Subscribe to our FinCrimes Update for news about the Foreign Corrupt Practices Act and related prosecutions and enforcement actions.
On July 18, 2012, aircraft maintenance, repair and overhaul ("MRO") provider, Nordam Group, Inc., resolved an FCPA matter with the US DOJ related to conduct in China. The non-prosecution agreement calls for a $2 million penalty, and makes this the second aviation services FCPA matter this year, joining Lufthansa Technik AG's MRO subsidiary, BizJet International Sales and Support, Inc.
- Non-Prosecution Agreement
- NPA Attachment A - Statement of Facts
- NPA Attachment B - Compliance Undertakings
Sector Sweep Continues: Medical Device Manufacturer Orthofix Resolves FCPA Violations Related to Conduct in Mexico
On July 10, 2012, medical device manufacture Orthofix International N.V. became the latest in a string of companies in the sector to resolve an FCPA matter with the U.S. government. The Orthofix FCPA resolution calls for the company to pay a criminal fine to the U.S. Department of Justice (DOJ) of $2.22 million, and a civil monetary sanction (including disgorgement and interest) of $5.2 million to the U.S. Securities and Exchange Commission (SEC). The DOJ resolved the matter through a Deferred Prosecution Agreement, which was attached to the company's 8-K of July 10, 2012, reporting the resolution. According to the allegations in the SEC's Complaint, Promeca S.A. de C.V, a subsidiary based in Mexico, paid bribes to employees of the government-operated health care system, referring to the payments as "chocolates" and booking inaccurate reimbursement requests as meals, car tires or training expenses. The Mexico subsidiary made approximately $317,000 in improper payments over a 7-year period, according to the SEC. As initially reported in an August 31, 2010 8-K, the company disclosed to the DOJ and the SEC that it was investigating certain conduct at Promeca. The FCPA resolution follows a June 7, 2012 guilty plea by the U.S. subsidiary, Orthofix Inc., on a False Claims Act-related matter, resulting in $7.8 million fine and payment of over $34 million to resolve a civil action (see DOJ Press Release). The settlement adds Orthofix to the list of device manufacturers that have settled FCPA matters in 2012, along with Smith & Nephew and Biomet, which settled in February and March 2012, respectively.
On March 14, 2012, aircraft maintenance, repair and overhaul ("MRO") provider, BizJet International Sales and Support, Inc., resolved an FCPA matter with the US DOJ related to conduct in Latin America, including Mexico and Panama. The deferred-prosecution agreement calls for an $11.8 million penalty. BizJet is an indirect subsidiary of the German company, Lufthansa Technik AG, which also entered a DPA.
Anti-corruption enforcement initiative involving medical device manufacturers continues, as Smith & Nephew resolves US FCPA enforcement actions for $22 million.
On February 6, 2012, the U.S. Department of Justice and Securities and Exchange Commission announced resolved FCPA enforcement actions against medical device manufacturer, Smith & Nephew Inc., and its UK-based parent company, Smith & Nephew plc. The combined monetary sanction totals $22.226 million, and the UK parent must retain an independent compliance monitor for a period of 18 months. The conduct in question, as alleged in the SEC Complaint, involved the use of three UK shell companies created by a distributor in Greece for use as conduits to make payments to physicians in Greece working "at publicly-owned hospitals [and who were] government employees, providing healthcare services in their official capacities." The commercial relationship between Smith & Nephew and the distributor ended in 2008. Notable points: Compliance Monitor: The settlement requires Smith & Nephew to retain an "independent compliance monitor" for a period of 18 months, in contrast to the many recent FCPA cases that have been resolved with the retention of a "compliance consultant." Although the DOJ Press Release noted the company's "cooperation with the department's investigation, thorough self-investigation of the underlying conduct, and the remedial efforts and compliance improvements undertaken by the company," the resolution still involves a monitor. Distributor: The vast majority of FCPA matters involve a third party in some manner and in this case, the third party was a distributor. Although a few prior FCPA cases have involved distributors (see e.g., InVision in 2005), most involve a different type of commercial relationship, such as agents or consultants. Many companies classify distributors as a type of customer rather than as an intermediary, and in doing so apply compliance controls that may not be as robust as for agents or consultants. As this case confirms, distributor relationships may present acute corruption risks, and should be assessed and controlled for such risks. International Cooperation / Greece: In April 2011, medical device manufacturer DePuy International, a subsidiary of Johnson & Johnson, pleaded guilty to violating the FCPA for conduct related to sales to state-employed physicians in Greece. In both the DePuy and Smith & Nephew cases, the DOJ "acknowledge[d] and expresse[d] its appreciation for the assistance provided by the authorities of the 8th Ordinary Interrogation Department of the Athens Court of First Instance and the Athens Economic Crime Squad in Greece." This ongoing cooperation is consistent with the long term trend of international collaboration on anti-corruption matters. Industry-Wide Enforcement: As described in the SEC press release, "[t]he charges stem from the SEC's and DOJ's ongoing proactive global investigation of bribery of publicly-employed physicians by medical device companies." Prior enforcement actions have been lodged against device manufacturers AGA Medical Corp. (regarding conduct in China), Immucor Inc. (Italy) and Micrus Corp. (France, Turkey, Spain and Germany), and this action seems certain not to be the last. Smith & Nephew issued its own press release regarding the enforcement actions.
On January 17, 2012, the U.S. Department of Justice announced an FCPA enforcement action against Japanese trading company, Marubeni Corporation. The action calls for Marubeni to pay $54.6 million and engage a compliance consultant for a two-year period, in compliance with the deferred prosecution agreement between the company and the DOJ. As described in the DOJ Press Release, Marubeni acted as an agent for a joint venture among four companies bidding to construct a liquefied natural gas plant in Nigeria. Each participant in the joint venture has settled their own FCPA enforcement action, including the Japanese construction company JGC Corporation, which settled in April 2011 for $218 million.
- Tina Tchen to discuss the Time’s Up Legal Defense Fund at the AHLA ForWard: Women Advancing Hospitality conference
- Jonice Gray Tucker to discuss "Protect yourself from a CFPB investigation" at the National Association of Settlement Purchasers Conference
- APPROVED Webcast: Financial services licensing developments: 2018-2019
- Tina Tchen to deliver keynote address at the American Bar Association Professional Success Summit
- Jeffrey P. Naimon and Jonice Gray Tucker to discuss "Enforcement and litigation trends" at the American Bankers Association General Counsel Meeting
- Andrea K. Mitchell to discuss "Developments in fair lending law" at the Mortgage Bankers Association Summit on Diversity and Inclusion
- David S. Krakoff to discuss "The DOJ corporate enforcement policy and your disclosure calculus one year in: Are companies benefitting?" at the American Conference Institute International Conference on the Foreign Corrupt Practices Act
- Moorari K. Shah to discuss "Legal & regulatory issues " at the Opal Group Marketplace Lending & Alternative Financing Summit
- Jonice Gray Tucker to discuss "Hot topics in 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
- Daniel P. Stipano to discuss "Anti-money laundering/OFAC compliance" at the Institute of International Bankers U.S. Regulatory/Compliance Orientation Program