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6 Major Enforcement Actions

The Department of Justice and Securities and Exchange Commission were especially aggressive this year in bringing FCPA enforcement actions. There were several major enforcement actions brought last year, and each pointed to systemic corruption and ineffective leadership.

This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.

From the narrow perspective of FCPA enforcement, the Justice Department and the SEC have demonstrated yet again the maturation of their respective aggressive FCPA enforcement programs. As in 2014 (but not 2015), the DOJ and SEC closed out the calendar year with record-setting major FCPA enforcement actions.

The DOJ and the SEC collected a total of $1.8 billion in FCPA fines, penalties and disgorgement. Whatever happens to FCPA enforcement under the new administration, which I predict will result in very little change in policy and practice, the Obama administration will be remembered as an era of unprecedented enforcement, including the FCPA, with the singular exception of lack of enforcement against the financial industry.

When it comes to the FCPA, however, the DOJ and SEC have accomplished much in building international coalitions and relationships with law enforcement agencies around the globe. In effect, the DOJ and SEC have “institutionalized” global anti-corruption enforcement, and it will be extremely difficult for any future administration to dismantle this existing infrastructure. There may be marginal changes in policy or emphasis or credits for compliance programs, but in the end, companies will continue to face aggressive enforcement actions, especially in those systemic cases we witnessed this past year.

There were six major enforcement actions this year, each of which underscores the existence of systemic corruption within poor corporate leadership and cultures. Let’s briefly review these actions:

VimpelCom

The DOJ and SEC reached a $795 million settlement for a bribery scheme carried out by senior executives to acquire cellular telephone licenses controlled through shell companies by the daughter of the President of Uzbekistan. VimpelCom demonstrated a governance failure in the boardroom by corporate directors, continuing into the senior executives who deliberately withheld information, and the failure of legal and internal audit to stand up to what was an obvious failure to identify the beneficial owners of the shell companies. After a slow 2015 and first quarter of 2016, VimpelCom demonstrated that the DOJ was back with a vengeance and that there was no such thing as an FCPA enforcement slowdown.

Och-Ziff

The DOJ and SEC brought this first major enforcement action against a private equity company, Och-Ziff, in which they recovered a total of $412 million in fines, disgorgement and penalties. The SEC also charged two individuals, including the CEO of Och-Ziff, and reached settlement agreements with each of them. Och-Ziff broke new ground in terms of transaction monitoring, raising due diligence review standards for joint venture partners and outlined a massive bribery scheme that rippled through various African countries, especially the Democratic Republic of the Congo.

Embraer

The DOJ and SEC finally closed this long-running investigation of Embraer for bribery in the Dominican Republic, Saudi Arabia and Mozambique. Interestingly, the DOJ and SEC withheld remediation credit from Embraer, despite its aggressive discipline of various executives and employees, based on Embraer’s failure to discipline a senior executive who, at least, was aware of the bribery schemes and failed to report or intervene to stop the conduct.

JPMorgan

After years of investigation and with more enforcement actions promised against other financial institutions, JPMorgan settled with the DOJ and SEC for $202 million for its corrupt hiring program, aka the Sons and Daughters Program. Notwithstanding the stiff penalties, JPMorgan was able to secure a non-prosecution agreement (NPA) with the Justice Department and avoid a corporate monitor, two achievements that were difficult, to say the least, given JPMorgan’s years of operating the corrupt hiring program. Hiring of former foreign officials and their relatives is certainly a high-risk area but can be done in appropriate circumstances assuming that robust controls are in place.

Odebrecht/Braskem

The DOJ and SEC resolved this blockbuster case as part of a coordinated effort with Brazil and Swiss prosecutors. The two cases, jointly resolved, reinforced the growing international cooperation among prosecutors and law enforcement and the ability of countries to divide corporate fines and proceeds among themselves.

Odebrecht/Braskem is a record-setting settlement, totaling close to $4.6 billion – only a relatively small portion of which, approximately $424 million, will end up in the U.S. Treasury. But the facts as outlined eclipse even the systemic and outright blatant conduct involved in the long-cited Siemens enforcement action resolved in 2008. Odebrecht/Braskem reminds us yet again that in the midst of a global crackdown against corruption, there are companies that will engage in flagrant, institutionalized bribery operations as a means to increase business. This vast corruption operation touched a number of countries where bribery payments to government officials were made and underscored the lack of transparency in the U.S. banking system that continues to facilitate global corruption.

Teva

As a further reminder at the close of the year that the DOJ and SEC are far from done with the drug and medical device industries, the DOJ and SEC announced a $519 million settlement with Teva for bribery payments in Russia, Ukraine and Mexico. It is worth remembering that the largest pharma or medical device settlement until Teva was Johnson and Johnson, totaling roughly $70 million. Teva paid a Russian company owned by a high-ranking government official to repackage and market Copaxone, bribed a senior government official in the Ukraine Ministry of Health and failed to implement adequate internal controls to prevent improper payments to doctors in Mexico to increase prescriptions of the same drug.

Corporate Compliance Insights is a wholly owned subsidiary of Conselium Executive Search, the global leader in compliance search.  
Michael Volkov

Michael Volkov

Michael-Volkov-leclairryanMichael Volkov is the CEO of The Volkov Law Group LLC, where he provides compliance, internal investigation and white collar defense services.  He can be reached at mvolkov@volkovlaw.com.  His practice focuses on white collar defense, corporate compliance, internal investigations, and regulatory enforcement matters. He is a former federal prosecutor with almost 30 years of experience in a variety of government positions and private practice.

Michael maintains a well-known blog: Corruption Crime & Compliance which is frequently cited by anti-corruption professionals and professionals in the compliance industry.Michael has extensive experience representing clients on matters involving the Foreign Corrupt Practices Act, the UK Bribery Act, money laundering, Office of Foreign Asset Control (OFAC), export controls, sanctions and International Traffic in Arms, False Claims Act, Congressional investigations, online gambling and regulatory enforcement issues.

Michael has assisted clients with design and implementation of compliance programs to reduce risk and respond to global and US enforcement programs.

Michael has built a strong reputation for his practical and comprehensive compliance strategies.Michael served for more than 17 years as a federal prosecutor in the U.S. Attorney’s Office in the District of Columbia; for 5 years as the Chief Crime and Terrorism Counsel for the Senate Judiciary Committee, and Chief Crime, Terrorism and Homeland Security Counsel for the Senate and House Judiciary Committees; and as a Trial Attorney in the Antitrust Division of the U.S. Department of Justice.

Michael also has extensive trial experience and has been lead attorney in more than 75 jury trials, including some lasting more than six months. His clients have included corporations, officers, directors and professionals in, internal investigations and criminal and civil trials. He has handled a number of high-profile criminal cases involving a wide‐range of issues, including the FCPA and compliance matters, environmental crimes, and antitrust cartel investigations in countries all around the world.

Representative Engagements

  • Successfully represented three officers of a multinational company in two separate criminal antitrust investigations involving a criminal antitrust investigation in the District of Columbia and the Southern District of New York.
  • Defended pharmaceutical company before the Food and Drug Administration and Senate Finance Committee relating to application for approval of generic drug.
  • Conducted internal investigation which exonerated company against allegations of false statements in submissions to the FDA and against improper conduct alleged by Senate Finance Committee.
  • Represented company before the US State Department on alleged violations of ITAR which lead to voluntary disclosure and imposition of no civil or criminal penalties.
  • Advised several multinational companies on compliance with anti‐corruption laws, and design and implementation of anti‐corruption and anti‐money laundering compliance programs.
  • Advised hospitals, pharmaceutical companies and medical device companies on compliance issues relating to Stark law and Anti‐Kickback law and regulations.
  • Conducted due diligence investigations for large multinational companies for anti‐corruption compliance of: potential third party agents, joint venture partners and acquisition targets in Europe, Africa, Asia and Latin America.
  • Represented individual in white collar fraud case in Alexandria, Virginia and secured dismissal of criminal charges and expungement of criminal record.
  • Represented company before Congress and Executive Branch in effort to modify Justice Department regulations concerning use of federal funds.
  • Advised and assisted World Bank in review of global corruption policies, enforcement programs and corruption investigations and prosecutions.

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