On September 4, 2018, the Securities and Exchange Commission (“SEC”) announced a $25.2 million settlement with French pharmaceutical company Sanofi (“Sanofi” or the “Company”) for violating the books and records and internal controls provisions of the Foreign Corrupt Practices Act (“FCPA”) in connection with a scheme to bribe foreign officials to increase sales of Sanofi products. The Sanofi settlement encompasses conduct by three Sanofi subsidiaries organized in Kazakhstan, Lebanon and the United Arab Emirates (“UAE”). The Sanofi settlement follows a recent enforcement action by U.S. authorities against another French company—Société Générale—for FCPA violations. In announcing the Sanofi resolution, the SEC signaled its intention to focus further on bribery risk in the pharmaceutical industry. Continue Reading Sanofi Settles FCPA Charges With SEC for $25.2 Million
On August 27, 2018, the Securities and Exchange Commission (“SEC”) announced a $34.5 million settlement with investment management firm Legg Mason, Inc. (“Legg Mason” or the “Company”) for violating the internal controls provision of the Foreign Corrupt Practices Act (“FCPA”) in connection with a scheme to bribe Libyan government officials to secure investments from Libyan state-owned financial institutions. The SEC settlement follows a June 2018 non-prosecution agreement between Legg Mason and the U.S. Department of Justice (“DOJ”) regarding the same conduct. Under the non-prosecution agreement, Legg Mason agreed to pay $64.2 million. The Legg Mason settlements reflect the increased focus of U.S. authorities on coordinating with other authorities in imposing penalties on a company, including not “piling on,” and the continued enforcement of the FCPA, while highlighting the potential risks under the FCPA of not having proper controls in place for assessing use of third party intermediaries.
On August 24, 2018, the Second Circuit in United States v. Hoskins issued a decision limiting the FCPA’s reach, holding that foreign nationals who cannot be convicted as principals under the FCPA also cannot be held liable for conspiring to violate or aiding and abetting a violation of the statute. The decision, written by Judge Pooler (joined by Chief Judge Katzmann and Judge Lynch, who also wrote a concurring opinion), concluded that, due to affirmative legislative policy and extraterritoriality concerns, the FCPA’s reach cannot be extended via conspiracy or complicity liability to implicate individuals who cannot violate the FCPA as principals. Although the decision limits the government’s ability to prosecute foreign nationals for conspiring to commit or aiding and abetting a violation of the FCPA, practically speaking, the decision will apply only to a small class of foreign nationals and entities – those who engaged in a bribery scheme in which there is otherwise jurisdiction under the FCPA, but who are not themselves subject to the FCPA’s jurisdiction. That said, the ruling is significant as one of the few cases limiting the FCPA’s jurisdiction due to the statute’s unique, extraterritorial nature, which may encourage charged defendants in other cases to challenge the DOJ’s broad interpretation of its jurisdiction.
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DOJ has expanded its efforts to give more concrete guidance to companies facing FCPA risk to M&A transactions and the question of successor liability. In a speech on July 25, 2018, at the American Conference Institute’s 9th Global Forum on Anti-Corruption Compliance in High Risk Markets, Deputy Assistant Attorney General Matthew S. Miner highlighted DOJ’s views on successor liability for FCPA violations by acquired companies. Miner sought to clarify DOJ’s policy regarding the voluntary disclosure of misconduct by successor companies and to highlight the benefits of such disclosure as spelled out in the joint DOJ and SEC FCPA Resource Guide (the “Resource Guide”). In general, as with other recent pronouncements and actions by DOJ, such as the FCPA Corporate Enforcement Policy, Miner’s speech seemed intended to highlight ways in which firms can gain cooperation credit (up to and including a declination) in FCPA investigations. Continue Reading DOJ Remarks Provide Guidance on Addressing FCPA Risk in M&A Transactions
Yesterday the U.S. Department of Justice (“DOJ”) announced a non-prosecution agreement (“NPA”) with a Hong Kong-based subsidiary of Credit Suisse Group AG arising out of the so-called “princelings” scandals of recent years—the practice of hiring unqualified, but politically-connected, relatives of Chinese officials to garner business from state-owned firms. Per Credit Suisse’s admissions, “bankers discussed and approved the hiring of close friends and family of Chinese officials in order to secure business,” resulting in $46 million “in profits from business mandates with Chinese” state-owned enterprises. As part of the resolution, Credit Suisse agreed to a $47 million criminal penalty, to continue to cooperate with DOJ, and to enhance its compliance program, including adopting additional controls around hiring. In addition, Credit Suisse agreed to pay nearly $25 million in disgorgement and $4.8 million in prejudgment interest to the Securities and Exchange Commission (“SEC”). In its press release, DOJ stated that it was giving Credit Suisse a 15 percent discount from the bottom end of the U.S. Sentencing Guidelines for its cooperation in the investigation, while also (as discussed more below) noting steps the firm did not take that worked to limit the amount of such cooperation credit. While this is hardly the first of the “princelings” cases, it does demonstrate DOJ’s continued commitment to the cooperation framework it laid out in its FCPA Corporate Enforcement Policy (“Enforcement Policy”) late last year.
On June 13, 2018, in its latest decision in a long-running litigation, the U.S. District Court for the District of Columbia considered the applicability of certain exemptions under the Freedom of Information Act (“FOIA”) to documents sought by journalists relating to the actions of the independent compliance monitor that Siemens AG was required to retain under the terms of its 2008 plea agreement for violations of the Foreign Corrupt Practices Act (the “FCPA”). Broadly speaking, although the court concluded that portions of the documents that related to Siemens’ business operations and the DOJ’s analysis of the monitor’s activities were exempted from disclosure, the court also required the DOJ to produce other portions of those materials and to reevaluate, based on the court’s decision, whether additional materials had to be disclosed. The decision, and the lengthy litigation over the application of FOIA to these materials, highlight the complexity of identifying the boundaries of the FOIA protection applicable to the typically sensitive and confidential information companies provide to compliance monitors and the risk that such information later will have to be disclosed once it is in the hands of the government. Continue Reading Recent District Court Decision on Applicability of FOIA to Siemens FCPA Monitorship Documents Provides Guidance on Scope of Possible Disclosures
On May 9, Deputy Attorney General Rod J. Rosenstein provided remarks at the American Conference Institute’s 20th Anniversary New York Conference on the Foreign Corrupt Practices Act and announced a new policy designed to promote coordination and limit the imposition of multiple penalties on a company for the same conduct, which he referred to as “piling on.”
This memorandum highlights some of the most salient points from Rosenstein’s remarks, and describes the key elements of the new policy, with an eye towards potential implications for enforcement actions going forward.
On March 1, 2018, U.S. Department of Justice (“DOJ” or the “Department”) officials announced that the Criminal Division is expanding the applicability of a policy that encourages corporate self-reporting and cooperation for violations of the Foreign Corrupt Practices Act (“FCPA”) to reach other types of non-corruption criminal cases. Speaking at the American Bar Association’s National Institute on White Collar Crime in San Diego, John Cronan, Acting Assistant Attorney General for the DOJ Criminal Division, and Benjamin Singer, Chief of the DOJ Securities and Financial Fraud Unit, told attendees that the Criminal Division will apply the FCPA Corporate Enforcement Policy (the “FCPA Enforcement Policy”) as nonbinding guidance in cases other than FCPA cases.
The FCPA Enforcement Policy, which was adopted in November 2017, provided additional guidelines regarding the credit the Department will provide to companies that self‑report FCPA violations and then cooperate with the resulting investigation – including a presumption that self-reporting companies will not be criminally charged. Expanding use of the FCPA Enforcement Policy signals the Department’s perception of its success and a further effort by DOJ to encourage companies to self-report and cooperate. It also provides important guidance for companies faced with a variety of different types of investigations regarding the treatment they can expect, and tools to advocate before the Department for more favorable resolutions. Continue Reading DOJ Announces Expansion of Approach Encouraging Self Reporting and Cooperation
The recent uptick in the mergers and acquisitions market in Brazil comes at a time of great upheaval in Brazil. Brazil’s sweeping anticorruption investigation, which is more than three years old, has resulted in more than 844 search and seizure warrants, 201 arrest warrants, 158 whistleblower agreements, and 10 corporate settlements (known in Brazil as “leniency agreements”) with some of the largest companies in Brazil. Some companies implicated in the scandal have been forced to restructure or file for bankruptcy as a result of their involvement.
Fortunately there is a well-worn path, informed by past settlements as well as guidance from U.S. regulators, that helps investors either avoid buying tainted companies or lessen the risk of exposure to corruption-related liability when making investments in tainted companies. To avoid or reduce these risks, investors need to be aware of and plan for circumstances unique to the Brazilian context. Appropriate diligence and early planning can help to minimize the risks and capitalize on the opportunities presented by the Brazil M&A market.
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This past year, which marked the 40th anniversary of the Foreign Corrupt Practices Act, saw significant anti-corruption developments in the United States and abroad, capped by the announcement of a new FCPA corporate enforcement policy by the U.S. Department of Justice. As the year began with a new administration, however, there was initially some uncertainty as to how much the new administration would prioritize FCPA enforcement. Perhaps wanting to put this concern to rest, President Trump’s appointees quickly emphasized that FCPA enforcement was “as alive as ever” with Attorney General Jeff Sessions promising that the DOJ would “continue to strongly enforce the FCPA and other anti-corruption laws.” While there were fewer total FCPA corporate resolutions in 2017 than in 2016, the DOJ concluded two of the largest global settlements in FCPA history this year. The DOJ also demonstrated a continued and expanded focus on anti-corruption compliance, aided by its issuance in February of new guidance on how the DOJ would evaluate the effectiveness of compliance programs.
This memo examines some of these key FCPA developments in greater detail and provides our analysis of what their impact may be in 2018.
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