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Evaluating Recent FCPA and Anti-Corruption Enforcement Actions to Identify Red Flags and Target Potential Risks. Bryan Daly Bethany Hengsbach Sheppard, Mullin, Richter & Hampton. Enforcement Trends. Increased enforcement Penalties Number of prosecutions/investigations

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Bryan daly bethany hengsbach sheppard mullin richter hampton

Evaluating Recent FCPA and Anti-Corruption Enforcement Actions to Identify Red Flags and Target Potential Risks

Bryan Daly

Bethany Hengsbach

Sheppard, Mullin, Richter & Hampton


Enforcement trends

Enforcement Trends

  • Increased enforcement

    • Penalties

    • Number of prosecutions/investigations

  • Increased government resources

  • Focus on individuals

  • International cooperation

  • Industry-wide probes

    • Technology Sector


Bryan daly bethany hengsbach sheppard mullin richter hampton

Increased Enforcement

FCPA Fines Imposed on Corporations

$1,825.3 B

$1,600

$1,400

$1,200

$893.4

$1,000

$800

$621.9

$600

$400

$155.1

$87.2

$200

$36.3

$28.2

$0

In Millions

2004

2005

2006

2007

2008

2009

2010


Increased government resources

Increased Government Resources

More government resources on the ground:

SEC now has FCPA-dedicated unit in San Francisco

FBI agents dedicated to the FCPA

Whistleblower provisions of the Dodd-Frank Act

Trials


Focus on individuals latin node

Focus on Individuals – Latin Node

CEO and Board Chairman sentenced to 46 months in prison, plus 2 years supervised release

3rd longest FCPA prison sentence in history

87 months (#1)

57 months (#2)

Improper payments to state-owned telecommunications company in Honduras


Focus on individuals lindsey manufacturing

Focus on Individuals - Lindsey Manufacturing

CEO and CFO convicted after 6 week trial

30% commission to agents in Mexico

No "smoking gun" evidence of actual knowledge

Face jail time and fines that cannot be paid by the company


International cooperation

International Cooperation

Global anti-corruption settlements

BAE Systems

Innospec

Ongoing investigations

Allianz

Hewlett-Packard


Industry wide probes technology sector

Industry-wide Probes: Technology Sector

  • Recent settlements by IBM, Maxwell Technologies, Comverse Technology

  • Business model involves regular interaction with government officials

  • Rapid expansion into emerging markets

  • Heavy use of intermediaries


Ibm 2011

IBM (2011)

$10 million to settle SEC charges of books and records and internal controls violations

Improper cash payments to government officials in South Korea and China

Giving gifts and paying travel and entertainment expenses that violated the FCPA


Maxwell technologies 2011

Maxwell Technologies (2011)

$14 million to settle DOJ and SEC charges

COO reported that the issue was known and was being dealt with while at the same time requesting that there be "[n]o more emails" about the issue

SEC described Maxwell's internal controls as "wholly inadequate"


Jgc corporation 2011

JGC Corporation (2011)

JGC paid $220 million to settle DOJ charges

DPA

Independent compliance consultant for 2 years

Agent forfeited $149 million to the DOJ, the largest individual forfeiture in FCPA history

“Commissions” paid to intermediaries to secure contracts on Bonny Island in Nigeria

The “Bonny Island” settlements now total $1.5 BILLION


Johnson johnson 2011

Johnson & Johnson (2011)

J&J subsidiaries paid public health workers in Greece, Poland and Romania to induce the purchase of J&J medical devices

Paid kickbacks in Iraq to obtain Oil for Food contracts

$70 million settlement with the DOJ and SEC, and entered into DPA with the DOJ


What does this mean for compliance

What does this mean for compliance?

What does this mean for compliance?

  • Streamline

  • Common sense

  • No “one size fits all”


What does this mean for compliance1

What does this mean for compliance?

  • Risk and Resources driven

    • Third parties

    • Biggest producers

  • Follow the money


What does this mean for compliance2

What does this mean for compliance?

  • Ongoing feedback and monitoring

    • Risk Assessments

    • Audits

    • Best Practices Reviews


What does this mean for compliance3

What does this mean for compliance?

Tone at the Top

Keep management informed

Keep Board and Audit Committee informed

Document everything!


Contact information

Contact Information

Bryan D. Daly(213) [email protected]

Bethany Hengsbach(213) [email protected]


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