You’ve been reading the FCPA Compliance Digest for five months now, and there’s still not a shortage of companies getting into trouble for violating the FCPA. That may seem like an obvious statement, but running out of news was my biggest fear when I began this digest. Clearly, I worried in vain.
Today’s digest covers 4 FCPA news articles – we start with great news for Hyperdynamics Corporation, then some startling claims about Wal-Mart’s auditors. We’ll then dive into Braskem’s self-reported FCPA investigation and BHP’s fine for FCPA violations – as well as a news story in our global anti-corruption section about a new anti-corruption unit being formed in Abu Dhabi.
Hyperdynamics gets FCPA Declination from DOJ
Hyperdynamics Corporation had great news to announce on May 26th, when it shared that the DOJ closed its FCPA investigation without bringing any charges against the company. The Houston-based oil and gas company said it had cooperated with the government’s investigation, and the “DOJ noted the value of the Company’s cooperation in its declination letter.”
Hyperdynamics received a subpoena from the DOJ in September 2013 requesting documents relating to its business in Guinea. The company said the investigation focused on whether its “activities in obtaining and retaining the Concession rights and [its] relationships with charitable organizations potentially violate the FCPA and anti-money laundering statutes.” Charitable contributions can violate the FCPA if they benefit foreign officials personally and are intended to obtain or retain business or gain an unfair advantage. Hyperdynamics earlier disclosed that it spent about $7.5M on the FCPA investigation.
Shareholder Group Says E&Y Knew About Wal-Mart Mexico Bribery Allegations
Yikes. A small shareholder group says Wal-Mart’s longtime auditor, Ernst & Young, knew about possible bribery in Mexico long before the company disclosed it to US authorities, highlighting a little-known area of US anti-corruption law and making the Wal-Mart bribery scandal even more scandalous. CtW Investment Group, which works with union pension funds that hold about 0.15% of Wal-Mart Stores Inc. stock, made the claim in a letter to the Public Company Accounting Oversight Board, which oversees public companies’ outside accounting firms. The letter cites an internal Wal-Mart email dated Feb. 27, 2006, that says employees in Wal-Mart’s Bentonville, AK, HQ “briefed E&Y over the past several months,” along with some of the company’s directors, on an internal investigation into the possible bribery. It wasn’t until late 2011 that Wal-Mart disclosed its investigation to the DOJ and SEC, according to the company’s securities filings.
CtW said in its letter that E&Y likely should have reported the suspected bribery to the SEC and should be investigated by the PCAOB, because the acts under investigation and how it was handled could have affected the retailer’s financial statements. The challenge raises the question of external auditors’ responsibilities when their clients may have violated the FCPA. If an outside auditor discovers a potentially illegal act, it generally is only expected to notify responsible authorities within the company, accounting and legal experts said. But it may be obliged to notify the government if the appropriate steps aren’t being taken and a company’s books may be compromised, they said. The PCAOB can investigate public company accounting firms for poor audits, including fraud, and in some cases hands out disciplinary fines or revokes a firm’s right to practice. It has never sanctioned an outside accountant for issues related to the FCPA, a spokesman for the regulatory body said. We’ll have to watch what happens next…experts expect the Wal-Mart FCPA settlement to happen late 2015 or early 2016.
SEC Fines BHP Billiton $25M For FCPA Violations
The SEC fined Australian mining company BHP Billiton $25M for practices tied to gifts offered to foreign government officials during the 2008 Summer Olympic Games in Beijing, in violation of the FCPA. The mining company invited 176 government officials and employees of state-owned enterprises to attend the Beijing Games at BHP’s expense, the SEC said in its complaint. The sponsored guests were primarily from countries in Africa and Asia and received hospitality packages, which included event tickets and hotel accommodations, which were valued at $12-$16K per package. The SEC said BHP failed to provide employees with specific training on how to evaluate the bribery risks of an invitation or how to complete a hospitality application form for officials invited to the Olympics. It didn’t have procedures to ensure meaningful preparation, review and approval of the requests, in violation of the internal-controls provisions of the FCPA.
BHP, which neither admitted nor denied the findings, said it was addressing the SEC’s findings, including adding a new independent compliance group. The company, whose American depositary shares are traded on the New York Stock Exchange, said the SEC came up with “no findings of bribery or corrupt intent.” BHP was an official sponsor of the 2008 Games and supplied the raw materials used to make the gold, silver and bronze medals awarded at the Games. The settlement requires BHP to report to the SEC on the operation of its Foreign Corrupt Practices Act compliance program for a one-year period.
Braskem Self-Reports FCPA Investigation
When it comes to the FCPA, Brazil is the new Texas. Brazil-based petrochemical giant Braskem said in a filing with the SEC that it has launched an internal investigation into potential FCPA violations. Braskem said it is investigating allegations that 2 of its former executive officers made improper payments between 2006 and 2012 to Brazil’s state-owned oil company Petrobras (sound familiar?) in exchange for raw-material supply agreements. In response to the allegations, which were made public in lawsuits, the company’s management and board of directors approved plans to launch an internal investigation, which will be “carried out by law firms experienced in similar cases in the US and in Brazil,” the filing stated. “The law firms will work under the coordination of an ad hoc committee formed by members of its board of directors, specially created for this purpose.” In addition, Braskem said it has self-disclosed the investigation to the Brazilian authorities the SEC and the DOJ.
Updates on Global Anti-Corruption Initiatives
Crown Prince of Abu Dhabi Orders Establishment of Anti-corruption Unit
In early May, the Crown Prince of Abu Dhabi issued directives to the Abu Dhabi Accountability Authority (ADAA) for the creation of an anti-corruption unit to reflect commitment to corporate governance, transparency and accountability. The new anti-corruption unit’s tasks include investigation of financial irregularities, corruption, identifying gaps in legislations and internal audit regulations and proposing means to address them.
Under the directives, the ADAA will draft the appropriate legislations and put in place procedures to eliminate financial crimes and maintain a financial and administrative system based on transparency and integrity, aimed at realizing the leadership’s aspirations for efficient government functioning and an adequate climate for the development process. The ADAA will work with the judicial, security and other competent authorities to formulate policies for investigating violations related to the abuse of public funds and of public office, conflict of interest, profiteering from government contracts and fraud.
Next Steps: How Engaging is Your Code of Conduct?
You may have seen our recent post regarding the dilemma companies often face regarding whether to spend more time on job training versus compliance training, especially for new employees. Don’t forget that one key vehicle that can teach your employees about both, and can be a particularly valuable source of culture-related information for new employees is your Code of Conduct.
Our new Agile Code of Conduct™ has a compounding effect in this area because, as it’s interactive by nature, employees don’t just read it, they interact with it and learn as they do. The Agile Code allows you to embed interactive exercises, like quizzes and Q&A features into your Code. It’s fully responsive, meaning that your employees can view the training and complete the exercises on any device, from anywhere. Your new employees already have to certify on the Code – why not make it an enriched experience that will make the most of their time and enhance their retention of your message?
If learning about your FCPA program is critical for your employees, you could embed our Anti-Bribery and Gifts, Gratuities and Entertainment Learning Blocks into your Agile Code for a 5-7 minute overview, with a link to the full policy for those employees who need a deeper understanding. Want to see the Agile Code in action? Contact us to see how the Agile Code can transform your Code of Conduct.
Share Your Thoughts with Us
For More Information About FCPA Training, Check Out These Resources:
- Blog Post: April FCPA Compliance Digest | BONUS: Major Changes to Global Anti-Corruption and Anti-Money Laundering Legislation
- Whitepaper: Effective FCPA Compliance During Economic Downturns
- Blog Post: When Designing Your Compliance Training Program, Consider When NOT to Train
Whitepaper | The Business Impact of Employee Engagement in Ethics and Compliance Training
David Houlihan, Principal Analyst of Blue Hill Research, discusses the underlying business needs and dynamics related to the role of employee engagement in the execution and value of FCPA compliance and other training.