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Published on March 12, 2008

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FOREIGN CORRUPT PRACTICES ACT ENFORCEMENT: RENEWED EMPHASIS BY THE SEC AND DOJ:  FOREIGN CORRUPT PRACTICES ACT ENFORCEMENT: RENEWED EMPHASIS BY THE SEC AND DOJ Thomas O. Gorman Porter Wright Morris & Arthur Washington, D.C. www.SECactions.com February 11, 2008 INTRODUCTION:  INTRODUCTION Background: Evolution of the FCPA The Act is rooted in the Watergate scandal of 1970 SEC brought over 40 “questionable foreign payment” cases based on Section 10(b) SEC’s “volunteer program” resulted in about 400 companies admitting “questionable payments” INTRODUCTION :  INTRODUCTION Background: Evolution of the FCPA (cont.) An SEC report stated: “Subsequent Commission investigations revealed that instances of undisclosed questionable or illegal corporate payments – both domestic and foreign – were indeed widespread and represented a serious breach in both the operation of the Commission’s system of corporate disclosure and, correspondingly, in public confidence in the integrity of the system of capital formation.” Promotion of Reliability of Financial Information, Exchange Act Release No. 34-15,570 (Feb. 15, 1979). INTRODUCTION :  INTRODUCTION Evolution of the FCPA (cont.) In 1977 Congress passed the FCPA In 1988 Congress amended the statute For years, the U.S. was the only country with FCPA-type prohibitions 1997: OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions INTRODUCTION :  INTRODUCTION Current Enforcement Trends DOJ and SEC officials re-emphasize FCPA - Last year, 38 FCPA cases were brought by DOJ & SEC - In 2006 only 15 cases were brought - Reported to be more than 100 open investigations. See, e.g., 39 SEC. REG. L.R. 157 (Oct. 15, 2007) To examine trends, we will consider: 1) Overview of statutes 2) Review of recent court decisions 3) Large penalty cases 4) Industry wide cases 5) Emphasis on individuals 6 Other significant cases 7) Current significant cases pending trial 8) Analysis and conclusions THE STATUTES :  THE STATUTES Structure of FCPA Two primary components - The books and records provisions Much broader than anti-bribery provisions Extend to all SEC reporting companies Not limited to corrupt payments - The bribery provisions Generally prohibit bribery of foreign government or political officials to obtain/retain business THE STATUTE :  THE STATUTE Structure of FCPA (cont.) Enforcement - SEC: civil injunctive and administrative proceedings to enforce all FCPA provisions against issuers - DOJ: Criminal actions – against any person or company for bribery + books & records & internal controls Civil injunctive action against any domestic concern for violations of anti-bribery provisions THE STATUTE:  THE STATUTE The Books and Records Provisions Overview - Books, records & control provisions in SEA §§ 13(b)(2)-(7) - Generally apply to all issuers - Broader than anti-bribery provisions – apply to all payments and transactions, not just foreign or domestic bribes or corrupt payments THE STATUTE:  THE STATUTE The Books and Records Provisions Section 13(b)(2)(A) requires every SEC registrant or issuer to “make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer” THE STATUTE :  THE STATUTE Books and Records – 13(b)(2)(A) (cont.) Materiality and scienter not required. See, e.g., SEC v. World-Wide Coin, 567 F. Supp. 724 (N.D. Ga. 1983) “In reasonable detail” substitutes for materiality; intended to “effectively prevent off-the-books slush funds and payments of bribes” H.R. REP. No. 95-831, at 10 (1997), reprinted in 1977 U.S.C.C.A.N. 4121, 4122. THE STATUTE:  THE STATUTE Books and Records – 13(b)(2)(A) (cont.) 1988 amendments further define “in reasonable detail” - Section 13(b)(7) provides that “reasonable” means the degree of detail which “would satisfy prudent officials in the conduct of their own affairs” - Prudent man is not an “unrealistic degree of exactitude ... concept of reasonableness of necessity contemplates weighing a number of relevant factors, including the cost of compliance” H.R. REP. NO. 100-576, at 917 (1988), reprinted in 1988 U.S.C.C.A.N. at 1950. THE STATUTE:  THE STATUTE Books and Records – 13(b)(2)(A) (cont.) Provision have three objectives “(1) books and records should reflect transactions in conformity with accepted methods of reporting economic events, (2) misrepresentation . . . and other deliberate acts resulting in inaccurate financial books and records are unlawful, and (3) transactions should be properly reflected on books and records in such a manner as to permit the preparation of financial statements in conformity with GAAP” H.R. REP. NO. 95-831, at 10 (1977), reprinted in 1977 U.S.C.C. A. N. at 4120. THE STATUTE:  THE STATUTE Books and Records – Section 13(b)(2)(A) (cont.) Two SEC rules implement section - Rule 13b-2-1: “No person shall directly or indirectly, falsify or cause to be falsified, any book, record or account . . .” (emphasis added) - Rule 13(b)2-2: “No director or officer of any issuer shall, directly or indirectly . . . make any false statement” to any auditor. See, e.g. SEC v. Triton Energy, Litigation Release No. 15,266 (Feb. 27, 1997) THE STATUTE :  THE STATUTE Internal controls provisions Section 13(b)(2)(B) requires every issuer “devise and maintain a system of internal accounting controls sufficient to provide reasonable assurance that --- Transactions are executed in accordance with management’s general or specific authorization; To maintain accountability for assets; Access to assets is permitted only in accordance with management’s general or specific authorization; and The recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences . . . ” THE STATUTE:  THE STATUTE Internal controls (cont.) Purpose: to ensure that entities adopt accepted methods of recording economic events, protecting assets and conforming transactions to management’s authorization No specific system is mandated THE STATUTE:  THE STATUTE Internal controls (cont.) SEC had identified key conceptual elements - Overall control environment - Translate broad objectives of controls to specific control objectives of particular business - Consider specific control procedures and environment which contribute to achieving the specific control objective - Monitor control procedures – ensure they function - Consider benefits/costs of additional procedures/alternatives THE STATUTE :  THE STATUTE Internal controls (cont.) There is a natural interplay between books and records/controls provisions and anti-bribery sections Phrase “books and records” not defined - Debate: Records necessary to prepare financial statements v. broader reading - Purpose is preparation of financial statements and corporate accountability – suggests broader reading THE STATUTE:  THE STATUTE Section 13(b)(5) Internal controls, section provides “No person shall knowingly circumvent or knowingly fail to implement a system of internal accounting controls or knowingly falsify any book, record or account described in reasonable . . .” Applies to anyone who “causes” violation, according to SEC THE STATUTE:  THE STATUTE Subsidiaries Section 13(b)(6) added in 1988 amendments clarifies responsibility for subsidiaries not wholly owned 50% or less of voting power, required only to “proceed in good faith to use its influence, to the extent reasonable . . . to cause . . . [the firm] to devise and maintain a system of internal accounting controls consistent with . . .” the section THE STATUTE:  THE STATUTE Subsidiaries – Section 13(b)(6) (cont.) Reasonableness includes “the relative degree of the issuer’s ownership of the domestic or foreign firm and the laws and practices governing the business operations of the country in which such firm is located . . . . An issuer which demonstrates good faith efforts to use such influence shall be conclusively presumed to have complied . . .” Congress recognized that “it is unrealistic to expect a minority owner to exert a disproportionate degree of influence . . .” H.R. REP. NO. 100-576, at 917 (1988). THE STATUTE :  THE STATUTE Subsidiaries – 13(b)(6)(cont.) SEC has brought enforcement actions where issuer has less than 50% voting power. See, e.g., SEC v. BellSouth Corp., Litigation Release No. 17,310 (Jan. 15, 2002) Criminal: Only for knowingly falsifying any book, record or account. See, e.g., 134 CONG. REC. H2115 (1988) The Statute:  The Statute Sarbanes-Oxley Act Strengthened FCPA Section 302 re CEO/CFO certification Section 906 re criminal liability for certifications Section 404 re internal controls THE STATUTE:  THE STATUTE The Bribery Provisions 18 U.S.C. § 78dd-2 makes it unlawful for any issuer or domestic concern, or for any officer, director, employee, agent or shareholder “to make use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to – THE STATUTE:  THE STATUTE The bribery provisions – Section 78dd-2 (cont.) Any foreign official for purposes of – (A) (i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage; or (B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality; in order to . . . assist . . . in obtaining or retaining business for or with, or directing business to, any person; THE STATUTE:  THE STATUTE The bribery provisions – Section 78dd-2 (cont.) (2) Any foreign political party or official thereof or any candidate for foreign political office for purposes of [as stated above in (1)(A)&(B)] . . . (3) Any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to any candidate for foreign political office, for purposes of [as stated above in (1)(A)&(B)] . . .” THE STATUTE:  THE STATUTE The Bribery Provisions (cont.) Basic elements of an offense 1. Any U.S. person or entity – includes “issuers,” “domestic concerns,” officer, directors and agents 2. Jurisdictional means 3. Corruptly 4. Payment – anything of value including a promise to pay 5. Foreign government official – includes any official, member of party or candidate 6. Receipt of thing of value – knowing that all or part of thing of value will be offered 7. Purpose – influence to do/omit 8. Obtain/retain business THE STATUTE:  THE STATUTE Elements – Issuer/Domestic Concern Any U.S. issuer or domestic concern -- Issuer: 15 U.S.C. § 78dd-1(a), includes any U.S. public company subject to SEA reporting requirements including employees and foreign agents -- Domestic concern: 15 U.S.C. § 78dd-2(h)(10)(B), includes any business with its principal place of business in U.S. See, e.g. U.S. v. Liedo, 923 F.2d 428 (8th Cir. 1991) THE STATUTE :  THE STATUTE Elements – Issuer/Domestic Concern (cont.) FCPA applies to foreign agents of issuers or domestic concerns Does not apply either directly or through conspiracy count to foreign officials. U.S. v. Blondek, 741 F. Supp. 116 (N.D. Tex. 1990), aff’d sub nom. U.S. v. Castle, 925 F.2d 831 (5th Cir. 1991) THE STATUTE :  THE STATUTE Elements – Issuer/Domestic Concern (cont.) Foreign corporations Not directly subject to the Act Possible vicarious liability if used as conduit for proscribed payments U.S. citizens or residents acting as agents of foreign corporations – possible liability. See, e.g., Arthur F. Mathews, Defending SEC and DOJ FCPA Investigations and Conducting Related Corporate Internal Investigations: The Triton Energy/Indonesia SEC Consent Decree Settlements, 18 NW. J. Int’l. L. & Bus. 303, 323 (1998) THE STATUTE:  THE STATUTE Elements – Jurisdictional Means Virtually any method of communication involving interstate commerce unless wholly outside the U.S. - Use of jurisdictional means must be in furtherance of prohibited conduct (not defined in statute) - See SEC v. Montedison, S.p.A., [1995-1998 Transfer binder] Fed. Sec. L. Rep. ¶74,374 (Nov. 21, 1996)(all conduct outside U.S. but foreign corporation had ADRs trading in NY) THE STATUTE :  THE STATUTE Elements – Corruptly Not defined in statute Legislative history “The word ‘corruptly’ is used in order to make clear that the offer, payment, promise, or gift, must be intended to induce the recipient to misuse his official position in order to wrongfully direct business to the payor or his client, or to obtain preferential regulation . . . [it] connotes an evil motive or purpose, an intent to wrongfully influence the recipient. It does not require that the act be fully consummated, or succeed in producing the desired outcome . . . The defense that the payment was demanded on the part of a government official as a price for gaining entry into a market THE STATUTE:  THE STATUTE Elements – Corruptly (cont.) or to obtain entry into a market would not suffice . . . That the payment may have been first proposed by the recipient rather than the U.S. company does not alter the corrupt purpose . . . On the other hand true extortion situations would not be covered by this provision since a payment to an official to keep an oil rig from being dynamited should not be held to be made with the requisite corrupt purpose.” H.R. Rep. No. 95-640, at 8 (1977), S. Rep. No. 95-114, at 10-11 (1977), reprinted in 1977 U.S.C.C.A.N. 4098, 4108. THE STATUTE :  THE STATUTE Elements – Anything of Value U.S. v. Liebo, 923 F.2d 1308 (8th Cir. 1991), finding the evidence sufficient to establish the “corruptly” requirement where defendant paid for plane ticket for official’s honeymoon, the company won the contract shortly after the honeymoon and the defendant concealed the true nature of the payment, although the case was reversed on other grounds Payment of cash, cash equivalents or any form of expense reimbursement or intangible benefit is probably sufficient A wide variety of payments have been charged – -- Charitable donations -- Loans with favorable terms -- Transportation of household goods -- College scholarships -- Services of a prostitute THE STATUTE:  THE STATUTE Elements – Knowing Authorization Knowing defined in 1988 amendments - “A person’s state of mind is ‘knowing’ with respect to conducting a circumstance or a result if— (i) such person is aware that such person is engaging in such conduct, that such circumstances exist or that such result is substantially certain to occur; or (ii) such person has a firm belief that such circumstance exists or that such result is substantially certain to occur.” -- The term includes “conscious disregard,” “willful blindness,” and “deliberate ignorance,” but excludes simple negligence. H.R. Rep. No. 100-76, at 920 (1988), reprinted in 1988 U.S.C.C.A.N. 1547, 1553 Direct payments infrequent Vicarious liability is often a key issue THE STATUTE :  THE STATUTE Elements – Foreign Government Official Defined: “any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or any person acting in an official capacity for or on behalf of any such government or department, agency or instrumentality.” - Employees of state-owned entities are government officials. See. e.g., DOJ FCPA Rev. Prc. Release Nos. 93-1 (April 20, 1993) - Payments to relatives of foreign official hired as consultant or agents may or may not violate FCPA, depending on circumstances THE STATUTE:  THE STATUTE Elements – Obtaining/Retaining Business Only illegal if made to “assist in obtaining or retaining business for or with, or directing business to, any person” 15 U.S.C. §§ 78dd-1, 2 - Both houses of Congress at time of passage rejected bills that would have prohibited payments unrelated to the award or renewal of business. Conference committee added language in text. See, e.g., Stephen F. Black & Roger M. Witten, Complying with the Foreign Corrupt Practices Act, § 206, at 2-7 (1997). - In 1988 amendments, the language remained the same. The legislative history, however, suggests that the statute is intended to cover situations such as influencing legislation. - Language is broadly construed. See, e.g., U.S. v. Kay, discussed infra. THE STATUTE :  THE STATUTE “Grease” Payments The bribery provisions do not apply to so-called “grease” payments defined as “any facilitating or expediting payment to a foreign official, political party or party official the purpose of which is to expedite or to secure the performance of routine government action by a foreign official, political party, or party official.” 15 U.S.C. §§ 78dd-1(b) and 2(b) THE STATUTE :  THE STATUTE “Grease” Payments (cont.) Routine government action is “An action which is ordinarily and commonly performed by a foreign official in— obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; processing governmental papers, such as visas and work orders; providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country; providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or actions of a similar nature.” 15 U.S.C. § 78dd-1(f)(3)(A). THE STATUTE:  THE STATUTE “Grease” Payments (cont.) Generally these are small payments limited to routine services to which the person is entitled But see U.S. v. Vitusa Corp., No. 93-253 (S.D.N.Y. 1994), 3 FCPA Rep. 699.158 (1994) (guilty plea where payments made to expedite release of final payment required under existing contract that had been performed) THE STATUTE :  THE STATUTE Defenses – Overview Local law - Under 15 U.S.C. § 78dd-2(c)(1), it is an affirmative defense that “the payment, gift, offer, or promise, of anything of value that was made, was lawful under the written laws and regulations of he foreign official’s, political party’s, or candidate’s country.” THE STATUTE :  THE STATUTE Defenses (cont.) Promotional expenses - 15 U.S.C. § 78dd-2(c)(2), added in 1988, makes it an affirmative defense if “the payment, gift, offer, or promise or anything of value that was made, was a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to (A) the promotion, demonstration, or explanation of products or services; or (B) the execution or performance of a contract with a foreign government or agency thereof” - See however the recent cases against Lucient Technologies, discussed infra. THE STATUTE :  THE STATUTE Defenses (cont.) Statute of limitations - DOJ criminal cases The general federal criminal five year statute of limitations in 18 U.S.C. § 3282 applies. Under 18 U.S.C. § 3292, DOJ can seek a court order suspending the running of the statute for three years when a federal grand jury has been empanelled, and an indictment has not been returned, DOJ files a request with the court where the grand jury is sitting and the court finds by a preponderance of the evidence that an official request has been made for the evidence and it appears reasonably at the time that the evidence is in the foreign country. See U.S. v. Kozeny discussed infra. THE STATUTE :  THE STATUTE Defenses (cont.) - SEC actions Generally equitable injunctive actions to which statute of limitations does not apply Statute of limitations does apply to penalty Where the action is stale and punitive the statute may apply even to injunctive actions RECENT COURT DECISIONS:  RECENT COURT DECISIONS Obtaining/Retaining Business In U.S. v. Kay, the Fifth Circuit concluded that making payments to foreign officials to reduce customs duties and taxes may, depending on the circumstances, constitute payments made to “obtain or retain” business. The first ruling in 2004 was made after a motion to dismiss was granted while the second followed trial and conviction. RECENT COURT DECISIONS:  RECENT COURT DECISIONS U.S. v. Kay (cont.) Defendants were charged with bribing Haitian Customs officials to accept false documents to understate shipments by about one-third to reduce taxes The detailed indictment stated only that the bribe was paid to “obtain or retain” business, reciting the statutory language The district court dismissed concluding that bribes to obtain favorable tax treatment are not made to “obtain or retain business” RECENT COURT DECISIONS:  RECENT COURT DECISIONS U.S. v. Kay (cont.) The Fifth Circuit reversed. 359 F. 3d 738 (2004) (“Kay I”) - The FCPA only criminalizes certain payments, essentially those where there is a “quid pro quo” - After extensively reviewing the legislative history, the court held that “Congress intended for the FCPA to apply broadly to payments intended to assist the payor . . .” in business RECENT COURT DECISIONS:  RECENT COURT DECISIONS Kay I (cont.) Not every bribe to reduce taxes is prohibited however, because “it still must be shown that the bribery was intended to produce an effect – here, through tax savings – that would ‘assist in obtaining or retaining business.’” While increased profit margins is insufficient, when coupled with other facts it may fall within the prohibitions of the statute RECENT COURT DECISIONS:  RECENT COURT DECISIONS Kay I (cont.) Defendants were convicted and appealed claiming lack of fair notice and inadequate jury instructions on question of what is “obtaining or retaining business.” The court affirmed. 2007 WL 3088140 (5th Cir. Oct. 24, 2007) (Kay II) The court rejected both arguments by defendants RECENT COURT DECISIONS:  RECENT COURT DECISIONS Kay II On the question of obtaining/retaining business the court held “Paying taxes and customs duties is inherent to foreign business, and decreasing these payments through bribery, as Defendants have admitted, was common practice in Haiti. If bribery to obtain favorable tax and customs obligations was intended as common as established in the record, then it is reasonable to imply that businesses viewed these practices as one of the only guarantees of maintaining a successful business in Haiti in the 1990’s. It is not therefore a novel application of the law for the district court to find that Defendants made these payments for the purpose of ‘retaining business.’” RECENT COURT DECISIONS:  RECENT COURT DECISIONS Kay II (cont.) The court found the instructions on “corruptly” and “willfully” sufficient: “Corruptly” means an act that is “done voluntarily and intentionally, and with a bad purpose or evil motive of accomplishing either an unlawful end or result or a lawful end or result by some unlawful method or means.” Knowingly was defined in the instructions as a knowing act as one “done voluntarily ad intentionally, not because of accident or mistake.” See also In the Matter of Bristow Group, Inc., Admin. Proc. File No. 3-12833, SEC Release 56533, (Sep. 26, 2007), http://www.sec.gov/litigation/admin/2007/34-56533.pdf. (Settled administrative proceeding where the Order alleged the Bristol Group made improper payments to Nigerian state government officials in return for a reduction in employment taxes. Respondent consented to a cease and desist order as to the anti-bribery, books and records and internal control provisions). RECENT COURT DECISIONS :  RECENT COURT DECISIONS Statute of Limitations U.S. v. Kozeny - Victor Kozeny, Frederick Bourke and David Pikerton were indicted for engaging in a scheme to bribe officials in Azerbaijan to ensure that the state-owned oil company would be privatized so they could share in the profits from that transaction. - Defendants moved to dismiss. - DOJ had sought assistance from two foreign governments and, after the five-year limitation period expired, obtained an order under 18 U.S.C. § 3292 extending the limitation period. RECENT COURT DECISIONS:  RECENT COURT DECISIONS U.S. v. Kozeny (cont.) The district court dismissed the indictment as time barred - First, the court held that the general five-year limitation period applies to FPCA cases - Second, the court held that the time of the order is key, not the time of the request. 493 F. Supp. 2d 518 (S.D.N.Y. 2007) - Subsequently, the court modified the dismissal order, reinstating three counts which appear to be based on conduct within the limitation period. 493 F. Supp. 2d 693 (S.D.N.Y. 2007) RECENT COURT DECISIONS:  RECENT COURT DECISIONS U.S. v. Kozeny (cont.) DOJ has appealed to the Second Circuit Subsequently, Omega Advisors, Inc. entered into a non-prosecution agreement with the U.S. Attorney’s Office for the Southern District of New York based on allegations that the company participated in oil privatization efforts in Azerbaijan where it knew that Mr. Kozeny had entered into corrupt arrangements with officials. RECENT COURT DECSIONS:  RECENT COURT DECSIONS Public Authority Defense U.S. v. Griffen, 473 F.3d 30 (2nd Cir. 2007) The Second Circuit dismissed a government appeal from what it claimed was the denial of a motion in limine in an FCPA case where defendant appeared to be raising a public authority defense Although the court dismissed the appeal it made certain “observations” about the defense RECENT COURT DECISIONS:  RECENT COURT DECISIONS U.S. v. Griffen (cont.) The “public authority” defense has two branches – actual authority and one based on estoppel Actual authority: “exists where a defendant has in fact been authorized by the government to engage in what would otherwise be illegal activity.” The proffer must disclose facts establishing actual or apparent authority. Entrapment by estoppel defense: “can be established without the defendant having received actual authorization. It depends on the proposition that the government is barred from prosecuting a person for his criminal conduct when the defendant, by its own actions, induced him to do those acts and led him to rely reasonably on his belief that his actions would be lawful by reason of the government’s seeming authorization.” Again, specific facts must be proffered RECENT COURT DECISIONS:  RECENT COURT DECISIONS U.S. v. Griffen (cont.) A related doctrine of negation of intent is not an affirmative defense, but an attempt to negate the government’s proof of intent, demonstrating that the defendant acted in good faith. Only the Eleventh Circuit has adopted this position. While the court indicated it had great difficulty with this theory, it “assumed” that there are some circumstances where it might apply. LARGE PENALTIES:  LARGE PENALTIES A Year of Record Settlements: 2007 DOJ obtained the largest FCPA fine in Vetco International SEC and DOJ obtained the largest combined FCPA settlement in Baker Hughes LARGE PENALTIES:  LARGE PENALTIES Records: Vetco International Three wholly owned subs of Vetco pled guilty to FCPA bribery violations; a fourth entered into a non-prosecution agreement. U.S. v. Vetco Gray Controls, Inc., No. 07-004 (S.D. Tex. filed Feb. 6, 2007); U.S. v. Aibel Group Ltd., No. 07-005 (S.D. Tex. filed Feb. 6, 2007). LARGE PENALTIES:  LARGE PENALTIES Records: Vetco International (cont.) Vetco Gray UK provided services and construction equipment to Nigeria’s first deep water oil drilling project in conjunction with Aibel Group, Vetco Gray Controls Inc. (based in Huston and a domestic concern) and Vetco Controls Ltd. From 2002 to 2005, the companies authorized a freight forwarding agent to make at least 378 corrupt payments totaling $2.1 million to Nigerian Customs officials to obtain preferential treatment. Previously, in 2004, Vetco Gray UK (then named ABB Vetco Gray UK) pled guilty to FCPA bribery charges relating to a Nigerian government agency. Prior to being acquired DOJ had issued an opinion to the acquirer noting that the subsidiary must implement an FCPA compliance program. LARGE PENALTIES:  LARGE PENALTIES Records: Vetco International (cont.) The plea agreements require - The payment of the fine of $26 million - Undertake a complete investigation of the conduct in various countries - Ensure that if any companies are sold, the agreement binds the acquirer to the monitoring and investigation obligations LARGE PENALTIES:  LARGE PENALTIES Records: Baker Hughes The more than $44 million in penalties, criminal fines, disgorgement and interest paid as part of the resolution of these cases is the largest joint FCPA settlement to date. Also, the $10 million civil penalty paid for violating a 2001 SEC C&D Order is the first of its kind. LARGE PENALTIES:  LARGE PENALTIES Records: Baker Hughes (cont.) The SEC complaint alleges that Baker Hughes paid about $5.2 million to two agents knowing that some or all of the money was intended to bribe officials of state-owned companies in Kazakhstan Defendant Fearnley urged that the agents be hired, claiming the company would not get any future business without them The company was awarded a contract in the oil fields in Kazakhstan and had over $219 million in gross revenue LARGE PENALTIES:  LARGE PENALTIES Records: Baker Hughes (cont.) The company also obtained a second contract with KazTranOil, the national oil transportation operator of Kazakhstan. A $1 million fee was paid to the agent who was representing a high ranking executive of KazTranOil. In addition, Baker Hughes made payments in Nigeria, Angola, Indonesia, Russia, Uzbekistan and Kazakhstan under circumstances which reflect a failure of sufficient controls to determine the nature of the payments and whether they were for legitimate services. LARGE PENALTIES:  LARGE PENALTIES Records: Baker Hughes (cont.) SEC settlement: - Consent to an injunction based on the anti-bribery, books and records and internal control provisions - Pay disgorgement of $19,944,778 - Pay prejudgment interest of over $3 million - Pay $10 million civil penalty for violation of a prior C&D FCPA order - Retain an independent consultant to review FCPA compliance and procedures SEC v. Baker Hughes, Inc., Civ. Action No. 07-01408 (S.D. Tex. filed April 26, 2007). Note Mr. Fearnly has not settled. LARGE PENALTIES:  LARGE PENALTIES Records: Baker Hughes (cont.) DOJ - Charging documents alleged that sub BHS bid on and obtained a contract to develop an oil field. - KazTranOil officials demanded a commission; BHS agreed to pay 2% of the revenue on the current project and 3% on future projects. A commission of $4.1 million was paid. LARGE PENALTIES:  LARGE PENALTIES Records: Baker Hughes – DOJ (cont.) Resolution -- BHS pled guilty to FCPA violations Baker Hughes entered into a deferred prosecution agreement The agreement requires Baker Hughes to hire an independent monitor for three years to oversee the creation of a robust compliance program and to make a series of reports to DOJ. U.S. v. Baker Hughes Inc., No. 07-130 (S.D. Tex. filed April 11, 2007) INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Industry wide investigations appears to be another trend. This contrasts with more traditional inquiries that tended to focus on a single company. What is perhaps the largest industry-wide inquiry stems from The United Nations Oil-For-Food Program (“OFFP”). - The Report of the Independent Inquiry Committee Regarding The OFFP concluded that “Iraq manipulated the Program to dispense contracts on the basis of political preference and to derive illicit payments from companies that obtained oil and humanitarian goods contracts.” INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS The report identified 2,253 companies who paid over $1.8 billion in illicit income to the Iraqi government. The SEC and DOJ have a number of companies under investigation relating to this matter. About two dozen companies have disclosed inquiries. Set forth below are recent cases related to this matter INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS El Paso Corporation On February 5, 2007 the company resolved FCPA charges with the SEC, the U.S. Attorney’s Office for the Southern District of NY, and the Office of Foreign Asset Control (“OFAC”) regarding its participation in the OFFP SEC: Claimed that beginning in 2001 the company paid approximately $2.1 million in surcharges to Iraq’s State Oil Marketing Organization (“SOMO”) on 15 contacts. - After the first contract SOMO told the company the surcharge would be added to all contracts - Subsequent transactions were handled through an agent - Surcharges were recorded as “cost of goods sold” INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS El Paso Corporation (cont.) SEC resolution: - Injunction prohibiting future violations of the books, records and internal control provisions - Disgorge over $5.4 million in profits (satisfied per an arrangement with U.S. Attorney) Civil penalty of over $2.2 million SEC v. El Paso Corp., Civ. Action No. 07-00899 (S.D.N.Y filed Feb. 7, 2007) INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS El Paso Corporation (cont.) U.S. Attorney - Entered into a non-prosecution agreement - Required to forfeit about $5.48 million which will be transferred to the Development Fund of Iraq sanctioned under a U.N. resolution (payment here satisfies SEC disgorgement obligation) INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Textron, Inc. Settled FCPA investigations by the SEC and DOJ regarding its involvement with the humanitarian side of OFFP on August 23, 2007. The settlement resulted in large part from the cooperation of the company. SEC - Violated books, records and internal control provisions when its two French subs paid over $650,00 in “kickback payments” - Payments are “after sales service fees” made by inflating the value of the contract and then increasing agent’s commission - Company reimbursed the agents for payment made - Payments recorded as “commissions” and “consulting fees” - Company made about $1.9 million in profits on the deals INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Textron (cont.) SEC settlement - Permanent injunction prohibiting future violations of the books, records and internal control provisions - Pay disgorgement of about $2.2 million plus over $450,000 in prejudgment interest - Pay civil penalty of $800,000 - Comply with certain undertaking regarding its FCPA program SEC v. Textron, Inc., Civ. Action No. 07-01505 (D.D.C. filed Aug. 23, 2007) INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Textron (cont.) DOJ Entered into a non-prosecution agreement Pay $1.15 million fine Press Release, Dept. of Justice, Textron Inc. agrees to $1.15 million fine in connection with payment of $600,000 in Kickbacks by its French subsidiaries under the United Nations Oil for Food Program, (Aug. 23, 2007), http://www.usdoj.gov/opa/pr/2007/August/07_crm_646.html (last visited Feb. 7, 2008). INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS York International On October 1, 2007, the company settled anti-bribery, books and records, and internal control charges involving OFFP and other countries with the SEC and DOJ SEC - OFFP Dubai sub allegedly made over $647,000 in kickback payments in connection with sale of humanitarian goods to Iraq under OFFP Services characterized as “after-sales service fees” No bona fide services performed Payments were made through a third party to Iraqi-controlled accounts in other countries Company made over $931,000 in net profits on six transactions INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS York International (cont.) SEC (cont.) - Delaware sub In 2003 and 2004, paid about $522,500 to intermediary Knew that most of payments were to bribe UAE officials Bribes paid to secure construction contracts on government-owned luxury hotel Sub had revenue on these deals for about $3.7 million INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS York International (cont.) SEC (cont.) - Other transactions From 2001 to 2006, other subsidiaries made over $7.5 million in illicit payments to secure orders on certain commercial and government projects in Middle East, India, China, Nigeria and Europe Payments referred to as “consultancy payments” internally and concealed Total of 854 improper payments on 774 contracts Over $8 million in net profits from the transactions INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS York International (cont.) SEC settlement - Permanent injunction of the anti-bribery, books, records and internal control provisions - Pay disgorgement of about $8.9 million plus over $1 million in prejudgment interest - Pay civil penalty of $2 million - Required to retain an independent compliance monitor SEC v. York International Corp., Civ. Action No. 7-01750 (D.D.C. filed Oct. 1, 2007) INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS York International (cont.) DOJ - Information charged conspiracy, wire fraud and FCPA books, records and controls violations - Entered into deferred prosecution agreement - Pay $10 million penalty - Compliance program and procedures reviewed by an independent monitor U.S. v. York International Corp., No. 07-01750 (D.D.C. filed Oct. 1, 2007) INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Ingersoll-Rand Settled books and records charges with SEC and wire fraud and FCPA books and records charges with DOJ as to one sub SEC complaint alleged violations by three subs - ABE (German sub) Alleged to have entered into six contracts involving over $718,000 in kickback payments After first contract, Ingersoll chairman’s office received fax about kickback arrangement INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Ingersoll-Rand (cont.) Salesman for sub then negotiated two contracts with kickbacks of over $292,000 to Iraqi ministry After some disclosure to U.N., the company was told arrangements illegal and the contracts did not go forward Did not withdraw from program Subsequently entered into four more contracts and paid an additional $425,000 in kickbacks INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Ingersoll-Rand (cont.) SEC (cont.) - I-R Italiana (Italian sub) Entered into four program agreements Paid over $474,000 in side payments Concealed with false paper work Also sponsored two-day tour for eight Iraqi Oil Minister officials to Italy; officials spent two additional days on holiday and were given $8,000 in pocket money INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Ingersoll-Rand (cont.) SEC (cont.) - I-R Benelux (Belgian sub) Sold equipment to a Jordanian third party Knew it would be resold at 70% mark-up to Iraq After sale, service fees were paid on deal Another similar contract with Irish sub never approved by U.S. INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Ingersoll-Rand (cont.) SEC settlement - Permanent injunction re books, records and internal controls provisions - Pay disgorgement of over $1.7 million plus about $560,000 in prejudgment interest - Pay civil penalty of $1.95 million - Comply with certain undertakings regarding its FCPA compliance program SEC v. Ingersoll-Rand Co. Ltd., Civ. Action No. 07-01955 (D.D.C. filed Oct. 31, 2007) INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Ingersoll-Rand (cont.) DOJ - Filed one information against Thermo King Ireland Ltd charging conspiracy to commit wire fraud - Filed a second information against the Italian sub charging conspiracy to commit wire fraud and FCPA books and records violations - Resolved with a deferred prosecution agreement Company admitted responsibility for subs Agreed to pay $5 million penalty U.S. v. Thermo King Ireland Ltd., No. 07-296 (D.D.C. filed Oct. 31, 2007); U.S. v. Ingersoll-Rand Italiana S.p.A., No. 07-00294 (D.D.C. filed Oct. 31, 2007) INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Chevron Settled with the SEC, DOJ, OFAC and the Manhattan District Attorney’s Office re $20 million in kickbacks paid in connection with the purchase of oil from Iraqi. SEC - Alleged Chevron paid $20 million in surcharges in connection with the purchase of 78 million barrels of crude oil under 36 contracts INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Chevron (cont.) Payments made through third party Chevron’s books show that after demand for surcharge, payments to third party increased Nevertheless, management routinely authorized the payments Despite a policy of conducting due diligence on contracting, partners failed to do so in some instances INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Chevron (cont.) SEC settlement - Injunction prohibiting future FCPA books and records violations - Pay disgorgement of $25 million (satisfied by complying with agreement with US Attorney and Manhattan district attorney) - Pay civil penalty of $3 million SEC v. Chevron Corp., Civ. Action No. 07-10299 (S.D.N.Y. filed Nov. 14, 2007) INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Chevron (cont.) DOJ - Entered into non-prosecution agreement - Pay $27 million as follows Forfeit $20 million to U.S. Attorney to be transferred to Development Fund of Iraq $5 million to New York County District Attorney’s Office $2 million to OFAC in settlement of civil penalties INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Akzo Nobel Settled with DOJ and SEC re books and records charges regarding two subsidiaries and, in a first, DOJ deferred any fine conditioned on a settlement with Dutch authorities and the payment of a fine in that case. SEC - Intervet International (sub) Initially refused a request for a commission Later paid kickback of $38,741 on one agreement INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Akzo Nobel (cont.) SEC complaint (cont.) - Organon (sub) Entered into three contracts Paid sales service fees of $240,750 on the contracts Generally funded by inflating contract price and backdating documents to match the inflated prices INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Akzo Nobel (cont.) SEC settlement - Permanent injunction prohibiting future violations of the FCPA books, records and internal controls provisions - Pay disgorgement of about $1.6 million plus prejudgment interest of over $584,000 - Pay civil penalty of $750,000 SEC v. Akzo Nobel, N.V., Civ. Action No. 07-02293 (D.D.C. filed Dec. 20, 2007) INDUSTRY-WIDE INVESTIGATIONS:  INDUSTRY-WIDE INVESTIGATIONS Akzo Nobel (cont.) DOJ - Entered into non-prosecution agreement - Company took responsibility for the subs - Requires full cooperation with Dutch National Public Prosecutor’s Office for Financial, Economic and Environmental Offenses - Contemplates resolution within 180 days with Dutch authorities and a fine of Euro 381,000 - If no agreement with Dutch authorities, pay $800,000 fine to U.S. Treasury Press Release, Dept. of Justice, Akzo Nobel Acknowledges Improper Payments Made by its Subsidiaries to Iraqi Government Under the U.N. Oil for Food Program, Enters Agreement with Department of Justice (Dec. 20, 2007), http://www.usdoj.gov/opa/pr/2007/December/07_cm_1024.html (last visited Feb. 7, 2005) INDIVIDUALS:  INDIVIDUALS SEC and DOJ officials have made it clear in various statements that one focus of FCPA cases is individuals DOJ brought an number of FCPA cases last year including - U.S. v. Si Chan Wooh, No. 07-244 (D. Or. filed June 26, 2007); see also SEC v. Si Chan Wooh, No. 07-957 (D. Or. filed June 29, 2007) Former executive of Schnitzer Steel based in Portland One count information alleges conspiracy to violate FCPA by paying over $200,000 bribes and gifts to managers of government owned steel mills in China to induce them to buy scrap metal INDIVIDUALS:  INDIVIDUALS DOJ cases – Si Chan Wooh (cont.) In addition defendant is alleged to have made about $1.7 million in other payments to privately owned steel mills in China and South Korea DOJ settlement: Mr. Wooh pled guilty to the information and is cooperating with the government SEC settlement: consented to an injunction barring FCPA books and records violations and agreed to disgorge over $14 million in bonuses plus pay prejudgment interest and a civil penalty of $25,000 INDIVIDUALS:  INDIVIDUALS DOJ cases (cont.) U.S. v. Jason Edward Steph, No. 07-00307 (S.D. Tex. filed July 18, 2007) - Former executive of Willbros Group named in four count indictment - Alleges conspiracy to pay over $6 million in bribes to Nigerian officials to obtain and retain gas pipeline construction business controlled by government company - Pled guilty to Count I, conspiracy to violate FCPA and is cooperating with the government INDIVIDUALS:  INDIVIDUALS DOJ case (cont.) U.S. v. Roger Michael Young, No. 07-609 (D. N.J. filed July 25, 2007); U.S. v. Steven J. Ott, No. 07-608 (D. N.J. filed July 25, 2007); see also U.S. v. Yaw Osei Amoako, No. 05-1122 (D. N.J. filed June 28, 2006) - Each defendant is a former executive of ITXC Corp, a global telecommunications company - Each was charged in an information which alleged that they conspired to violate the FCPA and Travel Act by paying about $266,000 in bribes to foreign officials of state owned and foreign owned telecommunications carrier in Nigeria, Rwanda and Senegal to obtain/retain business for ITXC - Messrs. Ott and Young pled guilty on July 25, 2007; Yaw Osei Amoako pled guilty in 2006 and was sentenced to 18 months in prison. See also SEC v. Ott and Young, Civ. Action No. 06-4195 (D. N.J. filed Sept. 6, 2006); SEC v. Yaw Osei Amoako, Civ. Action No. 05-4284 (D. N.J. filed Sept. 1, 2005). INDIVIDUALS:  INDIVIDUALS SEC actions SEC v. Martin, No. 07-0434 (D.D.C. filed March 6, 2007) Former Government Affairs Director of Asia for Monsanto Co. Alleged to have paid a $50,000 bribe to senior Indonesian Ministry of Environment official as part of failed effort to repeal an unfavorable consent decree Settled with an injunction prohibiting future violations of the FCPA books and records provisions and the payment of a $30,000 civil penalty. Note: Monsanto settled in a separate administrative proceeding INDIVIDUALS:  INDIVIDUALS SEC actions (cont.) SEC v. Srinivasan, Civ. Action No. 07-01699 (D.D.C. filed Sept. 25, 2007) - Defendant is the former president of A.T. Kearney India, a sub of EDS - Alleged to have authorized his sub to pay $720,000 in illicit payments to senior employees of Indian state-owned enterprises to avoid having contracts canceled - Settled with an FCPA books and records injunction and the payment of a $70,000 civil penalty. The company settled a separate administrative proceeding. INDIVIDUALS:  INDIVIDUALS SEC actions (cont.) SEC v. Monty Fu, Civ. Action No. 07-01735 (D.D.C. filed Sept. 28, 2007) - Defendant is founder and former chairman of Syncor International - Alleged to have made payments over a 17 year period to doctors employed in private and public hospitals in Taiwan as commissions and referral fees - Booked as “advertising and promotional expenses” - Settled with an injunction prohibiting future violations of the FCPA books and records provisions and the payment of a civil penalty of $75,000. OTHER SIGNIFICANT CASES:  OTHER SIGNIFICANT CASES Promotional expenses Payment of travel and entertainment expenses for foreign officials is a significant issue under the FCPA. Last year, there were two significant SEC cases and two DOJ opinions dealing with this issue. OTHER SIGNIFICANT CASES:  OTHER SIGNIFICANT CASES Promotional expenses (cont.) SEC v. Lucent Technologies, Inc., Civ. Action No. 07-092301 (D.D.C. filed Dec. 21, 2007) Complaint alleges that in a three-year period, the company, through a sub, paid over $10 million for about 1,000 Chinese foreign officials to travel to the U.S. About 315 of the trips had a disproportionate amount of sightseeing, entertainment and leisure Some trips were, in fact, vacations to places such as Hawaii, Las Vegas, the Grand Canyon, Disney Word and similar venues Lucent was either doing business with or attempting to do business with these individuals OTHER SIGNIFICANT CASES:  OTHER SIGNIFICANT CASES Promotional expenses – Lucent (cont.) The expenses for these trips were booked to a “factory inspection account” The complaint also alleged that for years Lucent provided inadequate FCPA training Settlement: The company consented to an FCPA books and records injunction and an order requiring payment of a $1.5 million civil penalty. DOJ: The company also entered into a non-prosecution agreement with DOJ under which it agreed to pay a $1 million fine. OTHER SIGNIFICANT CASES:  OTHER SIGNIFICANT CASES Promotional expenses (cont.) SEC v. The Dow Chemical Company, Civ. Action No. 07-00336 (D.D.C. filed Feb. 13 2007) - Complaint Alleges that a sub in India made improper payments to Indian government officials consisting of over $37,000 in gifts, travel, entertainment and other items Sub also made improper payments of an official in India with the Central Insecticides Board to expedite the registration of three products Settled: Injunction prohibiting future violations of the books and records provisions of the FCPA and the payment of a civil penalty of $325,000. OTHER SIGNIFICANT CASES:  OTHER SIGNIFICANT CASES Promotional Expenses (cont.) DOJ opinions - FCPA Op. Proc. Rel. 2007-01. Would not bring an enforcement action where Company paid domestic travel expenses of six-person foreign government official delegation in connection with visit to requestor’s U.S sites Conditions: expenses properly recorded; legal opinion that it is proper under local law; paid through a service provider; no spending money; gifts of nominal value OTHER SIGNIFICANT CASES:  OTHER SIGNIFICANT CASES Promotional Expenses – DOJ Opinions (cont.) FCPA Op. Proc. Rel 2007-02 - Request is similar to first - Adds two points which are not disapproved Payment of modest daily incidental expenses backed by receipts Modest four-hour sightseeing tour of city OTHER SIGNIFICANT CASES:  OTHER SIGNIFICANT CASES Mergers Many cases involve mergers and matters discovered during due diligence SEC v. Delta & Pine Land Co. and Turk Deltapine, Inc., No. 07-01352 (D.D.C. filed July 25, 2007) - Two settled actions involving a parent and sub - Both allege that Turk Deltaphine made payments of about $43,000 to officials of the Turkish Ministry of Agriculture and Rural Affairs to obtain government reports and certifications OTHER SIGNIFICANT CASES:  OTHER SIGNIFICANT CASES Mergers (cont.) Monsanto discovered the conduct in pre-merger due diligence and reported The SEC brought an administrative proceeding against the parent which settled with a cease and desist order and the requirement that an independent consultant be retained A civil injunctive action was brought against the sub which was settled with an injunction barring future FCPA books and records violations and the payment of a $300,000 penalty SIGNIFICANT PENDING CASES:  SIGNIFICANT PENDING CASES U.S v. Jefferson, No. 07-00209 (E.D. Va. filed June 4, 2007) Sixteen-count indictment against U.S. Congressman William Jefferson Among the charges is an alleged violation of the FCPA anti-bribery provisions along with wire fraud, money laundering obstruction of justice and RICO In part, the indictment alleges that the Congressman promised to make a $500,000 “front-end payment” to a Nigerian official for regulatory approvals and a “back end payment” of 50% of the joint venture’s profits SIGNIFICANT PENDING CASES:  SIGNIFICANT PENDING CASES U.S. v. Smith, No. 07-69 (S.D. Cal. filed Apr. 25, 2007) Mr. Smith is the co-founder of Pacific Consolidated Ind. Charged with violating FCPA anti-bribery provisions, money laundering and tax offenses Alleged to have made more than $300,000 in bribes to an official of the U.S. Ministry of Defense for the award of Royal Air Force contracts ANALYSIS AND CONCLUSIONS:  ANALYSIS AND CONCLUSIONS Both the SEC and DOJ have reemphasized FCPA enforcement A record number of cases were brought last year The number of open investigations suggest a continued focus in this area Expect more cases this year ANALYSIS AND CONCLUSIONS:  ANALYSIS AND CONCLUSIONS Significant points and trends include - Increased size of fines - Increased emphasis on expansive industry and “other subsidiary” investigations - Focus on individuals - Inconsistent application of cooperation standards - Inconsistent use of non-prosecution and deferred prosecution agreements ANALYSIS AND CONCLUSIONS:  ANALYSIS AND CONCLUSIONS Impact of prior consent decrees Increased use of monitors and undertakings Opportunities for coordinated resolutions among regulators - Possibility of “joint” credit for payments Overall: More enforcement; harsher sanctions Suggests emphasis on - Effective compliance procedures consistently applied - Periodic education of employees - Careful assessment of “country risk” - Complete due diligence when hiring agents

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