FCPA Year in Review and What to Watch for in 2017 Lee Dunst Kim - PowerPoint PPT Presentation

FCPA Year in Review and What to Watch for in 2017 Lee Dunst Kim Parker February 1, 2017- Strafford CLE Seminar

<Presentation Title/Client Name> Agenda I. FCPA Basics II. Recent Trends in Enforcement III. Recent Legal Developments IV. Predictions for 2017 2

<Presentation Title/Client Name> I. FCPA Basics 3

<Presentation Title/Client Name> FCPA Basics § The Foreign Corrupt Practices Act − Prohibits bribery of foreign government officials − Requires public companies to maintain accurate records and have vigorous internal controls § The FCPA applies to: − publicly traded companies in the U.S. − companies incorporated or based in the U.S. − officers, employees, and agents of such companies − U.S. nationals and residents wherever they may be − any person who furthers foreign bribery while “in” the U.S. § Enforced by: − Department of Justice (including the FBI) − Securities and Exchange Commission 4

<Presentation Title/Client Name> FCPA Basics § Two Key Provisions ‒ Anti-bribery provisions: § Prohibit giving, offering, promising, or authorizing anything of value to non-U.S. government officials in order to obtain or retain a business advantage ‒ Accounting provisions: § Must maintain effective internal controls § Must keep accurate books and records § Not just corporate accounting ledgers; includes underlying support for transactions 5

<Presentation Title/Client Name> FCPA: Consequences of Violation Companies Individuals § Internal/external investigations § Imprisonment § Criminal/civil fines and profit § Civil and criminal fines disgorgement (employer may not pay) § Compliance monitors § Loss of job or other employment action § Suspension or debarment from doing business with U.S. § Debarment from serving as an government and/or international officer or director of U.S.-listed institutions company § Private lawsuits § Reputational harm § Reputational harm § Disruption of business 6

<Presentation Title/Client Name> II. Recent Trends in Enforcement 7

<Presentation Title/Client Name> <Presentation Title/Client Name> Anti-Corruption Enforcement Trends þ Increased Resources=Increased Enforcement Risk þ Focus on China/Latin America þ Aggressive Focus on Individuals þ DOJ FCPA Pilot Program þ Cross-Border Enforcement þ Continued Risks Related to Hiring Practices, T&E and Gifts þ Renewed Focus on Financial Services and Pharma 8

<Presentation Title/Client Name> Increased Resources DOJ has committed additional resources to FCPA enforcement 3 new FBI Hired 10 new Appointed first squads DOJ FCPA FCPA ever FCPA unit has 31 devoted to prosecutors in compliance prosecutors FCPA 2016 expert investigations 9

<Presentation Title/Client Name> Increased Risk of Enforcement § U.S. FCPA investigations continue at a rapid pace − SEC indicated early on that 2016 would be “very busy year” − Record-breaking year for number of settlements − 32 SEC settlements and 21 DOJ settlements − Reports of over 200 cases still under investigation § SEC whistleblower reporting has increased − Dodd-Frank whistleblower program creates incentives to report to SEC − International Game Technology – first case based solely on retaliation for whistleblower reporting 10

<Presentation Title/Client Name> FCPA Enforcement Actions Per Year (2007-2016) Number of FCPA Enforcement Actions Per Year DOJ Actions 50 48 SEC Actions 45 40 35 32 30 26 26 25 25 23 21 20 20 19 20 18 17 14 15 13 12 11 10 10 9 10 8 5 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 11

<Presentation Title/Client Name> 2017 Enforcement Action Cases (To Date) § Las Vegas Sands Corp. § Orthofix International § Rolls-Royce plc § Sociedad Quimica y Minera de Chile S.A. § Zimmer Biomet Holdings § Mundelez International, Inc. § Joo Hyun Bahn et al. 12

<Presentation Title/Client Name> Leading Enforcement Actions Four of the top ten largest monetary settlements in FCPA history were reached in 2016. All but two were reached after 2010. No. Company Total Resolution DOJ Component SEC Component Date 1 Siemens AG $800,000,000 $450,000,000 $350,000,000 12/15/2008 2 Alstom S.A. $772,290,000 $772,290,000 -- 12/22/2014 3 KBR/Halliburton $579,000,000 $402,000,000 $177,000,000 2/11/2009 4 Teva Pharmaceuticals $519,000,000 $283,000,000 $236,000,000 12/22/2016 Odebrecht S.A. & 5 $419,800,000 $354,800,000 $65,000,000 12/21/2016 Braskem S.A. 6 Och-Ziff $412,000,000 $213,000,000 $199,000,000 9/29/2016 7 BAE Systems* $400,000,000 $400,000,000 -- 2/4/2010 8 Total S.A. $398,200,000 $245,200,000 $153,000,000 5/29/2013 9 VimpelCom $397,600,000 $230,100,000 $167,500,000 2/18/2016 10 Alcoa $384,000,000 $223,000,000 $161,000,000 1/9/2014 *BAE pleaded guilty to non-FCPA conspiracy charges of making false statements and filing false export licenses, but the alleged false statements concerned the existence of the company’s FCPA compliance program, and the publicly reported conduct concerned alleged corrupt payments to foreign officials. 13

<Presentation Title/Client Name> Key Geographic Areas China : § 60% of FCPA cases brought by the SEC between October 2015 and October 2016 § All 5 pharmaceutical companies Latin America : § Operation Car Wash in Brazil has triggered a wave of enforcement actions § Predicted increase; “several cases in the pipeline.” (Brockmeyer) 14

<Presentation Title/Client Name> Focus on Individuals § Yates Memo (Sept. 9, 2015): − Focus on individuals from the start of the investigation. − Company must provide DOJ with “all relevant facts” relating to individual misconduct to be eligible for cooperation credit § But company may still be eligible even if it cannot identify culpable individuals given the relevant facts − Absent extraordinary circumstances or approved departmental policy, DOJ will not release culpable individuals from liability when resolving a matter with a corporation − Civil attorneys encouraged to pursue civil enforcement against individuals despite an individual’s ability to pay 15 15

<Presentation Title/Client Name> Focus on Individuals: DOJ DOJ resolved FCPA charges with 9 individuals in 2016: EBRD PDVSA • Dmitrij Harder pleaded guilty in • Three individuals pleaded guilty in relation to bribes paid to an official at connection with a scheme to secure the European Bank for energy contracts from the Venezuela Reconstruction and Development state-owned energy company • Roberto Enrique Rincon-Fernandez • Moises Abraham Millan Escobar • Abraham Jose Shiera-Bastidas Mexican Aviation Och-Ziff • Four individuals pleaded guilty in • Samuel Mebiame pleaded guilty in connection with bribes paid to relation to bribes paid to African Mexican aviation officials: officials in return for obtaining mining rights for a joint venture involving the • Douglas Ray hedge fund • Victor Hugo Valdez Pinon • Kamta Ramnarine • Daniel Perez 16

<Presentation Title/Client Name> Focus on Individuals: DOJ § On January 10, 2017, DOJ indicted three individuals on FCPA charges in relation to a scheme to pay $2.5 million in bribes to close the sale of a commercial building in Vietnam to a Middle Eastern sovereign wealth fund ‒ Father and son Ban Ki Sang and Joo Hyun Bahn § Brother and nephew of former United Nations Secretary General Ban Ki-Moon ‒ San Woo § Malcolm Harris, the individual who allegedly set up the scheme, was charged with wire fraud and other charges 17

<Presentation Title/Client Name> Focus on Individuals: SEC § SEC has said it will continue to focus on charging individuals, including foreign nationals − Individuals made up 25% of the SEC’s enforcement docket in 2016 − Och-Ziff Capital Management Group (Sept. 2016): two executives settled SEC charges § Daniel Och (CEO) – paid $2.2 million § Joel Frank (CFO) – penalty may be assessed 18

<Presentation Title/Client Name> New DOJ FCPA Pilot Program § One year pilot program announced April 5, 2016 § Goal: encourage voluntary self-disclosure by being more transparent about benefits of disclosure and cooperation § Requirements: ‒ Voluntary self-disclosure ‒ Full cooperation ‒ Remediation and disgorgement § Generally disclosure and cooperation must be timely and proactive 19

<Presentation Title/Client Name> New DOJ FCPA Pilot Program § If all three requirements are met : ‒ Up to 50% off the bottom of the Sentencing Guidelines range ‒ No compliance monitor (if compliance program effective) ‒ Potential declination of prosecution § If cooperation and remediation but no voluntary disclosure : ‒ Up to 25% off the bottom of the Sentencing Guidelines range 20

<Presentation Title/Client Name> Pilot Program in Action § DOJ has issued 5 declinations under the Program: – Nortek – Akamai – Johnson Controls – HMT – NCH § For HMT and NCH , DOJ announced declinations noting that the companies had met the requirements of the Pilot Program, but the companies agreed to pay disgorgement 21

<Presentation Title/Client Name> Pilot Program: Weighing the Factors Results Results • 30% below the bottom • 25% above the low end of the Guidelines range of the Guidelines range • No independent • Compliance monitor compliance monitor for 27 months 22