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February FCPA Compliance Digest: If You Haven’t Started Your FCPA Compliance Training, Now Might Be A Great Time…

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February FCPA Compliance Digest: If You Haven’t Started Your FCPA Compliance Training, Now Might Be A Great Time…

This might be our most exciting FCPA Compliance Digest thus far – we get to write about a DECLINATION! It feels a little bit like seeing a compliance unicorn.

Cobalt Energy Announces SEC FCPA Declination

It’s not often that we get to write about a declination. Last month, Cobalt International Energy, Inc. (CIE) said that the SEC’s FCPA investigation relating to the company’s operations in Angola has concluded without any enforcement action recommended by the SEC. The investigation began in 2011 in response to allegations of a connection between senior Angolan government officials and Nazaki Oil and Gaz, S.A., an Angolan company that, until 2014, held a working interest alongside Cobalt in offshore Angola. Cobalt had received a formal investigative order from the SEC in November 2011 and a Wells Notice on August 4, 2014. The DOJ, however, is still investigating.

Teva Pharmaceuticals Yields ‘Likely’ FCPA Violations

Teva Pharmaceutical Industries Ltd. said in a securities filing that an internal investigation has turned up business practices that were “likely” violations of the FCPA. The drugmaker had previously said it was looking into “issues” in a number of countries around the world that “could rise to the level of FCPA violations and/or violations of local law.” The company has said its internal investigation began after it received subpoenas and other requests for information related to foreign bribery from the SEC and DOJ starting in 2012, and has since turned up business practices and transactions in Russia, Eastern Europe and Latin America that are “likely” violations of the FCPA. Teva has previously said that it could have to pay “material fines” in connection with the FCPA probe and that “affiliates in certain countries under investigation” gave local authorities “inaccurate or altered information” on marketing and promotion practices.

Flowserve Discloses FCPA Investigation

Flowserve Corp. announced that it discovered actions involving an employee based in an overseas subsidiary which violated its code of conduct, and may have violated the FCPA. Flowserve fired the employee, is in the process of completing an internal investigation and reported the potential violation to the DOJ and SEC. “While the company does not currently believe that this matter will have a material adverse impact on its business, financial condition, results of operations or cash flows, there can be no assurance that the company will not be subjected to monetary penalties and additional costs,” it said in the filing. In 2008, the company agreed to pay a $4M penalty as part of a settlement over allegations of kickbacks paid to the Iraqi government related to the United Nations Oil for Food program.

Corporate FCPA Cases Leading to Growing Number of Civil Lawsuits

The WSJ is reporting on a trend in the ethics and compliance industry that gives insight into a specific challenge any compliance or legal professional going through an FCPA investigation could face; corporate corruption cases are leading to a growing number of break-off lawsuits, filed on behalf of investors who say they have been harmed by their company’s alleged misconduct overseas. These lawsuits are usually unsuccessful, but they are changing the dialogue around how much –and when–CCOs or GCs should disclose possible misconduct to the DOJ. FCPA-related lawsuits claim that by failing to prevent foreign bribery, top executives have hurt shareholders. In order for the suits to stand a chance, the basic facts of the case have to point to bad behavior by the company’s board itself. Because so many FCPA violations are caused by misconduct from employees in the field or distant subsidiaries, many of these civil lawsuits never get past motion to dismiss stage.

After New York Times articles in 2012 alleged that Wal-Mart Stores’ Mexico unit paid bribes to win government zoning changes and permits, the company was hit with a series of lawsuits on behalf of shareholders who claimed to have been harmed by a failure of the company to disclose the issue earlier. Last September, an Arkansas federal judge overruled Wal-Mart’s motion to dismiss one such case brought by the city of Pontiac, Michigan’s pension fund. In another FCPA-related lawsuit against Wal-Mart, the Delaware Supreme Court ruled that Wal-Mart needed to turn over to investors, years of documents and emails about its internal investigations into bribery.

Samuel Cooper, an FCPA specialist at Paul Hastings LLP, said that years ago these lawsuits were usually filed after a settlement was reached with the government. But, increasingly, they are filed just after news of the internal investigation hits papers, placing companies in an awkward position. At the same time that a company counsel is negotiating a deal with the government to investigate and disclose misconduct, a barrage of discovery requests from a parallel lawsuit may be flooding in.

Goodyear to Pay $16M for FCPA Violations

Goodyear Tire & Rubber Company reached a $16M settlement with the SEC to resolve charges that it violated the FCPA when its subsidiaries paid bribes to land tire sales in Kenya and Angola. The SEC said the settlement amount “reflects the company’s self-reporting, prompt remedial acts, and significant cooperation with the SEC’s investigation.” According to the SEC, Goodyear failed to prevent or detect more than $3.2M in bribes during a four-year period because of the company’s inadequate FCPA compliance controls at its subsidiaries in sub-Saharan Africa. Bribes generally were paid in cash to employees of private companies or government-owned entities, as well as other local authorities, such as police or city council officials. Goodyear then falsely recorded these improper payments as legitimate business expenses in the books and records of the subsidiaries, which were consolidated into Goodyear’s books and records. Goodyear agreed to pay $14.1M in disgorgement, which comprises the company’s illicit profits in Kenya and Angola, and $2.1M in prejudgment interest. Goodyear also must report its FCPA remediation efforts to the SEC for a 3-year period.

Despite Compliance Reform, Canada Charges SNC-Lavalin with Bribery

SNC-Lavalin Group Inc., Canada’s largest engineering firm, is reeling from federal fraud and bribery charges filed by Canadian prosecutors, even after the company has spent three years implementing massive compliance reforms. The company fired off a heated statement questioning why the charges were needed, saying they were without merit and that it would vigorously defend itself. The charges involve alleged bribery by former employees on projects in Libya. Some individuals already have been arrested and convicted. The company held out hope of reaching some sort of settlement with authorities, as the DOJ usually does with large corporations in the U.S., perhaps involving fines and other penalties but stopping short of conviction, as that would be devastating to the company, which employs 40,000 workers.

Most of its business in Canada involves government entities; under new anti-corruption rules, Canada bans companies convicted of crimes from doing business with the government. In an interview with the Toronto Globe and Mail last October, the company’s CEO called Canada’s policy a “meat cleaver” that leaves little room for companies to improve their behavior and survive. He said any charges would threaten the company’s future and jeopardize at least 5,000 jobs in the company’s Montreal HQ. After the interview was published, the Canadian government declined to renew a major contract with the company to maintain thousands of federal facilities, according to a CBC news report. The contract had a potential value of $22.8B. The loss was a setback to the company, which has undergone major compliance reforms since the bribery probe began 3 years ago, including:

  • a massive training program for employees
  • the naming of a chief compliance officer who reports to the board
  • the hiring of noted compliance leaders to advise the company
  • the appointment of an independent monitor recommended by, and who reports solely to, the World Bank Group
  • placing compliance officers in all of the company’s business units and regional offices worldwide

Compliance Meme

I was torn between memes this week, so you get two. First, this confused seal:
Source: Compliance Week Daily Compliance Meme

Second, this meme. Perhaps someone could share this with Former Secretary of State Clinton, who’s facing some heat over revealing she conducted all of her business as Secretary of State via a personal email, which, as we all know, might as well be a Dropbox.
Source: Compliance Week Daily Compliance Meme

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About the Author

Pia Adolphsen, Associate Manager of Marketing Content Strategy. Pia leads content strategy at The Network. Previously, she led client advocacy and marketing initiatives in the competitive intelligence industry. She is strongly in favor of lattes, 1.0mm pens, and her Georgia Bulldogs. Connect with Pia on LinkedIn

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