Overall, 2018 was a more

active year in terms of Foreign Corrupt Practices Act ("FCPA") enforcement

actions compared to 2017.

In

2018, the Department of Justice ("DOJ") took a total of 40 enforcement actions,[1] and the

Securities and Exchange Commission[2]

("SEC") took a total of 14 enforcement actions.

According

to the FCPA Blog's 2018 FCPA Enforcement Index, 16 companies paid a total of

$2.89 billion to resolve FCPA cases in 2018, including resolutions with the DOJ

and the SEC, as well as DOJ declinations with disgorgement.[3] As

anticipated over the past few years, the Yates Memo might have arguably shown

its effect, as 32 out of the 40 enforcement actions taken by the DOJ were

related to real persons, most of which were related to multiple bribery schemes

involving PDVSA, a Venezuelan state-owned oil and natural gas company. In terms

of the sectoral concentration of FCPA enforcement actions in 2018, we observe that

a wide array of sectors were affected by these actions, including the investment

banking, petroleum and technology sectors.

DOJ Declination

Decisions

In April 2018, the DOJ closed its

investigation with regard to the Insurance

Corporation of Barbados Limited ("ICBL"). According to the DOJ, ICBL had

paid approximately $36,000 in bribes to Donville Innis, a member of the

Parliament of Barbados and the Minister of Industry, International Business,

Commerce and Small Business Development of Barbados, in exchange for government

contracts worth $93,000 in profits. Under the terms of the declination pursuant

to the DOJ's Corporate Enforcement Policy, ICBL paid the DOJ about $93,900 in

disgorged profits.

In April 2018, the DOJ closed its

investigation with regard to Dun &

Bradstreet, which is a company that provides commercial data and analytics

services for businesses. According to the U.S. government, two Dun &

Bradstreet subsidiaries in China made bribery payments to Chinese government

officials. In its resolution with the SEC, Dun & Bradstreet agreed to pay

over $9 million in disgorgement. According to the DOJ, the declination decision

was based on, among other factors, (i) Dun & Bradstreet's identification of

the misconduct, (ii) its prompt and voluntary self-disclosure, (iii) thorough

investigation, (iv) full cooperation, and (v) the fact that it had agreed with

the SEC to disgorge profits, despite the acts of bribery committed by the

employees of Dun & Bradstreet's subsidiaries in China.

In August 2018, the DOJ closed its

investigation with regard to Guralp

Systems Limited ("GSL"), an engineering company based in the U.K., even

though there was evidence of violations of the FCPA arising from the payment

made by GSL to Heon-Cheol Chi, the director of the Earthquake Research Center

at the Korea Institute of Geoscience and Mineral Resources. According to the

DOJ, several reasons lead to the declination decision, such as GSL's (i)

voluntary disclosure of the misconduct, (ii) significant remedial efforts, and

(iii) being the subject of an ongoing parallel investigation by the U.K.'s

Serious Fraud Office for violations of law relating to the same conduct, and its

commitment to accepting responsibility for that conduct with the Serious Fraud

Office.

DOJ Enforcement

Actions

In March 2018, Transport Logistics International Inc. ("TLI"), a company providing

services in the field of transportation of nuclear materials, agreed to resolve

criminal charges in connection with a conspiracy involving the bribery of an official

at a subsidiary of Russia's State Atomic Energy Corporation for awarding

uranium transportation contracts, and also to pay a $2 million criminal penalty.

TLI entered into a three-year deferred prosecution agreement ("DPA") with the DOJ.

As per the DPA, the $2 million penalty amount is based on TLI's financial

inability to pay the penalty set forth under the U.S. Sentencing Guidelines.

TLI also committed to cooperate fully with the ongoing investigation, and to

continue to implement a "compliance and ethics" program, designed to prevent

and detect violations of the FCPA and other anti-corruption laws throughout its

operations.

In March 2018, Eberhard Reichert, a former Siemens AG executive who worked for the

company between 1964 and 2001, pleaded guilty and entered into a plea deal with

the DOJ, for conspiring to violate the FCPA's anti-bribery, internal controls,

and books and records provisions. The charges in this case involved making bribery

payments to officials in ten countries, including to Argentine government

officials, for $1 billion worth of contracts in order to create national

identity cards, and using shell companies controlled by intermediaries to

disguise and launder the funds.

In April 2018, Panasonic Avionics Corporation ("Panasonic Avionics"), a subsidiary

of the multinational electronics company, Panasonic Corporation ("Panasonic"),

agreed to pay a criminal penalty of $137,400,000 to resolve charges arising out

of a scheme to retain consultants of its U.S. in-flight entertainment unit in

the Middle East and Asia for improper purposes and to conceal payments to

third-party sales agents between 2007 and 2016, in violation of the accounting

provisions of the FCPA. According to the investigated party's admissions and

court documents, Panasonic Avionics had knowingly and willfully caused

Panasonic to falsify its books and records with respect to Panasonic Avionics'

retention of consultants for improper purposes. Panasonic Avionics also entered

into a DPA with the DOJ, which requires the company to be supervised by an

independent monitor for at least two years.

In June 2018, Société Générale S.A. ("Société Générale"), a global financial

services company based in Paris, France, and its subsidiary, SGA Société

Générale Acceptance N.V., agreed to pay a combined total penalty of more than

$860 million to settle with criminal authorities in the United States and in France,

to resolve charges arising out of bribery payments to government officials in

Libya. Société Générale entered into a DPA with the DOJ and it also reached a

settlement with the Parquet National Financier ("PNF") in Paris. The United

States will credit $292,776,444 that Société Générale will pay to the PNF under

its agreement, equal to 50 percent of the total criminal penalty payable to the

United States. According to the DOJ, this is the first coordinated resolution

with French authorities in a foreign bribery case.[4]

In August 2018, Legg Mason Inc. ("Legg Mason"), an investment management firm based

in Maryland, entered into a non-prosecution agreement ("NPA") with the DOJ by

agreeing to pay $64.2 million to resolve charges relating to violations of the

FCPA in Libya, as well as a civil penalty of $34 million to the SEC, in order to

disgorge $27.6 million of ill-gotten gains and pay $6.9 million in prejudgment

interest to settle the SEC's case. According to the DOJ and the SEC, Permal Group

Inc., a former subsidiary of Legg Mason, partnered with a French financial

services company to solicit investment business from Libyan state-owned

financial institutions and engaged in a scheme to pay bribes to Libyan

government officials through a Libyan middleman in order to secure investments.

As a result of the bribery scheme, Legg Mason was awarded investments by the

Libyan financial institutions, in the amount of $1 billion.

In September 2018, Petróleo Brasileiro S.A. ("Petrobras"), a Brazilian state-owned and

state-controlled energy company, entered into an NPA with the DOJ, and also reached

an agreement with the Brazilian authorities, agreeing to pay a combined total

of $853.2 million in penalties to resolve charges relating to violations of the

FCPA. To resolve the SEC investigation, Petrobras agreed to pay an additional

$933 million in profit disgorgement and prejudgment interest. According to the

DOJ and the SEC, Petrobras executives, who

consisted mostly of company board members, facilitated bid-rigging and bribery

schemes by enabling their contractors to inflate the contracts for their

infrastructure projects, where the contractors made facilitating payments to the

Brazilian politicians and political parties responsible for appointing the

Petrobras executives to their positions in exchange for the inflated contracts.

SEC Enforcement

Actions

In March 2018, Kinross Gold Corporation ("Kinross Gold"), a Canada-based gold and

silver mining company, paid a civil penalty of $950,000 to settle the SEC's

charges for violating the FCPA's books and records and internal accounting controls

provisions, arising from the company's repeated failure to implement adequate

accounting controls for two African subsidiaries. According to the SEC, Kinross

had acquired two African mining companies in 2010, operating in Mauritania and

Ghana, which lacked the requisite anti-corruption compliance programs and

internal accounting controls. Kinross Gold was able to implement adequate

controls in three years; however, the company failed to subsequently maintain these

controls. For example, Kinross Gold awarded a logistics contract to a company

preferred by Mauritanian government officials. Furthermore, it paid vendors and

consultants without making sure that the payments were consistent with its

anti-bribery compliance policies.

In March 2018, Elbit Imaging Ltd. ("Elbit"), an Israel-based company operating in the

real estate, medical imaging, hotels, shopping malls, and retail sectors,

agreed to pay a $500,000 penalty to the SEC to resolve charges relating to violations

of the FCPA's books and records and internal accounting controls provisions.

According to the SEC, Elbit and its indirect subsidiary, Plaza Centers N.V., made

large amounts of payments to third-party offshore consultants and a sales

agent, for services related to a real-estate development project in Romania and

the sale of a large portfolio of real-estate assets in the U.S., without

knowing if the contracted services were actually provided. The companies also

failed to accurately record these payments in their books and records, in a

manner that fairly reflected their true nature.

In July 2018, Beam Suntory Inc. ("Beam"), a subsidiary of Suntory Beverage &

Food Ltd., based in Chicago, which is a subsidiary of Suntory Holdings of

Osaka, Japan, paid the SEC $8.2 million to resolve charges relating to violations

of the FCPA, stemming from the improper payments made by its Indian subsidiary

to government officials in India. According to the SEC, Beam's Indian

subsidiary had used third-party sales promoters and distributors to make

illicit payments to government employees between 2006 and 2012, in order to (i)

increase sales orders, (ii) process license and label registrations, and (iii) facilitate

the distribution of Beam's distilled spirit products.

In September 2018, one of the biggest

pharmaceutical companies in the world, Sanofi

S.A. ("Sanofi"), based in Paris, France, agreed to pay $25.2 million (comprising

a civil penalty of $5 million, $17.5 million in disgorgement payments and $2.7

million in prejudgment interest) to resolve charges relating to violations of the

FCPA's books and records and internal accounting controls provisions, as a

result of its subsidiaries in Kazakhstan and the Middle East bribing officials to

win business contracts. According to the SEC, the bribery schemes spanned

multiple countries and involved illicit payments to government procurement

officials in Jordan, Lebanon, Syria, Bahrain, Kuwait, Qatar, Yemen, Oman, and

the United Arab Emirates, in order to be awarded tenders and to increase

prescriptions of its products. In March 2018, the DOJ had closed its four-year

FCPA investigation without deciding to bring an enforcement action.

In September 2018, United Technologies Corporation ("United Technologies"), a

Connecticut-based company providing high-technology products and services to

the building systems and aerospace industries, settled charges with the SEC

that it had violated the FCPA by making illicit payments in its elevator and

aircraft engine businesses. United Technologies agreed to pay $13.9 million to

resolve charges that its actions had violated the FCPA. According to the SEC,

its subsidiary, Otis Elevator Co., had made payments in bribes to Azerbaijani

officials to facilitate elevator equipment sales in Baku, and had also paid a

Chinese sales agent in order to obtain confidential information from a Chinese

official to help win engine sales contracts from a state-owned Chinese airline.

In September 2018, Stryker Corporation, a company based in Michigan operating in the

medical device sector, agreed to settle with the SEC and pay a $7.8 million

penalty to resolve charges

relating to the FCPA's books and records and internal accounting controls provisions.

According to the SEC, Stryker's internal accounting controls were not

sufficient to detect the risk of improper payments in sales of Stryker products

in India, China, and Kuwait, and Stryker's Indian subsidiary had failed to

maintain complete and accurate books and records. Stryker had also been charged

by the SEC back in October 2013, with respect to bribery payments made by its

subsidiaries in five different countries to doctors, health care professionals,

and other government-employed officials in order to obtain new business or

retain existing business relationships.

On November 19, 2018, Vantage Drilling Company ("Vantage") agreed to pay $5 million to

the SEC in disgorgement for violations of the FCPA's internal accounting

controls provisions, regarding its failure to properly implement and maintain a

system of internal accounting controls related to its use of third-party marketing agents.

According to the SEC, Vantage lacked sufficient internal accounting controls in

relation to the heightened risk of conducting business in the oil and gas

industry in Brazil.

Authors: Gönenç Gürkaynak, Esq., Ceren Yıldız and

Nazlı Gürün, ELIG Gürkaynak Attorneys-at-Law

(First published

by Mondaq on January 16, 2019)

[1]

Please see here

[2] Please see here

[3]

Please see here

[4]

Please see here