FCPA 2020 Year-End Update - January 26, 2021 Panelists
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FCPA 2020 Year-End Update
January 26, 2021
Panelists:
Patrick Stokes
John W.F. Chesley
Christopher W.H. Sullivan
Ella Alves Capone
Moderator: F. Joseph Warin
MCLE Certificate Information
• Most participants should anticipate receiving their certificate of
attendance within four weeks following the webcast.
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certificate of attendance within six weeks following the webcast.
• All questions regarding MCLE Information should be directed to
Victoria Chan (Attorney Training Administrator) at 650-849-5378 or
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2
Today’s Panelists
F. Joseph Warin Patrick Stokes John Chesley
FWarin@gibsondunn.com PStokes@gibsondunn.com JChesley@gibsondunn.com
TEL:+1 202.887.3609 TEL:+1 202.955.8504 TEL:+1 202.887.3788
Christopher Sullivan Ella Alves Capone
CSullivan@gibsondunn.com ECapone@gibsondunn.com
TEL:+1 202.887.3625 TEL:+1 202.887.3511
3
Gibson Dunn Programs & Resources
Upcoming Programs
• February 23, 2021 webcast - 17th Annual Challenges in Compliance and Corporate Governance
• Securities Docket February 2, 2021 Webcast – Navigating the Minefield of Dodd-Frank’s
Whistleblower Provisions (2020 Update)
Recent Programs Gibson Dunn Webcasts (CLE Credit Available)
• December 10, 2021 webcast – International Anti-Money Laundering and Sanctions Enforcement
• January 12, 2021 webcast- FCPA Trends in the Emerging Markets of Asia, Russia, Latin America,
India and Africa
• January 7, 2021 webcast – Privacy and Consumer Protection in the Biden Administration
Resources
• 2020 FCPA Year-End Update
• 2020 FCPA Mid-Year Update
• Gibson Dunn FCPA Practice Group
• COVID-19 Resource Center
4
Agenda
1. FCPA Overview
2. Anti-Corruption Policy and Enforcement
Updates
3. DOJ FCPA Enforcement Framework
4. FCPA Trends and Enforcement Actions
5
FCPA Overview
FCPA – Overview
The FCPA was enacted in 1977 in the wake of reports that numerous U.S.
businesses were making large payments to foreign officials to secure business.
• Anti-Bribery Provisions. The FCPA prohibits corruptly giving, promising, or
offering anything of value to a foreign government official, political party, or party
official with the intent to influence that official in his or her official capacity or to
secure an improper advantage in order to obtain or retain business.
• Accounting Provisions. The FCPA also requires issuers to maintain accurate “books
and records” and reasonably effective internal controls.
U.S. Enforcement Agencies
Department of Justice Securities and Exchange Commission
• Criminal enforcement of anti-bribery provisions • Civil enforcement of the anti-bribery provision
• Criminal enforcement of the accounting provisions (issuers)
(books and records and internal controls) • Civil enforcement of the accounting provisions
(books and records and internal controls)
• Increasing utilization of non-FCPA statutes
• ~ 38 enforcement attorneys in Home Office, plus
• ~ 35 prosecutors in the Criminal Division FCPA Unit attorneys in several Regional Offices
7FCPA – Anti-Bribery Provisions
• The FCPA prohibits not only actual payments, but also any offer, promise, or
authorization of the provision of anything of value.
➢ An offer to make a prohibited payment or gift, even if rejected, may violate the FCPA.
• The FCPA also prohibits indirect corrupt payments.
➢ The FCPA imposes liability if a U.S. company authorizes a payment to a third party
while “knowing” that the third party will make a corrupt payment.
➢ Third parties include local agents, attorneys, brokers, consultants, distributors, joint-
venture partners, liaisons, and subsidiaries.
• There is no “de minimis” exception, and a “thing of value” can include:
Charitable / Political Contributions Consulting Fees Entertainment / Sporting Events
Education / Internships / Training Free Goods Gifts
Grants / Research Support Meals Travel
8FCPA – Accounting Provisions
• Connection to Bribery Allegations. Unlike the FCPA’s anti-bribery provisions, the books
and records and internal controls provisions do not require a nexus between:
➢ An inaccurate book or record or a weak control, and
➢ An allegedly improper payment.
• DOJ / SEC Approach. The government often invokes the accounting provisions where it
lacks jurisdiction to bring a bribery charge or when it is seeking to compromise in the context
of settlement negotiations.
➢ The SEC has shown a greater willingness to bring charges based on the accounting
provisions even where it lacks sufficient evidence to conclude that bribery occurred.
➢ The SEC brings accounting provision charges against issuers, whereas DOJ may
bring parent or subsidiary accounting provision charges.
• Compliance Controls. The SEC frequently asserts that an expansive scope of conduct
implicates the internal controls provision, including accounting-related deficiencies and issues
traditionally associated with weak corporate compliance programs.
9DOJ Under the Biden Administration
Attorney General
Merrick Garland
(Nominated, Pending Confirmation)
Current Acting – Monty Wilkinson
Deputy Attorney General
Lisa Monaco
(Nominated, Pending Confirmation)
Current Acting - John Carlin
Criminal Division
Acting Assistant Attorney General
Nicholas McQuaid
Fraud Section
Acting Chief Daniel Kahn
FCPA Unit
Chief – Christopher Cestaro
10SEC Under the Biden Administration
Chairman
Commissioner Gary Gensler
Commissioner (Nominated, Pending Commissioner Commissioner
Allison Herren Lee
Caroline Crenshaw Confirmation) Hester M. Peirce Elad Roisman
(Term expires 2022)
(Term expires 2024) (Term expires 2025) (Term expires 2023)
Currently acting Chair
Enforcement
Acting Director - Melissa Hodgman
FCPA Unit
Chief – Charles Cain
11FCPA Enforcement Actions (2011-2021*)
35
35 DOJ Actions
32 SEC Actions
30 29
25
25
23
22
21 21
20 19 19
17 17
15
12
11 11
10 10 10
10 9
8
5
1 1
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 12
*As of January 25, 2021FCPA + FCPA-Related Enforcement Actions (2011-2021*)
FCPA-Related DOJ
SEC Actions
60
DOJ Actions
50
19
40
26
7
30 19
1 2 6
6
20
35
32
29
23 25 1 2 21 22 21
10 19 19
17 17
11 12 10 10 10 11
8 9
0 1 0
1
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
*As of January 25, 2021
13U.S. Corporate FCPA Top 10 List
No. Company Total Resolution DOJ Component SEC Component Date
1 Goldman Sachs $1,663,088,000 $1,263,088,000 $400,000,000 10/22/2020
2 Ericsson $1,060,570,432 $520,650,432 $539,920,000 12/06/2019
3 Mobile TeleSystems $850,000,000 $750,000,000 $100,000,000 03/06/2019
4 Siemens AG $800,000,000 $450,000,000 $350,000,000 12/15/2008
5 Alstom S.A. $772,290,000 $772,290,000 -- 12/22/2014
6 KBR/Halliburton $579,000,000 $402,000,000 $177,000,000 02/11/2009
7 Teva $519,000,000 $283,000,000 $236,000,000 12/22/2016
8 Telia $483,103,972 $274,603,972 $208,500,000 09/21/2017
9 Och-Ziff $412,000,000 $213,000,000 $199,000,000 09/29/2016
10 BAE Systems $400,000,000 $400,000,000 -- 02/04/2010
14Global Dimension of Anti-Corruption Enforcement Actions
In addition to substantial monetary penalties in the U.S., in recent years
companies are increasingly paying significant fines to non-U.S. enforcers.
Company Global Resolutions
Goldman Sachs agreed to pay over USD 2.9 billion to U.S. government bodies and foreign
Goldman Sachs (2020)
authorities in countries including the United Kingdom, Singapore, Hong Kong and Malaysia.
Odebrecht agreed to pay USD 2.6 billion (down from $4,503,600,000 due to inability to pay) in a
Odebrecht (2016)
coordinated resolution with U.S., Brazil, and Swiss authorities.
The total combined amount of United States, Dutch, and Swedish penalties was USD 965.8
Telia Company AB (2017)
million.
Airbus’s total sanctions, paid to United States, United Kingdom, and French authorities, totaled
Airbus SE (2020)
around USD 4 billion.
While the DOJ assessed the full USD 585 million penalty against SocGen, approximately half of
Société Générale S.A. (2018) it (USD 292.8 million) was paid to the French regulator, Parquet National Financier and
credited against the U.S. fine.
15Anti-Corruption Policy and
Enforcement UpdatesUpdated Guidance for Evaluating Corporate
Compliance Programs
• In June 2020, DOJ updated its guidance entitled “Evaluation of Corporate Compliance
Programs.” This guidance is structured around three “fundamental questions” that DOJ
prosecutors should ask in assessing corporate compliance programs in an investigation, in
making charging decisions, and in negotiating resolutions:
➢ Is the program well-designed?
➢ Is the program being applied earnestly and in good faith? In other words, is the
program adequately resourced and empowered to function effectively?
➢ Does the Program work in practice?
• The updated guidance groups 12 topics and sample questions that DOJ considers relevant
in evaluating a corporate compliance program.
• There is an emphasis on evaluating compliance programs on a case-by-case basis relative
to the individual company’s size, industry, geographic footprint, and regulatory landscape
and on whether control functions are provided with sufficient resources and data
access to discharge their responsibilities.
17SFO Guidance on Evaluating Compliance Programs
• In January 2020, UK’s Serious Fraud Office also published guidance on how the SFO
will evaluate a company’s compliance program when considering an enforcement
action and a sentence, in the event of a successful prosecution.
• The guidance begins by stating that a compliance program “needs to be effective and
not simply a ‘paper exercise.’”
➢A compliance program should be “proportionate, risk-based, and regularly-
reviewed.”
• The SFO will consider compliance programs at the time of the offense, at the current
time, and in the future, with respect to how it might change.
• The guidance also refers to “six principles” that compliance programs should reflect:
(i) Proportionate procedures; (ii) Top level commitment; (iii) Risk assessments;
(iv) Due Diligence; (v) Communications, including training; and (vi) Monitoring
and review.
• Directs prosecutors to evaluate compliance programs “early on” in an investigation.
18CFTC Enforcement Guidance for Evaluating Corporate
Compliance Programs
• In September 2020, the CFTC issued guidance outlining factors that will be considered in a
risk-based analysis when evaluating compliance programs in connection with enforcement
matters.
• The guidance considers whether a compliance program was reasonably designed and
implemented to: (i) prevent the underlying misconduct at issue; (ii) detect the misconduct;
and (iii) remediate the misconduct.
• Factors evaluated for a program’s ability to prevent misconduct include: (i) Written policies
and procedures in effect; (ii) Training of staff; (iii) Failure to cure any previously identified
deficiencies; (iv) Adequate resources; and (iv) Structure, oversight, and reporting of compliance.
• Factors evaluated for the effective detection of underlying misconduct include: (i) Internal
surveillance and monitoring; (ii) Internal-reporting system and handling of complaints; and (iii)
Procedures for identifying and evaluating unusual or suspicious activity.
• Factors evaluated for remediation include: (i) Effectively addressed the impact of the
misconduct; (ii) Appropriately disciplined responsible individuals; and (iii) Identified and
addressed any deficiencies.
19Update to the FCPA Resource Guide
• In July 2020, DOJ and SEC published its first comprehensive update to their FCPA
Resource Guide to the FCPA, which was first issued in November 2012.
➢ Inclusion of the FCPA Corporate Enforcement Policy
➢ Updated guidance on the application of the FCPA in M&A transactions
➢ Updates regarding the scope of the term “agent” for assessing corporate
liability
➢ Scope of the SEC’s disgorgement authority
➢ Requirements for criminal violations under the accounting provisions
20SEC Commissioners Rebuff Extensive Use of Internal Controls
• In October 2020, the SEC settled charges against Andeavor for allegedly failing to
devise and maintain a system of internal controls sufficient to provide reasonable
assurances that stock buyback transactions were executed in accordance with
management's authorization and without material nonpublic information.
➢ A majority of the Commission accepted the settled action, but Commissioners
Peirce and Roisman voted against it.
• In November 2020, Commissioners Pierce and Roisman issued a statement
explaining why they voted against the settlement, in which they said the FCPA
requires not “internal controls” but “internal accounting controls” and that
this matter as well as other recent ones “go well beyond the realm of
“accounting controls.”
➢ Insider trading cases are typically brought under the Exchange Act Section
10(b) and Rule 10b-5, which would have required proof that Andeavor acted
with scienter.
21SEC Approves Amendments to Whistleblower Program Rules
• On September 23, 2020, the SEC approved amendments to its whistleblower
program to “provide greater clarity to whistleblowers and increase the
program’s efficiency and transparency.”
➢ Revising the definition of “whistleblower” to cover only individuals who
report information in writing to the SEC per Digital Realty Trust (US 2018);
➢ Procedural changes to facilitate more efficient resolution of frivolous claims
and to bar individuals who have filed false or frivolous claims;
➢ Clarifying that DPAs, NPAs, and SEC settlements not resolved through
administrative or judicial proceedings are eligible for awards;
➢ Providing interpretive guidance of expected “independent analysis”; and
➢ Amendments to award determination process, allowing SEC to revise small
awards upward and clarify scope of SEC’s discretion in determining awards.
• Subject to challenge in Thomas v. SEC (D.D.C. 2021).
22DOJ FCPA Enforcement
FrameworkDOJ FCPA Corporate Enforcement Policy
• Most recently updated in November 2019, DOJ’s FCPA Corporate Enforcement Policy
outlines the requirements for companies to receive credit for cooperation, disclosure,
and remediation in FCPA investigations.
To Qualify for a Presumption of Declination:
• Self-Disclosure, without aggravating circumstances
• Full Cooperation
• Timely and Appropriate Remediation
• Since 2016, there have been 14 declinations under this policy, including for World
Acceptance Corporation last year.
24DOJ FCPA Corporate Enforcement Policy
• Where a company (1) voluntarily self-discloses,
(2) fully cooperates, and (3) appropriately
remediates, DOJ will recommend a 50%
reduction off the low end of the USSG fine
range and generally not require a monitor.
• Even when a company does not voluntarily
disclose, full cooperation and appropriate
remediation will result in an up to 25%
reduction off the low end of the USSG fine
range.
Voluntary Self-Disclosure:
• Results in a “presumption that the company will receive a declination absent aggravating circumstances
involving the seriousness of the offense or the nature of the offender,” including involvement by
corporate executive management, significant profit, pervasive misconduct or criminal recidivism.
• Must occur “prior to an imminent threat of disclosure or government investigation” and reasonably
promptly after the company learns of the misconduct. The company must disclose all relevant facts.
25DOJ FCPA Corporate Enforcement Policy
• Full Cooperation: Maximum cooperation credit requires a series of actions
including:
➢ Timely disclosure of all facts relevant to the misconduct;
➢ Proactive, rather than reactive cooperation;
➢ Timely preservation, collection, and disclosure of relevant documents; and
➢ Making officers and employees available for interviews.
• Appropriate Remediation: Remediation requires a series of actions including:
➢ Thorough analysis of the causes underlying the conduct;
➢ Implementation of an effective compliance and ethics program;
➢ Discipline of employees; and
➢ Retention and non-destruction of business records.
26FCPA Trends and Enforcement
ActionsFCPA Trend 1: Blockbuster Penalties (2008 – 2020)
Millions
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
28Goldman Sachs - Facts
• In October 2020, Goldman Sachs reached a multi-billion dollar coordinated resolution in
connection with the 1MDB matter, making it the largest monetary corporate FCPA
resolution to date.
• U.S. authorities alleged that Goldman Sachs conspired with others to pay more than $1.6
billion to officials in Malaysia and Abu Dhabi to obtain and retain business for Goldman
Sachs from 1MDB, a Malaysian state-owned and state-controlled fund created to pursue
investment and development projects for the economic benefit of Malaysia and its people.
• Two Goldman Sachs former managing directors have also been charged in connection with
these allegations. One pled guilty to conspiring to launder money and to violate the FCPA,
and the other is awaiting trial on similar charges.
• The matter also involved coordination with the Money Laundering and Asset Recovery
Section and the DPA included self-reporting and compliance program requirements with
respect to anti-money laundering as well as anti-corruption.
29Goldman Sachs - Penalty
• Goldman agreed to pay more than $2.9 billion to criminal and civil authorities in the U.S., UK,
Singapore, and Hong Kong, PLUS $3.9 billion in penalities and disgorgement to Malaysian
authorities in connection with the 1MDB scandal.
• DOJ: A three-year Deferred Prosecution Agreement for an allegation of conspiracy to violate the
FCPA’s anti-bribery provisions and a $1,263,088,000 criminal penalty, after offsetting fines and
disgorgement paid to other regulators.
• SEC: A cease and desist order charging anti-bribery, books and records, and internal controls
violations, a $400 million civil penalty, and $606 million in disgorgement that was fully credited due
to the Malaysian settlement.
• Malaysia: $2.5 billion settlement and $1.4 billion in seized assets.
• Federal Reserve: $154 million
• New York State Department of Financial Services: $150 million
• UK Financial Conduct Authority/Prudential Regulation Authority: $63 million each
• Singaporean authorities: $122 million
• Hong Kong Securities and Futures Commission: $350 million
30Goldman Sachs – Penalty
31Goldman Sachs – Penalty
32Goldman Sachs – Penalty
• Goldman Sachs received a 10% cooperation discount off the bottom of fine range.
33Airbus - Facts
• In January 2020, Airbus agreed to pay a combined $3.9 billion
in penalties to the United States, France, and the UK for the
company’s alleged scheme to use third-party business partners
to bribe government officials to retain business.
• In the United States, Airbus entered into a DPA and agreed to pay $527 million
for violations of the FCPA and International Traffic in Arms Regulations (ITAR),
which requires disclosure of political contributions for certain defense sales.
• Airbus signed similar resolutions in the UK with the Serious Fraud Office
(“SFO”) and in France with the Parquet National Financier (“PNF”), agreeing to
pay $2.3 billion and $1.1 billion to those government enforcers, respectively.
• The resolution is the second largest global foreign bribery resolution.
34Airbus – Notable Jurisdictions
• The alleged conduct spanned at least 16 jurisdictions, with the DOJ, SFO, and
French CJIP splitting jurisdictions.
• UK • France • Saudi Arabia
• United States
• Malaysia • China • Taiwan
• China
• Sri Lanka • Colombia • Russia
• Taiwan • Nepal
• Indonesia • South Korea
• Ghana • UAE
35Airbus – Notable Observations
• FCPA Jurisdiction:
36Airbus – Notable Observations
• Anti-Piling On:
37Airbus – Notable Observations
• Forfeiture:
38FCPA Trend 2: The CFTC Dives into FCPA Waters
• In 2019, the CFTC published an advisory on self-reporting and cooperation for
“violations involving foreign corrupt practices” and announced its intent to bring
enforcement actions stemming from foreign bribery.
• Since then, several companies have announced investigations by the CFTC with a
potential foreign bribery nexus.
• On December 3, 2020, DOJ and CFTC announced their first coordinated foreign
corruption resolution with Vitol Inc., the U.S. affiliate of one of the world’s largest
energy trading firms.
• Vitol also entered into a leniency agreement with Brazilian authorities for the alleged
conduct.
39Vitol Inc.
• Vitol was alleged to have paid bribes to state oil companies in Brazil, Ecuador, and
Mexico to obtain preferential treatment, access to trades with the oil companies, and
confidential information, including specific prices at which Vitol understood it would
win a particular bid or tender.
➢Two former oil traders were also charged with FCPA and FCPA-related charges
for their roles in the alleged conduct.
• Vitol entered into a DPA with DOJ and agreed to a $135 million fine, with $45
million credit applied for payments to Brazil’s Federal Public Ministry.
• Vitol also consented to a cease-and-desist order by the CFTC for “manipulative and
deceptive conduct” under the Commodity Exchange Act and over $95 million in civil
penalties and disgorgement, with $67 million credit applied for the DOJ penalty.
40FCPA Trend 3: The Cautionary Tale of Beam Suntory
• In 2018, Beam Suntory entered into an agreement with the SEC to settle FCPA
allegations that senior executives at Beam Suntory’s Indian subsidiary directed efforts
by third parties to make improper payments to increase sales and facilitate
distribution, among other things.
➢$2 million civil penalty, $5,264,340 disgorgement, and $917,498 prejudgment
interest.
• In October 2020, Beam Suntory entered into a DPA with DOJ for the same general
conduct, with the lead corrupt payment allegation involving a ~$18,000 payment to a
senior government official in exchange for a license.
➢$19,572,885 fine, with no credit for the SEC resolution.
➢DOJ did not provide Beam Suntory with voluntary disclosure credit or with full
cooperation or full remediation credit.
41FCPA Trend 3: The Cautionary Tale of Beam Suntory
42FCPA Trend 4: No Monitorships
Monitors in Corporate FCPA Enforcement Actions (2016-2020)
9
8
7
6
5
4
3
2
1
0
2016 2017 2018 2019 2020
External Monitor Hybrid Monitor
43Sargeant Marine - Facts
Recent
• On September 22, 2020, Sargeant Marine Inc. (“SMI”),
a Florida-based asphalt company, pleaded guilty to conspiring
to violate FCPA anti-bribery provisions.
• SMI is alleged to have bribed foreign officials in Brazil,
Venezuela, and Ecuador between 2010 and 2018 with the
purpose of obtaining contracts with oil companies.
➢ The allegations involve consulting agreements to funnel bribes to government
officials and state-owned oil company executives and commissions to offshore
bank accounts controlled by intermediaries.
➢ According to DOJ, co-conspirators communicated using draft emails, which they
would edit and save in a U.S.-based shared email account.
➢ DOJ alleged that SMI and affiliated companies earned profits of approximately
$26.5 million from alleged conduct in Brazil; $8.2 million in Venezuela; and $3.2
million in Ecuador.
44Sargeant Marine - Penalty
Recent
• The Sentencing Guidelines penalty range was between $120 million and $240
million.
• SMI and DOJ agreed that the appropriate criminal penalty was $90 million, which
reflected a 25% discount off the bottom of the applicable sentencing range for full
cooperation and remediation.
➢ SMI did not receive voluntary disclosure credit.
• After demonstrating an inability to pay, SMI and DOJ ultimately agreed to reduce its
criminal fine by more than $73 million to a fine of $16.6 million over eight months.
• SMI also agreed to self-report to DOJ for three years regarding the company’s
remediation and corporate compliance program.
45Sargeant Marine - Penalty
Recent
• SMI received full cooperation credit for:
➢ Conducting a thorough internal investigation;
➢ Promptly meeting requests from DOJ;
➢ Proactively identifying issues and facts likely to be of interest to DOJ;
➢ Making factual presentations;
➢ Producing relevant documents; and
➢ Voluntarily making foreign-based employees available.
46Sargeant Marine – Notable Observations
Recent
• Inability to Pay:
47Sargeant Marine – Notable Observations
Recent
• Remedial Measures and No Monitorship:
48Sargeant Marine – Notable Observations
Recent
• Shell Companies, Consultants, & Due Diligence:
49FCPA Trend 5: International Coordination and Focus in
Latin America
50J&F Investimentos - Facts
Recent
• In October, DOJ and SEC announced a combined $155 million FCPA resolution with
Brazil-based holding company J&F Investimentos S.A. and its affiliated global meat
and protein producer and ADR-issuer, JBS, S.A.
• J&F pleaded guilty to conspiracy to violate the FCPA’s anti-bribery provisions based on
allegations that over many years, millions in payments were made to high-level
Brazilian officials to obtain hundreds of millions of dollars of financing and an
approval for a corporate merger.
• The SEC charged JBS and two of its executives under the accounting provisions.
• J&F had previously entered into a settlement with Brazilian authorities for $3.2 billion.
51J&F Investimentos - Penalty
Recent
• DOJ: $256,497,026 fine, reduced to $128,248,513 after applying credit for payments
to resolve the matter in Brazil.
➢ Self-reporting at least annually, for three years.
➢ Partial cooperation credit
52J&F Investimentos - Penalty
Recent
• SEC: $26.8 million in disgorgement for conduct by J&F, JBS, and two executives for internal controls
and books and records violations related to Pilgrim’s Pride Corporation.
➢ J&F Investimentos, S.A. is a private company, but the SEC settled with it for conduct related to
the issuers.
➢ JBS is a J&F subsidiary, and it is a US issuer because its Brazilian shares are listed on a U.S.
exchange as ADRs.
➢ The executives who resolved with the SEC had already pleaded guilty in Brazil.
➢ The legal violation the SEC focused on related to the internal controls and books and records of
Pilgrim’s Pride, a relatively new subsidiary acquired by a U.S. subsidiary of JBS.
▪ The SEC’s consent order described that Pilgrim’s Pride did not engage in any intentional
misconduct, but its funds were mixed up with JBS’s funds, which did engage in misconduct.
Pilgrim’s Pride’s books and records did not reflect this fact, and its controls did not prevent
it.
▪ And so, the SEC brought an action against J&F, a private company, JBS, a Brazilian issuer,
and Brazilian executives who had pleaded guilty in Brazil, for causing accounting violations
to Pilgrim’s Pride and did not bring an action against Pilgrim’s Pride.
▪ This may be a first for the SEC.
53J&F – Notable Observations
Recent
• New Corporate Compliance Program Requirements
54J&F – Notable Observations
Recent
• New Corporate Compliance Program Requirements
55J&F – Notable Observations
Recent
• New Corporate Compliance Program Requirements
56J&F – Notable Observations
Recent
• New Corporate Compliance Program Requirements
57J&F – Notable Observations
Recent
• New Corporate Compliance Program Requirements
58J&F – Notable Observations
Recent
• New Corporate Compliance Program Requirements
59J&F – Notable Observations
Recent
60J&F – Notable Observations
Recent
61FCPA Trend 6: Intersection Between Anti-Corruption,
AML, Antitrust, and Trade Sanctions
Recent cases show that prosecutors are increasingly combining corruption charges with other criminal
offenses
AML: U.S. authorities continue
Trade Sanctions: In addition to AML: An Indonesian court
to prosecute former Venezuelan
FCPA charges, Airbus entered into convicted Emirsyah Satar, former
officials and their co-conspirators
a deferred prosecution agreement CEO of Garuda Indonesia,
involved in public corruption
with the DOJ to resolve Indonesia’s state-owned airline,
schemes using anti-money
allegations of conspiracy to of corruption and money
laundering laws. In 2020, DOJ
violate the Arms Export Control laundering after finding that he
brought money laundering
Act and the International Traffic received bribes from Airbus and
charges against former National
in Arms Regulations. DOJ Rolls-Royce in exchange for
Treasurer of Venezueala Claudia
alleged that the company made procurement contracts for aircraft
Patricia Diaz Guillen and her
false reports to the U.S. and aircraft parts. Satar was
huband. Diaz Guillen’s
government to facilitate the sale sentenced to eight years in prison
predecessor at the Treasury also
or export of defense articles and and ordered to pay a fine of USD
pleaded guilty to money
services. 1.4 million.
laundering charges.
• We have also seen intersections between FCPA and antitrust.
62Mitigation: Coordinate Your Compliance Program
and Disclosure Strategy
It’s not just the FCPA!
• Compliance programs should account for global compliance standards, not just the FCPA.
• In the Airbus matter, U.S. authorities also alleged violations of the Arms Export Control Act (“AECA”)
and its implementing regulations, the International Traffic in Arms Regulations (“ITAR”).
Voluntary Self-Disclosure Should be a Carefully Considered Decision, Part of a
Coordinated Global Strategy
• The Goldman Sachs and Airbus actions reflect that Coordination is Key
regulators expect self-disclosure, particularly in matters of In 2020, Beam Suntory did not receive
this scope, and that self-disclosure should be considered credit from the DOJ for settlement
amounts paid to the SEC to resolve
as part of a coordinated global strategy. charges based on the same conduct
• Airbus disclosed the AECA and ITAR conduct to DOJ in a because, according to the DOJ, Beam
did not seek a parallel resolution.
“timely” manner, but disclosed FCPA issues only after it
had disclosed to the UK’s SFO. Remember that coordinating voluntary
disclosure, cooperation, and settlement
• DOJ specifically noted in its settlement with Goldman negotiations with multiple enforcement
Sachs that it had “reached this resolution with Goldman agencies, including with non-U.S.
based on a number of factors, including the Company’s regulators, may yield benefits.
failure to voluntarily disclose the conduct to the
Department[.]”
63FCPA Trend 7: Focus on Compliance, Controls, and
Internal Audit
• In legislation, regulations and enforcement/prosecution decisions, authorities are
increasingly emphasizing the need for a well-developed compliance program.
• As recent landmark U.S. enforcement actions show, authorities will not credit
companies for having internal conrols if they are easily circumvented. On the other
hand, they have shown a willingness to credit the state of a compliance program after
remediation following the discovery of misconduct.
• Recent FCPA enforcement actions have also highlighted the importance of Internal
Audit and the need to address issues uncovered by auditors.
64Cardinal Health – Facts
• In February 2020, U.S.-based pharmaceutical company Cardinal Health, Inc. entered
into a cease-and-desist order with the SEC to resolve charges under the internal
accounting controls and recordkeeping provisions of the FCPA.
• The settlement arises out of charges that Cardinal Health’s internal accounting controls
were not sufficient to detect improper payments made by employees of its former
Chinese subsidiary.
➢ The order states that Cardinal China employees, who were marketing products for
the benefit of a European company with whom Cardinal had a profit sharing
agreement, directed payments to government-employed healthcare professionals and
employees of state-owned retail companies who had influence over purchasing
decisions.
65Cardinal Health – Penalty
• Penalty amount: $2.5 million civil penalty, and $5.4 million in disgorgement.
• Cardinal voluntarily disclosed the results of its internal investigation and significantly
cooperated in the SEC’s investigation.
• Cardinal China undertook significant remedial measures including:
➢Terminating the marketing accounts and employment contracts with marketing
employees;
➢Adding anti-bribery representations and obligations to relevant contracts; and
➢Strictly limiting the use of the remaining balance of the European company’s
funds to low risk expenses with robust controls and monitoring over their
payment.
66Cardinal Health – Notable Observations
• Acquisition and Integration Risks:
67Cardinal Health – Notable Observations
• Focus on Compliance, Controls, and Internal Audit:
68Cardinal Health – Notable Observations
• Healthcare Focus: Several U.S. and foreign anti-corruption enforcement actions of
late have involved the healthcare sector.
69Eni S.p.A. – Facts
• In April 2020, Italian multinational oil and gas company Eni S.p.A. entered into a
cease-and-desist order with the SEC to resolve charges under FCPA’s books and
records and internal accounting controls provisions.
• The settlement arises out of allegations that Eni’s subsidiary, Saipem S.p.A., which it
held a 43% interest in, made payments to an intermediary who “directed at least a
portion of that money through offshore shell entities to Algerian officials or their
designees.” Saipem was awarded at least 7 projects during the relevant time period
from Algeria’s state-owned oil company.
➢ The allegations involve executive conduct.
• The cease-and-desist order found that a senior executive at Saipem orchestrated the
scheme, and continued to facilitate Saipem’s improper payments after he was hired to
be CFO of Eni.
70Eni S.p.A. – Penalty
• Penalty: $19.75 million in disgorgement, and $4.75 million in prejudgment interest.
• The SEC considered the remedial efforts and cooperation, including:
➢ Compiling financial data and analysis of the transactions at issue;
➢ Making substantive presentations; and
➢ Providing translations of key documents and foreign proceedings.
• In 2010, Eni settled another FCPA matter with the SEC, based on bribery conduct by its
then-wholly owned Dutch subsidiary Snamprogetti Netherlands, B.V.
71Eni S.p.A. – Notable Observations
• Minority interest risks and executive involvement impact:
72Eni S.p.A. – Notable Observations
• Third Parties and Due Diligence:
73Mitigation: Establish An Effective Corporate
Compliance Program
DOJ Criminal Division Updated Guidance
Key Takeaways
▪ Starting with a Risk Assessment: A company’s compliance program should be based on the result of a
risk assessment to ensure that the program is appropriately tailored.
▪ Building on Lessons Learned: The risk profile should be “periodically updated,” and the program should
be reexamined and revised on an ongoing basis in light of lessons learned.
▪ Importance of Compliance: A number of factors are considered, such as where within the company the
compliance function is housed and how the compliance function compares with other functions in terms of
stature, compensation, rank/title, reporting lines, resources, and access to key decision-makers.
▪ Responsibility for Third Parties: The 2020 update places increased focus on a company’s third-party
oversight. DOJ will consider whether a company has appropriate business rationale for third parties. It
will also consider the process for supplier selection and for ensuring third parties cannot be re-engaged
without appropriate authorization once terminated.
▪ Cascading Tone from the Top: Emphasizes a “culture of compliance.” Messaging from the top is
inadequate. DOJ will consider cultural leadership by middle management and whether managers were
held accountable for misconduct that occurred under their supervision.
74Mitigation: Collaboration Between Internal Audit,
Legal, and Compliance Functions
Consider whether audits should be conducted with legal oversight when sensitive topics are
at issue
• Involve the legal department if an audit addresses compliance with the law.
➢ Implement a policy with defined escalation steps, particularly where involving indicia of fraud,
corruption, or other legal violations.
➢ Include compliance- and corruption-related areas in your company’s regular audit rhythm.
Consider implementing best practices for a working relationship between internal audit,
legal, and compliance
• Confirm Legal direction and the scope of the review in a formal communication.
• Keep audit issue summaries and reports strictly factual. Avoid conclusions especially when referring the
matter to another group, i.e. compliance.
• Use precise wording in audit reports.
➢ Avoid sweeping or overly broad statements. Words on legal exposure, risk, and liability can be taken
out of context.
➢ Be clear about if/when findings are limited.
• Label documents appropriately. When a document contains information that is confidential, proprietary,
or privileged, mark it as such. Documents not in final form should be labeled as drafts.
• Ensure that remedial steps are practical and workable, and there is a process to follow through on any
action items.
75FCPA Trend 8: Third Parties Remain The Greatest Area
of Corruption Risk
• Third parties continue to pose the greatest FCPA
risk and feature in enforcement actions.
• It is estimated that over 90% of reported FCPA
matters involve third parties.
• Third parties often handle a wide range of services
and activities that can create additional compliance
risks, such as:
➢Participation in government tenders for state-
owned customers;
➢Handling licensing or other regulatory permits
required to distribute products in other countries;
and
➢Handling customs formalities for the import of
products, warehousing, or inventory management.
76Alexion Pharmaceuticals - Facts
Recent
• On July 2, 2020 Boston-based Alexion Pharmaceuticals
(“Alexion”) agreed, without admitting or denying the SEC’s
allegations, to pay more than $21 million to resolve charges
that it violated the FCPA books-and-records and internal accounting controls
provisions.
• The SEC alleged that from 2010 to 2015, Alexion’s Turkish subsidiary bribed Turkish
government officials in order to obtain approval for patient prescriptions and secure
favorable regulatory treatment for its drug, Soliris, and that from 2011 to 2015,
Alexion’s Russian subsidiary did the same with respect to Russian government health
care officials.
• The SEC further alleged that Alexion’s subsidiaries in Brazil and Colombia created, or
directed third parties to create, inaccurate financial records.
77Alexion Pharmaceuticals - Penalty
Recent
• Penalty: $14,210,194 in disgorgement and $3,766,337 in prejudgment interest, as well
as a $3.5 million civil penalty.
• The SEC considered Alexion’s remediation and cooperation in finalizing the terms of
the order.
• Cooperation included:
➢ Regular briefings to the SEC regarding findings from its internal investigation;
➢ Forensic accounting review; and
➢ Identifying and providing translations of key documents.
78Alexion Pharmaceuticals - Penalty
Recent
• Remediation included:
➢ Strengthening and expanding its global compliance organization;
➢ Enhancing policies and procedures regarding payments to third parties, including
the implementation of a centralized system to track and monitor third-party
payments;
➢ Revamping its HCP engagement process and oversight;
➢ Enhancing its internal audit function;
➢ Conducting proactive compliance market review; and
➢ Improving anti-corruption training.
79Alexion Pharmaceuticals – Notable Observations
Recent
• Third Parties: This resolution reflects the SEC’s continued focus on
interactions with third parties as areas ripe for FCPA compliance issues.
Looking beyond Alexion’s own direct handling of its books and records,
the order alleged that Alexion’s subsidiaries in Brazil and Columbia
directed third parties to create inaccurate records regarding payments to
patient advocacy organizations.
80Alexion Pharmaceuticals – Notable Observations
Recent
• Geographic Risk and Adequate Diligence and Documentation
81Alexion Pharmaceuticals – Notable Observations
Recent
• “Other” Conduct Captured
82Mitigation: Carefully Monitor High-Risk Third
Parties
Third parties are an inevitable part of doing business in an emerging market. Pre-
engagement screening, as well as close monitoring, can help offset the decreased
transparency and control that comes with agents and intermediaries.
BEST PRACTICES
• Identify the specific functions that are prone to corruption and handled by third parties.
• Involve legal and compliance in contract negotiations/drafting to ensure that services are specifically and
accurately described and allow for an efficient control (e.g., finance) to assess whether the services have
actually been rendered and whether prices are reasonable in light of those services and are in line with
market rates.
• Include audit rights with a trigger in third-party agreements to allow for audits when indicated.
• Conduct specific training for employees working with third parties and with end customers.
• Use a risk-based approach to periodically select third parties for an audit review.
• Ensure that rebates, credit notes, and other payments provided to the third party are made to the
contracting entity, including identifying any offshore arrangements.
• Understand interaction between sales force in emerging markets, involved third parties (e.g., distributors,
agents) and end-customers, and conduct function-specific compliance training with these employees.
• Understand whether margins of intermediaries are passed on to end-customers by reviewing publically
available tender materials or conducting audit reviews.
83FCPA Trend 9: Continued Focus on Individual
Enforcement Actions
PDVSA Individuals - Background and Notable Developments
• In August 2020, the latest in a line of Venezuela
state-owned energy company PDVSA employees
was charged under the FCPA and certain money
laundering statutes.
• Jose Luis De Jongh Atencia, a dual U.S.-Venezuelan citizen, was a procurement
officer and manager in Citgo’s Special Projects group, and was charged with accepting
$2.5 million in bribes in exchange for business with Citgo and PDVSA.
• FCPA Jurisdiction: PDVSA employees like Atencio, and others, including citizens of
Venezuela and Switzerland, have been considered “foreign officials” under the FCPA.
This includes those acting on behalf of PDVSA’s U.S.-based companies, such as
Citgo.
• Wide Ranging Investigation: The PDVSA investigation, parallel to other diplomatic
and prosecutorial U.S. pressure on Venezuela in recent years, has resulted in charges
against 27 individuals, 20 of whom have pleaded guilty.
84FCPA Trend 9: Continued Focus on Individual
Enforcement Actions
Alstom Employees - Background and Notable Developments
• In February 2020, two former executives of French
power company Alstom were charged (in an
unsealed, superseding indictment) with violating
the FCPA and committing certain money laundering offenses.
• Reza Moenaf (former president of Alstom’s subsidiary in Indonesia) and Eko Sulianto
(former director of that subsidiary) were both alleged to have paid bribes via external
consultants to high-level Indonesian officials in exchange for assistance in securing a
$118 million contract for Alstom’s US and Indonesia subsidiaries.
• FCPA Jurisdiction: The indictment asserted that Moenaf and Sulianto were both
agents of a “domestic concern”—Alstom’s U.S. subsidiary--under the FCPA for their
role in securing contracts that Alstom Power US would benefit from.
• Wide Ranging Investigation: This prosecution dates back to the 2013 FCPA action
against Alstom, which includes the Hoskins Second Circuit case.
85Panelists
F. Joseph Warin
1050 Connecticut Avenue, N.W., Washington, DC 20036-5306 USA
TEL:+1 202.887.3609
fwarin@gibsondunn.com
F. Joseph Warin is chair of the 200-person Litigation Department of Gibson Dunn’s Washington, D.C. office, and he is co-chair of the firm’s global White Collar Defense and
Investigations Practice Group. Mr. Warin’s practice includes representation of corporations in complex civil litigation, white collar crime, and regulatory and securities
enforcement – including Foreign Corrupt Practices Act investigations, False Claims Act cases, special committee representations, compliance counseling and class action civil
litigation.
Mr. Warin is continually recognized annually in the top-tier by Chambers USA, Chambers Global, and Chambers Latin America for his FCPA, fraud and corporate investigations
expertise. Who’s Who Legal named Mr. Warin a “Global Elite Thought Leader” in its 2020 and 2019 Investigations guides list for Business Crime Defense – Corporate and
Investigations. In 2020, Mr. Warin was selected by Chambers USA as a “Star” in FCPA, a “Leading Lawyer” in the nation in Securities Regulation: Enforcement, and a “Leading
Lawyer” in the District of Columbia in Securities Litigation and White Collar Crime and Government Investigations. In 2017, Chambers USA honored Mr. Warin with the
Outstanding Contribution to the Legal Profession Award, calling him a “true titan of the FCPA and securities enforcement arenas.” He has been listed in The Best Lawyers in
America® every year from 2006 – 2020 for White Collar Criminal Defense. U.S. Legal 500 has repeatedly named him as a “Leading Lawyer” for Corporate Investigations and White
Collar Criminal Defense Litigation. He has been recognized by Benchmark Litigation as a U.S. White Collar Crime Litigator “Star” for nine consecutive years (2011-2019), and was
named to Securities Docket’s “Enforcement 40” for 2017. In 2020, Mr. Warin was also named a Leading Individual by Legal 500 Latin America in a new category, “International
Firms: Compliance and Investigations. In 2019, Latinvex named Mr. Warin one of Latin America’s Top 100 Lawyers in the category of FCPA & Fraud. In 2018, Washingtonian
Magazine named Mr. Warin as one of Washington’s “Top Lawyers” in White Collar Criminal Defense. BTI Consulting named Mr. Warin to its 2017 “BTI Client Service All-Stars”
List.
Mr. Warin’s group was recognized by Global Investigations Review in 2020 as the leading global investigations law firm in the world. This is the fifth time in six years to be so
named. Global Investigations Review reported that Mr. Warin has now advised on more FCPA resolutions than any other lawyer since 2008. In 2016 Who’s Who Legal and Global
Investigations Review named Mr. Warin to their list of World’s Ten-Most Highly Regarded Investigations Lawyers based on a survey of clients and peers, noting that he was one of
the “most highly nominated practitioners,” and a “’favourite’ of audit and special committees of public companies.” Best Lawyers® named Mr. Warin the Lawyer of the Year in
2020 and in 2016 for White Collar Criminal Defense in the District of Columbia, and he was named among the Lawdragon 500 Leading Lawyers in America in 2016.
Mr. Warin has handled cases and investigations in more than 40 states and dozens of countries. His clients include corporations, officers, directors and professionals in regulatory,
investigative and trials involving federal regulatory inquiries, criminal investigations and cross-border inquiries by dozens of international enforcers, including UK’s SFO and FCA,
and government regulators in Germany, Switzerland, Hong Kong, and the Middle East. His credibility at DOJ and the SEC is unsurpassed among private practitioners – a reputation
based in large part on his experience as the only person ever to serve as a compliance monitor or counsel to the compliance monitor in three separate FCPA monitorships,
pursuant to settlements with the SEC and DOJ: Statoil ASA (2007-2009); Siemens AG (2009-2012); and Alliance One International (2011-2013). He has been hired by audit
committees or special committees of public companies to conduct investigations into allegations of wrongdoing in a wide variety of industries including energy, oil services,
financial services, healthcare and telecommunications.
87Patrick Stokes
1050 Connecticut Avenue, N.W., Washington, D.C. 20036-5306
Tel: +1 202.955.8504
PStokes@gibsondunn.com
Patrick Stokes is a litigation partner and a member of the firm's White Collar Defense and Investigations, Securities Enforcement, and Litigation Practice
Groups.
Mr. Stokes' practice focuses on internal corporate investigations, compliance reviews, government investigations, and enforcement actions regarding
corruption, securities fraud, and financial institutions fraud. He has tried more than 30 federal jury trials as first chair, including high-profile white-collar
cases, and handled 16 appeals before the U.S. Court of Appeals for the Fourth Circuit. Mr. Stokes is equally comfortable leading confidential internal
investigations, negotiating with government enforcement authorities, or advocating in court proceedings. Mr. Stokes is ranked nationally and globally by
Chambers USA and Chambers Global as a leading attorney in FCPA.
Prior to joining Gibson Dunn, Mr. Stokes spent nearly 18 years with the U.S. Department of Justice (DOJ). From 2014 to 2016 he headed the FCPA Unit,
managing the DOJ's FCPA enforcement program and all criminal FCPA matters throughout the United States, covering every significant business sector, and
including investigations, trials, and the assessment of corporate anti-corruption compliance programs and monitorships. Mr. Stokes also served as the DOJ’s
principal representative at the OECD Working Group on Bribery working with law enforcement and policy setters from 41 signatory countries on anti-
corruption enforcement policy issues.
From 2010 to 2014, he served as Co-Chief of the DOJ's Securities and Financial Fraud Unit. In this role, he oversaw investigations and prosecutions of
financial fraud schemes involving accounting fraud, benchmark interest rate manipulations, insider trading, market manipulation, Troubled Asset Relief
Program (TARP) fraud, government procurement fraud, and large-scale mortgage fraud, among others.
From 2002 to 2008, Mr. Stokes served as an Assistant United States Attorney in the Eastern District of Virginia, where he prosecuted a wide variety of
financial fraud, immigration, and violent crime cases. From 1998 to 2002, he served in the DOJ's Tax Division as a trial attorney in the Western Criminal
Enforcement Section.
Mr. Stokes received various awards while at the DOJ, including the Attorney General's Distinguished Service Award in 2013 and 2014 and the Assistant
Attorney General's Exceptional Service Award (Criminal Division) in 2011 and 2014.
88John W.F. Chesley
1050 Connecticut Avenue, N.W., Washington, DC 20036-5306 USA
TEL:+1 202.887.3788
jchesley@gibsondunn.com
John Chesley is a litigation partner in Gibson Dunn’s Washington, D.C. Office. He focuses his practice on white collar criminal enforcement and
government contracts litigation. He represents corporations, audit committees, and executives in internal investigations and before government agencies
in matters involving the Foreign Corrupt Practices Act, procurement fraud, environmental crimes, securities violations, sanctions enforcement, antitrust
violations, and whistleblower claims. He also has significant trial experience and appears regularly in federal and state courts and administrative tribunals
throughout the Washington Metropolitan Region and nationwide.
Among his recent engagements, Mr. Chesley served as the Interim Chief Ethics & Compliance Officer of a publicly-traded, multi-national corporation,
responsible for managing a global team of compliance personnel. In this role, Mr. Chesley conducted and oversaw internal investigations, managed a
whistleblower hotline, provided compliance advice, created and updated compliance policies, and administered compliance training for tens of thousands
of employees worldwide. This opportunity provided Mr. Chesley with first-hand insights into the day-to-day challenges experienced by in-house counsel,
which he uses to bring practical solutions to the table for all of his clients.
Mr. Chesley has been recognized repeatedly as one of the leading lawyers of his generation. Specifically, he was named one of the “world’s leading young
investigations specialists” by Global Investigations Review “40 Under 40,” as well as a “Rising Star” in the Government Contracts field by Law 360. Most
recently, Mr. Chesley was recognized by Benchmark Litigation as a “Future Litigation Star” in Washington, D.C. (2019) and by Who’s Who Legal
Investigations guide as a “Future Leader” in Investigations (2018). The National Law Journal named Mr. Chesley to its list of 2015 D.C. Rising Stars, noting
his white-collar defense practice and pro bono work, and Legal Bisnow identified him as one of “Washington’s 2015 Trending 40 Lawyers Under 40.” Mr.
Chesley also has been recognized as a “Rising Star” by LMG 500 (2015-2018) and Washington DC Super Lawyers (2014-2018).
Mr. Chesley publishes and speaks regularly on legal developments, particularly involving the FCPA. In addition, he is frequently quoted in print
publications such as Bloomberg BNA, Compliance Week, Corporate Counsel, Global Investigations Review, Law 360, The FCPA Report, and SEC Today and
has appeared as a legal commentator on the Fox News Channel.
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