Avon Agrees to DPA, $135 Million Penalty and Compliance Monitor to Settle FCPA Probe

In May, door-to-door cosmetics giant Avon agreed to pay USD $135 million to settle FCPA-related claims — USD $68 million to settle the U.S. Department of Justice’s (DOJ) criminal investigation and USD $67 million to settle the U.S. Securities and Exchange Commission’s (SEC) civil investigation. The penalty, which includes fines, disgorgement and prejudgment interest, is slightly higher than the anticipated USD $132 million the company set aside for the settlement in its quarterly financial disclosures in February. Avon’s FCPA troubles began in June 2008 with an internal investigation into illicit payments in China. The six-year probe cost the company more than USD $340 million (as of February), not including the USD $135 million penalty. In addition to the USD $135 million, the company will enter into a three-year deferred prosecution agreement (DPA), and Avon’s Chinese unit will plead guilty to violating the FCPA’s books-and-records provision. Under the recently developed and increasingly utilized "hybrid monitorship" construct, the company is required to have a compliance monitor for the first 18 months of the agreement. However, with the DOJ’s permission, the company will be able to self-monitor for the remaining year and a half of the DPA. Read more at Business Week and Compliance Week.

GSK Former China Head Arrested, Company Facing Bribery Allegations in the United Kingdom, Poland, Iraq, Lebanon and Jordan

GlaxoSmithKine PLC (GSK) announced on Tuesday, May 27, that it is facing a formal investigation by the U.K.’s Serious Fraud Office (SFO). This disclosure marks the latest development in a series of investigations surrounding the U.K.-based pharmaceutical company. Earlier in May, the former head of GSK was accused by Chinese police of “authorizing corrupt practices” in China. The allegations stem from charges that GSK personnel bribed doctors in China and other foreign government officials. In July, the company was accused of paying Chinese doctors USD $483 million to promote GSK prescriptions. 

The company is also being investigated in Poland by Poland’s Central Anti-Corruption Bureau (CBA) for allegedly bribing doctors to promote an asthma drug, Seretide. Between 2010 and 2012, GSK set up a diagnostic standard and medical training program run by doctors in Lodz, Poland. During that time, 11 doctors and one GSK regional manager were charged with alleged corruption. The company suggested that one rogue employee had been responsible for a scheme in which GSK paid doctors to provide “patient education” in return for those doctors writing a certain number of prescriptions for GSK drugs. According to the company, that employee was disciplined and is now cooperating with the ongoing investigation. GSK faces similar allegations of making improper payments to doctors to promote GSK prescriptions in Iraq, Jordan and Lebanon. The company said that the allegations relate to “a small number of individuals” in those countries. 

In 2012, GSK pleaded guilty to “promoting two drugs for unapproved uses” in the largest health care fraud settlement in US history — USD $3 billion. Read additional coverage on the U.K. at Reuters, on China at the Times of India, on Poland at the Chicago Tribune, on Iraq at London South East and on Jordan / Lebanon at Reuters

Defunct New York Broker-Dealer Execs Face Charges for $60 Million Bribery Scheme

Earlier this month, the former chief executive officer, Benito Chinea, and former managing director, Joseph DeMeneses, of Direct Access Partners (DAP) faced 16 counts of criminal charges for FCPA and Travel Act violations, including bribery, conspiracy, money-laundering and obstruction of justice. The charges stem from a scheme to bribe an official at a Venezuelan bank in order to secure more than USD $60 million in bond-trading business from the bank. The defendants allegedly made payments through a third party to Maria de los Angeles Gonzalez de Hernandez, a vice president of Banco de Desarollo Económico y Social de Venezuela (BANDES). In 2008, DAP established the Global Markets Group (GMG), and BANDES was a GMG client. According to the allegations, Chinea and DeMeneses worked with three other DAP employees based in Miami to execute a bribery scheme in which Ms. Gonzales directed trading business to GMG. Broker-dealers would execute fixed-income trades on behalf of BANDES, for which they could charge the bank a commission. From 2008-2012, the broker-dealers made more than USD $60 million in commissions using this scheme. The three Miami-based broker-dealers pleaded guilty for their roles in August 2013. The vice president pleaded guilty for her role in the scheme in November 2013 and is awaiting sentencing, which is scheduled for August. Read the DOJ press release and additional coverage atReuters.

Problems in China Lead to DOJ and SEC Probes for Qualcomm, Delphi, and Johnson

In April, Qualcomm Inc. ("Qualcomm"), Delphi Automotive Plc ("Delphi") and Johnson Controls Inc. ("Johnson Controls") all announced that they had self-reported potential FCPA violations to the SEC and the DOJ related to business activities in China.

Qualcomm is cooperating with official DOJ and SEC investigations and revealed the company did offer gift benefits to individuals in China who were affiliated with state-owned companies and agencies, including preferential hiring and gifts. In total, the mobile-chip vendor estimates that these benefits amounted to less than USD $250,000.

Qualcomm learned of and disclosed the SEC investigation in 2012. Last year, Chinese regulators received a tip from industry groups complaining about Qualcomm’s alleged unfair practices to corner China’s smartphone market and raided Qualcomm’s offices twice. Qualcomm could face serious financial penalties in the United States, including disgorgement of profits, imposition of an independent monitor and civil monetary penalties as well as additional penalties in China, including confiscation of financial gains and a possible fine of up to ten percent of Qualcomm’s annual revenue for 2013. Read additional coverage at Yahoo News and here at PC World.

In late April, Delphi revealed in a 10-Q filing to the SEC that it had identified “certain potentially improper payments” by some employees in China that could violate the FCPA. The company disclosed this information to the DOJ and SEC and is cooperating fully with both agencies. Read more at Reuters.

In May, Johnson Controls also disclosed that it self-reported potential FCPA violations to both the SEC and the DOJ and opened its own internal investigation. The automotive-seating and car-interior electronics manufacturer disclosed in its 10-Q filing potential violations related to its building-efficiency marine business in China. The company said it is cooperating fully with ongoing DOJ and SEC investigations. Read additional coverage at Compliance Week.