Think You’re Immune from FCPA Violations? Think Again…

From NAVEX Global:

“In 2010, the number of federal prosecutions for violation of the Foreign Corrupt Practices Act (FCPA) more than quadrupled. The Department of Justice (DOJ) set a new record for fines and penalties – collecting nearly $1B. The FBI has announced that FCPA investigations are one of its highest priorities, which means that these trends will only accelerate.

If you think your organization is safe from FCPA liability, you may need to think again. In a recently published article by CFO.com, a list of 5 commonly held misconceptions about the FCPA were identified.

1. Our foreign sales are too immaterial to create FCPA risk… 
2. Our foreign customers are not government departments / agencies…
3. Our employees never interact directly with anyone from foreign governments… 
4. We’re better off not knowing what our foreign personnel and agents do to get business done… 
5. Everybody else does it and never gets caught.” 

Read the update, The Top 5 FCPA Fallacies - NAVEX Global»

Ralph Lauren Settlement Confirms that Feds Reward Companies with Effective Compliance Programs

Ralph Lauren’s recent $1.6 million settlement of Foreign Corrupt Practices Act violations sends a clear message: the Department of Justice and the Securities and Exchange Commission take effective compliance programs seriously. From NAVEX Global:

“Having a well-established compliance policy significantly impacted Ralph Lauren’s ability to respond to the issues both internally and with the U.S. government.  Upon learning of the misconduct, Ralph Lauren:

1. immediately reported it to the SEC and took steps to end any further FCPA violations;

2. gave a thorough review of its existing compliance program to help prevent future compliance issues; and

3. agreed to provide the government with ongoing reporting over a two-year period.

This recent news follows the high-profile 2012 Morgan Stanley FCPA case, where the DOJ declined to prosecute Morgan Stanley because of a strong compliance program and internal controls.  Similarly, the robust compliance program Ralph Lauren put into place prior to these events highlights the importance of a comprehensive and well-designed program.  Both the DOJ and SEC are sending companies a strong message that effective ethics and compliance programs (vs. ‘paper programs’) will get real credit – from avoiding potential prosecution to reduced fines and penalties.”

Read the full update, Lessons from Ralph Lauren: Designing Better Ways to Manage Third Party Risk - NAVEX Global»

Feds Take FCPA Fight to Wall Street

From Corporate Law Report:

U.S. regulators just took the fight against bribery and corruption to a new arena: Wall Street. Attorneys John Goselin and Mauro Wolfe of Duane Morris explain:

“On May 7, 2013, the U.S. Attorney’s Office for the Southern District of New York unsealed extraordinary criminal charges against two registered representatives of a U.S. broker-dealer and a high-level Venezuelan government official for engaging in a ‘Massive International Bribery Scheme.’ What makes this fraud scheme remarkable is that it involves the activities of a U.S. broker-dealer, its client, a foreign-owned and controlled bank, the Foreign Corrupt Practices Act and several suspicious transactions that potentially should have raised concerns—a perfect storm.”

Read the post in full»

Former Siemens Board Member Fined $275K for Bribery

A federal court has imposed a $275,000 fine on Uriel Sharef, former Siemens AG board member, for his role in the company’s bribery of Argentinian government officials. From Emily Stern and Tenley Mochizuki  of law firm Katten Muchin Rosenman:

“In December 2011, the SEC sued Sharef and six other Siemens executives for their alleged participation in a complex bribery scheme that spanned from 1996 through 2007… According to the SEC’s complaint, the group paid a total of $100 million to Argentine officials, including two Presidents and several Cabinet ministers, initially to secure a $1 billion government contract to produce identity cards and, thereafter, in an attempt to reauthorize the contract following its cancellation… Sharef, who was the most senior executive named as a defendant, allegedly played a role in the scheme from the outset, including meeting with intermediaries in New York and devising a plan to funnel $27 million in bribes to Argentine officials through a sham arbitration and other fraudulent means.”

Read the full update, SDNY Imposes Second Highest Penalty Under Foreign Corrupt Practices Act - Katten Muchin Rosenman LLP»

SEC Draws Roadmap for Avoiding FCPA Prosecution

The Securities and Exchange Commission recently announced its first non-prosecution agreement with a company accused of violating the Foreign Corrupt Practices Act. 

The landmark agreement with Ralph Lauren Corporation, relating to bribes the company allegedly paid government officials in Argentina, establishes a clear roadmap for avoiding significant fines and penalties for companies accused of foreign bribery and corruption. From attorneys at Skadden Arps:

“This case is a milestone in the SEC’s implementation of a broad set of policy initiatives in the last several years to encourage cooperation with its enforcement program. In addition to the development of mechanisms such as the NPA utilized here, those initiatives include similar mechanisms to recognize cooperation by individuals and a whistleblower program to reward individuals with cash payments for providing information that leads to an enforcement action.

The SEC emphasized that the conduct at issue was discovered by the issuer as it was implementing an FCPA compliance program, and that the issuer reported it to the SEC within two weeks of discovery. Clearly, the government viewed the company’s prompt response to that discovery and immediate self-reporting as commendable. Under the precedent set by Lauren, the SEC will be looking for: (i) self-reporting followed by extensive, thorough, real-time cooperation with both the SEC and the DOJ, including complete disclosure of the violative conduct, and (ii) a thorough review of existing compliance programs, with steps to update and improve compliance measures.”

Read the full update, SEC Announces First Non-Prosecution Agreement in an FCPA Matter - Skadden, Arps, Slate, Meagher & Flom LLP»

Self-Reporting FCPA Violations Pays Off: Just Ask Ralph Lauren

Clothing retailer Ralph Lauren will pay $1.6 million for paying approximately $600,000 in bribes to government officials in Argentina. But it could have been a lot worse, writes David Smyth of law firm Brooks Pierce: 

“From the government’s perspective, the important part of all of this was how the payments were discovered and what Ralph Lauren did in reaction to them… Within two weeks of uncovering the payments and gifts, RLC self-reported its preliminary findings to the both the SEC and the DOJ…

The company was subject to financial sanctions – $700,000 to the SEC and an $882,000 criminal penalty to the Justice Department – but escaped other penalties. The penalties might have been much worse if the company had waited until it was forced to respond on the government’s terms.”

More importantly, the settlement sets a new standard for cooperating with the government. From attorney David Jenson of Leonard, Street and Deinard: 

“For the first time, the SEC has entered into a Non-Prosecution Agreement (NPA) with a company relating to misconduct under the Foreign Corrupt Practices Act (FCPA).  The SEC decided not to prosecute Ralph Lauren Corporation for violations of the FCPA as a result of the company’s cooperation with the SEC’s enforcement division during the investigation as part of the SEC’s Enforcement Cooperation Initiative.  Announced in 2010, the initiative is designed to reward companies that come forward to report legal violations and cooperate with the SEC during the ensuing investigations.”

Read the updates:

• Ralph Lauren Escapes FCPA Problems with Minimized Damage - Brooks Pierce 
• SEC Agrees Not To Prosecute Ralph Lauren Corporation For FCPA Violations - Leonard, Street and Deinard 

Oil & Gas Industry Cannot Ignore International Anti-Corruption Laws

The global anti-corruption landscape is constantly changing, and oil and gas companies that don’t keep up face significant risk. From attorneys at Pepper Hamilton:

“Oil and gas businesses operate in a dynamic realm of increasing anti-corruption enforcement risk. The industry is perceived to be among the most corrupt, with a high incidence of bribery of foreign officials in resource-rich countries. Prosecutions by the U.S. government have resulted in payments by oil and gas companies totaling hundreds of millions of dollars, and new developments in U.S. law have increased burdens on the industry. New prosecution risks are emerging as foreign governments enact and strengthen their anti-corruption laws and enforce them against oil and gas firms. Moreover, firms engaged in the booming but controversial renaissance in domestic oil and gas production may face additional risks under the anti-corruption laws of the states where they operate. Oil and gas businesses are accordingly advised to regularly re-assess their anti-corruption risk and implement compliance programs that are carefully tailored to their operational profiles.”

Read the full update, Anti-Corruption Law And The Oil And Gas Industry: Evolutions In Both Demand Vigilance - Pepper Hamilton LLP»

Don’t Shortchange the Key Element of Your Compliance Program

In their rush to development anti-corruption compliance programs, many companies gloss over the most important step: conducting a company-wide risk assessment, write attorneys at K&L Gates. And that’s a big mistake:

“Although a risk assessment can provide key information to those responsible for anti-corruption compliance, such an exercise is unlikely to have much visibility outside the company, and the failure to perform one may well go unnoticed. Yet without a clear vision of its particular corruption risks, a company’s compliance efforts may turn out to be needlessly costly and inefficient and, even more importantly, fail to provide the protection that the company hopes to obtain. Yogi Berra may have said it best: if you don’t know where you’re going, you might not get there…

Simply ‘having’ a policy against bribery provides little or no protection from corruption-related problems. U.S. authorities say they have frequently encountered companies ‘with compliance programs that are strong on paper but that nevertheless have significant FCPA violations because management has failed to effectively implement the program […].’ The purpose of an anti-corruption compliance program is to ‘mitigate’ or reduce the company’s risk of liability for improper conduct. A well-considered assessment of a company’s risks in this regard provides a solid foundation for these efforts. By identifying and evaluating its full range of corruption risks, a company is able to assure that it addresses key risks appropriately. Where risks are not identified, however, there may be gaps that leave certain exposures unmitigated.”

Read the full update, Anti-Corruption: Effective Compliance Begins with the Assessment of Risks - K&L Gates LLP»

FCPA Watchdogs Target Health Care Industry

Health care firms take note: the feds are cracking down on corruption in the industry. From Doreen Edelman at law firm Baker Donelson:

“… in 2012, the SEC brought five enforcement actions and the DOJ initiated four prosecutions against pharmaceutical and medical device companies. What can you learn from these cases? The cases reveal preventable compliance failures in an industry that knows its employees and agents will have contact with foreign government officials.”

What to do? Change your compliance best practices:

• “As your opportunities abroad grow, so must your anticorruption compliance. Your compliance must be more specific to your business issues.
• You can no longer limit training to the FCPA.
• In my opinion, the UK Bribery Act is the new standard. Even Russia has standards following the UK Act.
• You also must train locally. China is different from Brazil and France.”

Read the full update, Focus on Health Care Firms in FCPA Investigations - Baker, Donelson, Bearman, Caldwell & Berkowitz, PC»

FCPA Enforcements Are Down, but Pressure Is Still On

Foreign Corrupt Practices Act enforcements were down significantly in 2012, but that doesn’t mean the Department of Justice and the Securities and Exchange Commission have given up the fight. From attorneys at Venable:

“In 2012, DOJ and the SEC brought 25 new Foreign Corrupt Practices Act (‘FCPA’) enforcement actions, a significant decrease from the number of FCPA enforcement actions brought in 2011 (45) and the prolific 2010 (71). However, there is no reason to suspect that DOJ and the SEC are losing their zeal for enforcement. Rather, it is likely that DOJ and the SEC are juggling the approximately 150 open investigations and were distracted by the drafting of their comprehensive FCPA Resource Guide, which was released in November 2012, as well as several trials.

Many trends from 2011 continued into 2012, including DOJ’s and the SEC’s willingness to reward companies for their swift voluntary disclosure and ongoing cooperation. In at least one significant case (U.S. v. Peterson), DOJ and the SEC declined to bring an enforcement action against the individual defendant’s corporate employer, financial services giant Morgan Stanley, noting Morgan Stanley’s rigorous FCPA compliance program, voluntary disclosure, and cooperation. In addition, the trend away from using independent compliance monitors/“consultants,” in favor of self-monitoring and periodic self-reporting, continued. DOJ’s and the SEC’s targeting of the health care and life sciences industries continued to bear fruit. Indeed, more than half of DOJ’s FCPA enforcement actions this year were brought against medical device manufacturers and/or pharmaceutical companies.”

Read the full update, FCPA Snapshot – 2012 - Venable LLP»