The Anti-Corruption Report

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

Articles By Topic

By Topic: Internal Controls

  • From Vol. 7 No.13 (Jun. 27, 2018)

    Using Data Analytics to Boost Compliance Program Effectiveness

    Data analytics is becoming a critical component of FCPA compliance. Unfortunately, like other fields that involve math, many lawyers find it beyond their skill set, according to Richard W. Grime, a partner at Gibson Dunn, while moderating a recent PLI program on maximizing the use of data in compliance programs. However, lawyers must become familiar and comfortable with analyzing data if they are going to be doing any FCPA compliance work, he said. The speakers on the panel also included Hui Chen, an independent ethics and compliance consultant and former DOJ compliance counsel; Sulaksh R. Shah, a partner at PwC; and Zachary N. Coseglia, assistant general counsel and head of global compliance monitoring and analytics at Pfizer Inc. See our four-part series on measuring compliance: “Getting Started” (Aug. 2, 2017); “Seven Areas of Compliance to Measure” (Aug. 16, 2017); “How to Measure Quality” (Sep. 6, 2017); and “Gathering and Analyzing Data” (Sep. 20, 2017).

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  • From Vol. 7 No.9 (May 2, 2018)

    SEC and DOJ Officials Predict That Current FCPA Enforcement Trends Will Continue, Defense Attorneys Agree

    FCPA enforcement, both in terms of the number of prosecutions and the priorities of the government, will hold steady in 2018, Charles Cain, head of the SEC’s FCPA Unit, and David Johnson, Assistant Chief of the DOJ’s FCPA Unit, indicated during a recent event sponsored by the Practising Law Institute. Noting that 2016 was a banner year for FCPA prosecutions, Cain observed that enforcement in 2017 was more in line with historical norms and predicted that the same would be true in 2018. Johnson and Cain also confirmed that, going forward, the government will remain committed both to prosecuting individuals and cooperating with foreign counterparts to enforce global anti-corruption laws. See “Any Decrease in FCPA Enforcement Under Trump Will Be Overshadowed by International Enforcement, Experts Predict” (Apr. 4, 2018).

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  • From Vol. 7 No.9 (May 2, 2018)

    Lessons From the Dismissal of the Embraer Securities Fraud Class Action

    A federal court’s fatal blow to a securities fraud class-action suit based on Embraer’s 2016 $200-million FCPA enforcement action provides a roadmap for public disclosures that minimize collateral liability from FCPA cases. This article analyzes the plaintiffs’ allegations and the court’s reasoning and provides insight on the decision from Dechert partner Mauricio A. España. See “A Guide to Disclosing Corruption Investigations in SEC Filings (Part One of Four)” (May 1, 2013); Part Two (May 15, 2013); Part Three (May 29, 2013); and Part Four (Jun. 12, 2013).

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  • From Vol. 6 No.18 (Sep. 20, 2017)

    Measuring Compliance: Gathering and Analyzing Data (Part Four of Four)

    Knowing what data to collect about a compliance program is an obvious and necessary first step to measuring its effectiveness, but figuring out the logistics of data collection and analysis is just as important. In the first article in this four-part series we discussed how to begin generating compliance metrics. The second article laid out seven areas of compliance a company can measure and the third part discussed the challenges of measuring compliance program quality. This final article discusses how to gather and analyze data and use it to continually improve a compliance program. See “Developing Key Performance Indicators and Tracking Metrics Using ISO 37001 (Part One of Two)” (Nov. 9, 2016); Part Two (Nov. 23, 2016).

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  • From Vol. 6 No.17 (Sep. 6, 2017)

    Measuring Compliance: How to Measure Quality (Part Three of Four)

    One of the biggest challenges companies face when evaluating a compliance program is finding ways to measure quality and effectiveness. Often, companies focus on quantitative measures which can be easy to collect but lacking in insight. Many such metrics, like the number of trainings or dollars spent on compliance, offer little information on how effective a program is at achieving its goals. Because quality can be so challenging to measure, many companies just do not do it, which can leave them at risk. This article, the third in a four-part series, provides specific methods companies can use to measure the quality of their program and the strength of their compliance culture. See “Developing Key Performance Indicators and Tracking Metrics Using ISO 37001 (Part One of Two)” (Nov. 9, 2016); Part Two (Nov. 23, 2016).

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  • From Vol. 6 No.16 (Aug. 16, 2017)

    Measuring Compliance: Seven Areas of Compliance to Measure (Part Two of Four)

    There are myriad approaches a company can take to measuring compliance. Indeed, the choices might seem overwhelming. As discussed in the first article in this multi-part series, there is value in picking just a few metrics and getting started. This second article discusses seven common elements of a compliance program that companies can measure. Future articles in the series will discuss the importance of measuring a compliance program’s quality and techniques for gathering and anaylzing data. See “Defining, Documenting and Measuring Compliance Program Effectiveness” (Dec. 2, 2015).

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  • From Vol. 6 No.15 (Aug. 2, 2017)

    Measuring Compliance: Getting Started (Part One of Four)

    While most companies have established some sort of compliance program, measuring its effectiveness can be challenging. Collecting data is clearly an important part of that process, but questions remain as to what data to collect, how to collect it and how to analyze it. “When companies think about data, they automatically assume it is something very sophisticated, but it isn’t – it’s just asking how many, how much and why?” Hui Chen, former compliance counsel to the DOJ’s Fraud Section, told The Anti-Corruption Report. In this first article in a multi-part series, we discuss why companies should be measuring their compliance programs and the steps they should take to get started. The following articles will suggest some specific areas of compliance a company could consider tracking and measuring, and discuss the challenges of qualitatively measuring compliance, and gathering and analyzing data. See “Developing Key Performance Indicators and Tracking Metrics for an Anti-Corruption Program (Part One of Two)” (Feb. 24, 2016); Part Two (Mar. 9, 2016).

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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.14 (Jul. 19, 2017)

    Recent Settlements Reveal the Hidden ABAC Risks and Rewards of Internal Audits 

    Frequent, vigorous internal audits are a cornerstone of any robust corporate compliance and anti-corruption program. But merely having an effective audit team in place, which is no small feat, is not enough. A number of companies have been getting burned by the SEC and DOJ for not acting quickly enough after internal audits yielded evidence suggestive of FCPA violations or other internal control deficiencies. In a guest article, Steptoe & Johnson partner Matthew Herrington and associate Brady Cassis unpack the recent settlements revealing several strategies for successfully managing internal audits. For more from Herrington see “Developing Key Performance Indicators and Tracking Metrics for an Anti-Corruption Program (Part One of Two)” (Feb. 24, 2016); Part Two (Mar. 9, 2016).

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  • From Vol. 6 No.11 (Jun. 7, 2017)

    SEC and DOJ Address Corporate Concerns About Future FCPA Enforcement

    Amid continuing uncertainty about FCPA enforcement in the Trump administration, regulators are highlighting the global community’s dedication to anti-corruption enforcement. At the same time, they are defending the U.S. regime’s transparency and reach, but with a more business-focused frame of reference. Acting Principal Deputy Assistant Attorney General Trevor McFadden stressed international coordination and cooperation in a recent speech in São Paolo, Brazil. Andrew Weissmann, head of the DOJ’s Fraud Division, and Andrew Calamari, Director of the SEC’s New York Regional Office, echoed that international focus, and discussed enforcement trends – including some numbers from the first year of the Pilot Program – and corporate concerns at a recent PLI panel. See “Current and Former FCPA Officials Debate Enforcement Trends and Strategies” (May 24, 2017).

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  • From Vol. 6 No.10 (May 24, 2017)

    Current and Former FCPA Officials Debate Enforcement Trends and Strategies

    How much will FCPA enforcement change under the Trump administration and how well do key enforcement strategies work? Top FCPA attorneys offered their insights on what to expect from the new administration during a recent PLI seminar and debated the merits of enforcement strategies, including international cooperation, the use of monitors in settlements and the DOJ’s pursuit of criminal internal-control charges. See “Embraer Global Settlement Presages a New Paradigm in International Enforcement and Next-Level Compliance” (Dec. 7, 2016).

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  • From Vol. 6 No.8 (Apr. 26, 2017)

    Managing Subsidiary Risks: Internal Controls (Part Three of Three)

    While subsidiaries continue to be a major source of corruption risk, parent companies have several tools at their disposal to mitigate that risk. This final article in our three-part Managing Subsidiary Risks series explores some of the strongest tools and controls – internal and financial – available to a parent company to prevent corruption at its subsidiaries. The first article discussed what steps companies can take when setting up new subsidiaries, either from scratch or through the acquisition of an existing company, to limit corruption risk and the second part of the series addressed leveraging strong communication and a culture of compliance. See “Rolls-Royce Settlement Offers Lessons on How to Pay Commissions Without Corruption” (Feb. 15, 2017).

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  • From Vol. 6 No.5 (Mar. 15, 2017)

    Rolls Settlement Illuminates SFO Expectations for Cooperation and Compliance

    Rolls-Royce’s recent settlement with U.K., U.S. and Brazilian authorities was a key development in global anti-corruption enforcement. The case opens a window into what the SFO, now a major player on the field of anti-corruption enforcement, expects from companies both in terms of cooperation and remediation. That information may prove crucial for many multinational companies as U.K. enforcement continues to assert its dominance on the anti-corruption stage. See “Rolls-Royce Settlement Offers Lessons on How to Pay Commissions Without Corruption” (Feb. 15, 2017) and “SFO Arrives in the Anti-Corruption Premier League With Rolls-Royce Settlement” (Mar. 1, 2017).

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  • From Vol. 6 No.5 (Mar. 15, 2017)

    DOJ’s Guidance Shows That Compliance Programs Still Matter

    Critical comments of the FCPA by President Trump, coupled with a general policy position of lessening regulatory oversight of U.S. companies, have caused speculation as to whether the new administration will curtail FCPA enforcement. Recently, the DOJ Fraud Section quietly released this administration’s first guidance setting out its position on the contours of an effective corporate compliance program. In a guest article, Paul Hastings partners Tara Giunta and Palmina Fava, and their associate Brian Wilmot, explain that this guidance does not signal any easing of enforcement – rather, the Fraud Section is signaling an incisive review of companies and their compliance programs, functions, resources and effectiveness. See “Top FCPA Officials Encourage Strong Compliance Programs and Remediation, the Defense Bar Responds” (Dec. 21, 2016).

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  • From Vol. 6 No.4 (Mar. 1, 2017)

    SFO Arrives in the Anti-Corruption Premier League With Rolls-Royce Settlement

    The U.K.’s Serious Fraud Office has struggled for legitimacy in recent years, with a limited number of enforcement actions under its belt and a shrinking budget. But its recent settlement with Rolls-Royce has established it as a force to be reckoned with in global anti-corruption enforcement. “The settlement catapults the SFO into the Premier League of global anti-bribery law enforcement,” said London-based Barry Vitou, head of Pinsent Masons’ corporate crime team. But is it sending mixed messages about the value of cooperation and self-reporting? For more on the settlement, see “Rolls-Royce Settlement Offers Lessons on How to Pay Commissions Without Corruption” (Feb. 15, 2017).

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  • From Vol. 6 No.4 (Mar. 1, 2017)

    Nine Months After SEC Settlement, Las Vegas Sands Pays $7M Penalty to Bring DOJ Investigation to a Close

    Just one day before the recent change in administration, the DOJ announced its settlement with Las Vegas Sands Corp. to resolve FCPA charges stemming from payments made to a politically connected consultant doing business in China and Macao between 2006 and 2009. The deal is notable for the relatively small penalty involved given the behavior at issue and the cash flow of the company, as well as for the unusual lag between the resolution of the DOJ matter and an earlier one with the SEC over substantially the same facts. See “A Shady Consultant and Lackluster Accounting in China Wins Sands a $9 Million Penalty” (Apr. 20, 2016).

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  • From Vol. 6 No.3 (Feb. 15, 2017)

    Rolls-Royce Settlement Offers Lessons on How to Pay Commissions Without Corruption

    Rolls-Royce’s recent massive settlement with U.S., U.K. and Brazilian authorities is a stark reminder of the anti-corruption risks associated with intermediaries, agents and fixers when negotiating contracts with state-owned entities. Commissions paid by Rolls-Royce to its agents – including notorious oil-and-gas “solutions” provider Unaoil – often were eventually passed on to foreign officials to close deals, netting Rolls-Royce a global settlement for hundreds of millions of dollars. In this first article discussing the case, we look at the bribes Rolls-Royce paid, how its compliance program failed to prevent them and what companies can do to make sure that commissions paid to agents are not used improperly. In a second article, we will look at the implications for cooperative U.S. and U.K. enforcement and what the SFO is looking for in terms of cooperation and remediation. See “Bribery Act Experts Discuss the Impact of Brexit, DPAs and Other U.K. Developments” (Jul. 13, 2016).

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  • From Vol. 5 No.24 (Dec. 7, 2016)

    A Dish of Cream? Some Caviare? Or Strassburg Pie? How to Properly Respond to Bribery Requests  

    “Before a Cat will condescend to treat you as a trusted friend, some little token of esteem is needed, like a dish of cream,” T.S. Eliot wrote in his Book of Practical Cats. Ensuring that an employee properly responds to a bribe request is no easy task because providing the soliciting individual with a “little token of esteem” may be the path of least resistance for employees. In a guest article, Hogan Lovells attorneys Peter Spivack and Rafael Ribeiro discuss how a company can strengthen all aspects of its compliance program to minimize the risk that bribes will be requested and ensure that their employees respond appropriately when they are. For further insights from Hogan Lovells, 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.23 (Nov. 23, 2016)

    Developing Key Performance Indicators and Tracking Metrics Using ISO 37001 (Part Two of Two)

    The International Organisation for Standardisation’s new standard for anti-bribery management systems – ISO 37001 – provides a useful frame of reference for companies developing management tools such as key performance indicators (KPIs) and tracking metrics to address anti-corruption compliance. In the first part of this guest article series, Matthew Herrington, a partner at Steptoe & Johnson, Jonathan Drimmer, vice president and deputy general counsel at Barrick Gold Corp., and Leslie Benton, vice president of advocacy and stakeholder engagement of CREATE.org, explained how to use ISO 37001 to develop management tools such as KPIs and tracking metrics to address anti-corruption compliance, and provided an example of a KPI strategy mapped to the training requirement. In this second part, they examine additional areas of ISO 37001 that naturally lend themselves to KPI and/or metrics. See “Developing Key Performance Indicators and Tracking Metrics for an Anti-Corruption Program” Part One of Two)” (Feb. 24, 2016); Part Two (Mar. 9, 2016).

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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.17 (Aug. 31, 2016)

    Key Energy Claims Financial Hardship, Receives DOJ Declination and No Civil Penalty for Mexican Corruption

    Key Energy Services’ recent SEC settlement resolving internal controls and books and records charges once again highlights the dangers of failing to supervise foreign subsidiaries. The company agreed to disgorge $5 million to resolve charges that it violated the FCPA when a consultant working on behalf of its Mexican subsidiary allegedly made improper payments to an employee of Mexico’s state-owned oil company, Petroleos Mexicanos, commonly known as Pemex. Key Energy previously announced that the DOJ declined to prosecute it based on the same conduct. Despite significant evidence of wrongdoing, the company avoided a civil penalty due to its precarious financial condition, significant remediation efforts and its imminent exit from the Mexican market. See also “Could Johnson Controls Have Prevented the Flagrant Circumvention of Its Revamped Compliance Program?” (Jul. 27, 2016).

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  • From Vol. 5 No.13 (Jun. 29, 2016)

    The DOJ Deploys Carrots and Sticks in Analogic FCPA Settlement

    The SEC and DOJ’s recent FCPA settlements with health care and security technology company Analogic reveal how the government is treating self-reporting and cooperation after the announcement of the Pilot Program and the Yates Memo. The combination of Analogic’s voluntary disclosure of its bribery scheme involving Russian slush funds, and its failure to fully cooperate in the investigation, netted benefits (the lack of a parent-level DOJ plea) yet also less-than-optimal results (a lower discount than the Pilot Program provides for). We analyze the more than $11 million settlement with Analogic and its Danish subsidiary BK Medical and BK Medical’s former CFO. See also “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.8 (Apr. 20, 2016)

    Regional Risk Spotlight: Baker & McKenzie Lawyers Discuss Italy’s Corruption Risks and Unique Compliance Model 

    There is a growing trend, particularly in European countries, of implementing laws that outline the best practices for an anti-corruption compliance program and then allow a company to assert their effective compliance program as a defense to anti-corruption violations. Italy – a country riddled by corruption scandals, most publicly during the tenure of Prime Minister Silvio Berlusconi – has recently introduced an innovative set of laws that takes these proscriptive best practices a step further, particularly with regard to monitoring compliance programs. The FCPA Report recently spoke with Roberto Cursano and Aurelio Giovannelli of the Studio Professionale Associato of Baker & McKenzie located in Rome about the state of anti-corruption compliance in Italy. See previously “Analyzing Spain’s New Corporate Compliance Defense” (Apr. 6, 2016).

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  • From Vol. 5 No.8 (Apr. 20, 2016)

    Ten Key Compliance Measures CCOs Should Implement in 2016

    The increased enforcement of the FCPA and the U.K. Bribery Act, and statements by top enforcers of those laws, have highlighted the need for companies to identify and address any potential exposure to violations of anti-bribery and corruption laws around the world. As a new KPMG study reveals, managing new and emerging risks can seem overwhelming. In a guest article, Randy Stephens and Ed Petry of NAVEX Global identify ten steps to help compliance officers get ahead of the curve and plan for the coming year. See “Five Tools Every Chief Compliance Officer Needs for Effective FCPA Compliance: Title, Authority, Access, Budget and Culture (Part One of Two)” (Apr. 3, 2013); Part Two (Apr. 17, 2013).

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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.7 (Apr. 6, 2016)

    Travel and Entertainment Corruption Risks: Internal Controls to Ensure the Program Is Working (Part Three of Three)

    A strong travel and entertainment policy that clearly delineates between an acceptable business expense and an impermissible bribe is critical to keeping a company out of FCPA trouble. But a policy alone is not enough – a company must also have sufficient internal controls in place to ensure that employees understand and follow company policies. In this final installment of The FCPA Report’s three-part series on travel and entertainment expenses, we explore the controls companies should have in place to keep their travel and entertainment programs working effectively. The first article in the series discussed the hallmarks of an appropriate T&E expense and the second looked at T&E policies. See also “Five Stages of Corruption and Myriad Internal Controls Failures: Compliance Takeaways From the VimpelCom Settlement” (Mar. 9, 2016).

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  • From Vol. 5 No.6 (Mar. 23, 2016)

    Travel and Entertainment Corruption Risks: Three Musts for a Strong T&E Policy and Five Ways a Company Can Customize Its Program (Part Two of Three)

    A strong travel and entertainment policy is the bedrock of a compliance program, but a policy that is overly complicated or doesn’t consider business realities may undermine a company’s compliance efforts. In this article, the second in a three-part series on travel and entertainment expenses, we explore three characteristics of a strong T&E compliance policy and five ways companies can customize their policy to their business. The first article in the series outlined five hallmarks of an acceptable T&E expense and the third article will investigate what internal controls a company needs to make sure that its program is functioning properly. See also “How to Build an Anti-Corruption Policy That Allows for Appropriate Business Gifts” (Sep. 19, 2012).

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  • From Vol. 5 No.5 (Mar. 9, 2016)

    Five Stages of Corruption and Myriad Internal Controls Failures: Compliance Takeaways From the VimpelCom Settlement

    VimpelCom’s historic settlement with U.S. and Dutch authorities was notable for many reasons, among them the enormous penalties and disgorgement paid and the DOJ’s attendant civil forfeiture suit. But beyond the settlement itself, which was discussed in the first part of this two-part article series, the underlying bribery scheme is noteworthy – and informative – as well. Over and over the company’s weak internal controls enabled employees to make corrupt payments to a government official in Uzbekistan. Here, we take a close look at the five stages of corruption that were outlined by the DOJ in its criminal information. The underlying facts show the mechanics of how corrupt payments can be made and how strong internal controls could have prevented them. See “Examining New DOJ Compliance Counsel Hui Chen’s Four Elements of a Successful Compliance Program” (Jan. 13, 2016).

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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.2 (Jan. 27, 2016)

    Survey Highlights Surprising Lack of Corporate Anti-Corruption Efforts

    The World Bank estimates that $1 trillion is lost to corruption of foreign public officials each year. Yet, a recent survey conducted in the second half of 2015 by the economic crime and justice studies department at Utica College, along with risk and business consulting firm Protiviti Inc., found that company anti-corruption efforts are lacking. During a recent panel discussion, Scott Moritz, a Protiviti managing director, observed that most companies are not well positioned to deter, detect or investigate fraud and corruption. We summarize the most concerning portions of the survey report to help compliance professionals evaluate their programs and advocate for sufficient resources. See also “Ernst & Young’s Fraud Survey Warns of Anti-Corruption Complacency” (Jun. 25, 2014); and “Kroll Managing Director Extracts Practical Lessons From 2013 Anti-Bribery and Corruption Benchmarking Survey” (Jun. 26, 2013).

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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.20 (Oct. 7, 2015)

    “No Money, No Prescription” Attitude in China Leads Bristol-Myers Squibb to $14 Million SEC Penalty

    The SEC has made no secret that it is focused on bribes made by pharmaceutical companies to Chinese health care practitioners, whom it considers foreign officials under the FCPA.  Previous settlements with pharma companies operating in China - such as Eli Lilly, Biomet, Pfizer and Mead Johnson – have focused on the provision of gifts, travel, entertainment or simply cash to Chinese health care practitioners in exchange for prescribing products or getting on government formularies. On October 5, 2015, the SEC announced that it resolved similar charges with pharma giant Bristol-Myers Squibb (BMS) for over $14 million.  The SEC says former BMS employees called their bribes an “open secret” and the only way to meet their sales targets.  We analyze the settlement, a U-turn from the initial investigation into BMS’ activities in Germany, and some of the mistakes BMS made.  See “Ceresney, Focusing on Pharma, Discusses SEC Enforcement Priorities and Compliance Expectations,” The FCPA Report, Vol. 4, No. 6 (Mar. 18, 2015).

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  • From Vol. 4 No.18 (Sep. 9, 2015)

    Miller & Chevalier’s Ellis Offers Insights from Former SAP Employee’s FCPA Guilty Plea and SEC Settlement

    In a rare joint effort to pursue an individual, the DOJ and SEC recently reached settlement agreements with Vicente Eduardo Garcia, a former SAP vice president who orchestrated a scheme to bribe Panamanian officials.  On August 12, 2015, Garcia pled guilty to a one-count Information filed in the Northern District of California, charging him with conspiracy to violate the FCPA.  On the same day, the SEC entered a Cease-and-Desist Order in which Garcia agreed to pay a civil penalty of more than $85,000 based on substantially similar allegations.  The enforcement actions demonstrate that companies may be able to avoid liability even when their employees engage in corruption, and serve as a warning about the types of schemes prevalent in Central America.  The FCPA Report recently spoke with Matteson Ellis, a member of Miller & Chevalier and an expert on FCPA enforcement in Latin America.  Ellis explained how this case fits into a broader pattern of FCPA cases coming out of Central America in general, and Panama in particular.  He also discussed whether further actions related to Garcia’s scheme are likely and what the SEC and DOJ may be signaling about companies’ compliance programs.  See also “Corruption Risk and the Changing Legal Climate in Latin America,” The FCPA Report, Vol. 3, No. 4 (Feb. 19. 2014).

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  • From Vol. 4 No.16 (Aug. 5, 2015)

    Four Compliance Lessons from Lesser-Known FCPA Cases

    In today’s active FCPA enforcement environment, the compliance bar is always rising.  Although most compliance specialists are familiar with the details of the headline-grabbing cases such as PetroTiger and FLIR, smaller, less-publicized cases can also provide valuable insight on how best to avoid FCPA liability.  In a recent webinar hosted by the Society of Corporate Compliance and Ethics, Bill Currier, a partner at White & Case, and Sulaksh Shah, a partner in PwC’s forensic service practice, discussed how companies can use the SEC and DOJ’s enforcement activity in recent, lower-profile corruption cases to tailor their compliance programs to the unique needs, risks and structures of their businesses or industries.  See also “Best Practices for Reviewing Anti-Corruption Compliance Programs: Government Expectations, Scheduling and Staffing (Part One of Three),” The FCPA Report, Vol. 2, No. 16 (Aug. 7, 2013); “Challenges, Preparation and Risk Evaluation (Part Two of Three),” Vol. 2, No. 17 (Aug. 21, 2013); and “Implementation, Remediation and Documents (Part Three of Three),” Vol. 2, No. 18 (Sep. 11, 2013).

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  • From Vol. 4 No.15 (Jul. 22, 2015)

    No Discount and a Three-Year Monitor: Dissecting LBI’s $17.1 Million FCPA Settlement

    Securing government contracts through deliberately disguised bribes recently landed Louis Berger International (LBI) in hot water with the DOJ.  The New Jersey-based construction management company agreed to pay $17.1 million to settle charges that it violated the FCPA.  Unlike other companies that have been rewarded for cooperation or self-disclosure with a below-sentencing guidelines fine, the LBI fine was within the statutorily suggested range.  The company was also required, under the terms of the DPA, to engage a corporate monitor for a period of three years, a costly undertaking that the government has been requiring less frequently.  This article explains the bribery scheme and what companies can learn from the settlement.  See “Top FCPA Enforcers Tout Voluntary Disclosure and Warn About International Cooperation; The Defense Bar Responds,” The FCPA Report, Vol. 3, No. 24 (Dec.3, 2014).

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  • From Vol. 4 No.14 (Jul. 8, 2015)

    Ten Steps a Company Can Take to Mitigate Corruption Risk When Entering a New Market (Part Two of Two)

    Expanding into new markets provides companies with unparalleled opportunities for growth, but establishing operations in a new location requires a company to navigate numerous corruption landmines.  The FCPA Report’s ten-step guide to mitigating corruption risk when entering a new market is designed to help companies create and implement an effective market-entry strategy.  This second article in the series discusses the final six steps: addressing logistical challenges; making disclosures to local governments; creating an integration plan; establishing a compliance program; implementing internal controls; and monitoring and reviewing that program.  The first article in the series addressed the first four steps, including how a company can build a risk profile for the country; the various methods companies can use to enter new markets; and how to mitigate the risk from local partners and other third parties.  See also “Gibson Dunn Attorneys Take the Pulse of Anti-Corruption Risks in Emerging Markets,” The FCPA Report, Vol. 3, No. 3 (Feb. 5, 2014).

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  • From Vol. 4 No.12 (Jun. 10, 2015)

    Detecting and Mitigating Corruption Risk When Participating in Public Procurements: Seven Steps to Take During and After a Procurement Process (Part Three of Three)

    Winning a contract through a public procurement process presents a tremendous opportunity for a company trying to enter or expand in an emerging market – the World Bank estimates that procurements account for approximately two-thirds of spending in such areas.  However, these rich sources of business do not come without risk.  Procurement processes require companies to interact with foreign officials and often involve third-party agents or local partners, providing ample opportunity for bribery.  The FCPA Report is publishing a three-part article series to help companies mitigate the corruption risks that arise before, during and after the public procurement process.  This third and final article in the series details seven steps a company should take to protect itself during and after a procurement process.  The first article examined how procurement works and when and how bribery occurs during the procurement process.  The second article provided six steps a company should take prior to engaging in a procurement process.  See also “The World Bank’s Wide Reach and Its Growing Anti-Corruption Program,” The FCPA Report, Vol. 3, No. 11 (May 28, 2014).

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  • From Vol. 4 No.10 (May 13, 2015)

    How Companies Can Use Enhanced Auditing Techniques to Address the Government’s Increasing Focus on Internal Controls

    Recent FCPA enforcement actions demonstrate that the government is asking more of the companies it regulates, especially when it comes to internal controls to prevent and detect corruption.  Fortunately, enhanced technologies are providing companies with new ways to create and maintain internal controls.  In a guest article, Michael J. Shepard, a partner at Hogan Lovells, explains how both pressure from the government and the ability to do more may push companies to go beyond the techniques traditionally associated with anti-corruption compliance programs and into a world previously inhabited almost exclusively by finance professionals – the world of internal controls.  See also “Mitigating Bribery Risks Using Financial Controls, Risk Assessments and Leveraging Internal Resources,” The FCPA Report, Vol. 3, No. 18 (Sep. 10, 2014).

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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.5 (Mar. 4, 2015)

    $16 Million Goodyear SEC Settlement Highlights M&A Risks and Subsidiary Liability

    Goodyear Tire & Rubber Company has agreed to pay $16 million to settle civil FCPA charges, resolving allegations that it failed to detect more than $3.2 million in improper payments made by its Kenyan and Angolan subsidiaries.  The SEC says that due diligence failures relating to the acquisition of the Kenyan subsidiary and weak internal controls allowed the bribery to occur unchecked.  Goodyear received credit for self-disclosure, cooperation and remediation.  “Goodyear did very well,” Robert Appleton, a partner at Day Pitney, told The FCPA Report.  The company “got the best result I think it could have hoped for,” he said.  See also “Seven Issues to Address When Performing Pre-Acquisition Due Diligence,” The FCPA Report, Vol. 2, No. 23 (Nov. 20, 2013).

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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)

    Recordbreaking Alstom Criminal FCPA Settlement Results from Wide-Ranging Bribery Scheme and Lack of Cooperation

    The Department of Justice ended 2014 with its largest criminal FCPA enforcement action yet.  On December 22, 2014, Alstom S.A., a French engineering, power and transportation company, agreed to pay $772 million to resolve charges relating to widespread bribery involving tens of millions of dollars paid to foreign officials across the globe.  The bribery schemes included travel for foreign officials, bribes disguised as charitable payments and funds funneled to foreign officials via third parties.  The case brings up questions of jurisdiction, the consequences of failing to cooperate, as well as successor liability, given Alstom’s pending sale to General Electric.  The intersection of U.S. and French law may also have affected the terms of this settlement.  With insight from Edward Kang, a partner at Alston & Bird, The FCPA Report analyzes the salient facts and terms of the resolution, and draws compliance takeaways.  See also “Compliance Lessons from Total S.A.’s $398 Million FCPA Settlement: Foreign Cooperation, Compliance Monitors, Broad Jurisdiction and the Effect of Reluctant Cooperation with the DOJ and SEC,” The FCPA Report, Vol. 2, No. 12 (Jun. 12, 2013).

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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.22 (Nov. 5, 2014)

    Bio-Rad Settles FCPA Charges for $55 Million through DOJ Non-Prosecution Agreement and SEC Administrative Action

    Bio-Rad, a California-based medical diagnostics and life sciences manufacturing and sales company, has agreed to pay $55 million to settle criminal and civil allegations that it violated the FCPA by making improper payments to foreign officials in Russia, Vietnam and Thailand to win government business.  The SEC and DOJ said the company had a decentralized and weak system of internal controls, but that its cooperation and investigation were extensive after it voluntarily disclosed the problems.  In Thailand, the entity that made the bribes had just been acquired by Bio-Rad, demonstrating the importance of pre-merger diligence.  See also “Checklist of Actions to Take and Factors to Consider When Conducting Pre-Merger Anti-Corruption Due Diligence,” The FCPA Report, Vol. 2, No. 19 (Sep. 26, 2013).

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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.25 (Dec. 18, 2013)

    FCPA Corporate Settlements of 2013: Details, Trends and Compliance Takeaways

    FCPA enforcement got off to a slow start in 2013, with no official corporate FCPA settlements announced until the beginning of the second quarter.  Experts dove into the vacuum, speculating about whether the lack of settlements signaled a downturn in the government’s commitment to enforcement.  As the year progressed, however, enforcement picked up.  While the statistics were slightly down from 2012, as of press time, the DOJ and SEC had reached nine settlement agreements with corporations, including multiple DPAs and the SEC’s first-ever NPA.  The government assessed over $650 million in fines, disgorgement and penalties from the settling companies, with company settlements ranging from $1 million to a staggering $398 million.  This article discusses four compelling enforcement trends and summarizes the settlements and their compliance takeaways.  See also “Seven Key Trends That Are Changing the FCPA Enforcement and Compliance Landscape,” The FCPA Report, Vol. 2, No. 14 (Jul. 10. 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.23 (Nov. 20, 2013)

    How to Structure Chief Compliance Officer Reporting Lines to Maximize the Efficacy of Anti-Corruption Compliance (Part Two of Three)

    The structure of a company’s compliance reporting lines is a fundamental element of its ability to build and maintain an effective anti-corruption compliance program.  To whom a company’s chief compliance officer reports influences that CCO’s visibility, authority and effectiveness – which, in this era of increasing enforcement, affect the company’s revenue and reputation.  However, reporting structures vary among companies, and best practices are unsettled.  The FCPA Report is examining various reporting structures in a three-part series.  This article, the second in the series, explores the benefits and drawbacks of five different reporting line structures.  See also “Five Tools Every Chief Compliance Officer Needs for Effective FCPA Compliance: Title, Authority, Access, Budget and Culture (Part One of Two),” The FCPA Report, Vol. 2, No. 7 (Apr. 3, 2013); Part Two of Two, Vol. 2, No. 8 (Apr. 17, 2013). 

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  • From Vol. 2 No.22 (Nov. 6, 2013)

    Gifts, Travel, Entertainment and Anti-Corruption Compliance: Sources of Authority, Best Practices and Benchmarking

    FCPA experts report that gifts, travel and entertainment expenses are one of the most asked-about areas in anti-corruption compliance and the answers can be surprisingly hard to come by.  A recent Strafford webinar provided experienced practitioners’ insights into navigating the potentially perilous shoals surrounding these expenses.  The program, “FCPA Gifts, Entertainment and Hospitality: Surviving Heightened Enforcement,” featured Margaret M. Cassidy, a principal at Cassidy Law in Washington, D.C., and John E. Davis, a member of law firm Miller & Chevalier.  Cassidy and Davis discussed available sources of guidance on gifts, travel and entertainment expenses, sources of guidance for benchmarking compliance controls and insights on implementing effective policies with regard to gifts, travel and entertainment.  This article summarizes the key takeaways from that presentation.  See “Ten Strategies for Paying for Government Clients to Attend the Olympics or Other Sporting Events without Violating the Foreign Corrupt Practices Act,” The FCPA Report, Vol. 1, No. 1 (Jun. 6, 2012).

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  • From Vol. 2 No.22 (Nov. 6, 2013)

    Four Takeaways from Stryker’s $13 Million Civil Settlement of FCPA Internal Control Violations

    Six years after disclosing the SEC and DOJ investigation into possible FCPA violations, Stryker Corporation, a Michigan-based medical device company, has agreed to an SEC Consent Order that requires it to pay $13.3 million in disgorgement, interest and fines.  Stryker was not charged with violating the anti-bribery provisions of the FCPA, only the accounting provisions.  The SEC found that Stryker made approximately $7.5 million in profits as a result of the improper payments to foreign officials from 2003-2008 in Mexico, Poland, Romania, Argentina and Greece, which were described in Stryker’s books as legitimate expenses such as travel, charitable donations consulting and commissions. As discussed in The FCPA Report’s Guide to Disclosing Corruption Investigations in SEC Filings, Stryker first disclosed the government’s SEC investigation and Stryker’s cooperation in November 2007.  

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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.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.4 (Feb. 20, 2013)

    How Can Anti-Money Laundering Laws Affect an FCPA Compliance Program? An Interview with Former FinCEN Director James H. Freis, Jr. (Part Two of Two)

    Though motivated by different statutes, anti-money laundering compliance programs and FCPA compliance programs deal with related risks.  Anti-money laundering laws are also integrally related to FCPA charges, and prosecutors use them frequently in FCPA enforcement actions across industries and geographies.  The FCPA Report recently spoke with the nation’s former top anti-money laundering regulator, James H. Freis, Jr., about a range of issues, including the role anti-money laundering laws play in FCPA cases, how financial regulators are working together across the globe to combat corruption and the corruption challenges facing the gaming industry in particular.  In this, the second part of our interview, Freis discussed, among other things: the connection between anti-bribery laws and broader financial reforms around the globe; how financial institutions can integrate their AML and FCPA compliance programs; the similarities and differences between Politically Exposed Persons and foreign officials; and the importance of high-profile FCPA enforcement.  In the first article in this series, Freis discussed, among other things: what companies should focus on when conducting corruption and anti-money laundering risk assessments and audits; how the DOJ and SEC work with FinCEN on corruption cases; and details regarding the formation, operation and future of the Egmont Group, a 130-member organization of international financial intelligence units.  See “Former FinCEN Director James H. Freis, Jr. Discusses the Intersection between Anti-Money Laundering and Anti-Corruption Law (Part One of Two),” The FCPA Report, Vol. 2, No. 3 (Feb. 6, 2013).

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  • From Vol. 2 No.3 (Feb. 6, 2013)

    Former FinCEN Director James H. Freis, Jr. Discusses the Intersection between Anti-Money Laundering and Anti-Corruption Law (Part One of Two)

    One way prosecutors have pursued the FCPA’s broad jurisdictional reach and overcome some of the inherent challenges in corruption cases has been the use of a set of powerful tools – anti-money laundering laws.  The FCPA Report spoke with the nation’s former top anti-money laundering regulator, James H. Freis, Jr., about a range of issues, including how prosecutors use anti-monetary laundering laws in FCPA cases, how financial regulators are working together across the globe to combat corruption and the corruption challenges facing the gaming industry.  Freis was the director of the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) from 2007-2012 and is now Counsel at Cleary Gottlieb Steen & Hamilton LLP.  As Director of FinCEN, Freis led the development and enforcement of regulations, fighting not only money laundering and corruption, but terrorist financing, fraud and other financial crimes applicable to a broad range of financial institutions, including banks, securities and futures industry participants and insurance companies.  We are publishing our interview with Freis in two parts.  In the first part, Freis discussed, among other things, what companies should focus on when conducting corruption and anti-money laundering risk assessments and audits; how the DOJ and SEC work with FinCEN on corruption cases; and details regarding the formation, operation and future of the Egmont Group, a 130-member organization of international financial intelligence units.

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  • From Vol. 2 No.3 (Feb. 6, 2013)

    Strategies for Implementing the U.K. Bribery Act’s Requirement of Adequate Procedures for Intermediaries

    Intermediaries are crucial to many businesses, sometimes even mandatory, and are replete with corruption risk – under both the FCPA and the U.K. Bribery Act, they can generate criminal liability for their principals if they bribe to win business.  In many jurisdictions, intermediaries are routinely used to enter markets; to identify opportunities; to access and build relationships with decision-makers responsible for awarding contracts, including public officials; to assist with navigating complex local laws, regulations and customs; and to win business.  How can a company mitigate the risks these ubiquitous third parties pose?  In a guest article, James Maton, a partner in Edwards Wildman Palmer UK LLP’s London office, provides strategies to that end by reference to the requirements of the U.K. Bribery Act, one of the most comprehensive anti-bribery statutes in the world, with broad application to global activities connected to the U.K.  It requires companies and partnerships to have adequate procedures intended to prevent bribery in both their private and public sector business activities.  Maton’s article considers the key principles that should underpin those procedures, and the steps an organisation can take to reduce the bribery risks posed by intermediaries.

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  • From Vol. 2 No.2 (Jan. 23, 2013)

    JPMorgan Chase Anti-Money Laundering Consent Orders Highlight the Role of Risk in Structuring Compliance Programs

    On January 14, 2013, JPMorgan Chase Bank, N.A., JPMorgan Bank and Trust Company, N.A., and Chase Bank USA, N.A. (together, the Banks) and their parent holding company, JPMorgan Chase & Co. (JPMC), entered into a consent order with the Office of the Comptroller of the Currency of the United States (OCC) and a separate consent order with the Board of Governors of the Federal Reserve System (Fed).  The orders follow regulatory examinations of JPMC and the Banks occasioned by JPMC’s revelation that one of its traders, Bruno Iksil, known in the industry as the “London Whale,” made huge derivative bets that cost JPMC billions.  While the consent orders primarily focus on shortcomings in JPMC’s anti-money laundering efforts and how those efforts may be improved, they more generally espouse the view – apparently shared by the SEC and DOJ in their FCPA enforcement programs – that compliance efforts should be risk-based.  See “Comprehensive FCPA Guidance Provides a Roadmap for Companies to Reevaluate and Revise Their Compliance Policies,” The FCPA Report, Vol. 1, No. 13 (Nov. 28, 2012).  This article describes the orders in detail.

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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.13 (Nov. 28, 2012)

    DOJ and SEC Officials Provide Candid Insight into the Recently Issued FCPA Guidance

    On November 14, 2012, the DOJ and the SEC provided unprecedented guidance on the FCPA, releasing a Resource Guide to the Foreign Corrupt Practices Act (Guide or Guidance).  See “DOJ and SEC Jointly Issue Long-Awaited Guidance on the FCPA,” The FCPA Report, Vol. 1, No. 12 (Nov. 14, 2012) and the articles analyzing the Guide in this issue of The FCPA Report.  Two days later, at the American Conference Institute’s 28th Annual Conference on the Foreign Corrupt Practices Act, top officials from the DOJ and the SEC addressed the FCPA community.  In what moderator Homer Moyer, member at Miller & Chevalier Chartered, described as an “impressive exercise in transparency,” Charles Duross, the Deputy Chief of the Fraud Section of the Criminal Division of the DOJ, Kara Brockmeyer, Chief of the FCPA Unit of the Division of Enforcement of the SEC and Jeffrey Knox, Principal Deputy Chief of the Fraud Section of the Criminal Division of the DOJ, answered the legal and business community’s most pressing questions about the Guidance.  Topics addressed included: reasons for providing the Guidance; whether companies should rely on the Guidance; a company’s potential liability for the acts of a foreign subsidiary; successor liability under the FCPA; gifts and entertainment; definition of the term “foreign official”; corporate compliance programs; and corporate criminal liability.  This article relays the officials’ most noteworthy points on each of the foregoing topics.

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  • From Vol. 1 No.13 (Nov. 28, 2012)

    Top Government Officials Discuss FCPA Enforcement Actions Initiated During 2012 and Their Significance

    On November 16, 2012, at ACI’s 28th Annual FCPA Conference, top regulators from the DOJ and SEC discussed FCPA enforcement developments in a lively panel called the “2012 FCPA Overview.”  The panelists discussed, among other things, the “message” from recent cases, including the much-touted Morgan Stanley case and the “rogue employee” defense; the benefits of self-reporting; the increased capacity of the government to detect misconduct; and whether requirements for financial reporting are expanding.  The 2012 overview panel was moderated by Lucinda A. Low, a partner at Steptoe & Johnson, LLP, and head of its FCPA practice.  It featured the SEC’s Kara Novaco Brockmeyer and the DOJ’s Charles Duross.  Brockmeyer has been Chief of the SEC’s FCPA Unit since September 2011.  Prior to that, she served as Assistant Director of its Enforcement Division and in other capacities since 2000.  Duross is Deputy Chief of the Fraud Section in the DOJ’s Criminal Division and is in charge of all of the DOJ’s FCPA cases.  He previously served as an Assistant U.S. Attorney.

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  • From Vol. 1 No.11 (Nov. 7, 2012)

    The New Landscape of Corporate Social Responsibility Regulation and Its Overlap with FCPA Compliance

    New legislative demands on companies go beyond just prohibiting bribery to impose broader social responsibility, such as certifying that their products were not made with child labor, that their employees and supply chain partners did not engage in any trafficking-related activities, and others.  A broad anti-corruption program can incorporate social responsibility and supply chain issues as well as FCPA and anti-bribery elements, as many of the risk areas and bad actors – third parties especially – overlap.  This article – based on a panel at the ABA’s Fifth Annual FCPA Institute in Washington, D.C. on October 19, 2012, as well as independent research – discusses the current international landscape of Corporate Social Responsibility (CSR) laws around the world; the potential tension between CSR and bribery laws; how CSR and FCPA violations overlap; how companies can adapt their FCPA compliance programs to integrate CSR and broader corruption issues; and the likely ways in which the new CSR laws will be enforced.

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  • From Vol. 1 No.9 (Oct. 3, 2012)

    Five Themes for General Counsel to Monitor with Respect to Dodd-Frank Whistleblowers and the FCPA

    It’s late at night and General Counsel is giving the deck for the next morning’s Audit Committee presentation one final read through.  The subject of the presentation is a succinct yet thorough post-mortem report distilling the key findings from a wide-ranging internal investigation into irregularities relating to a major contract award in one of the company’s most challenging foreign markets.  There is sufficient evidence of questionable conduct to merit real concern under the FCPA and General Counsel, with Outside Counsel by her side, must make a recommendation to the Audit Committee as to whether the company should make a voluntary disclosure to U.S. authorities.  Flipping through the slides, General Counsel remarks to herself how familiar the facts have become, particularly the unattractive ones.  She is also well versed in the factors weighing on the pro and con side of disclosure.  But one wildcard prevents General Counsel from putting the presentation down and getting some much-needed rest: is there a whistleblower who has already informed the government?  If so, the company’s calculus is dramatically different.  But General Counsel just doesn’t know and that is one answer that Outside Counsel does not have for her.  Whistleblowers have long been a hot topic for corporate counsel.  They have become an even hotter topic since Congress passed Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), which amended the Securities Exchange Act of 1934 to add new Section 21F, “Securities Whistleblower Incentives and Protection.”  In a guest article, F. Joseph Warin, chair of Gibson, Dunn & Crutcher LLP’s Washington, D.C. Litigation Department and co-chair of the Firm’s White Collar Defense and Investigations Practice Group, along with John W.F. Chesley, a litigation associate at Gibson Dunn, provide a brief primer on the regulatory framework governing whistleblower awards under Dodd-Frank; explore early developments in Dodd-Frank whistleblower litigation, with a particular focus on two important cases predicated upon alleged violations of the FCPA; and list some of the key issues that they see as emerging or that they expect to emerge in the near future.

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  • From Vol. 1 No.5 (Aug. 8, 2012)

    Halliburton Settles Shareholder Derivative Suits Alleging Breaches of Fiduciary Duty Stemming from Inadequate Internal Controls and Violations of the FCPA

    In May 2009, the Policemen and Firemen Retirement System of the City of Detroit and the Central Laborers’ Pension Fund commenced separate shareholder derivative actions in the name of Halliburton Company (Halliburton).  The plaintiffs accused Halliburton and its former subsidiary, Kellogg, Brown & Root, Inc. (later Kellogg, Brown and Root, LLC) of operating as a “criminal enterprise” and running a “reign of terror” in connection with various violations of the FCPA and other laws.  Those violations included, notably, the payment of $182 million of bribes to win Nigerian oil contracts.  The parties have agreed to settle the suits and all related claims.  This article provides the background facts and a summary of the material terms of the settlement, with emphasis on those that relate to FCPA and anti-corruption compliance issues.  It also discusses Halliburton’s recently-filed Form 10-Q, which discloses internal FCPA investigations of payments made to third party agents in Angola and Iraq.

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