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  • DOJ Declines FCPA Action Against Cobalt International Energy

    Houston-based Cobalt International Energy, Inc. announced in a February 9, 2017 press release that the DOJ had formally closed its FCPA investigation into Cobalt’s oil exploration operations in Angola and would not prosecute the Company.  The press release noted that the DOJ’s investigation “was the last remaining FCPA investigation by any U.S. regulatory agency into Cobalt’s Angolan operations.”  The DOJ’s declination letter came more than two years after the SEC closed its own FCPA investigation and declined to bring an enforcement action.

    As detailed in a previous FCPA Scorecard post, the parallel investigations began in 2011, and were prompted by allegations concerning the connection between senior Angolan government officials and Nazaki Oil and Gáz, S.A., the local partner in a Cobalt-led deepwater oil venture.  According to Cobalt’s 10-K filing for FY 2012, the Company had voluntarily contacted the DOJ when the SEC launched its initial inquiry and “offered to respond to any requests the DOJ may have.”

    DOJ SEC Cobalt International Energy Angola

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  • Fired Bio-Rad General Counsel Wins $10.9 Million in FCPA Whistleblower-Retaliation Case

    On February 6, 2017, a federal jury in San Francisco awarded the former general counsel of Bio-Rad Laboratories, Inc. $10.9 million in a landmark FCPA whistleblower-retaliation case brought under the Sarbanes-Oxley Act (SOX), the Dodd-Frank Act, and California state law.  After three hours of deliberation, the jury found that Sanford Wadler, Bio-Rad’s general counsel of nearly 25 years, was fired for reporting suspected FCPA violations to Bio-Rad’s audit committee in February 2013, a protected activity under SOX’s anti-retaliation provisions.  Although Wadler did not report his concerns to the SEC, the court held in 2015 that internal whistleblowing under SOX was also protected by the Dodd-Frank Act’s anti-retaliation provisions, opening the door to Dodd-Frank’s double back-pay remedy.  Bio-Rad’s last-minute motion to block purported attorney-client privileged information from trial –“virtually all of the evidence and testimony Plaintiff might rely upon to prove his case” – was denied by the court in December 2016.

    The jury ultimately awarded Wadler $2.96 million in back-pay – to be doubled under Dodd-Frank – plus $5 million in punitive damages.  As detailed in a previous FCPA Scorecard post, Bio-Rad paid $55 million in November 2014 to settle DOJ and SEC allegations that the Company violated the FCPA in Russia, Thailand, and Vietnam.  Wadler’s report to the audit committee had involved separate allegations that the Company violated the FCPA in China.

    DOJ SEC Whistleblower Bio-Rad SOX Dodd-Frank

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  • New DOJ Official to Oversee Fraud Section

    Trevor McFadden, previously a partner with the law firm Baker McKenzie, was appointed Deputy Assistant Attorney General last month, with oversight over the Fraud and Criminal Appellate Sections.  He takes over from Sung-Hee Suh, who was appointed to the role in September 2014.

     

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  • Panasonic Discloses FCPA Investigation

    On February 2, Panasonic Corporation disclosed that U.S. subsidiary Panasonic Avionics was being investigated by the DOJ and SEC for possible violations of the FCPA and other related laws.  According to its press release, Panasonic is cooperating in the investigation and recently began settlement discussions with both agencies.  The countries at issue in the investigation have not been disclosed.

    Although Panasonic had not spoken publicly about the probe until this week, the Wall Street Journal first reported the investigation in 2013.  Panasonic Avionics makes in-flight entertainment and communication systems for airlines.

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  • Las Vegas Sands Pays $7 Million Penalty to Resolve Criminal FCPA Charges

    On January 17, Nevada-based gaming and resort company Las Vegas Sands Corp. agreed to pay the DOJ nearly $7 million to resolve FCPA charges with a non-prosecution agreement (NPA) in connection with payments from 2006 to 2009 totaling almost $6 million to a business consultant to promote its brand in China and Macau.  Sands admitted that the payments were made “without any discernable legitimate business purpose,” that its executives had knowingly and willfully failed to implement adequate internal accounting controls to ensure that the payments were legitimate, and that it failed to prevent the false recording of those payments in its books and records, continued to make the payments even after warnings from its finance staff and an outside auditor, and terminated the finance department employee who raised those concerns.

    The $7 million criminal penalty is a 25-percent discount from the bottom of the U.S. Sentencing Guidelines fine range.  In announcing the NPA, the DOJ credited Sands for its full cooperation in the investigation, including conducting a thorough internal investigation and voluntarily providing evidence and information to the DOJ, and its extensive remedial measures, including expanding its compliance and audit programs and making significant personnel changes.  The DOJ found particularly notable that Sands no longer employs or is affiliated with any of the individuals implicated in the investigation and hired a new general counsel and new heads of its internal audit and compliance functions.

    In an unusual move, the DOJ’s announcement comes several months after Sands resolved similar FCPA claims with the SEC in related proceedings last April.  There the SEC filed a cease and desist order against Sands and the company agreed to pay a civil penalty of approximately $9 million.  The SEC alleged that Sands violated the FCPA’s internal controls and books and records provisions in connection with more than $62 million in payments to a consultant operating in China and Macau who did not properly document how the money was used.  Sands had consented to the SEC’s order without admitting or denying the charges.  Previous FCPA Scorecard coverage of the Sands SEC settlement can be found here.

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  • SEC Investigating Herbalife for FCPA Violations in China

    On January 20, Herbalife Ltd., a Los Angeles-based maker of nutritional supplements and weight management products, disclosed in a Form 8-K filing that it is being investigated by the SEC in connection with the company’s activities in China.  Herbalife said it is also conducting its own review and “has discussed the SEC’s investigation and the company’s review with the Department of Justice.”  It also said it is cooperating with the SEC but “cannot predict the eventual scope, duration, or outcome of the matter at this time.”

     

    The announcement comes months after Herbalife agreed last July to pay $200 million in consumer redress to settle Federal Trade Commission allegations that it operated a pyramid scheme and “deceived consumers into believing they could earn substantial money selling diet, nutritional supplement, and personal care products.”  The FTC deal also required Herbalife to “fundamentally restructure” its multi-level marketing operations and compensation structure.

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  • Two More Former Och-Ziff Executives Charged by SEC in Far-Reaching Bribery Scheme

    On January 26, the SEC charged two more former executives at Och-Ziff Capital Management Group with being the “driving forces” behind a massive bribery scheme across Africa that violated the FCPA.  The civil complaint, which was filed in the United States District Court for the Eastern District of New York, alleges that Michael Cohen, the former head of Och-Ziff’s European office in London, and Vanja Baros, an investment executive on Africa-related deals, caused “Och-Ziff to pay tens of millions of dollars in bribes to government officials on the continent of Africa.”  Specific allegations include that they induced Libyan authorities to invest in Och-Ziff 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.  In announcing the complaint, Kara Brockmeyer, Chief of the SEC’s FCPA Unit, said the defendants “were the masterminds of Och-Ziff’s bribery scheme that improperly used investor funds to pay bribes through agents and partners to officials at the highest levels of foreign governments.”  The complaint seeks disgorgement and civil monetary penalties among other remedies.

     

    The complaint follows Och-Ziff’s payment last September of $412 million to the DOJ and SEC to settle criminal and civil charges in one of the largest ever FCPA enforcement actions.  Previous FCPA Scorecard coverage of Och-Ziff’s settlement with the DOJ and SEC can be found here.

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  • Medical Device Company Reaches Second FCPA Settlement in the Span of Five Years

    On January 18, Texas-based medical device company Orthofix International N.V. (Orthofix) admitted wrongdoing and agreed to pay approximately $6 million to the SEC to settle FCPA books and records and internal controls charges in connection with improper payments made by its Brazilian subsidiary to doctors through third parties. In related non-FCPA proceedings, Orthofix also agreed to pay a $8.25 million penalty to resolve various accounting violations, and former executives Jeff HammelKenneth MackBryan McMillan, and Brian McCollum each consented to accounting-related SEC orders without admitting or denying the findings.

    According to the Administrative Order Instituting Cease-and-Desist Proceedings, Orthofix’s Brazilian subsidiary Orthofix do Brasil LTDA employed third-party commercial representatives and distributors to make improper payments to doctors employed at government-owned hospitals to induce them to use Orthofix’s products, thereby increasing sales.  Orthofix also improperly recorded revenue, leading to the related accounting charges.

    In settling with the SEC, Orthofix has now resolved two separate FCPA cases in the span of five years.  In 2012, Orthofix resolved FCPA actions with both the SEC and DOJ in connection with bribes paid to Mexican officials by its Mexican subsidiary.  Given the prior corruption and internal controls issues, the SEC found that Orthofix failed to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances to detect and prevent such payments.  Orthofix agreed to hire a compliance consultant for one year.

    DOJ SEC Brazil Orthofix FCPA SEC DOJ

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  • Chilean Chemical Company Settles FCPA Charges With SEC and DOJ

    On January 13, Chilean chemical and mining company Sociedad Quimica y Minera de Chile, S.A. (SQM) agreed to pay nearly $30.5 million to resolve criminal and civil FCPA charges in connection with payments to politically-connected individuals in Chile. SQM admitted that, from at least 2008 to 2015, it made approximately $15 million in payments to Chilean politicians, political candidates, and individuals connected to them.  Many of the payments violated Chilean tax law and/or campaign finance limits and were not supported by documentation.  Rather, SQM made many of these payments to third-party vendors associated with the politically-connected individuals based on fictitious contracts and invoices for non-existent services.  SQM falsely recorded many of these payments in its books and records.

    SQM agreed to a three-year deferred prosecution agreement (DPA) with the DOJ, including a $15,487,500 criminal penalty, and agreed to retain an independent compliance monitor for two years.  The criminal penalty reflected a 25 percent discount from the low end of the U.S. Sentencing Guidelines fine range due to the company’s full cooperation and substantial remediation.  SQM also agreed to pay a $15 million penalty to the SEC pursuant to an Administrative Order Instituting Cease-and-Desist Proceedings to settle the SEC’s charges that the company violated the books and records and internal controls provisions of the FCPA.

    This settlement demonstrates the jurisdictional-reach of the U.S. government in enforcing the FCPA.  SQM, a Chilean company with no U.S. operations, agreed to settle both the SEC’s and DOJ’s charges even though the entirety of the conduct occurred outside of the United States and was committed by foreign nationals.  The only tie to the United States referenced in the SEC and DOJ settlement papers is that SQM is registered with the SEC as a foreign private issuer (its Series B shares have been listed on the NYSE since 1993).

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  • Rolls Royce Settles FCPA Charges As Part of $800 Million Global Bribery Investigation Resolution

    On January 17, Rolls-Royce plc (Rolls-Royce), a UK-based manufacturer and distributor for the civil aerospace, defense aerospace, marine, and energy sectors worldwide, agreed to pay nearly $170 million to the DOJ to resolve charges that it conspired to violate the anti-bribery provisions of the FCPA around the world. The settlement with the DOJ (via a three-year deferred prosecution agreement (DPA)), was a fraction of the company's $800 million global resolution in connection with bribes paid to government officials in exchange for government contracts in China, India, Indonesia, Malaysia, Nigeria, Russia, Thailand, Brazil, Kazahkstan, Azerbaijan, Angola, and Iraq. In addition to settling with the DOJ, the company resolved charges with the UK SFO by entering into a DPA and agreeing to pay a fine of $604,808,392.  

    Rolls-Royce entered into a leniency agreement with the Brazilian Ministério Público Federal (MPF) and agreed to pay a penalty of $25,579,170. According to the DPA Statement of Facts, Rolls Royce admitted that between 2000 and 2013, it conspired to violate the anti-bribery provisions of the FCPA by paying more than $35 million in bribes to foreign officials in exchange for confidential information and/or government contracts.  Many of these contracts benefited RRESI, Rolls Royce’s indirect U.S. subsidiary.  Rolls Royce made the majority of the bribes by inflating commission payments to third-party intermediaries, who then paid part of the commission as bribes to government officials. The DOJ lauded Rolls Royce’s cooperation in its investigation and as a result, Rolls Royce received a 25 percent reduction from the low end of the U.S. Sentencing Guidelines fine range due. 

    However, the DOJ refused to award the company any voluntary disclosure credit.  The DOJ has been transparent that it only will award voluntary disclosure credit when the disclosure occurs prior to an imminent threat of disclosure or government investigation. Here, that test was not satisfied because the company did not disclose the conduct until after media reports and the related SFO inquiry began.

     

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