Subscribe to our FinCrimes Update for news about the Foreign Corrupt Practices Act and related prosecutions and enforcement actions.
On April 30, a DOJ deferred prosecution agreement and SEC settlement with Japan-based Panasonic Corporation and a subsidiary were announced, with Panasonic agreeing to pay $280 million in total. The resolutions related to Panasonic’s U.S.-based subsidiary, Panasonic Avionics Corporation (PAC), and allegations that senior management of PAC orchestrated a bribery scheme to help secure over $700 million in business from a state-owned airline, in which PAC paid a Middle East government official nearly $900,000 for a “purported consulting position, which required little to no work,” and concealed the payment “through a third-party vendor that provided unrelated services to PAC.” PAC is then alleged to have falsely recorded the payments in its books and records, as well as similar payments made to other purported consultants and sales agents in Asia.
Under the DPA with PAC, PAC agreed to pay the DOJ a $137.4 million criminal penalty for knowing and willful violations of the FCPA’s accounting provisions. The DOJ gave PAC a 20 percent discount off the low end of the U.S. Sentencing Guidelines fine range because of its cooperation and remediation, which, although untimely in certain respects, did include causing several senior executives who were either involved in or aware of the misconduct to be separated from PAC or Panasonic.” However, because many of PAC’s remediation efforts were “more recent, and therefore have not been tested,” the deferred prosecution agreement subjects the company to two years of scrutiny by an independent compliance monitor, followed by a year of self-reporting. The SEC‘s simultaneous settlement included violations of the anti-bribery as well as accounting provisions, and the payment of $143 million to the SEC.
As FCPA Scorecard previously reported, Panasonic disclosed the investigations in February 2017, though they were first reported as early as 2013.
On July 25, LATAM Airlines Group S.A. (LATAM), a Chile-based airline, agreed to settle parallel criminal and civil FCPA matters relating to alleged bribery of Argentine labor union officials through a sham consulting contract with a third party in exchange for the union accepting lower wages and other concessions. LATAM agreed to pay a total of more than $22 million, including a $12.75 million penalty as part of a three-year Deferred Prosecution Agreement (DPA) with DOJ.
As part of the DPA, LATAM agreed to continue cooperating with DOJ’s investigation, to make improvements to its compliance program, and to retain a compliance monitor for a period of more than two years. In the DPA and in its press release regarding the settlement, DOJ noted that it took into account certain factors that weighed against LATAM, including that LATAM did not voluntarily disclose the alleged misconduct (which came to light through Argentinian press reports) or discipline the responsible employees. However, DOJ did note that LATAM cooperated with DOJ’s investigation once the press reports became public, and “provided all relevant facts known to it, including about individuals involved in the misconduct.”
Because of the factors weighing against LATAM, the penalty was within the U.S. Sentencing Guidelines range, and the Company did not receive a discount off the bottom of the range as suggested in DOJ’s recent guidance regarding its FCPA pilot program. As stated in the guidance, in order to be eligible for full mitigation credit, a company must voluntarily disclose the FCPA violations, and the DOJ considers such disclosure as a factor separate and apart from the company’s cooperation in the subsequent investigation. The company must also engage in timely and appropriate remediation, which includes appropriate discipline of employees identified by the company as responsible for the misconduct. The guidance specifically states that a monitor should not be required if the company “has, at the time of resolution, implemented an effective compliance program.”
In this case, one of the first under the FCPA pilot program, DOJ followed its guidance by refusing to give mitigation credit when the company did not voluntarily self-disclose and did not fully remediate. It is difficult to say what, if any, credit LATAM received for its extensive cooperation once the investigation began – cooperation that included turning over to DOJ “all relevant facts known to [the Company], including about individuals involved in the misconduct.”
At the same time, LATAM also settled an SEC administrative enforcement action by agreeing to pay $6.74 million in disgorgement and $2.7 million in prejudgment interest Earlier this year, the Company’s CEO separately settled with the SEC regarding the same scheme, and agreed to pay a $75,000 penalty and attend anti-corruption training.
On March 25, medical device manufacturer Biomet announced that the deferred prosecution agreement it entered into with the DOJ to settle FCPA charges in 2012 would be extended a second time. The company reported that the DOJ and SECs investigation into alleged misconduct in Brazil and Mexico, and into the companys compliance program, was still ongoing. Biomet settled FCPA charges with the DOJ and SEC in 2012 related to the companys conduct in Argentina, Brazil and China. As previously reported, Biomet disclosed in March 2015 that the deferred prosecution agreement it had agreed to as part of the settlement would be extended for one year because the company had discovered additional potential FCPA violations in Brazil and Mexico.
On March 1, Miami-based Olympus Latin America, Inc. (OLA) entered into a deferred prosecution agreement (DPA) to resolve charges of conspiracy to violate the FCPA and violating the FCPA in connection with improper payments and benefits to health care practitioners at government-owned facilities in Central and South America. OLA, which is a majority-owned subsidiary of the United States' largest distributor of endoscopes and related medical equipment, Olympus Corporation of the Americas, agreed to pay a $22.8 million penalty and admitted its criminal conduct. According to OLA's admissions, from 2006 through August 2011, OLA "designed and implemented a plan to increase medical equipment sales in Central and South America by providing personal benefits, including cash, money transfers, [ ] travel, free or heavily discounted equipment, and other things of value to certain health care practitioners" employed at government-owned health care facilities. The improper payments totaled nearly $3 million, which resulted in the recognition of more than $7.5 million in profits. Under the terms of the DPA, the DOJ will defer criminal prosecution for a period of three years and OLA will appoint a compliance monitor and implement numerous compliance measures. In reaching the resolution, the DOJ gave OLA a 20 percent reduction on its penalty as a result of its cooperation, which included "conducting an extensive internal investigation, translating documents, and collecting, analyzing, and organizing voluminous evidence and information." However, in assessing the penalty, the DOJ noted that OLA did not voluntarily disclose the misconduct in a timely manner.
The SEC announced on March 1 that it settled FCPA charges with Qualcomm Inc., the San Diego-based mobile chip maker. Qualcomm agreed to pay a $7.5 million civil penalty to resolve charges that it violated the FCPA by hiring relatives of Chinese government officials and providing things of value to foreign officials and their family members, in an attempt to influence these officials to take actions that would assist Qualcomm in obtaining or retaining business in China. Qualcomm and the SEC settled the case via an Administrative Order Instituting Cease-and-Desist Proceedings, in which Qualcomm did not admit or deny the findings set forth in the order. The order found that Qualcomm had violated the anti-bribery, internal controls, and books-and-records provisions of the FCPA. In addition to the $7.5 million civil penalty, Qualcomm agreed to provide the SEC with self-reports and certifications concerning its FCPA compliance during a two-year period. According to the order, Qualcomm both offered and provided employment and paid internships to family members of Chinese foreign officials in order to try to obtain business. Many of these hires were referred to internally at Qualcomm as "must place" or "special" hires and did not satisfy Qualcomms internal hiring standards. The order also details Qualcomms provision of meals, gifts, travel, and entertainment to both foreign officials and relatives of foreign officials in an effort to influence these officials to use Qualcomm technology. The settlement appears to be an extension of the SEC's "Sons and Daughters" investigations which, up until now, have been focused on the hiring practices of financial institutions in the Asia Pacific. As previously reported by the Wall Street Journal, in March 2014, the SEC sent letters to at least five U.S. and European banks, including Credit Suisse Group AG, Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc., and UBS AG, seeking more information about their hiring practices in Asia and to examine whether the banks violated the FCPAs anti-bribery provisions by hiring relatives of well-connected government officials. Prior FCPA Scorecard coverage of other aspects of the "Sons and Daughters" investigations around the world is available here.
On November 30, 2015 the United Kingdom’s Serious Fraud Office (SFO), working with the DOJ and SEC, entered into a deferred prosecution agreement (DPA) with Standard Bank under the U.K.’s Bribery Act of 2010 regarding payments by two former employees that were allegedly made to bribe members of the Tanzanian government. The DPA represents the SFO’s first-ever DPA and the first use of Section 7 of the Bribery Act, failure of commercial organizations to prevent bribery, by any U.K. prosecutor. As part of this DPA, Standard Bank has agreed to pay a combined $32.2 million in sanctions to the U.K. and Tanzania, and to cover the SFO’s litigation and investigation costs. The DPA also requires Standard Bank’s continued cooperation with authorities and the implementation of certain recommendations from its independent compliance consultants.
In addition to the DPA, Standard Bank agreed to pay $4.2 million to the SEC to settle charges related to the failure to disclose the underlying bribe payments in the bank’s offering documents and statements to potential investors. In light of Standard Bank’s cooperation with the SFO and the DPA, the DOJ reportedly closed its own investigation without bringing independent charges.
Notably, in one of the first examples of the SEC implementing its plan to make more defendants admit to the allegations against them as part of resolutions, Standard Bank agreed to the facts underlying the SEC charges.
In a recently-filed status report, the DOJ and medical device manufacturer Orthofix revealed that the company's Deferred Prosecution Agreement (DPA) will be extended by two months. The DPA was due to expire on July 17, 2015, but the status report states that Orthofix agreed to the extension in June to give DOJ "additional time to (1) evaluate Orthofixs compliance with the internal controls and compliance undertakings in the DPA and (2) further investigate potentially improper conduct the company disclosed during the term of the DPA." The report continued that DOJ intended to complete its investigation in August and inform Orthofix "of its proposed course of action shortly thereafter." Orthofix entered into the DPA on July 10, 2012 to resolve allegations that a Mexico-based subsidiary paid bribes to employees of Mexico's government-operated health system (see prior FCPA scorecard coverage). Earlier this year, another medical device manufacturer, Biomet, announced that its DPA would be extended for one year after it disclosed additional potential FCPA violations to the DOJ and SEC.
On July 17, the DOJ announced that Louis Berger International Inc. ("LBI") had agreed to enter into a Deferred Prosecution Agreement to resolve the DOJ's FCPA investigation into the New Jersey-based construction management company's operations in India, Indonesia, Vietnam, and Kuwait. LBI also agreed to pay a $17.1 criminal penalty. LBI admitted that it bribed foreign officials to secure government construction management contracts around the world. According to the company's admissions regarding a conspiracy to violate the anti-bribery provisions of the FCPA, from 1998 to 2010, LBI concealed $3.9 million in corrupt payments through various methods, including (i) using inflated and fictitious invoices that were used for the payments of bribes through intermediaries, and (ii) paying fictitious "commitment fees," "counterpart per diems," "marketing fees," and "field operation expenses." Under the terms of the DPA, the DOJ will defer criminal prosecution of LBI for a period of three years and the company will retain an independent compliance monitor for three years. In addition, Richard Hirsch of the Philippines and James McClung of the United Arab Emirates, both former executives of LBI, each pleaded guilty to one count of conspiracy to violate the FCPA and one substantive count of violating the FCPA. They are scheduled to be sentenced on Nov. 5, 2015. Continuing its recent trend, the DOJ emphasized the company's self-disclosure and cooperation, as well as remediation efforts.
On March 13, medical device company Biomet Inc. disclosed in an 8-K that the DOJ had extended by one year the Deferred Prosecution Agreement ("DPA") that was scheduled to expire this month. The DPA related to Biomet's 2012 settlement with the DOJ and SEC of FCPA allegations related to conduct in Argentina, China, and Brazil (see prior FCPA Scorecard coverage). According to the 8-K, 18 months after the DPA was originally entered, Biomet discovered additional potential FCPA violations in Brazil and Mexico and self-disclosed those issues to the DOJ and SEC. In addition to the DPA, Biomet's corporate monitor was also extended for a year. Biomet is now the second company in the last year to have a DPA extended by the DOJ due to new potential violations (the first being the DPA with Standard Chartered Bank regarding economic sanctions violations).
- Valerie L. Hletko to discuss "Forecasting litigation and settlement trends in the mortgage servicing and fair lending context" at the American Conference Institute National Forum on Residential Mortgage Regulatory Enforcement & Litigation
- Michelle L. Rogers and Jonice Gray Tucker to discuss “Building a govt affairs program; Government investigations” at the TechGC National Summit
- Tina Tchen to deliver keynote address at the American Bar Foundation Montgomery Summer Research Diversity Fellowship 30th Anniversary Celebration
- Douglas F. Gansler to discuss "Privacy, security and protection of your assets in contracts; Security exercises and tactical measures" at the TechGC National Summit
- H Joshua Kotin will discuss federal regulatory developments in mortgage lending and servicing at the Mortgage Bankers Association of Arkansas Fall Conference
- Kate Shrout to discuss "Conducting workplace investigations" at the TechGC National Summit
- Kathryn R. Goodman to discuss "HECM servicing policies and updates" at the National Reverse Mortgage Lenders Association Annual Meeting & Expo
- Fredrick S. Levin to discuss "Reverse mortgage litigation trends" at the National Reverse Mortgage Lenders Association Annual Meeting & Expo
- Melissa Klimkiewicz to speak at the "Digital marketing compliance roundtable" at the National Reverse Mortgage Lenders Association Annual Meeting & Expo
- Hank Asbill to discuss "The role of the media in white collar criminal investigations and the Mueller probe" at the American Bar Association White Collar Crime Town Hall
- John C. Redding to discuss "Regulatory compliance update" at PowerSports Finance
- Matthew P. Previn to discuss "Enforcement trends: Who is doing what and how?" at the Cambridge Forums Inc. Forum on Consumer Finance Litigation & Enforcement
- Jonice Gray Tucker to discuss "Protect yourself from a CFPB investigation" at the National Association of Settlement Purchasers Conference
- Tina Tchen to deliver keynote address at the American Bar Association Professional Success Summit
- Andrea K. Mitchell to discuss "Developments in fair lending law" at the Mortgage Bankers Association Summit on Diversity and Inclusion
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute
- Daniel P. Stipano to discuss "New CDD Rule: Pitfalls in compliance" at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference