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.