The Anti-Corruption Report

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

Articles By Topic

By Topic: Collateral Litigation

  • From Vol. 7 No.24 (Nov. 28, 2018)

    Answers to Four Critical Questions on Privilege in Internal Investigations

    Many lawyers do not understand the concept of privilege fully, Stuart Altman, senior vice president and global CCO at Las Vegas Sands Corp., observed at a recent webinar hosted by Strafford. A privileged communication is one “between client and lawyer sent under confidential conditions for purposes of seeking or providing legal advice,” he explained. When it comes to internal investigations, it can be difficult to determine what constitutes a communication covered by the privilege, who counts as an attorney, who counts as a client and when privilege might be waived. Altman was joined by Michael Hayes, a partner at Montgomery McCracken Walker & Rhoads, in discussing the nuances of the answers to these four key questions. We summarize their takeaways. See our three-part series on protecting attorney-client privilege and work product while cooperating with the government: “Establishing Privilege and Work Product in an Investigation” (Feb. 1, 2017); “Cooperation Benefits and Risks” (Feb. 15, 2017); and “Implications for Collateral Litigation” (Mar. 1, 2017).

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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.9 (May 10, 2017)

    No Good Deed Goes Unpunished: Possible Unintended Consequences of Enforcing Supply-Chain Transparency (Part Two of Two)

    Companies have been trying to mitigate risks associated with their supply chain through third-party contracts and audit rights, as well as disclaimer language on products and websites. But sometimes too many of these “buyer’s rights” may be construed against the companies claiming them and may result in a company’s liability for violations within its supply chain when no such duty exists independently. It is a modern-era-corporate-responsibility paradox – the more ethical the company wants to be, the more likely it may be subject to consequences of “trying to do the right thing.” The first part of this guest article series by Fernanda Beraldi, international ethics and compliance director and corporate counsel at Cummins, Inc., and Edwin Broecker, a partner at Quarles & Brady, detailed the different legal regimes that affect supply-chain transparency. In this second article, they address some of those unintended consequences. 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.8 (Apr. 26, 2017)

    No Good Deed Goes Unpunished: Possible Unintended Consequences of Enforcing Supply-Chain Transparency (Part One of Two)

    In light of recent laws such as the U.K. Modern Slavery Act and the California Transparency in Supply Chains Act, a responsible supply chain that embodies a company’s corporate social responsibility policies has become a key part of the strategy of many companies. But that strategy is being carried out by responsible sourcing teams and corporate-responsibility professionals while anti-money laundering and anti-corruption programs remain in the custody of legal and compliance personnel. In a guest article series, Fernanda Beraldi, international ethics and compliance director and corporate counsel at Cummins, Inc., and Edwin Broecker, a partner at Quarles & Brady, argue that the coming challenge for companies will be how to integrate these historically divergent functions as they balance disclosure demands, the operational need to continuously improve imperfect and challenging conditions in their supply chains and increasing legal risk for full disclosure and performance. In this first article, they discuss in detail the different legal regimes that affect supply-chain transparency. In the second article, they will discuss how, in light of recent litigation, that transparency can have unintended consequences for companies. See “The New Landscape of Corporate Social Responsibility Regulation and Its Overlap With FCPA Compliance” (Nov. 7, 2012).

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  • From Vol. 6 No.4 (Mar. 1, 2017)

    Protecting Attorney-Client Privilege and Attorney Work Product While Cooperating With the Government: Implications for Collateral Litigation (Part Three of Three)

    When a company conducts an internal investigation and cooperates with the government, collateral litigation can follow. To support their discovery efforts, litigants may try to argue, among other things, that the privilege and work product protection were waived as a result of the company’s cooperation with the government. This third and final installment in the three-part guest article series by Eric J. Gorman, a partner at Skadden Arps, and his associate, Brooke A. Winterhalter, analyzes strategies and legal arguments that companies may wish to consider as they seek to shield investigation materials shared with the government from third-party discovery requests in collateral litigation. For the first two installments in the series see “Establishing Privilege and Work Product in an Investigation” (Feb. 1, 2017) and “Cooperation Benefits and Risks” (Feb. 15, 2017).

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  • From Vol. 5 No.17 (Aug. 31, 2016)

    Eighth Circuit Dismisses Wal-Mart Shareholders’ FCPA-Related Derivative Suit

    In the more than four years since Wal-Mart’s Mexican bribery scheme was reported in The New York Times, the company has incurred sky-high expenses responding to the allegations and has revamped its compliance program. Although it has not yet reached an FCPA settlement with the government, it has recently prevailed in a string of shareholder actions in Arkansas related to the misconduct. In Cottrell v. Duke, the 8th Circuit affirmed the district court’s dismissal of shareholders’ consolidated derivative claims against the board. We analyze the court’s holding that the plaintiffs failed to adequately plead facts showing that a demand on the board to bring a suit would have been futile, and examine the effects the shareholders’ allegations had on the company. See “The Fallout From Wal-Mart’s Ongoing FCPA Investigation” (Jun. 25, 2014).

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  • From Vol. 5 No.16 (Aug. 10, 2016)

    Avon Settles FCPA Follow-On Suit for $6.25 Million 

    An FCPA violation is often just the first of many negative consequences following a company’s discovery of a corruption issue. Avon Products’ FCPA violations in China have already resulted in $135 million in fines, an internal investigation that cost far more than the fines, and a host of lawsuits. Adding to the laundry list of expenses, Avon recently resolved one litigation spawned by its violations by agreeing to pay $6.25 million to settle a class action suit brought by participants in its retirement plan. The plaintiffs claimed they were harmed when the value of Avon stock held by their plan dropped in 2011 after Avon disclosed the SEC’s investigation into its alleged FCPA violations. This article summarizes the key terms of the settlement. See “Anti-Corruption Compliance Lessons from the Avon Settlements” (Jan. 7, 2015).

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  • From Vol. 5 No.15 (Jul. 27, 2016)

    Serious Consequences for Former Louis Berger Executives Highlight Increasing Individual FCPA Risk

    In July 2015, Louis Berger International, an engineering, architecture and construction management consulting firm, entered into a deferred prosecution agreement with the DOJ and agreed to pay $17.1 million to settle allegations of corruption in Asia. One year later, several of the individuals involved in the bribery have been sentenced based on their guilty pleas and Louis Berger is seeking to recoup its settlement-related losses from one of those individuals in a civil suit. “The LBI complaint highlights yet another avenue for potential exposure for individuals involved in improper business activities,” explained Ted Kang, a partner at Alston Bird. See “No Discount and a Three-Year Monitor: Dissecting LBI’s $17.1 Million FCPA Settlement” (Jul. 22, 2015).

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  • From Vol. 5 No.9 (May 4, 2016)

    Corporate Governance Is Key to Avon’s FCPA-Related Civil Settlements

    The ramifications of corporate FCPA cases often extend beyond a settlement with the DOJ or SEC, as evidenced by the civil cases against Avon. The company, which resolved FCPA charges in December 2014 with the DOJ and SEC for $135 million, recently announced that it has settled several pending shareholder derivative and books and records lawsuits stemming from those FCPA allegations. The actions include claims for failure to comply with the FCPA, inadequate internal controls, breach of fiduciary duty, corporate waste and unjust enrichment. In addition to mutual releases, and the payment by Avon of a portion of the plaintiffs’ legal fees, a cornerstone of the settlement is Avon’s undertaking to adopt or maintain certain corporate governance measures aimed at assuring FCPA compliance. See also “Avon Class Action Dismissal Illustrates Challenges of FCPA-Related Shareholder Derivative Suits” (Oct. 22, 2014).

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  • From Vol. 4 No.18 (Sep. 9, 2015)

    The Collateral Effects of FCPA Violations: Recent Developments in Civil Cases

    For a publicly traded corporation, an FCPA investigation, or even settlement, may be only the beginning of the company’s anti-corruption woes.  In recent years, news reports of corruption have launched numerous shareholder securities cases and derivative litigations.  The risks associated with collateral FCPA actions are well known, but recent developments in several key cases further illustrate how collateral actions can take on a life of their own, creating years of litigation and costing companies millions of dollars beyond any penalties paid to the government.  See “How to Anticipate and Manage Collateral Litigation after an FCPA Investigation Becomes Public,” The FCPA Report, Vol. 2, No. 17 (Aug. 21, 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)

    HP’s FCPA Settlement Spurs RICO Suit by Bribe Recipient Pemex

    The “global labyrinth of bribery” laid out in HP’s $108 million FCPA settlement in April triggered civil liability, Petróleos Mexicanos and an affiliate (Pemex) claim in their freshly-filed California federal case.  Pemex, a target of HP’s bribes, alleges that HP’s bribery (among other things) predicated violations of the Racketeer Influenced and Corrupt Organizations Act (RICO).  The complaint also contains unfair competition, fraudulent concealment and tortious interference with contract claims.  Pemex seeks to evade the weaknesses of prior RICO cases (including its own dismissed case against Siemens) by using past failures as a template for future success against HP.  See “Three Regions, Four Settlement Tools and $108 Million: HP Entities Resolve Criminal and Civil FCPA Charges,” The FCPA Report, Vol. 3, No. 8 (Apr. 16, 2014).

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  • From Vol. 3 No.21 (Oct. 22, 2014)

    Avon Class Action Dismissal Illustrates Challenges of FCPA-Related Shareholder Derivative Suits

    FCPA allegations can have wide-ranging collateral consequences, even before the resolution of an enforcement action.  One such consequence is a civil lawsuit like the one Avon, a company that has conducted an extensive and costly corruption investigation, was facing in federal court in New York.  Avon has successfully moved to dismiss that civil case brought by shareholders who alleged that they were misled by the company and two of its former senior executives.  They claimed the company misrepresented the efficacy of Avon’s compliance program and touted Avon’s sales successes in China without revealing that those successes stemmed from bribery.  We analyze the case and the judge’s reasoning.  See also “Non-FCPA Liability for Alleged FCPA Violations,” The FCPA Report, Vol. 1, No. 1 (Jun. 6, 2012).

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  • From Vol. 3 No.13 (Jun. 25, 2014)

    The Fallout From Walmart’s Ongoing FCPA Investigation

    Walmart’s ongoing trials and tribulations demonstrate that anti-corruption violations can have ramifications far beyond the costs of a fine or penalty.  More than two years after Walmart’s anti-corruption troubles began, it is still suffering significant collateral consequences.  The retail giant has been deeply embroiled in a wide-ranging internal investigation since its 2011 SEC disclosure of possible FCPA violations, followed by the 2012 New York Times report that Walmart had paid over $24 million in bribes in Mexico.  The company has poured hundreds of millions of dollars into the investigation, overhauled its compliance program and personnel, and has faced criticism regarding the independence of its board, with Institutional Shareholder Services recommending that the company take actions to improve transparency and independence.  The company has also been the subject of ongoing civil litigation related to the bribery allegations.  See “How to Anticipate and Manage Collateral Litigation after an FCPA Investigation Becomes Public,” The FCPA Report, Vol. 2, No. 17 (Aug. 21, 2013). 

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  • From Vol. 3 No.8 (Apr. 16, 2014)

    HP and Hyperdynamics Suits Illustrate the Risk of Collateral Liability for FCPA Investigations

    The potential damage from an FCPA investigation extends beyond actions by the DOJ and the SEC – civil lawsuits related to the investigations loom large.  The success rate of such cases is mediocre, but the cost of defending them, in terms of money and reputation, can be high.  Two recently-filed lawsuits showcase two types of civil cases that can grow from an FCPA investigation – a derivative action and a securities class action.  This article analyzes recent cases brought against Hewlett Packard – which has recently settled FCPA charges with the government for $108 million – and Hyperdynamics.  See also “How to Anticipate and Manage Collateral Litigation after an FCPA Investigation Becomes Public,” The FCPA Report, Vol. 2, No. 17 (Aug. 21, 2013); and “Halliburton Settles Shareholder Derivative Suits Alleging Breaches of Fiduciary Duty Stemming from Inadequate Internal Controls and Violations of the FCPA,” The FCPA Report, Vol. 1, No. 5 (Aug. 8, 2012).

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  • From Vol. 2 No.19 (Sep. 26, 2013)

    Saudi Businessman Sues White & Case for Documents in Lead Up to Case Against Barclays

    Wealthy Saudi businessman Mohamed bin Issa al Jaber and his company have filed a peititon in state court in New York against White & Case LLP seeking a confidential settlement agreement they allege is in that law firm’s possession.  The lawsuit is part of Jaber’s effort to establish a claim that Barclays Bank PLC conspired with certain officials of the Kingdom of Saudi Arabia to damage his business.  He alleges that he and his company are victims of Barclay’s tortious scheme involving bribery of foreign officials, and the settlement document is central to proving those allegations.

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  • From Vol. 2 No.17 (Aug. 21, 2013)

    How to Anticipate and Manage Collateral Litigation after an FCPA Investigation Becomes Public

    A government investigation may be only the beginning of a company’s FCPA-related troubles.  Once the curtain is raised on an investigation, the company may face collateral litigation from various parties, multiplying its problems and presenting an array of challenges.  See “Non-FCPA Liability for Alleged FCPA Violations,” The FCPA Report, Vol. 1, No. 1 (Jun. 6, 2012).  (A public company under investigation must also contend with disclosure questions and reserve requirements.)  How can a company protect itself?  How can it maintain control over its confidential business information?  How can it cooperate with the government without providing a roadmap for plaintiffs’ lawyers?  At a recent panel hosted by the American Conference Institute, FCPA experts addressed these issues and others.  

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  • From Vol. 2 No.17 (Aug. 21, 2013)

    Former Ambassador Files Civil Suit Alleging That FCPA Violations Can Trigger RICO Liability

    While there is no private right of action under the FCPA, a private citizen may sue under the Racketeer Influenced and Corrupt Organizations Act (RICO) for damages caused by an enterprise that engages in a pattern of “racketeering activities,” the broad definition of which may include violations of the FCPA.  These principles – the broad sweep of RICO and the potential for FCPA violations to trigger RICO liability – are at issue in a civil suit recently commenced by the Honorable Otto J. Reich, a former Ambassador to Venezuela, against three Venezuelan expatriates.  Reich alleges that the expatriates sought to damage his business and reputation after Reich sought to assist a Venezuelan bank.  The bank was a vocal critic of the Hugo Chavez regime and claimed that those expatriates had bribed Venezuelan officials in order to secure lucrative contracts to build power plants in Venezuela.  This article summarize Reich’s complaint.  See also “How to Anticipate and Manage Collateral Litigation after an FCPA Investigation Becomes Public,” above, in this issue of The FCPA Report; and “Non-FCPA Liability for Alleged FCPA Violations,” The FCPA Report, Vol. 1, No. 1 (Jun. 6, 2012).

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  • From Vol. 1 No.11 (Nov. 7, 2012)

    ABA Panel Focuses on Trends in SEC Enforcement of the FCPA and Strategies for Negotiating Civil FCPA Settlements

    The SEC’s focus on the FCPA has remained sharp, and recent changes to its policies and new enforcement tools require defense lawyers to rethink their strategies for dealing with the agency.  On October 18, 2012, a group of distinguished attorneys discussed these issues at the ABA’s Fifth Annual National Institute on the FCPA in Washington, D.C.  The panel was moderated by Cheryl Scarboro, now a partner at Simpson Thacher & Bartlett LLP after a 19-year tenure at the SEC, most recently as the first Chief of the FCPA Unit in the Division of Enforcement.  The participants discussed the latest changes to the SEC’s “neither admit nor deny” policy; the viability of tack-on civil litigation; return of disgorged profits to victims or victim countries; negotiation of the disgorgement figure with the SEC; and the SEC’s use of non-prosecution agreements and deferred prosecution agreements.  This article provides highlights from the panel discussion, with particular emphasis on strategies useful to companies and counsel in responding to the SEC during investigations and in negotiating with the agency in settlement proceedings.

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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)

    New Delhi Television Action against Nielsen Highlights the Ability of Private Lawsuits to Serve as De Facto FCPA Whistleblower Complaints

    New Delhi Television Limited (NDTV) has filed a mammoth, 194 page complaint in New York State Supreme Court against principal defendants Nielsen Holdings N.V. and The Nielsen Company (together, Nielsen), Kantar Media Research PVT LTD. (Kantar), and their Indian joint venture, TAM Media Research Private Limited (TAM).  This suit appears to be the culmination of long-running efforts by plaintiff NDTV to challenge the reliability of television viewership data produced by defendant TAM.  NDTV claims that, to NDTV’s detriment, TAM’s ratings have been skewed by corruption and bribery for many years.  Although primarily a negligence and breach of contract suit, NDTV asserts one claim for “negligence per se” against Nielsen arising out of Nielsen’s alleged violation of the FCPA.  NDTV claims that many of the television stations that allegedly benefited from the corrupted ratings are owned by Indian politicians.  It claims total damages of more than $800 million.  This article summarizes the background of the dispute and NDTV’s FCPA theory of recovery, and highlights the manner in which private lawsuits may serve as de facto FCPA whistleblower complaints.

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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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  • 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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