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On December 10, 2014, the DOJ announced that it was settling FCPA charges with Dallas Airmotive, a company that provides aircraft engine maintenance services, after the company admitted to having violated the FCPA and agreed to pay a $14 million fine. A criminal information filed as part of the settlement charged the company with bribing government officials in Brazil, Peru and Argentina from 2008 to 2012 in exchange for contracts to provide maintenance and repair services on state-owned aircraft engines. According to the criminal information, Dallas Airmotive used "front" companies and third parties to pay bribes, and also directly provided things of value, such as paid vacations, to government officials. As part of the settlement, the company entered into a deferred prosecution agreement with DOJ. The company admitted to paying the bribes in a statement of facts accompanying the deferred prosecution agreement. In comments to the Wall Street Journal, Dallas Airmotive announced that the individuals responsible for the improper payments are no longer with the company. The settlement with Dallas Airmotive follows the recent FCPA-related settlement between the DOJ and BizJet, a subsidiary of Lufthansa Technik AG, which also concerned allegedly improper payments to government officials in Latin America in exchange for business related to aircraft maintenance and repair. In 2012, BizJet entered into a deferred prosecution agreement and agreed to pay an $11.8 million fine as part of the settlement, while Lufthansa entered into a non-prosecution agreement.
On December 2, the Organisation for Economic Co-operation and Development ("OECD") released a report that analyzed more than 400 bribery cases worldwide, from February 1999 to June 2014, involving companies or individuals from the 41 signatory countries to the OECD Anti-Bribery Convention who were involved in bribing foreign public officials. The OECD concluded that "most international bribes are paid by large companies, usually with the knowledge of senior management." The OECD found that bribes are generally paid to win contracts from state-owned or controlled companies in advanced economies, rather than in the developing world, and most bribe payers and takers are from wealthy countries. Notably, almost two-thirds of the cases occurred in just four sectors: extractive (19%), construction (15%), transportation and storage (15%), and information and communication (10%). Furthermore, the bribes were offered most often to employees of state-owned enterprises (27%), followed by customs officials (11%), health officials (7%), and defense officials (6%). The OECD report revealed that the time needed to resolve cases has increased over time, from around two years on average for cases concluded in 1999 to just over seven years today. According to the OECD, "this may reflect the increasing sophistication of bribers, the complexity for law enforcement agencies to investigate cases in several countries or that companies and individuals are less willing to settle than in the past." The OECD's bribery report can be found here.
On December 3, Transparency International released its 2014 Corruption Perceptions Index (CPI). The CPI ranks 175 countries based on the perception of public sector corruption and found that more than two-thirds of the countries had a score below 50 on a scale from 0 to 100 which shows that the levels of bribery and corruption in the public sector are still perceived to be very high. Denmark is at the top of the list with a CPI score of 92. The United States was 17th with a score of 74 but scored lower than numerous other G20 countries, including Australia, Germany, Japan, and the United Kingdom. China had one of the biggest falls, dropping four points from 40 in 2013 to 36 in 2014, despite the fact that its government launched an anti-corruption campaign targeting corrupt public officials. Transparency International called on countries where public sector corruption is limited to stop encouraging it elsewhere by doing more to prevent money laundering and to stop secret companies from hiding corruption. The 2014 CPI can be found at here.
On December 4, Asem Elgawhary, a former vice president of Bechtel Corporation, pled guilty in federal district court in Maryland to mail fraud, conspiracy to commit money laundering, and obstruction and interference with the administration of the tax laws for his role in a kickback scheme to manipulate the bidding process for state-run power contracts in Egypt. From 1996 to 2011, Elgawhary was the general manager of Power Generation Engineering and Services Company (PGESCo), a joint venture between Bechtel and Egypts state-owned electric company. PGESCo helped the Egyptian electric company select subcontractors by soliciting bids and awarding contracts for power projects. Elgawhary admitted to taking $5.2 million in kickbacks from three power companies to give them an unfair advantage in the bidding process. The power companies and their consultants paid the kickback payments into various off-shore and Swiss bank accounts under the control of Elgawhary. Elgawhary, a dual United States and Egyptian citizen, was indicted in February 2014 and is due to be sentenced on March 23, 2015. It is worth noting that this case was not brought under the FCPA. The DOJ did not allege that Elgawhary was a Egyptian government official or that PGESCo, while a joint venture between Bechtel and the Egyptian state-owned electric company, was a state-owned enterprise for FCPA purposes. The case, though, follows in the footsteps of similar prosecutions of foreign government officials who received bribes and shows the U.S. governments increasing willingness to police foreign recipients of bribes, even if those bribes are only commercial bribes.
According to a recent DOJ opinion release, an unidentified U.S. consumer products company would not face an FCPA enforcement action in connection with the planned acquisition of an unidentified foreign consumer products company and its wholly owned subsidiary. On April 30 of this year, the U.S. company requested guidance from the DOJ through its Opinion Release process due to concerns uncovered during pre-acquisition due diligence that the foreign firm had likely paid bribes of more than $100,000 to government officials in the firm's home country and engaged in deficient accounting and recordkeeping. Because the potential improper payments did not occur in the United States or involve U.S. individuals or issuers, and because no contracts or assets acquired through the bribery would remain in operation through which the U.S. company would derive financial benefit following the acquisition, the DOJ opined that it "would thus lack jurisdiction under the FCPA to prosecute" the acquiring company for improper payments made by the foreign firm prior to the acquisition. The opinion release is an important reaffirmation of the DOJ's position, as set out in its FCPA Resource Guide, that "successor liability does not . . . create liability where none existed before." The opinion release noted that the acquisition was "squarely addressed" by the illustrative example provided in the Resource Guide that "if an issuer were to acquire a foreign company that was not previously subject to the FCPA's jurisdiction, the mere acquisition of that foreign company would not retroactively create FCPA liability for the acquiring issuer." The DOJ also noted that the U.S. company had set forth a plan including remedial pre-acquisition measures and post-acquisition integration steps. While expressing "no view as to the adequacy or reasonableness" of the integration plan, the DOJ did encourage companies engaging in mergers and acquisitions generally to (1) conduct thorough risk-based FCPA and anti-corruption due diligence; (2) implement their codes of conduct and anti-corruption policies as quickly as practicable; (3) conduct FCPA and other relevant training for the acquired entity's directors, employees, third party agents and partners; (4) conduct an FCPA-specific audit of the acquired entity as quickly as practicable; and (5) disclose to the DOJ any corrupt payments discovered during the due diligence process. The issuance of an FCPA opinion release is relatively rare. Since 2004 the DOJ has released on average only about two such opinions every year. While the opinion creates a presumption that the acquisition is legal, it does not bind prosecutors should they later decide to pursue an enforcement action.
SBM Offshore Settles Corruption Investigation with Dutch and U.S. Authorities as Investigation Widens in Brazil
On November 12, Dutch oilfield company SBM Offshore N.V. announced that it had agreed to pay $240 million to the Dutch Public Prosecutor's Office to resolve an investigation into allegedly corrupt payments made to win contracts in several countries around the world. SBM also stated that the U.S. Department of Justice had simultaneously closed its investigation into the same matter, but news reports indicated that Brazilian and U.S. authorities were investigating payments made by SBM to Petrobras, the Brazilian state-owned oil company. The investigation in Brazil is part of a widening investigation into various allegations of corruption involving Petrobras, which has portrayed itself as a victim rather than perpetrator of misconduct. As to SBM Offshore, the Department of Justice's apparent willingness to accept the company's resolution with Dutch authorities is an encouraging indication that U.S. authorities are increasingly cognizant of the need to avoid imposing "double jeopardy" on multinationals. Moreover, while the Netherlands were termed as having "little or no enforcement" in Transparency International's recent "Exporting Corruption -- Progress Report 2014: Assessing Enforcement of the OECD Convention on Combating Foreign Bribery," this action seems certain to change perceptions about Dutch anti-corruption enforcement activity.
On November 3, Bio-Rad Laboratories Inc. agreed to pay a total of $55 million to settle DOJ and SEC allegations that the company violated the FCPA in Russia, Thailand, and Vietnam. According the SEC's cease-and-desist order, subsidiaries of the bio-medical instrument manufacturer paid $7.5 million in bribes in Russia, Thailand, and Vietnam from 2005 to 2010 in order to win business in violation of Section 30A of the FCPA, which resulted in $35 million in improper profits for the company. Some of the payments were disguised as commissions to foreign agents, in situations where the "agents had no employees and no capacity to perform the purported services for Bio-Rad." The company also allegedly had an "atmosphere of secrecy." Bio-Rad self-disclosed the violations to the government in 2010. As part of the resolution, the company reached a Non-Prosecution Agreement with the DOJ regarding activities in Russia and agreed to a $14.35 million criminal penalty related to books and records and internal controls violations. The resolution with the SEC involved the payment of $40.7 million in disgorgement and pre-judgment interest regarding anti-bribery, books and records, and internal controls violations related to Russia, Thailand, and Vietnam. Of note, and continuing the trend of cross-border cooperation, the SEC in its press release disclosed that numerous international entities had assisted its investigation, including the "Bank of Lithuania, Financial and Capital Market Commission of Latvia, and British Virgin Islands Financial Services Commission." Underscoring the issue, following public disclosure of Bio-Rad's settlement with the SEC regarding alleged payments in Vietnam, news reports indicate that Vietnam's Ministry of Health has ordered a review of hospital purchases from Bio-Rad, and asked for information and assistance from US authorities.
Just a month after announcing its internal investigation of possible FCPA violations, news reports indicate that General Cable Corporation's review will be completed or substantially completed by the first quarter of 2015. The company also announced that it "plans to exit all of its Asia Pacific and African manufacturing operations," although it did not link the exit — which affects nine plants in Asia and five plants in Africa, and approximately 17% of its total sales — to its FCPA investigation. In September, the Kentucky-based cable manufacturer announced that it was investigating its payment practices with respect to employees of public utility companies in Angola, Thailand, India and Portugal due to possible FCPA concerns. News reports indicate that, to date, the company has spent millions on the review, which has included a review of over 450,000 documents and interviews of over 20 individuals. The company also disclosed that it was cooperating with investigations by the DOJ and SEC.
On October 27, the SEC settled administrative proceedings via a cease and desist order against Layne Christensen Co., a Texas-based water management company, related to FCPA violations from operations in Africa. The SEC's order cited over $800,000 in improper payments to officials in Mali, Guinea, the Democratic Republic of the Congo, Burkina Faso, and Tanzania, related to tax liabilities, customs clearance, expatriate work permits, and border entry. Some of those payments were as small as $4. The company agreed to pay over $4,750,000 in disgorgement and prejudgment interest, and a $375,000 penalty. The SEC cited the company's self-disclosure, remediation, and "significant cooperation" as reasons for a smaller penalty. In August, the company announced that the DOJ had declined to file charges related to the alleged FCPA violations. Of note, the company has in the past tied its discovery of the irregular payments to an update of its FCPA policy. Periodic evaluations and updates of FCPA policies are a necessary component of any compliance program, but also represent opportunities to evaluate past conduct and uncover issues.
On October 23, the anti-corruption group Transparency International released its annual progress report on the enforcement of the Organisation for Economic Co-operation and Development ("OECD") anti-bribery convention. The 41 signatories of the 1997 Anti-Bribery Convention are, among other things, obligated to investigate credible allegations of corruption and, where appropriate, to prosecute those who offer, promise, or give bribes to foreign public officials and subject those parties to effective and dissuasive penalties. In its report, Transparency International found that only four of the 41 signatories to the convention are actively investigating and prosecuting companies that bribe foreign officials. Those four leading enforcers — Germany, Switzerland, the United Kingdom, and the United States — completed or initiated 282 cases from 2010-2013. The other 37 signatories to the convention, who account for 77% of world exports, completed or initiated only 73 cases during the same time period. According to Transparency International, enforcement of corruption is low "because investigators lack political backing to go after big companies, especially where the considerations of national economic interest trump anti-corruption commitments." Furthermore, investigators often lack the resources to investigate complex corruption cases. Transparency Intentional found that Canada was the only country to show significant improvement since last year's report, having, among other things, significantly improved its foreign bribery law.
- 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