Last week, DC Partner Mark Srere and DC Senior Associate Kristin Robinson presented a webinar providing a mid-year update on the FCPA. Click here to learn more. In it, Mark and Kristin read the tea leaves on whether the Trump Administration was going to be Tough or Tender on FCPA enforcement. Kristin predicted Tender. If all goes the way the first resolution goes, she was right. In a letter dated June 16, the Department of Justice issued a declination letter to counsel for Linde North America Inc. and Linde Gas North America (hereinafter “Linde”), stating that it was closing its investigation into FCPA violations pursuant to the FCPA Pilot Program.
Lest you think that Linde walked away without any penalty, it was required to pay $11.2 million in disgorgement and forfeiture. Thus, although Linde was not prosecuted and will not have any corporate monitor overseeing it for the next few years, it will pay that money to the U.S. government.
The violations at the heart of the investigation involved a company that Linde acquired in 2006, which made corrupt payments to high-level officials of a Technology Center of the Republic of Georgia. Those officials formed two companies with three managers of the Linde subsidiary and an intermediary. Those companies received and split profits from the sale of boron gas to the Center that the high-level officials approved. The Linde subsidiary also made nearly $6.4 million in profit from the corrupt contracts between 2006 and 2009. When the subsidiary was dissolved in 2010, the managers who engaged in the scheme were due earn out payments. Upon discovery of the scheme, however, Linde withheld $10 million of those earn out payments while it investigated the potential corrupt payments.
Linde voluntarily disclosed the FCPA issue to the DOJ. The government declined prosecution based on Linde’s “timely, voluntary self-disclosure;” its thorough investigation; its full cooperation (including giving all relevant facts about individuals responsible for the violations); its agreement to disgorge profits and forfeit certain money (as described below); its improvement of its compliance program and internal accounting controls; and its full remediation, including termination of responsible high and low level employees and severing of corrupt contracts.
Although the government declined to prosecute, Linde agreed to disgorge both the $1.43 million profit it made after dissolution of the subsidiary and the $6.39 million “benefits received” by the subsidiary for sales based on the corrupt contract between 2007 and 2009. In addition, Linde agreed to forfeit $3.415 million, “which constitute corrupt proceeds owed to companies owned or controlled by” the Center officials.
Given that DOJ likely has any number of investigations that it could have prioritized for closure, perhaps this first one does indicate that the new Administration will take a touch more tender approach to the resolution of these FCPA cases.