” The FCPA Report, Vol. 1, No. 9 (Oct. 3, 2012).

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  • From Vol. 1 No.14 (Dec. 12, 2012)

    Top Practitioners Analyze the DOJ & SEC FCPA Guidance (Part Two of Two)

    On November 14, 2012, the SEC and DOJ jointly issued long-awaited guidance on the FCPA (Guide or Guidance), spurred in part by the Organisation for Economic Cooperation and Development’s recommendation, and business pressures for more clarity about the FCPA and the government’s enforcement of it.  This article continues our extensive coverage of the Guidance and the practical implications of it, offering concrete suggestions to anti-bribery professionals on avoiding, handling and settling enforcement actions, conducting internal investigations and executing mergers and acquisitions.  This article – the second in a two-part series – uses input from leading FCPA experts to extract practical lessons from the Guide, including what it says about compliance programs and internal controls; whether the Guide sheds any light on what constitutes a facilitation payment and who constitutes a foreign official, and whether those distinctions are important; the Guide’s insight on third-party due diligence, successor liability and statute of limitations issues; and whether the Guide affects the self-reporting calculus.  The first article in this series addressed the backstory of the Guide and why it was issued; how companies and their counsel can use the Guide and the hypotheticals included in it; advice that can be distilled from the Guide on gifts, travel and entertainment; deficiencies in the Guide and which areas of the law remain unclear; and the highlights and lowlights of the Guide’s declination section.  See “Top Practitioners Analyze the DOJ & SEC FCPA Guidance (Part One of Two),” The FCPA Report, Vol. 1, No. 13 (Nov. 28, 2012).

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  • From Vol. 1 No.8 (Sep. 19, 2012)

    SEC Adopts Final Rules for Extractive Issuers That Overlap with FCPA Recordkeeping Requirements

    After vigorous lobbying, the SEC has voted to adopt final rules (Rules) implementing Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which added Section 13(q) to the Securities Exchange Act of 1934.  Deemed a victory by environmental and human rights groups, Section 1504 and the Rules take on corruption in extractive industries (gas, oil and mining) by requiring certain companies to disclose payments made to governments on a project-by-project basis.  While the FCPA’s books and records provision already requires issuers to keep records of payments to governments, the Rules require covered issuers to report payments to governments on a new form to be filed with the SEC called Form SD.

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  • From Vol. 1 No.7 (Sep. 5, 2012)

    A Seven-Step Process for Mitigating Corruption Risk When Engaging Third-Party Consultants in Brazil

    Brazil is a country with tremendous business promise, but considerable corruption risk.  On the upside, Brazil is the world’s sixth largest economy; will host the upcoming 2014 World Cup and the 2016 Summer Olympics; has a largely internally focused economy (and thus does not rely on exports to the same extent as China, for example); was relatively unscathed by the 2008-2009 financial crisis; is making a concerted push to upgrade its infrastructure (ports, roads, utilities, sporting venues, etc.); has a wealth of natural resources (including oil) and a growing ability to commercialize them; and more.  The Brazilian government recently estimated that its economy will grow 4.5 percent in 2013.  On the downside, however, corruption has been a drag on Brazil’s economy for as long as anyone can remember, and adversely affects other aspects of life in Brazil (notably, the uneven and sporadic administration of justice).  Brazil’s regulatory regime is infamously – many would say, unnecessarily – complicated, in particular with respect to tax.  (Avon’s internal FCPA investigation reportedly has uncovered, among other things, millions of dollars of payments made by Avon to tax consultants in Brazil.)  Accordingly, doing business effectively in Brazil requires navigating a highly complex regulatory regime.  In turn, navigating that regime often requires on the ground expertise, color and connections.  In short, it requires hiring local, third-party consultants, or despachantes, as they are called in Brazil.  A big business opportunity, a complex regulatory regime and third-party agents that are ubiquitous and virtually inevitable – anti-corruption professionals will recognize the current landscape in Brazil as a classic recipe for FCPA violations.  The key business question is how to avoid such violations while taking advantage of the considerable business opportunities that Brazil offers.  This article seeks to answer that question.  In particular, this article discusses: relevant precedent regarding third-party consultants in Brazil, including completed enforcement actions and ongoing investigations; industries in Brazil in which corruption risk is salient; specific corruption risks in Brazil; the rationale for the use of third-party consultants in Brazil; three “red flags” to be aware of when evaluating third-party consultants in Brazil; seven steps to take when retaining third-party consultants in Brazil (steps that were originally distilled by Navigant Consulting for Tyco International Ltd.); and suggestions for monitoring third-party consultants once they are hired.

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  • From Vol. 1 No.7 (Sep. 5, 2012)

    Pension Fund Sues Wal-Mart to Gain Access to Documents Pertaining to Mexican FCPA Allegations

    In preparation for a possible shareholder’s derivative suit, and claiming that Wal-Mart Stores, Inc. (Wal-Mart), has “made a mockery” of the Delaware law that affords shareholders the right to inspect corporate books and records, the Indiana Electrical Workers Pension Trust Fund IBEW (Trust) has sued Wal-Mart in the Delaware Court of Chancery.  The Trust seeks access to Wal-Mart’s books and records, and the records of Wal-Mart’s Mexican subsidiary, Wal-Mart de Mexico, S.A. de C.V., that relate to their handling of allegations of corruption, bribery and violations of the FCPA in their Mexican operations.  This article provides the background of the dispute and a summary of the Trust’s allegations.

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  • From Vol. 1 No.6 (Aug. 22, 2012)

    In Distributor Margin Case with the “Potential for Bribery,” Oracle Corporation Settles FCPA Books and Records Charges with the SEC for $2 Million

    On August 16, 2012, the SEC announced that it had reached an agreement with California-based Oracle Corporation, the world’s third largest software company, relating to charges that Oracle failed to audit payments to vendors in India.  No parallel DOJ settlement has been announced, and the government put forward no allegations of bribery.

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  • From Vol. 1 No.3 (Jul. 11, 2012)

    Ten Strategies for Avoiding FCPA Violations When Making Charitable Donations

    Charitable donations by companies and their employees present at least two FCPA-related risks.  First, charitable donations may be – or may appear to be – intended to improperly influence foreign government officials associated with a charity.  Second, even bona fide donations may violate the books and records provisions of the FCPA if inadequately accounted for.  Accordingly, companies and employees contemplating charitable donations must contend with potential FCPA consequences.  Unfortunately, in the case of charitable donations – as with many other recurring business questions with potential FCPA implications – there is little authoritative guidance.  Business decision-making in this area is typically guided by experience and best practices.  The purpose of this article is to distill best practices with respect to avoiding FCPA violations when making charitable donations.  In particular, this article: discusses in greater detail the intersection of the FCPA and charitable giving; summarizes the modest volume of relevant precedent (including an ongoing investigation of a big name in the gaming industry); then details ten strategies for approaching charitable donations in a manner intended to mitigate FCPA risk.  In the background of this discussion is a macro trend.  It is becoming increasingly apparent that good corporate citizenship is good business.  As communication channels proliferate, both in terms of technology and access, the number of global customers is increasing and the average customer is becoming better informed.  Customer choices are being swayed by factors beyond product and service quality – factors including corporate reputation.  Reputation, in turn, is powerfully affected by a corporation’s charitable undertakings in the areas where it operates.  A well-orchestrated, well-positioned and judiciously publicized charitable campaign can boost the social profile of a company, which can impact revenue more quickly and directly than ever before.  But a bungled charitable campaign – for example, one that trips up the FCPA – can conjure up the uncharitable old adage: “No good deed goes unpunished.”  Companies should engage in smart charity, and doing so entails staying on the right side of the FCPA.  This article provides a roadmap for doing so.

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  • From Vol. 1 No.1 (Jun. 6, 2012)

    Non-FCPA Liability for Alleged FCPA Violations

    Undiscovered bribes can yield a finite number of business benefits, which generally can be grouped under the rubric of increased revenue.  Discovered or even suspected bribes, on the other hand, can generate a seemingly limitless number of legal detriments.  One of the more frequently cited categories of detriments is the possibility of being subject to multiple global anti-bribery regimes based on the same or similar conduct.  Siemens is the paradigm case here.  A less frequently cited – but no less forbidding – bad outcome is the possibility of non-FCPA liability for actual or alleged FCPA violations.  A lawsuit recently filed by the County of York Retirement Plan (York County) against Avon Products, Inc. (Avon or the Company) illustrates the ability of an FCPA investigation to metastasize into something else entirely.  In this case, York County generally seeks to inspect Avon’s books and records in order to substantiate a breach of fiduciary duty claim; in turn, that underlying breach of fiduciary duty claim is generally premised on the idea that Avon had inadequate or nonexistent FCPA compliance policies and procedures in place during the relevant period, leading to apparent FCPA violations in China.  Those apparent violations have led to internal and regulatory investigations which to date have cost Avon almost a quarter of $1 billion.  This article describes the factual background and legal claims alleged in York County’s complaint and related litigation.

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