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© Sheppard Mullin Richter & Hampton LLP 2011 Evaluating Recent FCPA and Anti-Corruption Enforcement Actions to Identify Red Flags and Target Potential.

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Presentation on theme: "© Sheppard Mullin Richter & Hampton LLP 2011 Evaluating Recent FCPA and Anti-Corruption Enforcement Actions to Identify Red Flags and Target Potential."— Presentation transcript:

1 © Sheppard Mullin Richter & Hampton LLP 2011 Evaluating Recent FCPA and Anti-Corruption Enforcement Actions to Identify Red Flags and Target Potential Risks Bryan Daly Bethany Hengsbach Sheppard, Mullin, Richter & Hampton

2 2 Enforcement Trends  Increased enforcement –Penalties –Number of prosecutions/investigations  Increased government resources  Focus on individuals  International cooperation  Industry-wide probes –Technology Sector

3 3 FCPA Fines Imposed on Corporations $28.2 $36.3 $87.2 $155.1 $893.4 $621.9 In Millions $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1, $1,825.3 B Increased Enforcement

4 4 Increased Government Resources  More government resources on the ground: –SEC now has FCPA-dedicated unit in San Francisco –FBI agents dedicated to the FCPA  Whistleblower provisions of the Dodd-Frank Act  Trials

5 5 Focus on Individuals – Latin Node  CEO and Board Chairman sentenced to 46 months in prison, plus 2 years supervised release  3 rd longest FCPA prison sentence in history –87 months (#1) –57 months (#2)  Improper payments to state-owned telecommunications company in Honduras

6 6 Focus on Individuals - Lindsey Manufacturing –CEO and CFO convicted after 6 week trial –30% commission to agents in Mexico –No "smoking gun" evidence of actual knowledge –Face jail time and fines that cannot be paid by the company

7 7 International Cooperation  Global anti-corruption settlements –BAE Systems –Innospec  Ongoing investigations –Allianz –Hewlett-Packard

8 8 Industry-wide Probes: Technology Sector  Recent settlements by IBM, Maxwell Technologies, Comverse Technology  Business model involves regular interaction with government officials  Rapid expansion into emerging markets  Heavy use of intermediaries

9 9 IBM (2011)  $10 million to settle SEC charges of books and records and internal controls violations  Improper cash payments to government officials in South Korea and China  Giving gifts and paying travel and entertainment expenses that violated the FCPA

10 10 Maxwell Technologies (2011)  $14 million to settle DOJ and SEC charges  COO reported that the issue was known and was being dealt with while at the same time requesting that there be "[n]o more s" about the issue  SEC described Maxwell's internal controls as "wholly inadequate"

11 11 JGC Corporation (2011)  JGC paid $220 million to settle DOJ charges – DPA – Independent compliance consultant for 2 years  Agent forfeited $149 million to the DOJ, the largest individual forfeiture in FCPA history  “Commissions” paid to intermediaries to secure contracts on Bonny Island in Nigeria  The “Bonny Island” settlements now total $1.5 BILLION

12 12 Johnson & Johnson (2011)  J&J subsidiaries paid public health workers in Greece, Poland and Romania to induce the purchase of J&J medical devices  Paid kickbacks in Iraq to obtain Oil for Food contracts  $70 million settlement with the DOJ and SEC, and entered into DPA with the DOJ

13 13 What does this mean for compliance?  Streamline  Common sense  No “one size fits all” What does this mean for compliance?

14 14 What does this mean for compliance?  Risk and Resources driven –Third parties –Biggest producers  Follow the money

15 15 What does this mean for compliance?  Ongoing feedback and monitoring –Risk Assessments –Audits –Best Practices Reviews

16 16 What does this mean for compliance?  Tone at the Top  Keep management informed  Keep Board and Audit Committee informed  Document everything!

17 17 Contact Information Bryan D. Daly (213) Bethany Hengsbach (213)


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