ASSESSING THE IMPACT OF TWO SECOND CIRCUIT OPINIONS: THE CIRCUIT'S RECENT ANALYSIS OF MCDONNELL'S APPLICATION TO THE FCPA AND THE UPCOMING TRIAL LIMITED BY THE CIRCUIT'S HOSKINS RULING
While the U.S. Department of Justice (DOJ) has issued several updates to its Foreign Corrupt Practices Act (FCPA) guidance over the past year (which we previously analyzed here, here and here), companies and their legal and compliance employees seeking additional guidance in the form of binding case law have seen two U.S. Court of Appeals for the Second Circuit (Second Circuit) opinions on the FCPA in the past two years. In August, the Second Circuit issued a rare federal court of appeals decision analyzing whether the recent Supreme Court ruling in McDonnell v. U.S. related to a domestic bribery statute had an effect on the FCPA. Additionally, a little over one year ago, the Second Circuit limited the charges that DOJ could bring against Lawrence Hoskins for conduct allegedly in violation of the FCPA, holding that the theories of conspiracy and aiding and abetting do not allow DOJ to prosecute foreign nationals for FCPA violations if those individuals otherwise would not be subject to liability under the FCPA. (We previously analyzed that opinion here.) The practical impact of that decision could be seen shortly, however, as Hoskins is one of several defendants in FCPA cases with trials set for this fall. This article analyzes the Second Circuit's decision on McDonnell and then previews Hoskins' trial.
The Second Circuit Rejects McDonnell's Application to the FCPA
In McDonnell v. U.S., the Supreme Court interpreted a domestic public-sector bribery statute (18 U.S.C. Section 201) that makes it a crime for a public official to demand, seek, receive, accept or agree to receive or accept anything of value in exchange for "being influenced in the performance of any official act." Prosecutors argued that former Virginia Gov. Robert F. McDonnell violated this statute by accepting loans and gifts in exchange for various favors, including organizing meetings with other government officials and hosting events. The Supreme Court, however, rejected prosecutors' arguments for a broad reading of the domestic bribery statute, holding instead that prosecutors must prove that a bribe had been paid in exchange for an "official act" under that statute. The Supreme Court further elaborated that an "official act" needs to be a decision, action or agreement on some "question, matter, cause, suit, proceeding or controversy" involving a "formal exercise of governmental power" that is "pending" or "may be brought" before the official.
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The Second Circuit's opinion...affirms the practice of prosecutors that violations of the FCPA's bribery provisions
do not face the additional limitations that apply to domestic,
Ng Lap Seng, who was convicted in 2017 (after the McDonnell ruling) on charges related to a scheme to bribe United Nations officials to obtain support for a real estate project in Macau, argued on appeal that the FCPA was subject to the more onerous requirements of proof outlined in McDonnell and required proof of an "official act." The Second Circuit rejected Seng's arguments, reasoning that the text of the FCPA differed materially from the statute at issue in McDonnell and that the FCPA targeted a broader category of bribery than the domestic bribery statute. Specifically, the Second Circuit noted that the FCPA criminalizes giving a foreign official anything of value to corruptly obtain any of the following quid pro quos:
"influencing any act or decision of such foreign official in his official capacity"
"inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official"
"securing any improper advantage"
" inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality"
The Second Circuit stated that "[w]hile the first FCPA [quid pro] quo referencing an `act or decision' of a `foreign official in his official capacity' might be understood as an official act, the FCPA does not cabin `official capacity' acts or decisions to a definitional list akin to that for official acts under [ 201]." (Seng also made arguments related to the corrupt intent and the obtain or retain business elements of the FCPA that the Second Circuit summarily rejected.)
The Second Circuit's opinion, while binding only on the district courts in that circuit, affirms the practice of prosecutors that violations of the FCPA's bribery provisions do not face the additional limitations that apply to domestic, public-sector bribery.
...the Second Circuit held that because the statute omits jurisdiction over foreign nationals who act outside of the United
States and are not officers, directors, employees,
agents or stockholders of an issuer or domestic concern, Hoskins cannot instead be charged as a coconspirator or accomplice
to an FCPA violation.
The Impact of the Second Circuit's Hoskins Ruling
The trial of Lawrence Hoskins is scheduled for this month. Hoskins was charged in connection with DOJ's prosecution of Alstom S.A., a French power and transportation company, which resulted in a $770 million corporate settlement.
Until the Second Circuit's ruling in Hoskins' case last year, DOJ had historically taken the position that theories of conspiracy and aiding and abetting allow it to prosecute foreign nationals for FCPA violations, even if those individuals otherwise would not be subject to liability under the FCPA. The Second Circuit rejected that expansive view of the FCPA's jurisdiction in August 2018 in U.S. v. Hoskins, holding that an individual cannot be guilty as a co-conspirator or accomplice if he or she is incapable of committing the crime as a principal.
Hoskins, a former British citizen based in France, never worked for Alstom's American subsidiary in a direct capacity, but was alleged to have approved the selection of, and authorized payments to, consultants knowing that a portion of the money was intended to influence Indonesian officials. DOJ therefore charged Hoskins with conspiring to violate the FCPA based on its longstanding theory that if DOJ has jurisdiction over one conspirator, it has jurisdiction over all co-conspirators. In 2015, the trial court in Hoskins' case held that for an individual to be convicted of conspiring to violate the FCPA, the individual must also fall within a category of persons directly liable under the FCPA. On that basis, the court dismissed the conspiracy charge against Hoskins.
In 2018, the Second Circuit, analyzing the text and legislative history of the FCPA, held that because the statute omits jurisdiction over foreign nationals who act outside of the United States and are not officers, directors, employees, agents or stockholders of an issuer or domestic concern, Hoskins cannot instead be charged as a co-conspirator or accomplice to an FCPA violation. The court went on, however, to state that if prosecutors are able to show
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The Hoskins trial is also one of several trials
involving FCPA charges against individuals
scheduled for this fall that have the potential to result in significant additional FCPA case law, which could provide
further binding legal precedent for companies
and individuals facing potential liability under
that Hoskins acted as an agent of Alstom's American subsidiary (which is a domestic concern under the FCPA), then there would not be improper extraterritorial application of the FCPA to his conduct.
This decision was a significant blow to DOJ's expansive view of the jurisdictional reach of the FCPA and a crucial judicial check on DOJ's prosecutorial practices with respect to the FCPA. It will be seen this fall whether DOJ will nonetheless be able to prove that Hoskins is guilty under the remaining theory that he acted as an agent of Alstom's American subsidiary.
The Hoskins trial is also one of several trials involving FCPA charges against individuals scheduled for this fall that have the potential to result in significant additional FCPA case law, which could provide further binding legal precedent for companies and individuals facing potential liability under the FCPA. While DOJ's guidance over the past year on its policies related to FCPA prosecutions is a welcome addition to the public discourse, federal court precedent potentially limiting or at least clarifying DOJ's aggressive stances is an even more welcome addition.
THE UK SERIOUS FRAUD OFFICE PUBLISHES CORPORATE CO-OPERATION GUIDANCE
As part of its publication scheme set up pursuant to freedom of information requirements, the UK Serious Fraud Office (SFO) has over the past two years published a number of sections of its internal Operational Handbook. On August 6, 2019, the SFO published the section titled "Corporate Co-operation Guidance" (the Co-operation Guidance), which applies to SFO investigations, including investigations under the UK Bribery Act. While each case will be assessed on its particular facts and circumstances, the Co-operation Guidance provides some welcome clarity as to the SFO's approach to an issue that can place companies in a difficult position, including with respect to documents over which the company may have a claim to privilege.
The Co-operation Guidance expands on the SFO's expectations, stating that "co-operation
means providing assistance to the SFO that
goes above and beyond what the law requires."
Corporate Co-operation Guidance: Key Provisions
The SFO will take into account cooperation as a relevant consideration in its charging decisions, including in anticorruption investigations, as previously set out in the Guidance on Corporate Prosecutions and the Deferred Prosecution Agreements Code of Practice (the DPA Code). The Guidance on Corporate Prosecutions provides that a factor tending against prosecution is the extent to which the management of a company under investigation has adopted a "genuinely proactive approach" in that investigation. The Co-operation Guidance expands on the SFO's expectations in this regard, stating that "co-operation means providing assistance to the SFO that goes above and beyond what the law requires." This includes identifying suspected wrongdoing and the individuals who may be responsible, "regardless of their seniority or position in the organisation," and reporting to the SFO "within a reasonable time of the suspicions coming to light."
The Co-operation Guidance seeks to clarify the SFO's position in respect of various other key investigative themes:
Data Gathering and Production: This section contains detailed provisions on good general practices, such as preserving relevant digital and hard copy material, obtaining and providing material promptly to the SFO, providing lists of custodians and the locations of documents and providing material in a useful and structured way. The SFO also expects companies to identify relevant material in the possession of third parties and provide relevant material held abroad where it is in the possession or under the control of the organization.
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Although there is no affirmative obligation to waive privilege, it is
a factor that the SFO can (and will) take into account when considering
whether a company is eligible for a DPA.
If a company claims privilege over interview
memoranda, it will be expected to provide certification by
independent counsel that the material in question is privileged.
G enerally Asserting Privilege: With respect to privileged material, the Co-operation Guidance provides that companies should submit a schedule of material withheld, as well as the basis for asserting privilege. The SFO makes clear that it may challenge a claim to privilege over relevant material where it considers it appropriate to do so.
Importantly, the Co-operation Guidance provides that companies will not be penalized if they choose not to waive privilege. However, if a company elects to withhold privileged material, it will not attain the corresponding factor against prosecution in the DPA Code.
T he Company's Dealings With Individual Witnesses and Suspects: The SFO expects to be consulted before the company or its lawyers interview any potential witnesses or suspects to avoid prejudicing the investigation. Companies should also refrain from tainting a potential witness's recollection by showing the witness previously unseen documents or other witnesses' accounts of the relevant facts.
A sserting Privilege Over Interview Memoranda: Companies will be particularly interested in the SFO's guidance in relation to the perennial issue of privilege over interview memoranda. While the SFO's assurance that companies will not be penalized for making a genuine claim to privilege is to be welcomed, companies will nevertheless have to decide whether the benefit of disclosure to attain the maximum cooperation credit from the SFO outweighs any potential prejudice to the company. Although there is no affirmative obligation to waive privilege, it is a factor that the SFO can (and will) take into account when considering whether a company is eligible for a DPA.
If a company claims privilege over interview memoranda, it will be expected to provide certification by independent counsel that the material in question is privileged. The SFO's expectation that companies obtain these certifications from independent counsel may create a dilemma for multinational corporations that are subject to parallel proceedings in the United States in cases where interview memoranda reflect accounts of witnesses in that jurisdiction. U.S. rules of privilege generally afford protection to interview memoranda. However, depending on the circumstances, a claim to privilege over such documents under English law may be less clear-cut.
A further issue arises with respect to limited waiver of privilege, which is typically upheld by the English courts, in contrast to the position in the United States. So even where a company obtains independent certification of its documents, it will still have to balance the potential advantages in seeking cooperation credit from the SFO by providing the documents against the risk of third parties in any subsequent proceedings in the United States claiming that privilege in those documents has been lost as a result of such disclosure. This issue is accentuated by the fact that to obtain cooperation credit, the SFO expects companies to provide relevant material held abroad where it is in their possession or control.
T he SFO's Powers of Compulsion: The Co-operation Guidance provides that even where an organization is cooperating, there may be circumstances in which the SFO will nevertheless use its powers of compulsion to obtain relevant material. Compliance with compulsory process does not necessarily indicate cooperation, but, equally, the SFO's use of compulsion will not automatically mean it considers a company to be noncooperative.
Companies will have to give careful consideration to these issues at the outset of any internal investigation. Where the investigation has any potential nexus to the UK, companies should seek English law advice at the earliest opportunity to ensure the best possible outcome for their business.
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IN THE INTERIM 1
7/10/2019: The World Bank announced a 24-month sanction of India-based SAI Consulting Engineering Ltd (SAI) for the company's corrupt practices in connection with three World Bank-financed projects: the East Africa Trade and Transport Facilitation Project, the Mozambique Roads and Bridges Management and Maintenance Project and the Ghana Transport Sector Project. According to the World Bank press release, SAI offered cash payments and gifts to project officials to expedite invoice payments in connection with various construction projects. SAI was sanctioned with conditional nondebarment, which means that it remains eligible to participate in World Bank-financed projects if it complies with certain corporate compliance obligations defined in a settlement agreement between the World Bank and both SAI and SYSTRA, a France-based international engineering and consulting group that acquired a majority ownership position in SAI in 2014. The sanction was reduced in recognition that SYSTRA voluntarily disclosed SAI's corrupt practices to the World Bank Group's integrity vice presidency. As a condition for release from sanction, SAI committed to develop an integrity compliance program consistent with the principles set out in the World Bank Group Integrity Compliance Guidelines.
7/17/2019: The World Bank's chief suspension and debarment officer debarred OOO Fides Solutions and Ravshan Rizametov for three years for their corrupt practice in connection with the World Bank's Uzbekistan Modernizing Higher Education Project. According to the World Bank press release, OOO Fides Solutions and Rizametov engaged in a corrupt practice by offering a thing of value to a World Bank staff member in an attempt to improperly influence the staff member's actions in connection with a future contract.
7/19/2019: Basil Al Jarah, one of four individuals charged in the UK as part of the corruption investigation into Unaoil and described by prosecutors as "Unaoil's former partner in Iraq," pleaded guilty to five charges related to conspiracy to pay bribes. The SFO announced that the charges against Al Jarah were connected to contracts to build oil-handling facilities and pipelines in southern Iraq.
7/22/2019: Microsoft Corporation agreed to pay fines worth over $25 million to settle charges with DOJ and the Securities and Exchange Commission (SEC) involving a foreign bribery and kickback scheme orchestrated by its wholly owned Hungarian subsidiary, Magyarorszg Szmtstechnikai Szoglltat s Kereskedelmi Kft. (Microsoft Hungary). According to DOJ's press release, Microsoft Hungary agreed to pay a criminal penalty of $8.7 million to resolve DOJ's investigation into violations of the FCPA. The charges arose from a bid rigging and bribery scheme in connection with the sale of Microsoft software licenses to Hungarian government agencies. According to Microsoft Hungary's admissions, beginning in at least 2013 and continuing until at least 2015, a senior executive and other employees participated in a scheme to inflate margins in connection with the sale of Microsoft software licenses to Hungarian government agencies. In furtherance of that scheme, executives and employees falsely represented to Microsoft that steep discounts
1 In The Interim generally contains major anti-corruption enforcement actions and other significant anti-corruption updates from the third quarter of this year, but it does not contain a complete listing of relevant enforcement actions, as some may be omitted for practical or business purposes.
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were necessary to conclude deals with resellers who bid for the opportunity to sell Microsoft licenses to government customers. In actuality, the savings were not passed on to the government customers, but instead were used for corrupt purposes and were falsely recorded as "discounts."
On the same day as the DOJ settlement, the SEC announced that Microsoft agreed to pay $16.6 million to settle charges that it violated the FCPA in connection with the conduct of its subsidiaries in four countries, including the conduct described above in Hungary. According to the SEC order, Microsoft's subsidiaries in Saudi Arabia and Thailand provided improper travel and gifts to both foreign government officials and employees of nongovernment customers funded through slush funds maintained by Microsoft's vendors and resellers. The SEC further found that Microsoft's subsidiary in Turkey provided an excessive discount to an unauthorized third party in a licensing transaction for which Microsoft's records do not reflect any services provided. For this conduct, the SEC's order found that Microsoft violated the books and records and internal accounting controls provisions of the FCPA.
7/25/2019: Alex Nain Saab Moran and Alvaro Pulido Vargas, both citizens of Colombia, were charged in the Southern District of Florida for their alleged roles in laundering the proceeds of violations of the FCPA in connection with a scheme to pay bribes to take advantage of Venezuela's government-controlled exchange rate. The indictment alleges that beginning in or around November 2011 and continuing until at least September 2015, Saab and Pulido conspired with others to launder the proceeds of an illegal bribery scheme from bank accounts located in Venezuela to and through bank accounts located in the United States. Saab and Pulido allegedly obtained a contract with the Venezuelan government in November 2011 to build low-income housing units. However, they allegedly took advantage of Venezuela's government-controlled exchange rate by submitting false and fraudulent import documents for goods and materials that were never imported and by bribing Venezuelan government officials to approve those documents. In total, the scheme involved a transfer of approximately $350 million out of Venezuela, through the United States, to overseas accounts that Saab and Pulido owned or controlled.
8/5/2019: The Second Circuit upheld the money-laundering conviction of Mahmoud Thiam, a former Guinean mining minister who received bribes from the China International Fund (CIF), a Hong Kong-based entity. Prosecutors said Thiam took about $8.5 million in bribes from the CIF, which he spent on private school tuition for his children and a lavish estate near New York City. In return, the CIF received stakes in mining companies and mining permits, as well as rights to conduct business in broad swaths of the Guinean economy. For this conduct, Thiam was sentenced to a seven-year prison term in 2017. The charges brought against Thiam formed part of a recent trend among U.S. prosecutors to try to punish foreign officials who receive bribes, not just the companies that paid them.
8/12/2019: Robin Longoria, a Texas woman who managed aspects of an international program at an Ohio-based adoption agency, pleaded guilty for her role in a scheme to corruptly facilitate adoptions of Ugandan children through bribing Ugandan officials and defrauding adoptive parents and the U.S. Department of State. According to DOJ's press release, from 2013 through 2016, Longoria worked with a Ugandan attorney to pay bribes to Ugandan government officials to get the officials to use their positions to assist in facilitating
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adoptions of Ugandan children for U.S. clients. The bribes included payments to probation officers to influence them to issue favorable probation reports recommending that a particular child be placed into an orphanage and payments to court registrars to influence them to issue favorable guardianship orders to the adoption agency's clients. Through this scheme, the adoption agency received more than $800,000 in fees charged to these clients. For her conduct, Longoria pleaded guilty to one count of conspiracy to violate the FCPA, to commit wire fraud and to commit visa fraud.
8/13/2019: Israeli billionaire Beny Steinmetz and two associates are facing criminal charges in Switzerland for allegedly paying bribes to win mining licenses in Guinea between 2005 and 2010. In a public statement, the Swiss prosecutor stated that the defendants are charged with the criminal offenses of "foreign bribery and forgery" for paying bribes to one of the wives of former Guinean President Lansana Cont to win mining rights for Beny Steinmetz Group Resources (BSGR). Some of the $10 million in alleged bribes was transferred through Geneva when Steinmetz was living there. Earlier this year, BSGR relinquished its rights to the Simandou iron ore project as part of a legal settlement with the Guinean government related to accusations of bribery.
8/16/2019: Avianca Airlines S.A., the national airline of Colombia, publicly disclosed in a 6-K filing that it is investigating possible violations of the FCPA and other antibribery laws because of free and discounted tickets and upgrades given to government officials in various countries. Avianca Holdings publicly disclosed that tickets and upgrades were provided to government officials by Avianca employees, including members of Avianca's senior management and board of directors. The airline disclosed that it has retained outside counsel and a forensic investigative firm to conduct the investigation.
8/16/2019: Misonix, a medical device company, publicly disclosed that it will not be prosecuted by DOJ over possible corruption issues in China. According to its Form 8-K filed on August 16, 2019, Misonix received a declination letter from DOJ on August 13 stating that DOJ had closed its inquiry into Misonix without any action. Misonix, which makes ultrasound devices, conducted an investigation into the business practices of an independent Chinese entity that previously distributed Misonix products in China for potential FCPA violations. Following this investigation, Misonix voluntarily contacted the SEC and DOJ to advise them of these potential issues and thereafter fully cooperated with both agencies in their parallel investigations.
8/22/2019: A German-based multinational financial services corporation agreed to pay more than $16 million to settle charges that it violated the FCPA by hiring relatives of foreign government officials in order to improperly influence those officials in connection with investment banking business. According to the SEC's order, the company hired relatives at the request of foreign officials in both the Asia-Pacific region and Russia to obtain or retain business or other benefits. These so-called "referral hires" bypassed the company's highly competitive and merit-based hiring process and were often less qualified than applicants hired through the company's formal hiring process. The company agreed to the settlement without admitting or denying the SEC's findings. The SEC highlighted the company's remedial actions and its cooperation with the SEC's investigation in connection with reaching the settlement.
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8/29/2019: Juniper Networks, Inc., an American technology company, agreed to pay $11.7 million to settle charges that it violated the FCPA related to its sales practices in Russia and China. From 2008 to 2013, sales employees of Juniper's Russian subsidiary JNN Development Corp. secretly agreed with third-party partners to increase the discount on sales without passing those discounts to customers and instead kept those funds for other use. Those off-book funds were referred to as "common funds" and were directed partially to JNN sales representatives. Use of the "common funds" included travel for foreign officials to various locations where there were no Juniper facilities or industry conferences related to Juniper's business. The SEC order further states that from 2009 through 2013, sales employees of the company's Chinese subsidiaries falsified trip and meeting agendas for customers, including public officials, that understated the real value of entertainment involved on the trips. Juniper's legal department approved numerous trips without adequate review and after the events had taken place. In accepting the settlement, the SEC noted that Juniper cooperated by disclosing facts in a timely fashion and by "voluntarily produc[ing] and translat[ing] documents" to the agency during the investigation.
9/4/2019: The Inter-American Development Bank (IDB) announced six-year debarments for more than 20 subsidiaries of Brazilian conglomerate Odebrecht S.A. for bribing public officials in connection with the IDB's Highway Rehabilitation Program in So Paulo, Brazil, and the Tocoma Hydroelectric Power Plant Program in Venezuela. Between 2007 and 2015, Odebrecht companies paid $118 million in bribes for the two IDB-financed projects by "utilizing a complex network of agents and offshore financial payment schemes." In total, the bribes amounted to about 6% of the value of Odebrecht's contracts under both projects. In reaching the negotiated settlement, Odebrecht did not contest the IDB's evidence and agreed to make a total contribution of $50 million directly to nongovernmental organizations and charities managing social projects in IDB's developing member countries. In announcing the settlement, the IDB recognized "Odebrecht's continued cooperation, including internal investigations that are intended to uncover systemic integrity risks to IDB Group-financed activities." The IDB debarments qualify for cross-debarment by the World Bank, the Asian Development Bank, the European Bank of Reconstruction and Development and the African Development Bank.
9/12/2019: The World Bank announced the 28-month debarment of Ingeniera Especializada Obra Civil e Industrial S.A.U., a Spanish engineering company, for its corrupt, collusive and fraudulent practices in connection with the World Bank's National Roads and Airport Infrastructure Project in Bolivia. According to the World Bank press release, the World Bank's integrity vice president found that the company corruptly secured the award of the World Bank-financed project to supervise road construction. The company also engaged in a collusive practice when arranging to replace a bid form following bid submission and engaged in a fraudulent practice by approving certificates to inflate work progress. The debarment makes the company ineligible to participate in World Bank-financed projects. The World Bank noted that the debarment period was reduced in light of the company's extensive cooperation and voluntary remedial actions. These actions included conducting an internal investigation, voluntarily restraining from bidding on new World Bank-financed projects and taking internal action against responsible employees.
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9/13/2019: Sridhar Thiruvengadam, the former chief operating officer of Cognizant Technology Solutions Corporation, agreed to pay a civil monetary penalty of $50,000 following a settlement with the SEC. The SEC's order stated that Thiruvengadam participated in a scheme with three other former company executives to authorize the payment of a $2 million bribe to a government official in India. The payment was made in response to the official's demand to secure the issuance of a planning permit that was necessary for the construction of a commercial office facility in Chennai, India. Former employees also falsified the company's books and records to conceal the nature of the payment. Thiruvengadam further contributed to the concealment by signing false subcertifications to the company's management representation letters. Thiruvengadam thereby violated the FCPA's internal accounting controls and recordkeeping provisions. (The company had previously settled related charges with the SEC and received a declination from DOJ because of the company's "voluntary and prompt self-reporting, comprehensive investigation, compliance enhancements, and significant cooperation.")
9/19/2019: TechnipFMC plc, a global oil and gas services company, agreed to disgorge approximately $5 million for FCPA violations related to conduct that occurred prior to FMC Technologies' 2017 merger with Technip S.A. The SEC order found that TechnipFMC used a Monaco-based intermediary to bribe Iraqi government officials to obtain contracts to provide metering technologies for oil and gas production measurement to Iraqi state-owned oil companies. As stated in the order, TechnipFMC paid the intermediary without evidence of services rendered, allowed the intermediary to use agents and success-fee based compensation without adequate due diligence and falsely characterized the payments in its books and records. The order also found that TechnipFMC failed to properly assess and manage its anticorruption risks and devoted insufficient resources to compliance concerning its business dealings in Iraq. TechnipFMC's conduct violated the antibribery, books and records, and internal accounting controls provisions of the FCPA. In addition to disgorgement, TechnipFMC agreed to certain self-reporting requirements for three years. In reaching a resolution, the SEC took into consideration the company's cooperation and remediation. TechnipFMC had previously agreed to pay over $296 million in criminal fines as part of a three-year deferred prosecution agreement with DOJ in June 2019.
9/19/2019: Quad/Graphics, Inc., a marketing solutions and printing services provider headquartered in Wisconsin, agreed to pay nearly $10 million to resolve charges that it violated the FCPA by engaging in multiple bribery schemes in Peru and China. The SEC order found that from at least 2011 to January 2016, Quad/Graphics' Peruvian subsidiary, Quad/Graphics Peru S.A., repeatedly paid or promised bribes to Peruvian government officials to win sales contracts and avoid penalties and improperly attempted to influence the judicial outcome of a dispute with the Peruvian tax authority. Quad/Graphics Peru also created false records to conceal transactions with a state-controlled Cuban telecommunications company, which was subject to U.S. sanctions and export control laws. In addition, the order found that from 2010 to 2015, Quad/Graphics' China-based subsidiary, Quad/Tech Shanghai Trading Company Ltd., used sham sales agents to make and promise improper payments to employees of private and governmental customers to secure business. Quad/Graphics' conduct violated the antibribery, books and records, and internal controls provisions of the FCPA. In addition to paying nearly $10 million, Quad/Graphics agreed to self-report on its compliance program for a one-year period.
Relatedly, on September 19, DOJ announced that it had declined to prosecute Quad/Graphics for the above-described conduct, citing to, among other factors,
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Quad/Graphics' prompt, voluntary self-disclosure of the misconduct; Quad/Graphics' thorough and comprehensive investigation; Quad/Graphics' full and proactive cooperation in the matter (including its provision of all known relevant facts about the misconduct) and its agreement to continue to cooperate in DOJ's ongoing investigation and any related prosecutions; the nature and seriousness of the offense; Quad/Graphics' lack of criminal history; Quad/Graphics' full remediation, including the steps that it took to enhance its compliance program, its termination of the employees involved in the misconduct, and its termination of its relationship with third parties in Latin America and China involved in the misconduct; and the fact that Quad/Graphics' agreed to disgorge the full amount of its ill-gotten gains pursuant to the SEC order.
9/26/2019: LM Ericsson Telephone Company, a Swedish telecommunications company, publicly disclosed that it reserved approximately $1.2 billion to resolve an expected FCPA enforcement action with DOJ and the SEC. Ericsson first disclosed the investigation in a company statement on June 17, 2016, when it received a voluntary request from U.S. authorities. Since then, Ericsson has disclosed that it has been voluntarily cooperating since 2013 with an SEC anticorruption investigation and since 2015 with a DOJ investigation. As described in Ericsson's most recent filing, both investigations revealed breaches of the company's code of business ethics and the FCPA in China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam. Ericsson stated that the breaches were the result of several deficiencies, including a failure to react to red flags and inadequate internal controls.
9/26/2019: Luis Alberto Chacin Haddad, a Miami-based businessman, was sentenced to 51 months in federal prison after pleading guilty to conspiring to bribe a Venezuelan electricity official in exchange for contracts. Chacin, who owned a pair of Miami businesses, pleaded guilty in June to one count of conspiracy to violate the FCPA. According to court documents, Chacin worked with Jesus Roman Veroes to bribe an official at Corporacin Elctrica Nacional (Corpoelec), Venezuela's state-owned electric utility, to obtain contracts for construction equipment. The scheme began in 2016 when Chacin told Veroes, who also pleaded guilty to conspiracy to violate the FCPA in June, that he had been unsuccessful in winning Corpoelec business. Veroes responded that he had a personal relationship with a public official in both Venezuela's electricity ministry and Corpoelec. After an initial meeting with the public official, Veroes told Chacin that a second official would need a share of the profits in order for Chacin to obtain the contracts. Shortly thereafter, Chacin's companies won contracts to supply approximately $17 million worth of equipment to Corpoelec. Chacin and Veroes apparently agreed to keep about $5.5 million each in profits and to disperse other profits to the Corpoelec official and other conspirators. As part of his guilty plea, Chacin was ordered to forfeit the $5.5 million he received in profits as well as a condominium in Miami.
9/27/2019: Barclays PLC, a London-based bank holding company, agreed to pay over $6 million to settle charges that it violated the FCPA by hiring the relatives and friends of foreign government officials in order to improperly influence them in connection with its investment banking business. According to the SEC order, Barclays' Asia Pacific Region provided valuable employment to the relatives, friends and associates of government officials to obtain or retain business or other benefits. The SEC order found that Barclays failed to devise and maintain a system of internal accounting controls around its hiring practices sufficient to provide reasonable assurances that its employees were not bribing foreign officials in violation of company policy and the FCPA. In addition, with respect to certain hires, Barclays' employees in
Anti-Corruption | Q3 201910
the Asia Pacific region falsified corporate records to conceal the reasons for hiring the candidates. Barclays' conduct violated the books and records and internal accounting controls provisions of the FCPA. The SEC considered Barclays' remedial actions and cooperation with its investigation in determining the appropriate settlement in this matter.
FCPA GOVERNMENT INVESTIGATIONS AND CORPORATE SETTLEMENTS
21 20 19
13 14 11 11
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
* N ew criminal or civil cases (settled or contested) instituted by year
Corporate FCPA-Related Penalties* (in U.S. millions)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
* Includes disgorgement; does not include non-U.S. fines
Anti-Corruption | Q3 201911
THE FCPA/ANTI-CORRUPTION PRACTICE OF SIDLEY AUSTIN LLP
Our FCPA/Anti-Corruption practice, which involves over 90 of our lawyers, includes creating and implementing compliance programs for clients, counseling clients on compliance issues that arise from international sales and marketing activities, conducting internal investigations in more than 90 countries and defending clients in the course of SEC and DOJ proceedings. Our clients in this area include Fortune 100 and 500 companies in the pharmaceutical, healthcare, defense, aerospace, energy, transportation, advertising, telecommunications, insurance, food products and manufacturing industries, leading investment banks and other financial institutions.
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Anti-Corruption | Q3 201912