The Anti-Corruption Report

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

Articles By Topic

By Topic: Settlement Negotiations

  • From Vol. 6 No.3 (Feb. 15, 2017)

    $30M SQM Settlement Demonstrates the Hazards of Discretionary Accounts for CEOs and Charitable Donations to the Politically Connected

    Chemical and mining company Sociedad Química y Minera de Chile (SQM) has agreed to pay more than $30 million in civil and criminal penalties to settle allegations that it made inappropriate payments to politicians and people closely connected to them in violation of the FCPA. Much of the company’s FCPA problems stemmed from the mishandling of a discretionary fund provided for the use of the CEO, through which some $14.75 million was funneled to politicians and their associates, often via charitable foundations. See “Room for Improvement: Miller & Chevalier Survey Reveals Troubling Perceptions of Corruption and Compliance in Latin America” (Sep. 14, 2016).

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  • From Vol. 5 No.25 (Dec. 21, 2016)

    Government and Defense Bar Perspectives on the New Weapons in the FCPA Arsenal

    The SEC and DOJ have new weapons in their arsenal to fight corruption. Increased personnel, coordinated global investigations and new forms of settlement are changing the face of FCPA enforcement, officials said during ACI’s 33rd International Conference on the FCPA in Washington, D.C. The FCPA Report talked to defense lawyers to gauge their reaction to the government’s statements, and how the government’s enforcement approach affects the advice they give companies. See our coverage of last year’s ACI panel, “Top FCPA Enforcers Discuss Evolving and Diverging Enforcement Approaches and the Defense Bar Responds” (Dec. 2, 2015).

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  • From Vol. 5 No.20 (Oct. 12, 2016)

    A Close Look at the DOJ’s New Declination-Plus-Disgorgement Settlement Approach

    In late September, the DOJ publicly declined to prosecute two privately held corporations, NCH and HMT, for FCPA violations, asking only that the companies disgorge the profits from their respective bribery schemes. Each company’s counsel received a letter announcing that the Department was closing its investigation “[c]onsistent with the FCPA Pilot Program.” An “NPA-lite,” as Ryan Rohlfsen, a Fraud Section alumni and partner at Ropes and Gray, has coined the new settlement approach, carries significant benefits for companies subject to FCPA investigations. This article explores those benefits as well as the policy implications of the DOJ’s latest move. See “Going Deep on the Fraud Section’s FCPA Pilot Program” (Apr. 20, 2016); “How Will the Fraud Section’s Pilot Program Change Voluntary Self-Reporting?” (May 4, 2016); and “Earning Cooperation Credit Under the Fraud Section’s FCPA Pilot Program” (May 18, 2016).

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  • From Vol. 5 No.16 (Aug. 10, 2016)

    LATAM’s Delayed Self-Report and Inadequate Remediation Result in FCPA Fine Above Sentencing Guideline Minimum

    LATAM Airlines Group, along with its predecessor-in-interest LAN Airlines, has agreed to pay more than $22 million in penalties and disgorgement in order to settle allegations of books and records violations related to a union dispute in Argentina. Despite the lack of bribery allegations, the company paid a hefty penalty to the DOJ based on its failure to self-report the conduct in a timely manner or adequately remediate. Among the company’s remedial failures, the DOJ cited a lack of employee discipline, likely referencing the company’s CEO, who entered into a settlement with the SEC over the same conduct but remains in his position. See “CEO of LAN Airlines Settles FCPA Charges With SEC Over Union Dispute” (Feb. 10, 2016).

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  • From Vol. 5 No.9 (May 4, 2016)

    How Will the Fraud Section’s Pilot Program Change Voluntary Self-Reporting? (Part Two of Three)

    Over the last year, the DOJ has made a number of policy statements that make it abundantly clear that it wants companies’ help in identifying and prosecuting corruption. The Yates Memo and changes to the U.S. Attorneys’ Manual drove home the Department’s focus on prosecuting individuals. Its recent announcement of a pilot program, specific to the Fraud Section’s FCPA Unit, underlined the Department’s desire for companies to come forward and self-report FCPA violations. As discussed in the first article in this three-article series, while the program may not represent much of a change in enforcement, it was meant to increase transparency on how prosecution and settlement decisions are made within the FCPA Unit. However, several aspects of the program and the related guidance fail to clear up concerns companies have raised in the past and, in some instances, introduce greater confusion. The FCPA Report spoke with former DOJ prosecutors to get their insights on this uncertainty and how the pilot program might – or might not – change a company’s self-disclosure calculus. See “Ceresney and Caldwell Remarks Highlight New SEC Self-Reporting Policy, Cooperation, Remediation and Transparency” (Dec. 2, 2015).

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  • From Vol. 5 No.8 (Apr. 20, 2016)

    Going Deep on the Fraud Section’s FCPA Pilot Program (Part One of Three)

    The DOJ recently announced several changes to criminal FCPA enforcement that could shake up the anti-corruption space. At a press conference, Leslie R. Caldwell, Assistant Attorney General of the DOJ Criminal Division, explained that the changes represented “enhancements to our FCPA prosecution program in the Fraud Section here at the Criminal Division.” In order to evaluate the impact of these changes, The FCPA Report spoke with five former DOJ prosecutors who offered extensive analysis on the implications for companies. In this first article in a three-article series about the DOJ’s announcement, we unpack what is happening at the Fraud Section and to what extent it represents a change from previous practice. The second article in the series will examine the areas of uncertainty that remain for companies and how those uncertainties might alter incentives to self-report. The final article will discuss how the Pilot Program might impact companies cooperating witht the DOJ during an investigation. See previously “How Will the Yates Memo Change DOJ Enforcement?” (Part One of Two) (Sep. 23, 2015); Part Two (Oct. 7, 2015).

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  • From Vol. 5 No.8 (Apr. 20, 2016)

    Dan Newcomb Discusses the Unusual Second Extension of Biomet’s DPA

    In a rare move, the Department of Justice has extended Biomet’s deferred prosecution agreement for the second time in two years. In March 2015, days before the company’s March 2012 deferred prosecution agreement was set to expire, Biomet announced that the DOJ had informed the company that Biomet’s DPA and monitor appointment had been extended for an additional year. On March 25, 2016, the company announced a second extension, disclosing that the DOJ and SEC are continuing to investigate the company’s activities in Brazil and Mexico as well as “issues” relating to the company’s compliance program. The FCPA Report discussed the implications of this historic extension with Danforth Newcomb, counsel at Shearman & Sterling.  See previously “Learning from the Extension of Biomet’s DPA” (Apr. 1, 2015).

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  • From Vol. 4 No.24 (Nov. 18, 2015)

    U.S. Attorneys’ Manual Changes Announced by Yates Push Companies to Provide More Information About Individuals

    Calling it a “big step forward” for the DOJ, Deputy Attorney General Sally Quillian Yates announced changes to the U.S. Attorneys’ Manual (USAM) on November 16, 2015 at the American Banking Association and American Bar Association Money Laundering Enforcement Conference in Washington, D.C.  “We don’t revise the USAM that often and, when we do, it’s for something important.”  The revised sections formalize the September 2015 Yates Memo by emphasizing the “primacy in any corporate case of holding individual wrongdoers accountable” including a change in cooperation credit.  See “How Will the Yates Memo Change DOJ Enforcement? (Part One of Two),” The FCPA Report, Vol. 4, No. 19 (Sep. 23, 2015); Part Two, Vol. 4, No. 20 (Oct. 7, 2015).

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  • From Vol. 4 No.21 (Oct. 21, 2015)

    A Defense Lawyer, a Prosecutor and a Witness Discuss Cooperating with the Government

    Anti-corruption officials have been emphasizing their use of traditional law enforcement methods – wiretaps, undercover agents, confidential informants – to pursue FCPA matters.  Individuals questioned by the government about participation in a bribery scheme should think about cooperation while companies must be aware that some employees may be cooperators.  The recent Yates memo also may mean that companies will be more actively providing information about individuals to the government.  In another installment of our candid conversation with parties who sat on all sides of the table during an FCPA case, we explore the government’s investigation process, from the company’s initial self-report through the settlement, through the prism of that case and the larger enforcement trends.  Then-head prosecutor, Billy Jacobson, now a partner at Orrick; the defendant, Richard Bistrong, who now operates anti-corruption consulting company Front-Line Anti-Bribery; and Bistrong’s attorney Brady Toensing, a partner at diGenova & Toensing, share their insights.  See “How Will the Yates Memo Change DOJ Enforcement? (Part One of Two),” The FCPA Report, Vol. 4, No. 19 (Sep. 23, 2015); Part Two, Vol. 4, No. 20 (Oct. 7, 2015).

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  • From Vol. 4 No.16 (Aug. 5, 2015)

    Dissecting Mead Johnson’s $12 Million Chinese Baby Formula Bribe Settlement

    In the fifth FCPA enforcement action this year brought only by the SEC, Mead Johnson has agreed to pay $12.03 million to settle charges that its Chinese subsidiary created a slush fund with distributor discounts and used that money to bribe health care practitioners to recommend its baby formula and collect marketing information about new mothers.  The case is the latest in a line of Chinese health care FCPA enforcement actions, which may be taking on new life after the Chinese GSK case, Marc Alain Bohn, counsel at Miller & Chevalier, told The FCPA Report.  We discuss the case and the compliance lessons, including the ramifications of Mead Johnson’s failure to self-report, and why the DOJ has reportedly declined to bring a parallel action.  See also “What Does the PetroTiger Case Mean for FCPA Compliance?  Sigelman’s Attorneys and Other Experts Weigh In,” The FCPA Report, Vol. 4, No. 13 (Jun. 24, 2015).

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  • From Vol. 4 No.15 (Jul. 22, 2015)

    PetroTiger’s Counsel Reveals the Defense Strategy That Led to a DOJ Declination

    Three of the company’s senior managers were involved in the bribery scheme, including the CEO (who pled guilty during his trial on June 15), and yet the DOJ declined to prosecute PetroTiger for FCPA violations – its first public declination since Morgan Stanley.  The case is a source of hope for companies with FCPA issues, Timothy Treanor told The FCPA Report.  Treanor, a partner at Sidley Austin who negotiated with the government on behalf of PetroTiger, discussed why he and his team were able to achieve such a favorable result and convince the government that this was indeed the case of a “rogue CEO.”  Treanor emphasized that he thinks the FCPA bar can get further with the government than it may expect, and discussed the self-reporting calculation, the struggle to operate a business during the government investigation, strategies for the negotiation, and more.  See also “Comparing and Contrasting Three FCPA Experts’ Advice on Negotiating FCPA Settlements,” The FCPA Report, Vol. 3, No. 17 (Aug. 20, 2014).

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  • From Vol. 4 No.6 (Mar. 18, 2015)

    Operation Car Wash: Examining the History and Consequences of the Petrobras Scandal

    As the Petrobras investigation continues to unfold, consequences for companies and individuals, both in Brazil and worldwide, grow.  Raids have been conducted; hundreds of subpoenas issued; and the number of guilty pleas is already in the double digits.  Companies involved with Petrobras face a variety of consequences including potential FCPA charges.  In a recent webinar, Mayer Brown partner Kelly Kramer, and Tauil & Chequer Advogados partners Salim Jorge Saud Neto and Leonardo Morato discussed the history of the Petrobras investigation, the economic consequences for Petrobras suppliers and the international consequences of the scandal.  See also “The Changing Dynamics of Anti-Corruption Enforcement in Brazil,” The FCPA Report, Vol. 2, No. 23 (Nov. 20, 2013).

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  • From Vol. 3 No.24 (Dec. 3, 2014)

    Ten Strategies to Maximize the Tax Deductibility of Settlements (Part Two of Two)

    Tax structuring is a concept more often associated with business transactions than with legal settlements.  But in a recent presentation, Shearman & Sterling partner Lawrence M. Hill highlighted the fundamental role of tax in the net economics of legal settlements.  Informed tax structuring can dramatically reduce the dollars that go out the door in a legal settlement, and tax counsel can powerfully affect the economics of settlements.  In his presentation, Hill discussed ten specific strategies that companies can use to maximize the tax deductibility of legal settlements.  This article – the second in a two-part series – describes those ten strategies.  The first article in this series offered a comprehensive overview of the law governing taxation of settlements.

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  • From Vol. 3 No.22 (Nov. 5, 2014)

    Layne Christensen Resolves FCPA Civil Charges After DOJ Declination; Details Its Extensive Cooperation

    Layne Christensen, a global water management, construction and drilling company based in Kansas, has settled the SEC’s charges concerning improper payments to African officials to obtain favorable tax treatment and reduced customs duties, among other things, for $5.1 million.  The DOJ declined to prosecute the company, and both the government and the company have touted Layne’s self-disclosure and extensive cooperation for the relatively favorable treatment.  See also “Compliance Experts from Altria, Noble Energy and HP Share Corruption Investigation Best Practices,” The FCPA Report, Vol. 3, No. 18 (Sep. 10, 2014).

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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.17 (Aug. 20, 2014)

    Comparing and Contrasting Three FCPA Experts’ Advice on Negotiating FCPA Settlements

    The FCPA Report recently published a series of interviews with FCPA experts Larry Urgenson, Neil MacBride and John Buretta on best practices for negotiating FCPA settlements with the government.  Their views, drawn from their experience as prosecutors and defense counsel, at times converged and differed on salient points, such as the dynamic self-reporting calculus, how to avoid international double jeopardy and the best ways to make a presentation to the government.  Urgenson is a partner at Mayer Brown who has held key leadership positions at the DOJ; MacBride is a partner at Davis Polk and the former U.S. Attorney for the Eastern District of Virginia; and Buretta is a partner at Cravath, Swaine & Moore and a former top official in the DOJ’s Criminal Division who helped to author the DOJ/SEC FCPA Resource Guide.  We synthesize the highlights of their interviews.

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  • From Vol. 3 No.16 (Aug. 6, 2014)

    Strategies for Negotiating FCPA Settlements: An Interview with John Buretta, Cravath Partner and Former Deputy Assistant Attorney General

    Understanding how to speak the government’s language is crucial when conducting FCPA settlement negotiations.  A company that fails to convince the government that it is a trustworthy, compliant organization may experience a host of negative consequences, including larger fines and the imposition of a costly compliance monitor.  In an interview with The FCPA Report, John Buretta, a partner at Cravath, Swaine & Moore, discussed the government’s perspective on the self-disclosure calculus, effective negotiation techniques, global cooperation and more.  As a top official in the DOJ’s Criminal Division (Principal Deputy Assistant Attorney General and Chief of Staff), Buretta was a primary author of the FCPA Resource Guide.  See also our previous interviews in this series on negotiating strategies: Laurence Urgenson, Mayer Brown Partner and Former DOJ Official, Vol. 3, No. 14 (Jul. 9, 2014) and Neil MacBride, Davis Polk Partner and Former U.S. Attorney, Vol. 3, No. 15 (Jul. 23, 2014).

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  • From Vol. 3 No.16 (Aug. 6, 2014)

    Smith & Wesson Resolves FCPA Charges with the SEC, Avoids DOJ Charges

    Four years after it began its inquiry, the SEC has settled FCPA charges with Smith & Wesson for $2 million through an administrative action.  The DOJ declined to prosecute.  How good of a deal was this for the iconic gun maker?  We distill a few points from the fourth FCPA corporate enforcement action of the year.

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  • From Vol. 3 No.15 (Jul. 23, 2014)

    Strategies for Negotiating FCPA Settlements: An Interview with Neil MacBride, Davis Polk Partner and Former U.S. Attorney

    Demonstrating to the SEC and/or the DOJ that a company is committed to compliance and that it has addressed whatever program deficiencies led to the violation is critical in FCPA settlement negotiations.  A failure to convince the government that it is trustworthy can result in, among other things, larger fines, the appointment of an expensive corporate monitor and a larger disgorgement figure.  In an interview with The FCPA Report, Neil MacBride, a partner at Davis Polk and former U.S. Attorney for the Eastern District of Virginia, shared his strategies for negotiating effectively with the government.  Drawing from his extensive experience, both as a prosecutor and a defense attorney, MacBride discussed the mechanics of meeting with the government, the self-reporting calculus, international double jeopardy and more.  See our previous interview in this series, “Strategies for Negotiating FCPA Settlements: An Interview with Laurence Urgenson, Mayer Brown Partner and Former DOJ Official,” The FCPA Report, Vol. 3, No. 14 (Jul. 9, 2014).

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  • From Vol. 3 No.14 (Jul. 9, 2014)

    Strategies for Negotiating FCPA Settlements: An Interview with Laurence Urgenson, Mayer Brown Partner and Former DOJ Official

    When a company is facing FCPA charges, it may have the opportunity to directly influence the outcome of the government’s investigation – a monitor may be deemed unnecessary, lower fines may be agreed upon and prosecutions may even be avoided.  In an interview with The FCPA Report, Laurence Urgenson, a partner at Mayer Brown and former DOJ official, shared his advice to help companies and their advisors present the company’s case in the most favorable light possible.  Drawing on his extensive experience, Urgenson provided insight into the changing self-reporting calculus, the need for an international anti-corruption protocol and the best ways to make a presentation to the government.  See also “When and How Should Companies Self-Report FCPA Violations? (Part One of Two),” The FCPA Report, Vol. 1, No. 1 (Jun. 6, 2012); and Part Two of Two, Vol. 1, No. 2 (Jun. 20, 2012). 

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  • From Vol. 3 No.13 (Jun. 25, 2014)

    Davis Polk FCPA Experts Assess Global Anti-Corruption Trends (Part One of Two)

    Midway through 2014, what is the state of global anti-corruption enforcement and what does it mean for multi-national companies?  In a recent webinar, attorneys from Davis Polk & Wardwell examined the trends that are shaping the enforcement and compliance landscape.  In part one of this article series, Davis Polk attorneys compare and contrast three recent FCPA resolutions and discuss the enforcement climate in Asia and other parts of the world and the accompanying compliance implications.  In part two, they discuss international cooperation in anti-bribery investigations and changes in the FCPA enforcement climate, including the increasing use of administrative proceedings by the SEC.  See “Davis Polk Lawyers and Morgan Stanley Compliance Director Discuss DOJ’s Decision Not to Prosecute Morgan Stanley for FCPA Violations,” The FCPA Report, Vol. 1, No. 10 (Oct. 17, 2012).

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  • From Vol. 3 No.9 (Apr. 30, 2014)

    FCPA Experts in the Public and Private Sector Share Seven Lessons from Recent Cases (Part Two of Two)

    At a recent panel discussion sponsored by the Knowledge Group, former senior FCPA prosecutors, a current SEC lawyer and an economist shared advice on various critical aspects of an internal anti-corruption investigation, including factors to consider at the outset, whether to voluntarily disclose the investigation to the government, how to handle reporting to multiple jurisdictions, and calculating the “benefit of the bribe” for penalty purposes.  The first article in this two-part series contained the seven lessons the panelists extracted from recent FCPA settlements and trends; the initial decisions that a company faces when it discovers a potential violation; and the role of whistleblowers in revealing potential violations. See also “Top DOJ and SEC Officials Discuss FCPA Enforcement Priorities and Mechanics,” The FCPA Report, Vol. 3, No. 7 (Apr. 2, 2014).

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  • From Vol. 2 No.25 (Dec. 18, 2013)

    Charles Duross and Kara Brockmeyer Discuss What Matters to Regulators When Negotiating FCPA Settlements (Part Two of Two)

    What are FCPA regulators and prosecutors looking for during company presentations?  How can a company shorten the time from its first meeting with the government to the resolution of its FCPA issues?  Charles Duross, Deputy Chief of the Fraud Section of the Criminal Division of the DOJ, and Kara Brockmeyer, Chief of the FCPA Unit of the Division of Enforcement of the SEC, provided detailed insight at a recent ACI International Conference in Washington, D.C. on what regulators are looking for, discussing the government’s FCPA charging philosophies, investigative techniques and enforcement priorities, and dispensing advice about how companies can avoid or decrease FCPA penalties.  Among other things, the regulators highlighted the government’s continued focus on problematic travel and entertainment, warned that the DOJ and SEC will pursue matters involving charitable donations and commercial bribery, and provided tips for expediting government investigations and conducting effective settlement negotiations.  The first part of this article series contained insight from Duross and Brockmeyer about five micro trends within the overarching trend of increased FCPA enforcement: prosecution of individuals, SEC administrative proceedings focused on FCPA violations, increasing coordination between global regulators on anti-corruption matters, the persistence of use of corporate monitors following FCPA settlements and the continued FCPA risk posed by use of third parties.  See also “Top Government and Private FCPA Practitioners Discuss Global Enforcement, Self-Reporting, Facilitation Payments, M&A Due Diligence, Jurisdiction and NPAs,” The FCPA Report, Vol. 2, No. 11 (May 29, 2013).

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  • From Vol. 2 No.24 (Dec. 4, 2013)

    Four Ways the SEC Enforcement Landscape Is Changing and Why They Matter to FCPA Practitioners

    The judiciary and others have recently attacked the SEC’s longstanding “neither admit nor deny” policy, which allows defendants to settle without admitting any of the allegations leveled against them, and new SEC Chairwoman Mary Jo White has announced plans to end that policy in selected egregious cases.  How much will this change affect companies?  In the $13 billion settlement reached between JP Morgan and the SEC on November 19, 2013 over the sale of mortgage-backed securities, for example, the government recited agreed-upon facts, but some have called that weak tea, characterizing the facts as vague, and saying companies should have to make it clear why they are paying a fine.  Others say forcing defendants to admit allegations will squeeze the SEC’s resources, limiting it to bringing fewer enforcement actions as companies refuse to settle and go to trial.  The admissions policy change comes alongside a few other notable trends, including the increased use of administrative enforcement actions, a greater focus on cooperation tools and a greater judicial scrutiny of settlement agreements – for the “neither admit nor deny” provision and other settlement provisions, such as the fine and the reporting requirements.  During a recent webinar hosted by the Berkeley Research Group, Paul Hastings LLP and The FCPA Report, H. David Kotz, Managing Director at BRG, and Thomas Zaccaro, partner at Paul Hastings, discussed the development of these four trends and the implications for companies and individuals.  Rebecca Hughes Parker, Editor-in-Chief of The FCPA Report, moderated the event.

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  • From Vol. 2 No.23 (Nov. 20, 2013)

    Construction Industry Experts Discuss Crucial Steps in Internal Corruption Investigations, Due Diligence Best Practices and the Value of Cooperation

    Could the construction industry be the next target of anti-corruption enforcement action in the U.S. and abroad?  The industry is rife with risk – in the U.K., for example, 49% of corruption professionals say corruption is widespread, and law firm Reed Smith LLP predicts that at least two large U.K. Bribery Act investigations are in the works in the next two years for international construction firms.  How can construction companies, and others similarly situated, anticipate and mitigate what may be a gathering enforcement storm?  The Practising Law Institute recently sponsored a panel of attorneys with extensive experience in construction contracting who discussed the best ways to enhance compliance for the construction industry, offering lessons applicable to a range of industries.  The panelists analyzed the current global anti-corruption enforcement climate, detailed best practices with regard to due diligence when contracting with third parties in foreign countries, provided steps that a company should take when faced with an FCPA issue, including investigation mistakes companies make, and examined the value of cooperation and voluntary disclosure.  See also “Survey Reveals the Contours and Content of Bribery in the U.K. Construction Industry,” The FCPA Report, Vol. 2, No. 20 (Oct. 9, 2013).

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  • From Vol. 2 No.20 (Oct. 9, 2013)

    When and How Companies Should Include FCPA Risk Disclosures in SEC Filings (Part Two of Three)

    More and more companies are disclosing FCPA-specific risks in their SEC filings before an FCPA violation is even on their radar.  Some, however, question whether that kind of disclosure is advisable.  FCPA experts are sharply divided on whether the benefits outweigh the disadvantages of such disclosure, and guidance from the government is scarce and vague.  Should an FCPA violation, past or potential, influence this decision?  If a company does disclose FCPA risks, what should it be telling regulators and the public about those risks in its filings?  To help shed light on this controversial but critical issue, The FCPA Report is publishing a multi-part series addressing the strategy and mechanics of disclosure of FCPA risk in the Risk Factors section of SEC filings.  This article, the second in the series, discusses the consequences of including FCPA-specific disclosures and provides insight into drafting risk-based disclosure.  The first article in the series discussed the SEC rules governing such disclosure and the evolution of the disclosure of risk factors related to international operations, and examined both sides of the debate as to whether such disclosure is necessary and prudent.  The third and final article in the series will include a compendium of actual FCPA Risk Factor disclosures from recent SEC filings to aid practitioners in drafting their own disclosures, compiled with help from Intelligize’s database and search tools.  For more on disclosing corruption investigations in SEC filings, see The FCPA Report’s Guide on that topic – Parts OneTwo and Three, and the compendium of relevant disclosures in Part Four.

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  • From Vol. 2 No.19 (Sep. 26, 2013)

    A Comparison and Examination of DOJ Compliance Program Requirements in FCPA Settlement Agreements

    While the government has not explicitly enumerated the elements of a best-in-class FCPA compliance program, it has done so implicitly, via settlement agreements and the recent FCPA Resource Guide.  The DOJ and SEC often require settling companies to implement specific compliance policies and procedures listed in Deferred Prosecution or Non Prosecution Agreements.  Those requirements, most recently embodied in “Attachment C,” can be a gold mine of best practices for companies that know how to find such documents, how to read them in context, how to analogize the circumstances of the settlement to their own facts, and how provisions in the agreements have evolved over time.  The government’s view on best FCPA compliance practices is out there, but the information is disparate and difficult to digest.  To bring structure and coherence to this important area, and to enable our subscribers to act on it, The FCPA Report has undertaken a proprietary analysis of numerous settlement agreements released over the last five years.  The results of that analysis are reflected in the following chart, which presents 5 representative settlement agreements, analyzes each of the 15 compliance program provisions included in the settlement agreements, shows how those provisions have evolved over time, links to the full text of each settlement agreement and also links to articles from The FCPA Report offering a deeper dive on relevant provisions and concepts.

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  • From Vol. 2 No.16 (Aug. 7, 2013)

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

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

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  • From Vol. 2 No.15 (Jul. 24, 2013)

    Estimating Loss: When and How to Calculate and Disclose Financial Reserves for FCPA Settlements (Part Three of Three)

    When a company is involved in FCPA settlement negotiations with the government, it must consider whether those negotiations are likely to lead to a probable and estimable financial loss.  If so, the company may be required to reserve funds for the potential settlement and disclose its reserve in SEC filings.  When is setting a reserve appropriate?  How should that reserve be calculated?  When is disclosure of the reserve necessary?  This article is the third in a multi-part series addressing these and related crucial issues.  In particular, this article discusses how to calculate a reserve and how to craft the disclosures accompanying the setting of a reserve.  The first installment in the series discussed the accounting principles governing the setting of the reserve, examined when during an investigation a company should set a reserve and described who should be involved in setting the reserve.  The second article in the series discussed the issues a company should consider before setting a reserve, the risks related to setting reserves and the risks of miscalculating the reserve.  The final installment in the series will be a compendium of actual FCPA reserve-related disclosures from recent SEC filings compiled with help from Intelligize’s database and search tools.

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  • From Vol. 2 No.14 (Jul. 10, 2013)

    Estimating Loss: When and How to Calculate and Disclose Financial Reserves for FCPA Settlements (Part Two of Three)

    When a publicly traded company is negotiating an FCPA settlement, it must consider reserving funds for the associated loss.  Calculating a reserve becomes necessary when the company faces a probable, estimable and material loss.  Once that occurs, the company will likely be required to make a public disclosure about the reserve, exposing it to a host of potentially adverse consequences, including harm to the company’s reputation, a decrease in stock price and increased exposure to foreign prosecutions.  How should a company involved in settlement negotiations with the government address this sensitive issue?  How should it go about setting such a reserve?  When during those negotiations should the company begin to consider reserving funds for a future settlement?  How should the reserve be calculated?  How should it be disclosed?  The FCPA Report is publishing a multi-part series addressing these crucial issues.  This article, the second in the series, discusses the issues a company should consider before setting a reserve, the risks related to setting reserves and the risks of miscalculating the reserve.  The first installment in the series discussed the accounting principles governing the setting of the reserve, examined when during an investigation a company should set a reserve and described who should be involved in setting the reserve.  See “Estimating Loss: When and How to Calculate and Disclose Financial Reserves for FCPA Settlements (Part One of Three),” The FCPA Report, Vol. 2, No. 13 (Jun. 26, 2013).  The third and final installment will discuss how to calculate a reserve and how to draft the disclosures announcing the reserve.  It will also include a compendium of actual FCPA reserve-related disclosures from recent SEC filings, compiled with help from Intelligize’s database and search tools.

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  • From Vol. 2 No.14 (Jul. 10, 2013)

    How Can a Company Improve Its Chances of Obtaining an FCPA Declination?

    In 2012, the DOJ publicly announced that it had declined to prosecute Morgan Stanley for FCPA violations caused by a rogue employee in Shanghai.  The declination was notable because it was publicly announced and because of the egregious nature of the misconduct involved.  See “Davis Polk Lawyers and Morgan Stanley Compliance Director Discuss DOJ’s Decision Not to Prosecute Morgan Stanley for FCPA Violations,” The FCPA Report, Vol. 1, No. 10 (Oct. 17, 2012).  A recent program at the Momentum Event Group’s Global Anti-Corruption Congress, “Lessons Learned from Recent High Profile FCPA Declinations,” featured a panel discussion of several recent FCPA declinations.  The panelists, who were closely involved in those matters, presented their views of why the declinations were issued and how companies facing FCPA violations can improve their chances of receiving a declination.  This article summarizes the key insights from that discussion.

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  • From Vol. 2 No.13 (Jun. 26, 2013)

    Estimating Loss: When and How to Calculate and Disclose Financial Reserves for FCPA Settlements (Part One of Three)

    It is no secret that FCPA settlements can be monstrously expensive.  When faced with such a substantial loss, publicly traded companies often have an obligation to reserve funds in anticipation of a potential settlement and to disclose the amount of that reserve.  How should a company involved in settlement negotiations with the government go about setting such a reserve?  When during those negotiations should the company begin to consider reserving funds for a future settlement?  How should the reserve be calculated?  How should it be disclosed?  The FCPA Report is publishing a multi-part series addressing these and other crucial issues.  This article, the first in the series, discusses the accounting principles governing the setting of the reserve, examines when during an investigation a company should set a reserve and describes who should be involved in setting the reserve.  The second article in the series will discuss the issues a company should consider before setting a reserve and the risks related to setting reserves.  The third installment will discuss how to calculate a reserve and how to draft the disclosures announcing the reserve.  It will also include a compendium of actual FCPA reserve-related disclosures from recent SEC filings compiled with help from Intelligize’s database and search tools.

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  • From Vol. 2 No.13 (Jun. 26, 2013)

    U.S. Attorney Loretta Lynch Discusses Morgan Stanley, Ralph Lauren and the Government’s View on Compliance Programs, Self-Reporting, Monitors and More

    Every year, multi-national companies spend great sums on anti-corruption compliance.  By building robust compliance programs, companies seek to decrease corruption and also to limit company liability if bribery occurs.  However, many companies struggle with not only creating and maintaining an effective compliance program, but also communicating that program to the government if there is a problem.  At a recent conference hosted by the Society of Corporate Compliance and Ethics, Loretta Lynch, U.S. Attorney for the Eastern District of New York, shared a prosecutor’s perspective on corporate compliance programs.  Lynch also provided insight into the government’s position on employee discipline, training, self-reporting and corporate monitorship, along with specific discussions of the Ralph Lauren and Morgan Stanley cases.  See also “Davis Polk Lawyers and Morgan Stanley Compliance Director Discuss DOJ’s Decision Not to Prosecute Morgan Stanley for FCPA Violations,” The FCPA Report, Vol. 1, No. 10 (Oct. 17, 2012); “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. 2 No.8 (Apr. 17, 2013)

    For Individual FCPA Defendants, Providing Substantive Assistance Can Lead Directly to Downward Departures in Sentencing

    To what extent should an individual faced with an FCPA indictment cooperate with the government?  It’s a threshold question for individual FCPA defendants, potential defendants and their counsel.  Recent settlements with two former executives of BizJet, and charges recently unsealed against two other former executives of BizJet, illustrate the degree to which an individual’s cooperation with the government can affect the outcome of his or her FCPA case.  BizJet settled company-level FCPA charges last year for $11.2 million.  See “Shearman & Sterling Report Identifies Trends in FCPA Enforcement,” The FCPA Report, Vol. 1, No. 5 (Aug. 8, 2012).  This article summarizes the case against the BizJet executives, and distills lessons from the sentences.  See also “How Can Individual Defendants Use Strategic Cooperation to Mitigate FCPA Sentences?,” The FCPA Report, Vol. 2, No. 4 (Feb. 20, 2013).

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  • From Vol. 2 No.6 (Mar. 20, 2013)

    How to Find a Business-Minded Compliance Monitor and Minimize Reporting Requirements When Negotiating an FCPA Settlement (Part Three of Three)

    Resolving a government FCPA investigation is a costly proposition; if a company is required to retain a monitor, the costs skyrocket.  Companies can limit the burden of monitorship, however, by carefully vetting their monitor candidates and choosing a monitor that is business-minded, pragmatic and efficient.  This article details the specific characteristics a company should look for when choosing a monitor and discusses strategies for limiting the costs of monitorship.  The first article in this three-part series examined precedent, practice and trends in post-settlement FCPA reporting obligations; discussed the shift to less traditional forms of reporting; explained the process by which reporting obligations are created; and described the mechanics of the most intrusive types of reporting – traditional monitorship and self-reporting.  See “How to Find a Business-Minded Compliance Monitor and Minimize Reporting Requirements When Negotiating an FCPA Settlement (Part One of Three),” The FCPA Report, Vol. 2, No. 4 (Feb. 20, 2013).  The second article in this series provided real-world examples of innovative reporting requirements and outlined strategies for negotiating the most beneficial reporting requirements possible.  See “How to Find a Business-Minded Compliance Monitor and Minimize Reporting Requirements When Negotiating an FCPA Settlement (Part Two of Three),” The FCPA Report, Vol. 2, No. 5 (Mar. 6, 2013).

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  • From Vol. 2 No.6 (Mar. 20, 2013)

    How to Defend Individuals Against FCPA Charges (Part Two of Two)

    More individuals have been charged with violations of the FCPA in the past few years than ever before in the statute’s history.  The government has indicated repeatedly that this is a trend they expect to continue.  Accordingly, defending individuals in FCPA matters is becoming increasingly common.  But representing individuals in FCPA cases is different in important ways from defending corporations; the issues faced by corporations whose people are charged are notably different from the issues faced by corporations which themselves are charged.  A panel of experts at the New York City Bar recently shared their insights on salient concerns related to representing individuals facing FCPA charges.  The FCPA Report is synthesizing their advice in a two-part article series.  This article, the second in the series, addresses advising individual FCPA defendants on whether to participate in a company interview; when and how to cooperate with counsel for other individuals; and tips for cooperating with the government.  The first article discussed the primary differences between representing individuals and corporations; the key points to remember when negotiating payment of an individual’s attorney fees; when to enter into and how to draft Joint Defense Agreements; and how to gather information from company counsel.   See “How to Defend Individuals Against FCPA Charges (Part One of Two),” The FCPA Report, Vol. 2, No. 5 (Mar. 6, 2013).

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  • From Vol. 2 No.5 (Mar. 6, 2013)

    How to Find a Business-Minded Compliance Monitor and Minimize Reporting Requirements When Negotiating an FCPA Settlement (Part Two of Three)

    For many years, the world of post-settlement FCPA reporting requirements was black and white – companies were either required to submit to a multi-year independent compliance monitor or the settlement contained no reporting obligations at all.  Today, as companies develop innovative reporting requirements to satisfy the government, solutions are often found in the gray area.  Finding a customized solution to reduce potentially onerous reporting requirements is crucial, and this article, the second in a three-part series, provides five practitioner-approved strategies to do just that.  In addition to advising on negotiating post-settlement reporting requirements with the government, this article also discusses real-world examples of innovative reporting requirements.  The third article in the series will describe how to choose the best possible monitor and outline strategies for limiting the expenses of monitorship.  The first article in the series examined precedent, practice and trends in post-settlement FCPA reporting obligations; discussed the shift to less traditional forms of reporting; explained the process by which reporting obligations are created; and described the mechanics of the most intrusive types of reporting – traditional monitorship and self-reporting.  See “How to Find a Business-Minded Compliance Monitor and Minimize Reporting Requirements When Negotiating an FCPA Settlement (Part One of Three),” The FCPA Report, Vol. 2, No. 4 (Feb. 20, 2013).

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  • From Vol. 2 No.4 (Feb. 20, 2013)

    How to Find a Business-Minded Compliance Monitor and Minimize Reporting Requirements When Negotiating an FCPA Settlement (Part One of Three)

    Looming large in every FCPA settlement negotiation with the government is the reporting requirements the company will be subject to going forward.  Historically, companies had only two options at the negotiating table – plead for no future reporting to be required or accept an onerous and expensive multi-year compliance monitorship.  Thanks, in part, to the increased sophistication of many in-house compliance programs, the government is embracing new and creative reporting obligations, leaving room for companies to negotiate tailored solutions.  How can companies negotiate an agreement that meets the government’s need to decrease recidivism while limiting the uncertainty, invasiveness and expense of extensive reporting requirements?  This article, the first in a three-part series, examines precedent, practice and trends in post-settlement FCPA reporting obligations; discusses the shift to less traditional forms of reporting; explains the process by which reporting obligations are created; and describes the mechanics of the most intrusive types of reporting: traditional monitorship and self-reporting.  The second article in this series will discuss real-world examples of innovative reporting requirements and recommend specific strategies companies can use to negotiate the most beneficial reporting requirements possible.  The third article will provide advice on choosing the best possible monitor and tactics for limiting the expenses of a monitorship.

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  • From Vol. 2 No.4 (Feb. 20, 2013)

    How Can Individual Defendants Use Strategic Cooperation to Mitigate FCPA Sentences?

    Individuals at risk for FCPA charges can benefit from approaching and cooperating with the government as early as possible.  Working from recent DOJ sentencing memoranda, this article focuses on how actual and potential individual FCPA defendants (and their counsel) can approach cooperation in a way that is likely to lead to reduced sentences.  In particular, this article focuses on the content, timing and required utility of cooperation.

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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. 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)

    Fines, Victims, the Three Buckets of FCPA Costs and FCPA Reform: An Interview with Mike Koehler, the FCPA Professor (Part Two of Two)

    The FCPA Report recently interviewed Mike Koehler, Assistant Professor at Southern Illinois University School of Law, author of the popular blog the FCPA Professor and outspoken critic of the current FCPA enforcement regime.  This article includes the second part of our interview with Professor Koehler.  In this part, Professor Koehler addresses recent Supreme Court precedent affecting corporate fines; the potential for fines to be paid to victims instead of the U.S. Treasury; the cost-benefit analysis of FCPA compliance and the three buckets of FCPA costs; his distinction between license/permit cases and government procurement cases and its importance for compliance policies and procedures; and the prospect of FCPA reform, a topic on which Professor Koehler disagrees with Judge Sporkin.  For the first part of our interview with Professor Koehler, see “Compliance Implications of the Current Enforcement Climate: An Interview with Mike Koehler, the FCPA Professor (Part One of Two),” The FCPA Report, Vol. 1, No. 6 (Aug. 22, 2012).

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  • From Vol. 1 No.6 (Aug. 22, 2012)

    Four Ways to Minimize Multi-Jurisdictional Risk When Settling FCPA Charges with the DOJ or SEC

    It used to be that a corporation that wished to resolve claims of anti-corruption violations simply had to negotiate a settlement with U.S. authorities.  Until recently, most countries have been content to leave the United States to enforce the FCPA without venturing into the anti-corruption waters themselves.  Yet recent multi-jurisdictional developments in anti-corruption law – such as an increase in the enforcement of anti-corruption laws by foreign countries – have complicated companies’ abilities to settle anti-corruption investigations with certainty and predictability.  Indeed, foreign investigations following DOJ and SEC settlements have been increasing steadily, including investigations arising out of the Siemens, Panalpina and Bonny Island FCPA settlements.  This enforcement trend highlights the need for careful strategic planning, on a multi-jurisdictional level, for handling anti-corruption investigations and settlements.  In a guest article, Charles F. Smith and Gary DiBianco, both partners at Skadden, Arps, Slate, Meagher & Flom LLP, and Brittany Parling, a Skadden associate, discuss trends in multi-jurisdictional enforcement of anti-corruption laws and lay out four factors companies should consider when negotiating and evaluating settlements in a multi-jurisdictional context.

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