On Monday, June 18, 2012, DOJ announced that it had entered into a two-year Deferred Prosecution Agreement with Data Systems & Solutions LLC ("DS&S"), a company that provides design, installation, maintenance and other services at nuclear and fossil fuel power plants, to resolve violations of the Foreign Corrupt Practices Act. The company, which is based in Reston, Virginia, agreed to pay an $8.82 million criminal penalty. DOJ acknowledged DS&S’s "extraordinary cooperation" in resolving the matter.
Prosecutors filed a two-count Information in federal court in Virginia alleging conspiracy and a violation of the FCPA. Specifically, DOJ claimed that from approximately 1999 through June 2004 DS&S conspired with and paid bribes to officials employed by the Ignalina Nuclear Power Plant ("INPP"), a state-owned nuclear power plant in Lithuania, to obtain and retain contracts for DS&S from INPP to design, install, and maintain INPP's instrumentation and controls systems. DOJ further alleged that the bribes were funneled through several subcontractors located in the United States and overseas. Those subcontractors made the payments to officials at INPP. As part of a settlement, DS&S stipulated to the key allegations in a Statement of Facts.
Under the terms of the Deferred Prosecution Agreement, DOJ agreed that, if DS&S abides by the terms of the agreement, DOJ will dismiss the criminal information after two years. The company agreed to pay $8.82 million penalty within ten days. According to the agreement, the penalty is approximately 30% below the bottom of the fine range calculated under the Sentencing Guidelines, which DOJ stated was "appropriate given the facts and circumstances of this case, including the nature and extent of DS&S's extraordinary cooperation and extensive remediation in this matter." DOJ detailed the factors they considered regarding DS&S's cooperation, which included:
- "following the receipt of subpoenas in connection with the government's investigation, DS&S initiated an internal investigation and provided real-time reports and updates of its investigation into the conduct described in the Information and Statement of Facts;"
- "DS&S's cooperation has been extraordinary, including conducting an extensive, thorough, and swift internal investigation; providing to the Department searchable databases of documents downloaded from servers, computers, laptops, and other electronic devices; collecting, analyzing, and organizing voluminous evidence and information to provide to the Department in a comprehensive report; and responding promptly and fully to the Department's requests;"
- "DS&S has engaged in extensive remediation," including: (1) "terminating the officers and employees responsible for the corrupt payments;" (2) reorganizing its corporate structure; (3) "enhancing its due diligence protocol for third-party agents and subcontractors;" (4) "strengthening its ethics policies, including the appointment of a Company Ethics Representative who reports directly to the CEO and provides regular reports;" (5) FCPA training for all agents and subcontractors; and (6) establishing heightened review of most foreign transactions;
- "DS&S has committed to continue to enhance its compliance program and internal controls, including ensuring that its compliance program satisfies the minimum elements" set forth in document attached to the Deferred Prosecution Agreement entitled "Corporate Compliance Program;" and
- "DS&S has agreed to continue to cooperate with the Department in any ongoing investigation of the conduct of DS&S and its officers, directors, employees, agents, and subcontractors relating to violations of the FCPA."
It is interesting to note that there is no parallel case brought by the SEC as of yet (and the DOJ's press release acknowledged the involvement of other agencies in the investigation, but not the SEC).
It is also instructive to compare DS&S's settlement (and its "extraordinary cooperation") with the recent case involving Morgan Stanley, who managed to avoid prosecution completely for the acts of Garth Peterson, its former managing director for real estate business in China, as discussed here. At the time, DOJ stated that "Morgan Stanley constructed and maintained a system of internal controls, which provided reasonable assurances that its employees were not bribing government officials." That system was also designed to prevent employees from offering, promising or paying anything of value to foreign government officials by prohibiting bribery and addressing corruption risks associated with the giving of gifts, business entertainment, travel, lodging, meals, charitable contributions and employment. In order to keep up with regulatory developments and specific risks, the policies were updated regularly. Morgan Stanley also provided frequent training for its employees on these issues.
While DS&S took appropriate steps after the issues regarding the FCPA violation arose, Morgan Stanley's existing internal controls – in place prior to the alleged violations – seem to be the difference between one company's deferred prosecution (despite "extraordinary cooperation") and another's avoidance of prosecution.