Recent FCPA Cases Apply Principles Contained in DOJ’s Pilot Program

By Ellen Zimiles, Jay Perlman & Joseph Campbell

Posted: 12th August 2016 08:16

In recent years the Foreign Corrupt Practices Act (“FCPA”) has garnered significant attention from multinational companies, government prosecutors and investigative agencies, defense attorneys, compliance personnel, accountants, and others. In the United States, the U.S. Department of Justice (“DOJ”) and the Securities & Exchange Commission (“SEC”) lead investigations of the FCPA, which prohibits companies from paying bribes to foreign government officials in exchange for business opportunities and advantages and requires companies to maintain accurate books and records and a system of internal financial controls.
 
In April 2016, Assistant Attorney General Leslie Caldwell announced the FCPA Pilot Program (“Pilot Program”), which was designed to, among other things, motivate companies to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the DOJ, and, where appropriate, remediate compliance flaws. As a result of these efforts, corporate cooperators hope to receive a non-prosecution agreement (“NPA”) or ultimately a declination of prosecution. Recent non-prosecution agreements and declinations of prosecutions provide some context and useful insight into the DOJ’s intent with regard to application of the FCPA Pilot Program.[1] We outline below two recent non-prosecution agreements and two declinations of prosecutions and compare each decision against the criteria outlined in the Pilot Program.
 
Non-Prosecution Agreements
 
In February 2016, the DOJ entered into an NPA with Parametric Technology (Shanghai) Software Company, Ltd. and Parametric Technology (Hong action Kong) Ltd. (collectively “PTC China”) pursuant to which PTC China agreed to pay more than $14 million in fines to resolve FCPA charges. According to the DOJ, PTC China, through two business partners, provided recreational sightseeing visits  and other entertainment and gifts to several state-owned enterprises controlled by the Chinese government in exchange for more than $13 million in contracts. PTC China’s disclosure, cooperation and remediation efforts resulted in their receiving an aggregate discount of 15% off the lower end of what is the normal sentencing penalty for this type of bribery violation with regard to the sanctions imposed by DOJ.
 
In June 2016, the DOJ entered into a NPA with BK Medical ApS (“BK”) and its subsidiary Analogic Corporation (“Analogic”), a Massachusetts technology company in which, BK agreed to pay more than $3.4 million to resolve its foreign bribery charges. According to the DOJ, Analogic, through its distributor, sold medical equipment to hospitals or other medical facilities controlled by the government of Russia, provided inflated invoices to its Russian clients, and in turn made payments to third parties who provided no services to BK or Analogic, as a means to further BK’s business interests. Some of these payments ultimately went to doctors employed by Russian state-owned enterprises and facilitated BK’s continued business in Russia. The DOJ further noted that BK also engaged in similar schemes in five other countries. Analogic’s disclosure, cooperation and remediation efforts resulted in their receiving an aggregate discount of 30% off the lower end of what is the normal sentencing penalty for this type of bribery violation with regard to the sanctions imposed by DOJ.
 
Declinations of Prosecution
 
In June 2016, DOJ announced FCPA-related declinations of prosecution for Akamai Technologies, Inc., and Nortek, Inc. Both inquiries were closed based on a number of factors (noted in the following chart) related to their voluntary self-disclosure, full cooperation, and remediation. In both instances, DOJ specifically noted it had reached the conclusion to decline prosecution in a manner consistent with the FCPA Pilot Program. Both companies also entered into NPAs with the SEC resulting in disgorgement of proceeds.
 
Conclusion
 
These actions are instructive as a reminder that companies must continue to be vigilant in their efforts to develop, implement and maintain a smart and specifically tailored corporate compliance program from the top down. Elements of that program will generally include: (i) an effective culture of compliance; (ii) a sufficient number of compliance resources; (iii) quality and experienced compliance resources; (iv) a compliance function independent of the business; (v) an effective risk assessment and procedures tailored to the identified risks; and the (vi) periodic audit of the compliance program to ensure its continued efficacy. Additionally, based on the increase in investigative resources to FCPA-related allegations, including a 50% increase in prosecutorial resources and three new squads of Federal Bureau of Investigation special agents, now is the opportune time to test and update, if necessary, any compliance gaps.

Ellen Zimiles is a Managing Director and Head of the firm’s Global Investigations and Compliance practice as well as Leader of the Financial Risk & Compliance Segment. She has more than 25 years of litigation and investigation experience. As an assistant United States attorney in the Southern District of New York for more than 10 years, Ellen served in the civil and criminal divisions and was chief of the forfeiture unit for more than six years. She was responsible for many high-profile money laundering, fraud and forfeiture cases.

Ellen can be contacted on +1.646.227.4612 or by email at ellen.zimiles@navigant.com 

Jay Perlman is a Director with Navigant’s Global Investigations & Compliance practice. He previously served in a similar capacity with Daylight Forensic & Advisory prior to its acquisition by Navigant in May, 2010.

With more than 22 years of legal, regulatory compliance and investigative experience in both the government and private sector, Jay counsels clients in matters relating to anti-bribery and corruption, securities, and anti-money laundering compliance. He has conducted investigations, enhanced and developed compliance programs, and provided employee training to both public and private sector clients worldwide.

Jay can be contacted on +1.202.973.3220 or by email at jay.perlman@navigant.com 

Joseph Campbell, Director, Washington, D.C. Joseph brings to Navigant 25 years of experience developing and directing agency field and headquarters domestic and international operations and strategies and improving national security through identification and mitigation of threats to the U.S. at the Federal Bureau of Investigation (FBI). During his tenure at the FBI, Campbell developed and led execution of national and international criminal intelligence and investigative mission and strategies, and strengthened industry capabilities to combat foreign corrupt practices and money laundering. He has a proven ability to established reliable internal controls to ensure compliance with applicable laws, regulations, and guidelines. Campbell received several awards of exemplary performance from the FBI, including Leading Counterterrorism and Counterintelligence Investigations and Directing Weapons of Mass Destruction Investigations.

Joseph can be contacted on 1.800.621.8390 or by email at inquiries@navigant.com

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