Overall, this was a less active year in terms of Foreign Corrupt

Practices Act ("FCPA") enforcement actions, at least when compared to 2016. In 2017,

the Department of Justice ("DOJ") took a total of 9 enforcement actions and the

Securities and Exchange Commission ("SEC") took a total of 7 enforcement

actions. Therefore, we observe that the DOJ has been more active than the SEC

in terms of the number of enforcement actions this year. So far in 2017, we

have witnessed only 2 declinations within the scope of the Pilot Program,[1] as

opposed to 5 declination decisions in 2016.

[1]

The pilot program provides companies with the opportunity to receive

declination decisions, in case these companies meet the conditions put forth in

"The Fraud Section's Foreign Corrupt Practices Act Enforcement Plan and

Guidance."

Of the 9 enforcement actions taken by the DOJ, 5 of them were related to

real persons. 2 individuals were charged with offenses within the scope of the

7 SEC enforcement actions.

2017 marks another year in which enforcement actions against individuals

were lower in number than the enforcement actions taken against corporations.

The Yates Memo, which was published on 2015, underlined the significance of

individual accountability for deterring corporate wrongdoing, and provided

guidelines as to how to enforce and ensure such accountability. Nevertheless,

the total number of FCPA enforcement actions taken against individuals so far

is 7, as opposed to 12 enforcement actions brought against corporations.

DOJ Declination

Decisions

In June 2017, the DOJ closed its investigation with regard to Linde

North America, Inc., and Linde Gas North America, LLC (collectively known as

"Linde"). According to the DOJ, Spectra Gases, Inc. ("Spectra"), a company that

Linde acquired in 2006, bribed foreign public officials in the Republic of

Georgia between 2006 and 2009, in relation to Spectra's transactions with the

National High Technology Center ("NHTC"), a state-owned and state-controlled

entity in Georgia. The DOJ records indicate that three high-level executives of

Spectra entered into an arrangement with NHTC officials and a third-party

intermediary, whereby the parties would share the profits of income-producing

products sold by NHTC to Spectra. Throughout the course of this scheme, Spectra

entered into an agreement with a company established by NHTC officials, which

allegedly provided consultancy services to Spectra, and, in return, received a

certain amount of profit from the transaction in question. After Linde learned

of the corrupt arrangement, it withheld the $10 million payment due to Spectra

executives, and refused to make any further payments that were due to the

companies controlled by NHTC officials. The DOJ's declination decision was

based on this withholding of payments (which was viewed and categorized as a

remediation step), Linde's timely and voluntary disclosure, full cooperation,

its termination of the employees and business partners who had taken part in

the corrupt arrangement, and the fact that it had agreed to disgorge any profits

it had received due to the corrupt arrangement, among others.

In June 2017, the DOJ closed its investigation with regard to CDM Smith,

Inc. ("CDM"), a Boston-based engineering and construction firm. According to

the DOJ, CDM and its subsidiary in India had paid approximately $1.18 million

in bribes to Indian government officials through various employees and agents,

in order to secure construction contracts. The bribes, which were funneled

through subcontractors, were generally in the range of 2-4% of the contract

price. The subcontractors provided no actual services and they were aware that

the payments were being made for the benefit of public officials. All members

of the senior management of CDM India had taken part in this scheme. Among

others, the DOJ's declination decision was based on CDM's timely and voluntary

self-disclosure, its full cooperation, its comprehensive investigation of the

matter, and the fact that it had agreed to disgorge profits resulting from the

scheme.

DOJ Enforcement Actions

In January and October 2017, three individuals (Juan Jose Hernandez

Comerma, Charles Quintard Beech III, and Fernando Ardila Rueada), who were all

owners or partial owners of energy companies, pleaded guilty to a bribery

scheme related to Venezuela's state-owned and state-controlled energy company,

Petroleos de Venezuela S.A. ("PDVSA"). According to their statements and

admissions, all three had paid bribes so that their company could enter into

contracts with PDVSA. Public officials had been entertained based on the

contracts that had been awarded thanks to the actions and decisions of the

relevant officials. Beech also admitted that he had conspired to hide the

nature of the corrupt payments through various financial schemes and

transactions.

In January 2017, Zimmer Biomet Holdings, Inc. ("Biomet"), a medical

device manufacturing company, agreed to pay a $17.4 million penalty to the DOJ,

and more than $13 million to the SEC, for having violated the deferred

prosecution agreement ("DPA") that it had entered into in 2012. According to

the SEC and the DOJ, Biomet continued to do business with a prohibited

distributor in Brazil, which was notorious for its corruption and bribed a

Mexican customs official via a customs broker. Biomet was deemed not to have established

adequate internal control systems, as red flags suggesting bribery were

continuously ignored.

In January 2017, a Chilean-based

chemical and mining company called Sociedad Quimica y Minera de Chile S.A.

("SQM") agreed to pay a $15 million penalty to settle the SEC's charges and a

$15.5 million penalty as part of a deferred prosecution agreement with the DOJ.

According to the company's admissions, SQM had made donations to numerous

foundations affiliated with Chilean politicians. For example, SQM paid around

$630,000 to a foundation controlled by a Chilean official who had influence

over a key part of SQM's business in Chile. Furthermore, SQM hid these payments

under the guise of payments for consulting and professional services, which it

never received.

In January 2017, Las Vegas Sands Corp. ("Sands"), a Nevada-based gaming

and resort company, entered into a non-prosecution agreement ("NPA") with the

DOJ, and agreed to pay a fine of nearly $7 million for its FCPA violations.

According to the company's admissions, Sands knowingly and willfully failed to

implement an internal controls system in order to ensure that the company books

and records were complete and accurate. Sands paid approximately $5.8

million to a business consultant without any apparent legitimate business

purpose. In fact, the consultant was a former official of People's Republic of

China ("PRC") and had offered its assistance to Sands based primarily on the

qualification that it had political connections with PRC officials. Sands did

not carry out any enhanced due diligence regarding the consultant or its

dubious business practices, despite the numerous red flags. An employee of the

finance department, along with an outside auditor, had warned the company that

some of the payments made to the consultant could not be accounted for. Sands

terminated the finance-department employee who had raised this issue. In 2016,

Sands had paid $9 million to the SEC in a parallel investigation.

In July 2017, Amadeus Richers, the former general manager of an American

telecommunications company, pleaded guilty to the charge of conspiring to

violate the FCPA. According to his admission, Richers (along with his

co-conspirators) had paid about $3 million to Haitian government officials in

order to obtain business in relation to Telecommunications D'Haiti, the

state-owned and state-controlled telecommunications company in Haiti. Some of

the bribes had been paid through third-party intermediaries, and others had

been paid directly to officials or to the relatives of those officials.

Richers, a German citizen living in Brazil, was sentenced to time served, 3

years of supervisory release, and also ordered to pay a criminal monetary

penalty of $100.

In September 2017, a Swedish telecommunications company, Telia Company

AB ("Telia"), entered into a global settlement with the SEC, the DOJ and the

Dutch and Swedish law enforcement agencies. Telia and its Uzbek subsidiary,

Coscom LLC ("Coscom"), agreed to pay a total penalty of more than $965 million

to resolve charges with regard to a bribery scheme in Uzbekistan. According to

the records of the SEC and the DOJ, Telia and Coscom had bribed an Uzbek

government official in the amount of at least $331 million. According to the

SEC, Telia paid the bribes to a shell company, which was controlled by a family

member of the Uzbek president, in the guise of payments for lobbying and

consulting services, which were never obtained. The penalty payment of $965

million may be offset by the fines paid to Swedish and Dutch authorities.

In October 2017, Joseph Baptiste, a retired U.S. Army Colonel, was

charged in an indictment for allegedly taking part in a foreign bribery and

money laundering scheme with regard to an $84 million port-development project

in Haiti. Mr. Baptiste allegedly solicited bribes from undercover FBI agents,

who were acting as potential investors. Mr. Baptiste allegedly told the agents

that the payment would be made to Haiti officials through a non-profit that he

controlled. Mr. Baptiste allegedly took approximately $50,000 from the agents

for the bribes, and used the money for his personal dealings, but he allegedly

also intended to receive more money for the bribes.

SEC Enforcement

Actions

In January 2017, Mondelez International, Inc., a US-based food beverage

and snack manufacturer, along with its subsidiary, Cadbury Limited ("Cadbury"),

agreed to pay a $13 million civil penalty to settle SEC charges with regard to the

violation of the internal controls and books-and-records provisions of the

FCPA. According to the SEC, Mondelez acquired Cadbury and its subsidiaries,

including Cadbury India Limited ("Cadbury India"), in February 2010.

Subsequently, Cadbury India hired an agent in order to obtain licenses and

approvals for a factory in India. However, it did not conduct appropriate due

diligence or sufficiently monitor the agent. After receiving payments from

Cadbury India Limited, the agent withdrew most of the money (a total of $90,666) from the account in

cash. According to the SEC,

Cadbury India failed to keep accurate books and records with regards to the

agent's purported services, and Cadbury failed to implement adequate controls

regarding its subsidiary, Cadbury India.

In January 2017, Orthofix International ("Orthofix"), a Texas-based

medical device company, agreed to admit wrongdoing and pay a fine of more than

$14 million to the SEC. The settlement relates to two offenses: The SEC

found that Orthofix had booked certain revenues improperly and had made

payments to doctors who worked in a state-controlled hospital in Brazil in

order to boost its sales. In addition, four former executives also agreed to

pay penalties in cases that were related to the accounting violation. According

to the SEC, Orthofix used high discounts, third parties and fake invoices in

order to lure the doctors into using the company's products.

In January 2017, Michael L. Cohen, the former head of Och-Ziff Capital

Management Group's ("Och-Ziff") European office, and Vanja Baros, a former

executive of Och-Ziff who worked on deals related to Africa, were charged with

violating the FCPA and the Securities Exchange Act, and with aiding and

abetting Och-Ziff's violations. According to the SEC, the former executives

allegedly orchestrated a bribery scheme worth millions of dollars involving

high-level government officials in Africa, which resulted in an investment by

the Libyan Investment Authority (Libya's sovereign wealth fund) in funds that

were managed by Och-Ziff. They also allegedly attempted to pay bribes to

government officials in Chad, Niger, Guinea, and the Democratic Republic of the

Congo, in order to secure mining deals. Och-Ziff and two other executives had

already settled the charges brought against them in 2016.

In July 2017, Halliburton, an American oil field services

company, agreed to pay the SEC more than $29.2 million in order to settle the

charges brought by the SEC with regard to the selection and payment processes

of a local company with close ties to Angolan public officials, with the goal

of winning oil field services contracts from the government. According to the SEC, the company outsourced its business to a

local company whose owner was a former Halliburton employee and who also

happened to be the friend and neighbor of the Sonangol official who would award

the contracts. According to the SEC, the company entered into a relationship

with this company not because of the work that the local company would carry

out on its behalf, but solely in order to meet the local content regulations.

The company's former vice president Jeannot Lorenz, also agreed to pay a

$75,000 penalty to the SEC in relation to the same investigation.<[2]

Authors: Gönenç Gürkaynak, Esq., Ç. Olgu

Kama and Burcu Ergün, ELIG, Attorneys-at-Law

First published in Monday on November 22, 2017.

[2] Information

regarding the cases mentioned in this section 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/2017)

websites.