2016 FCPA Enforcement Actions and Highlights

Overall,
this was a more active year for FCPA enforcement actions when compared to 2015.
This year, Department of Justice ("DOJ") took a total of 10 enforcement actions
and Securities and Exchange Commission ("SEC") took a total of 25 enforcement
actions. Like last year, SEC is more active than DOJ, in terms of numbers of
the enforcement actions. Of the 10 enforcement actions taken by DOJ, only 1 of
them was related to a real person. Of the 25 SEC enforcement actions 4 of them
were related real persons.

Overall,
this was a more active year for FCPA enforcement actions when compared to 2015.
This year, Department of Justice ("DOJ") took a total of 10 enforcement actions
and Securities and Exchange Commission ("SEC") took a total of 25 enforcement
actions. Like last year, SEC is more active than DOJ, in terms of numbers of
the enforcement actions. Of the 10 enforcement actions taken by DOJ, only 1 of
them was related to a real person. Of the 25 SEC enforcement actions 4 of them
were related real persons.

In
terms of sectoral concentration of FCPA enforcement actions, one can see that
mostly the technology sector were targeted followed by the pharmaceutical
sector. In terms of where the foreign bribery took place, China seems dominant.
In fact, all of the 4 pharmaceutical companies were charged with foreign
bribery in China.

This
year, we were expecting to see the effects of Yates Memo, which underlined the
significance of individual accountability for deterring corporate wrongdoing
and provided a guideline on how to enforce such accountability. That said the
total number of FCPA enforcement actions against individuals so far is 5, as
opposed to 30 enforcement actions against corporations.

This
year, one of the more interesting cases is with regard to provision of paid
internships, provision of loans to universities and provision of loans for
house buying to relatives of Chinese officials (the Qualcomm case). The case
echoes the BNY Mellon case of last year, where provision of valuable
internships to relatives of public officials was deemed bribery. Also this year
for the first time, a hedge fund was found to have violated the FCPA.

DOJ
Enforcement Actions

In
February 2016, VimpelCom, a Dutch communications company agreed to pay a
combined fine of more than $795 million to US and Dutch authorities to settle
the charges that it made corrupt payments to Uzbek officials. The DOJ classified
this case as "one of the largest global foreign bribery resolutions ever".
VimpelCom's Uzbek subsidiary pleaded guilty, while Vimpelcom entered into a
deferred prosecution agreement ("DPA") with the DOJ. According to admissions,
companies paid at least $114 million in bribes to an Uzbek official, a close
relative of a high-ranking Uzbek governmental official who had influence over
the telecom industry. The companies attempted to hide illicit payments as
payments to shell companies, payments for equity transactions, consulting
agreements and reseller transactions. Vimpelcom is to pay $167 million to SEC
with regard to the case.

In February 2016, two
Chinese subsidiaries of PTC Inc. entered into a non-prosecution agreement
("NPA") with DOJ and agreed to pay $14.54 million in penalties. The companies
admitted that they paid for recreational travel expenses of Chinese public officials and in return
obtained $13 million in contract. Although the seeming purpose of these trips
was training, the travel plan also included New York, Los Angeles, Las Vegas
and Hawaii. Admittedly, the travel expenses were hidden in sales made to the
relevant Chinese state-owned entities. In a SEC action relating to the case,
PTC agreed to pay $11.858 million in disgorgement and $1,764 in prejudgment
interest to settle charges.

In
March 2016, Abraham Jose Shiera Bastidas pleaded guilty bribing Venezuelan
public officials, in order to obtain lucrative energy contracts from a
Venezuelan government owned and controlled energy company. Bastidas also made
corrupt payments in order to expedite payments to his companies.

In
March 2016, the Latin American subsidiary of a US based health-care company,
Olympus Latin America, entered into a DPA with the DOJ and agreed to pay $22.8
million to resolve FCPA charges. According to court documents in order to
increase its sales in Central and South America, the subsidiary implemented a
plan to provide cash, money transfers, personal grants, personal travel and
free or heavily discounted equipment to public officials. Officials would be
provided with these in trainings centers whose seeming aim was to educate
doctors. The bribes amounted to the approximate amount of $3 million and gains
were more than $7.5 million.

In
June 2016, Analogic Corporation entered into a $3.4 million NPA with the DOJ in
order to settle charges that its Denmark subsidiary BK Medical ApS made illegal
payments to Russian public officials. As per the scheme, BK Medical ApS would
pay inflated prices to its distributor and upon getting the payments from its
distributor, would then transfer the excessive amounts to third parties with
whom the subsidiary did not have a legitimate business relationship. The
Denmark subsidiary also admitted that it did not engage in third party due
diligence with these third parties. In a SEC action relating to the case,
Analogic agreed to pay $7.67 million in disgorgement and $3.8 million
prejudgment interest.

In
July 2016, Latam Airlines, a Chilean airline company entered into a DPA with
the DOJ and agreed to pay $12.75 million to settle charges. According to the
admissions, the company entered into a false consulting contract $1.15 million
in value, in order for the "consultant" to funnel the money to Argentine union
officials. This way, the union officials agreed to a lower wage deal. Company
is to pay the SEC $6.74 million in disgorgement and $2.7 million in prejudgment
interest. According to the SEC investigation when the consultant contacted the
company, the consultant made clear that payments would go to third parties and
CEO was aware that the consultant would not perform the actions stipulated in
the contract.

In September 2016,
Och-Ziff, a New York based hedge fund management entered into a DPA with the
DOJ, agreeing to pay more than $213 million in order to settle the charges. OZ
Africa, a wholly owned subsidiary of Och-Ziff pleaded guilty. According to
companies' admissions, Ocz-Ziff
employees knowingly continued their business relationship with a third party
consultant who they knew gained access to lucrative investment opportunities
through bribes to public officials. The company was aware that part of the
money paid to the consultant would be used as bribes. In another scheme, the
Och- Ziff admitted to knowingly hiring a consultant who would pay bribes to
government officials in order to secure investments. Och-Ziff hired the
consultant without any due diligence. Och- Ziff agreed to pay $200 million to
SEC, in order to settle charges regarding the relevant case. Och-Ziff is the
first hedge fund held accountable for FCPA violations.

In
September 2016, OZ Africa Management GP is the first hedge fund that held
liable for violating Foreign Corrupt Practices Act ("FCPA"). The company
entered into a DPA with DOJ and agreed to pay $213,055,689.

The charges arose from a widespread scheme
involving bribery of officials in Democratic Republic of Congo and Libya.

In
October 2016, Embraer, a Brazilian aircraft manufacturer, entered into a DP A
with the DOJ, agreeing to pay $107 million as penalty. The company admitted
that it paid government officials in Mozambique, Dominican Republic and in
Saudi Arabia, bribes in order to obtain contracts. The bribes were concealed
through false agency agreements. The company also agreed to pay $83.8 million
in disgorgement and $14.4 million in prejudgment interest to SEC.

SEC
Enforcement Actions

In
February 2016, SAP SE settled charges with SEC that it had paid Panamanian
government officials bribes in order to gain sales contracts. According to the
SEC investigation, an SAP employee falsified internal approval forms,
falsifying documents as discounts. Panamanian partner created a slush fund with
the excessive discounts and paid bribes to officials. SAP SE agreed to pay $3.7
million, in order to settle charges.

In
February 2016, SciClone, an American pharmaceutical company, agreed to pay $12
million to settle charges that it bribed Chinese health officials. According to
the SEC investigation, SciClone employees provided money, gifts and other
things of value to health officials.

In
February 2016, SEC entered into its first DPA with an individual in an FCPA
related case. SEC held that YU Kai Yuan, a former employee of PTC's Chinese
subsidiaries qualified for a NPA due to his significant cooperation during the
investigation into PTC Chinese subsidiaries.

In
February 2016, Ignacio Cueto Plaza, president and COO of LAN airlines agreed to
pay $75,000 to settle charges that he has authorized payments to an Argentinian
consultant who he knew would transfer the payments to Argentinian union
officials in order for them to agree to lower wages.

In
March 2016, Qualcomm, an American telecommunications company, settled charges
with SEC that it paid bribes to Chines officials in order to gain business
advantage, and agreed to pay a $7.5 million penalty. According to the SEC
investigation, Qualcomm provided employment and paid internships to Chinese
officials' relatives, in order to influence their business decisions. Such
employment and internship applications were referred to as "must place" or "special"
hires within the company. In one case, the company provided a grant to a
university, in order to render the son of Chinese official a position in a
Ph.D. program and renew his student visa. Further, a company executive provided
the son of a Chinese official with $75,000 loan for a house payment. Qualcomm
also provided other things of value to Chinese officials such as airplane
tickets to their children or luxury goods for their spouses.

In
March 2016, Nordion, a Canadian healthcare company and its employee Mikhail
Gourevitch settled charges that they bribed Russian officials for business
advantages. Mr. Gourevitch agreed to pay $100,000 in disgorgement, $12,000 in
prejudgment interest and a $66,000 penalty. Nordion agreed to pay a $375,000
penalty as well. According to the SEC investigation, Mr. Gourevitch paid
improper funds obtained from Nordion to a third party agent and falsified
documentation regarding the payments.

In
April 2016, Las Vegas Sands, an American casino and resort operating company,
agreed to pay a $9 million fine to settle SEC charges that it bribed Chinese
officials. According to the SEC investigation, company made improper payments
to a consultant in order to gain business advantages in China. The company
concealed the payments through falsifying books and records, and in one case
declaring payment for an artwork which was never purchased. The company
employees referred to the consultant as "the beard".

In
June 2016, Nortek Inc., an American building products manufacturer, entered into
an NPA with SEC in order to settle charges that it bribed Chinese officials.
The company agreed to pay $291,403 in disgorgement and $30,655 in interest.
According to the NPA, the company made cash payments, provided gift cards and
entertainment expenses to the Chinese officials in order to obtain favored
treatment and reduced customs taxes.

In
August 2016, Key Energy, an American energy company agreed to pay a $5 million
disgorgement in order to settle charges that its Mexican subsidiary bribed
Mexican officials. According to the SEC investigation, the Mexican subsidiary
made payments to a consulting company who funneled payments to the Mexican
public official. The Mexican official in return provided insider information on
how to successfully negotiate contracts with Mexica's state-owned oil company
Pemex. The Mexican subsidiary did not conduct due diligence or entered into a
written contract with the consulting firm.

In August 2016,
Astrazeneca, a UK pharmaceutical company, agreed to pay more than $5 million to
settle charges that the company's subsidiaries made illicit payments in China
and Russia.

According
to the SEC investigations the subsidiaries provided officials with cash, gifts
and other types of payments in order for the company products to be prescribed
and obtain fine reductions for proposed financial sanctions.

In
September 2016, a former employee of the Harris Corporation, an American
communications and information technology company, agreed to settle charges
that he bribed Chinese government officials. Jun Ping Zhang agreed to pay a
$46,000 civil penalty. The SEC investigation found that Ping falsified expense
receipts in order to obtain cash for the gifts provided to Chinese officials.
Harris Corporation was not charged by the SEC, as Harris Corporation discovered
the misconduct, its prompt self-reporting, remediation efforts and cooperation
with the SEC.

In
September 2016, GlaxoSmithKline ("GSK"), a UK pharmaceutical company, agreed to
pay $20 million for the transfer of money, gifts, and other things of value to
health care professionals in China in order to increase its sales.

In
September 2016, NuSkin Enterprises, an American multilevel marketing company
agreed to pay $765,688 to settle charges that it bribed Chinese officials.
According to the SEC investigation company's Chinese subsidiary made a donation
to a charity identified by a party official from Chinese Communist party to
impact an on-going provincial agency investigation against the company. In
July, Johnsons Controls, an American provider of HVAC systems, agreed to pay
$14 million to SEC in order to settle charges that it bribed Chinese officials.
According to SEC investigation, the company's Chinese subsidiary, which was the
subject of a previous FCPA enforcement action, made payments of almost $4.9
million to employees of Chinese government owned shipyards, and others, to
obtain and retain business and personally enrich themselves. The subsidiary
used vendors for these actions because vendor transactions (instead of agents)
were tagged as "low-risk" by the company. Even where the managers of the
company oversaw these transactions, they were not able to uncover the illicit
deals as the transactions were highly customized.[1]

Authors: Gönenç Gürkaynak, Esq.,
Ç. Olgu Kama, Burcu Ergün, ELIG, Attorneys-at-Law

 (First
published in Mondaq on December 19, 2016)

[1] Information regarding the cases mentioned in the article has been
obtained from the official SEC (https://www.sec.gov/spotlight/fcpa/fcpa-cases.shtml)
and DOJ (https://www.justice.gov/criminal-
fraud/case/related-enforcement-actions/2016) websites.