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  • Deputy AG Rosenstein Underscores Importance of Consistency in FCPA Enforcement

    Deputy Attorney General Rod Rosenstein recently issued remarks highlighting the importance of the DOJ’s consistency in enforcing policies “hold[ing] individuals accountable for corporate wrongdoing.” In particular, Deputy AG Rosenstein stated that the agency should focus on improving the recent track record of brining criminal proceedings against company employees—noting that the last 20 DOJ corporate FCPA enforcement actions have lacked related criminal charges against company employees—and that, going back to 2008, approximately 80% of DOJ corporate FCPA enforcement actions have lacked related criminal charges against company employees. He noted that various DOJ policies, including the Yates Memo and the FCPA Pilot Program, have shifted the focus away from entity liability, and toward issues surrounding individual officer or director liability.

    The comments are yet another in the steady drumbeat of calls, both internal and external to the DOJ, for DOJ enforcement strategy to hold individual corporate employees accountable for FCPA violations, although how much that strategy is being implemented remains to be seen. As Deputy AG Rosenstein’s comments concluded: “When we are serious about wanting people to follow rules, it does no good merely to post them. We need to make clear our intent to enforce the rules, with sufficient vigor that people fear the consequences of violating them.”

    FCPA Enforcement Action State AG DOJ FCPA Pilot Program

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  • CDM Smith Receives Declination of FCPA Charges

    On June 21, the DOJ issued a declination letter to attorneys for CDM Smith, Inc., in which the DOJ declined prosecution and closed an investigation of CDM regarding potential FCPA violations that occurred in India between 2011 and 2015. CDM, a Boston-based privately held engineering and construction firm, agreed to pay DOJ approximately $4 million in disgorgement. The DOJ announced the declination on June 29 with a link posted on its website, making it the second FCPA declination that the DOJ announced in June 2017. Prior to June, the DOJ had last issued an FCPA declination letter in September 2016. 

    According to the DOJ Letter, CDM paid approximately $1.18 million in bribes to India government officials in exchange for contracts that resulted in approximately $4 million in net profits (the disgorgement amount). The payments were made by CDM’s division responsible for India operations and by CDM’s wholly-owned subsidiary in India through fraudulent subcontractors and generally equaled two to four percent of the contract price. 

    The DOJ’s letter stated that its decision to close its investigation is consistent with the FCPA Pilot Program, launched in April 2016 to encourage companies to “voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.” Accordingly, the DOJ determined that CDM had, among other things, made a “timely and voluntary self-disclosure” of potential FCPA violations, conducted and “thorough and comprehensive investigation,” fully cooperated with the DOJ, and performed full remediation, including the termination of all of the executives and employees involved in the conduct at issue. However, the letter provides little detail about these factors. 

    The DOJ letter makes clear that it does not foreclose future prosecution of any individuals connected to this matter, whether affiliated with CDM or otherwise.

    DOJ India Bribery FCPA Enforcement Action CDM Smith FCPA Pilot Program

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  • DOJ Pilot Program Extended to Provide Adequate Time for Evaluation

    Speaking at the American Bar Association’s National Institute on White Collar Crime yesterday, U.S. Department of Justice official Kenneth Blanco reportedly announced that the Justice Department’s FCPA pilot program encouraging corporate cooperation will not end on April 5 of this year as originally announced.  Instead, until the Justice Department is able to render a final decision based on a complete evaluation, the program will remain in force.  Notably, as previously reported, the new Deputy Assistant Attorney General with oversight over the Fraud Section, Trevor N. McFadden, co-authored an article during his time in the private sector praising the program as “a step forward in providing companies and their counsel with more transparent and predictable benefits for self-reporting, cooperating, and remediating FCPA misconduct.”

    DOJ FCPA Update FCPA Pilot Program

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  • SEC Reaches Non-Prosecution Agreements for Bribes of Chinese Officials; DOJ Declines to Pursue FCPA Enforcement Actions

    On June 7, the SEC announced it had entered into non-prosecution agreements with two unrelated companies in connection with bribes paid to Chinese officials by foreign subsidiaries.  First, Akamai Technologies, a Massachusetts-based internet services provider, agreed to pay $652,000 in disgorgement and $19,433 in interest.  According to its agreement, Akamai’s foreign subsidiary had paid bribes to induce Chinese government-owned entities to purchase more services than they needed.  Second, Nortek Inc., a Rhode Island-based residential and commercial building products manufacturer, agreed to pay $291,000 in disgorgement and $30,000 in interest.  According to that agreement, Nortek’s subsidiary made improper payments and gifts to Chinese officials in exchange for preferential treatment, relaxed regulatory oversight, and reduced customs duties, taxes, and fees.  The agreements each stipulate that the companies are not charged with violations of the FCPA and will not pay any additional monetary penalties. In support of the agreements, the SEC noted that both companies promptly self-reported the conduct and cooperated extensively with the ensuing investigations.  Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, praised the companies for “promptly tighten[ing] their internal controls after discovering the bribes and [taking] swift remedial measures to eliminate the problems.” Also on June 7, Akamai and Nortek each released letters from the DOJ declining to pursue enforcement actions against the companies.  The letters are the first public declinations issued by the DOJ under its FCPA Pilot Program announced in April 2016.  The one-year Pilot Program is designed to encourage companies to voluntarily self-report potential FCPA-related misconduct and cooperate with federal investigations.  DOJ declined to pursue enforcement actions based on several factors, including that the companies identified the misconduct themselves, promptly self-disclosed the misconduct, thoroughly investigated the misconduct, enhanced their compliance programs and internal accounting controls, terminated the employees responsible for the misconduct, disgorged any ill-gotten gains, fully cooperated with the federal investigations, and agreed to cooperate with any future investigations.

    NPA Akamai Technologies Nortek Inc. FCPA Pilot Program

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  • Deputy Attorney General Yates Expands on Individual Accountability Policy

    On May 10, Deputy U.S. Attorney General Sally Yates spoke at the New York City Bar Association’s White Collar Crime Conference and expanded on the DOJ’s Individual Accountability Policy, which informally bears Yates’ name (the Yates Memo).   The DOJ issued the Yates Memo in September 2015, and Yates’ remarks were focused on why DOJ issued the policy and how it has been working in practice.  Yates made clear that “holding individuals accountable for corporate wrongdoing has always been a priority for” DOJ, but that the policy memorandum was necessary to overcome “real world challenges” that DOJ encounters (e.g., convoluted corporate structures and lines of authority, data privacy laws, and inability to compel foreign witness testimony) so that it can hold individuals responsible for corporate wrongdoing. In practice, Yates said that the policy has not caused the parade of horrors that defense attorneys and client alerts have predicted.  For example, she stated that she was not aware of any company refusing to cooperate with DOJ as a result of the policy.  She further added that “no one has told us that they will be forced to waive privilege in order to comply with the policy.”  Instead, she said that the policy already has caused a shift toward higher compliance standards within companies. Yates also highlighted how DOJ attorneys are focused on individuals from the outset of an investigation: “The first thing the lawyers briefing me discuss is what we are doing to identify the individuals involved and what the company is doing during the course of its cooperation to meet its obligation to provide all the facts about individual conduct.”  In addition civil enforcement efforts have broadened to focusing on individuals.  According to Yates, “[a]bility to pay is one of the factors considered, but it’s no longer the determinative factor in deciding whether to bring an action in the first instance.

    Yates Memo FCPA Pilot Program

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