DOJ Unveils New Guidelines on Corporate Compliance Programs

The DOJ’s Fraud Section recently published an “Evaluation of Corporate Compliance Programs.”  The guidelines were released on February 8 without a formal announcement.  Their stated purpose is to provide a list of “some important topics and sample questions that the Fraud Section has frequently found relevant in evaluating a corporate compliance program.”  The guidelines are divided into 11 broad topics that include dozens of questions.  The topics are:

  1. Analysis and Remediation of Underlying Conduct
  2. Senior and Middle Management
  3. Autonomy and Resources
  4. Policies and Procedures
  5. Risk Assessment
  6. Training and Communications
  7. Confidential Reporting and Investigation
  8. Incentives and Disciplinary Measures
  9. Continuous Improvement, Periodic Testing and Review
  10. Third Party Management
  11. Mergers & Acquisitions

According to the Fraud Section, many of the topics also appear in, among other sources, the United States Attorney’s Manual, United States Sentencing Guidelines, and FCPA Resource Guide published in November 2012 by the DOJ and SEC.  While the content of the guidelines is not particularly groundbreaking, it is nonetheless noteworthy as the first formal guidance issued by the Fraud Section under the Trump administration and new Attorney General Jeff Sessions.  By consolidating in one source and making transparent at least some of the factors that the Fraud Section considers when weighing the adequacy of a compliance program, the guidelines are a useful tool for companies and their compliance officers to understand how the Fraud Section and others at the DOJ may proceed in the coming months and years.

However, while the guidelines may give some indication of what the DOJ views as a best practices compliance program, they caution that the Fraud Section “does not use any rigid formula to assess the effectiveness of corporate compliance programs,” recognizes that “each company’s risk profile and solutions to reduce its risks warrant particularized evaluation,” and makes “an individualized determination in each case.”

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POSTED IN: Corporate Compliance Program, DOJ, SEC

‘Panama Papers’ Law Firm Raided, Founders Arrested, Tied to Odebrecht Bribery Investigation

On February 8, authorities in Panama raided the offices of Mossack Fonseca, the law firm at the center of the sprawling Panama Papers scandal, and arrested the firm’s founders, Juergen Mossack and Ramon Fonseca.  Reuters reports that Panama’s Attorney General announced on Twitter that the raid and arrests were tied to the investigation of Odebrecht S.A., the Brazilian construction company that in December reached a $3.5 billion combined global settlement with U.S., Brazilian, and Swiss authorities to resolve FCPA allegations.  Until now, the investigations spawned by the 2016 release of millions of documents stolen from the law firm were focused on money laundering and tax evasion.  The tie to the Odebrecht investigation brings anti-bribery investigations into the mix.

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Rolls Royce CEO Questioned by UK SFO in Bribery Investigation

Less than a month ago, as previously reported on FCPA Scorecard, Rolls Royce, a UK-based manufacturer and global distributor for the civil aerospace, defense aerospace, marine, and energy sectors, entered into deferred prosecution agreements with the DOJ and UK SFO  to resolve allegations that the company conspired to violate anti-bribery laws around the world.  Now, Reuters reports that the company’s CEO has been questioned by the SFO regarding bribery allegations.  According to the article, the SFO refused to comment on the report, citing concerns about an ongoing investigation.

Both the DOJ and SFO have repeatedly stated that they intend to pursue bribery cases against individuals.  But there is so far no indication that the DOJ is also investigating the Rolls Royce CEO.  Although DOJ could pursue such an investigation in the future, the agency may also defer to the SFO to handle the matter.

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POSTED IN: DOJ, Score Card

Former Magyar Telekom Executive Settles with SEC

On February 8th, Tamas Morvai, a former executive of the Hungarian telecommunications company, Magyar Telekom, settled a 2011 civil complaint filed by the SEC.  The trial of the remaining co-defendants is scheduled for May 8.  As part of the settlement, Morvai agreed to pay a $60,000 civil penalty and did not admit or deny the SEC’s allegations.  Morvai also admitted that U.S. courts had jurisdiction over the case. The issue of jurisdiction had been contested; in 2013, the court denied the defendants’ motion to dismiss for lack of personal jurisdiction.

The SEC’s complaint alleged that Morvai, along with two other co-defendants, authorized bribes to Macedonian government officials and others.  In 2014, the SEC dropped allegations regarding payments to government officials in Montenegro, substantially narrowing the allegations in the case.  Magyar Telekom and its parent, Deutsche Telekom AG, settled allegations regarding payments to government officials in Macedonia and Montenegro with the SEC and DOJ in 2011.  Prior Scorecard coverage of the Magyar Telekom investigation can be found here.

This outcome of this lengthy case illustrates that individual defendants can still achieve relatively favorable outcomes when they choose to litigate FCPA cases, even after the corporate defendants have reached a resolution.

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POSTED IN: DOJ, Score Card, SEC

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.”

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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.

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POSTED IN: DOJ, SEC

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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POSTED IN: DOJ, SEC

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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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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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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POSTED IN: SEC