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  • Class certification granted to hedge fund investors

    On September 14, a New York federal district court granted class certification to a group of shareholder investors suing an American hedge fund management firm and two of its senior executives on the grounds that the investors were misled about a government investigation into the company’s activities in Africa. In finding that the proposed class met all the requirements for certification, the court certified a class of investors that held some of the more than 100 million outstanding shares between February 2012 and August 2014, the time period in which the firm allegedly violated the Securities Exchange Act. Plaintiffs claim that the firm told investors it was not under any pending judicial or administrative proceeding that might have a material impact on the firm, when in fact it was under DOJ and SEC investigation over allegations that its employees were bribing government officials in Africa. The allegations against the firm were made public in 2014 media reports detailing government scrutiny into its dealings in Africa.

    Click here for prior FCPA Scorecard’s coverage of this matter.

    DOJ SEC Securities Exchange Act Africa Bribery

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  • United Technologies settles FCPA charges with SEC

    On September 12, the SEC announced that United Technologies Corporation (UTC) agreed to pay $13.9 million to settle FCPA charges related to payments made through a subsidiary in connection with the sales of elevator and airline equipment in Azerbaijan and China. According the SEC’s Order, from 2012 through 2014, the Connecticut-based company, through its wholly owned subsidiary Otis Elevator Company, made illicit payments to Azerbaijani officials to facilitate the sales of elevator equipment.

    The Order also included other conduct that both the DOJ and SEC have focused on in recent years, including the use of agents and gifts and entertainment. For example, the Order detailed conduct by UTC and a joint venture partner from 2009 to 2013 in which an agent in China received improper commissions totaling $55 million in connection with the company’s attempt to win airline business in China. The Order also found that the company, from 2009 through 2015, improperly “provided trips and gifts to various foreign officials in China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia” in order to obtain business. UTC consented to the SEC’s order without admitting or denying the findings that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA.

    SEC DOJ FCPA

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  • ING settles corrupt practices case in the Netherlands for approximately $900 million and receives SEC declination

    On September 4, the Netherlands-based financial services company ING Groep, N.V. announced in its Form 6-K filing that it had agreed to pay a penalty of $782 million and disgorgement of $115 million to resolve corruption charges by the Dutch Public Prosecution Service (“DPPS”). The DPPS charges related to ING’s prevention of money laundering, client on-boarding, and corrupt practices. ING acknowledged its “serious shortcomings in the execution of customer due diligence policies to prevent financial economic crime” and “regrets that these shortcomings enabled customers to misuse accounts.”

    On September 5, following the settlement with the DPPS, ING announced in a new Form 6-K filing that it received a formal notification from the SEC that it had concluded its own FCPA investigation and did not intend to recommend an enforcement action. ING first disclosed the SEC investigation in March 2017.  The response from the SEC is consistent with the new policy against so-called piling on issued by DOJ in May 2018. The policy is intended to encourage coordination among enforcement authorities to avoid duplicative penalties. See previous FCPA Scorecard coverage here.

    SEC FCPA

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  • Ensco receives double declination in FCPA investigation

    On September 4, Ensco PLC, a London-based offshore drilling company, announced in its Form 8-K filing that the DOJ and the SEC will not take action against the company, ending their investigations into alleged corruption related to a drilling services agreement between Pride International LLC (“Pride”), an acquired subsidiary, and Petrobras, the Brazilian state-owned oil company. According to the filing, the SEC letter stated that the agency “did not intend to recommend any enforcement action” related to the alleged irregularities. The DOJ letter acknowledged Ensco’s full cooperation in the investigation.

    SEC DOJ

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  • Sanofi settles FCPA action with SEC for $25.2 million

    On September 4, the SEC announced that French pharmaceutical company Sanofi S.A. had agreed to pay $25.2 million to settle FCPA charges related to payments made by company employees to healthcare professionals in Kazakhstan and the Middle East. According to the SEC’s order, from 2011 to 2015, employees of Sanofi’s subsidiaries acted to provide things of value to foreign officials and healthcare professions “in order to improperly influence them and increase sales of Sanofi products.” Employees generated the funds for the illicit payments by submitting fake reimbursement claims for, among other things, travel and entertainment expenses, product samples, and clinical trial and consulting fees.

    The SEC found that Sanofi violated the internal accounting controls and recordkeeping provisions of the FCPA. Sanofi agreed to pay a civil penalty of $5 million, $17.5 million in disgorgement, and $2.7 million in prejudgment interest, without admitting or denying the SEC’s findings.

    According to the press release, the chief of the SEC’s FCPA Unit, Charles Cain, called out bribery in the pharmaceutical industry as a continued significant problem.

    Sanofi announced in March 2018 that the DOJ had closed its FCPA investigation without bringing an enforcement action. See previous FCPA Scorecard coverage here and here.

    FCPA SEC

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  • SEC issues administrative order against investment manager Legg Mason

    On August 27, the SEC issued an administrative order settling allegations against Maryland-based investment manager Legg Mason which remained outstanding after the company’s June 4 NPA with the DOJ. The June 4 NPA resolved claims of FCPA violations in Libya and included a criminal penalty of $32.6 million and disgorgement of $31.6 million [see prior FCPA Scorecard coverage here].  The SEC order stated that Legg Mason’s actions were in violation of the internal accounting controls provision of the Securities Exchange Act of 1934.  The SEC settlement did not include a seprate penalty beyond the disgorgement already agreed to in June, and pre-judgment interest. 

    SEC DOJ

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  • Microsoft confirms U.S. investigations into Hungarian sales operations

    On August 23, the Wall Street Journal reported that Microsoft is under investigation by the DOJ and the SEC regarding whether bribes and kickbacks were paid to Hungarian officials connected to sales of Microsoft products in Hungary.  Microsoft stated in response to the reporting that it had terminated four employees as well as certain business partnerships in response to its own internal probe into potential wrongdoing in the 2013 to 2014 timeframe. In SEC filings over the last couple of years, Microsoft previously disclosed FCPA-related investigations and that it has been cooperating with related U.S. investigations, which have to date yielded no enforcement actions.

    DOJ SEC

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  • Global bank settles two FCPA actions for $10.5 million

    On August 16, the SEC announced that a global bank had settled two enforcement actions involving alleged violations of the FCPA’s books and records and internal control provisions.  The FCPA’s anti-bribery provisions were not implicated in either action.

    The first action alleged that three traders employed by a U.S. subsidiary of the bank had mismarked positions in certain proprietary accounts, causing $81 million in losses that were not reflected in the company’s books and records. Some of these losses were from allegedly “widespread unauthorized trading.” The second action alleged that the bank had “failed to devise and maintain adequate internal accounting controls,” causing $475 million in losses, when the company did not identify that a Mexican subsidiary had loaned nearly $3.3 billion to a counterparty on the basis of fraudulent documentation provided by the counterparty. Without admitting or denying the SEC’s findings, the bank “agreed to pay $10.5 million in penalties”: $5.75 million for the first action, and $4.75 million for the second.

    SEC FCPA

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  • Court dismisses SEC allegations against executives of hedge fund management firm as time-barred

    Judge Nicholas Garaufis of the Eastern District of New York issued a 32-page memorandum opinion this week dismissing the SEC’s civil suit against two former executives of an American hedge fund management firm (earlier coverage can be found here and here).

    The SEC’s complaint alleged that the executives violated the FCPA between May 2007 and April 2011 by causing the firm “to pay tens of millions of dollars in bribes to government officials on the continent of Africa.” Specifically, the defendants allegedly induced Libyan authorities to invest in firm managed funds, and directed illicit efforts to secure mining deals by bribing government officials in Libya, Chad, Niger, Guinea, and the Democratic Republic of the Congo. The case against the two executives was the latest in a line of civil and criminal proceedings involving the hedge fund management firm and its employees and executives, and the firm paid $412 million in criminal and civil penalties to settle its FCPA enforcement actions.

    Judge Garaufis, in dismissing the complaint in its entirety with prejudice, found that the claims were barred by the FCPA’s five-year statute of limitations, and he rejected the SEC’s tolling arguments. A cornerstone of this dismissal is the Supreme Court’s ruling last year in Kokesh v. SEC, which held that SEC disgorgement actions are subject to a five-year statute of limitations.

    SEC FCPA Africa

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  • SEC settles with Beam Suntory for $8.2 million regarding India payments

    On July 2, the SEC settled FCPA allegations with alcoholic beverage company Beam Suntory, Inc. (“Beam”) in an administrative proceeding stemming from alleged FCPA violations from 2006 through 2012. Beam neither admitted nor denied any wrongdoing. The SEC alleged that the company’s subsidiary in India made illegal payments to Indian government officials through third-party sales promoters and distributers. The third parties then presented fabricated or inflated invoices to the subsidiary. These invoices and accounting entries were ultimately incorporated into the parent company’s books and records. The SEC also alleged that Beam failed to maintain adequate internal controls.

    This is the third case the SEC has pursued related to conduct in India by alcoholic beverage companies, following Diageo in 2011 and AB InBev in 2016.

    SEC FCPA

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