FCPA Compliance and Enforcement Trends Annual Guide: April 2017

Transcription

1 FCPA Compliance and Enforcement Trends Annual Guide: April 2017

2 2017 Smith Pachter McWhorter PLC. This publication is not intended to provide legal advice but to provide information on legal matters. Transmission is not intended to create and receipt does not establish an attorney-client relationship. Readers should seek specific legal advice before taking any action with respect to matters mentioned in this publication.

3 SMITH PACHTER McWHORTER PLC Table of Contents I. Introduction II. III. The Statutory Framework 10 Frequently Asked Questions Regarding FCPA Anticorruption Compliance Programs 1. What subject areas must anticorruption compliance policies and procedures address? How much and what kind of training must a company provide to satisfy DOJ/SEC standards? What should an American company do to prevent misconduct by a non-u.s. subsidiary? What measures should be taken to prevent third party misconduct? Can travel, entertainment, gifts, or product discounts be provided to non-u.s. government officials? Should a company s anticorruption compliance policy prohibit facilitation payments? What is a company expected to do with respect to investigating potential corrupt payments? What do DOJ/SEC expect a company to do to assess its FCPA compliance risk? Does an SEC-registered company have to take additional anticorruption compliance measures beyond those taken by non-registered companies? Should a company s compliance program take into account non-u.s. anticorruption laws?... 7 IV. Enforcement and Policy Developments and Trends... 8 V Enforcement Actions: Case Summaries VI. FCPA Statutory Provisions and Penalties VII. DOJ Evaluation of Corporate Compliance Programs Analysis and Remediation of Underlying Misconduct Senior and Middle Management Autonomy and Resources Policies and Procedures Risk Assessment Training and Communications Confidential Reporting and Investigation Incentives and Disciplinary Measures Continuous Improvement, Periodic Testing and Review Third Party Management Mergers and Acquisitions Smith Pachter McWhorter White Collar Practitioners i

4 I. Introduction Our company has an anti-bribery policy and some associated procedures, but what else should we have? What do the DOJ and SEC expect? Can we both satisfy enforcement standards with respect to our program and still run a viable business with operations and sales abroad? And, given recent corruption scandals in countries outside of the U.S. such as Brazil and China, should we be worried about non-u.s. enforcement as well? In this annual Guide to the FCPA, we discuss answers to frequently asked questions regarding FCPA compliance, discuss recent developments and trends in enforcement, and provide a roundup of the cases from the most recent year. In addition, although the U.S. remains the world s leader in terms of anti-corruption enforcement, and U.S. standards, therefore, remain the most relevant for any company subject to U.S. jurisdiction, there is a trend towards multinational enforcement. That trend is well worth understanding as part of promoting compliance within your company and by its third party business partners, and to mitigate the risk of problems and subsequent enforcement actions by authorities whether in the U.S. or outside of it. This Guide is intended to be helpful for companies at various stages in their anticorruption compliance programs, from those who are still working to design and implement those programs, to those that already have robust measures in place but are looking to ensure their programs are up to date and continually evolving to reflect changing risks and best practices. Throughout, and consistent with our approach in our FCPA compliance, investigations and defense practice, we emphasize a practical approach. The key to a successful program is to understand the corruption risks that your company faces based on its business profile, on the one hand, and the expectations of enforcement authorities and more generally the standards for best practices developed by the compliance, legal and business communities on the other. Then, of course, the program has to be practical in terms of mitigating risk while appropriately allocating resources and setting priorities that are tailored to your company. II. The Statutory Framework The FCPA has two sets of provisions: The anti-bribery provision, which makes it unlawful to make a corruption payment to a foreign official for the purpose of obtaining or retaining business; and The books and records and internal controls provisions, which require companies with securities listed on stock exchanges in the United States to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. The above-listed provisions can be enforced against both corporate entities and individuals, and all can be enforced both criminally and civilly. A more detailed explication of these statutory provisions and the penalties for non-compliance is provided at the end of this Guide. ii

5 SMITH PACHTER McWHORTER PLC III. 10 Frequently Asked Questions Regarding FCPA Anticorruption Compliance Programs 1. What subject areas must anticorruption compliance policies and procedures address? As a general matter, a company s policies and procedures should address classic areas of FCPA risk as well as any risks that are particular to the company s business profile. Classic risk areas include: Third party due diligence, compliance requirements, and monitoring Gifts, meals, and entertainment Customer travel Employee expense reimbursements Use of cash (e.g., petty cash, or other cash needed for overseas payments) Political contributions and charitable donations and sponsorships Facilitation payments Solicitation of payments, and extortion Mergers and acquisition: anticorruption due diligence and post-m&a compliance program integration Risks that may be specific to a company s business profile can include, among others: Non-U.S. government sales and bidding Interaction with non-u.s. government regulators, e.g., customs, visa agencies, labor authorities, tax authorities, licensing authorities, particularly if through third party partners Non-U.S. sponsors required to conduct business in certain countries Local requirements to partner with local companies or to use local companies as suppliers or service providers Doing business in countries with a high degree of state involvement in the economy/state-owned or controlled enterprises A company s policies and procedures also need to address certain compliance program processes: Training and certification Compliance guidance resources Internal reporting mechanisms, including a hotline where reports can be made anonymously, and non-retaliation Ethics and compliance internal investigations Employee discipline for violations Corruption risk assessments Monitoring and updating of the anticorruption compliance program, including by making use of data and metrics regarding the functioning of the program and through control testing. It is also helpful to review the recent Guidance issued by the Department of Justice regarding how they evaluate corporate compliance programs, which guidance is summarized at the end of this Guide, and which is available in full at FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

6 2. How much and what kind of training must a company provide to satisfy the DOJ/SEC standards? The U.S. Department of Justice (DOJ) and Securities Exchange Commission (SEC) expect that training be risk-based. This means that anticorruption compliance training should be provided to all personnel who could confront corruption in performing their job duties, based on their function within the organization and/or location of work, and all personnel with managerial or supervisory responsibility over others in that position, to be trained as to the company s anticorruption policies, procedures and program. It is furthermore expected that employees in positions of leadership or trust will receive more in-depth and/or more frequent training. Such positions include senior executives and managers, personnel who occupy watchdog or gatekeeper functions (legal, compliance, finance, procurement, human resources), and personnel whose positions require them to handle transactions or situations that could put the company at risk (e.g., employees who manage non-u.s. government bids or interaction with non-u.s. government regulators, or who supervise third parties who perform such functions for the company). There are no specific rules regarding the specific training methodology including, for example, whether it is webbased or in-person or frequency that is required. The right answer for any given company as to any given portion of its workforce will vary based on the degree of risk, practicality, and resource commitment. Moreover, when a problem has occurred, it is unfortunately all too easy for enforcement authorities to criticize in retrospect the company s training program. Nor are the enforcement agencies typically sympathetic to arguments that it would have cost more than the company wanted to spend to do things differently. The best way to develop an effective, and defensible, training program is to be able to demonstrate that, whatever the particularities of the company s training program, that program is reasonably designed and effectively implemented given the three factors just mentioned: risk, practicality, and resources required. This includes using a format that is effective and clear, taking into account language issues, providing additional resources to employees who have questions, incorporating lessons learned from the company s experiences, and monitoring the effectiveness of the training program. Training of third party service providers, suppliers, subcontractors, business partners, and representatives or agents, raises its own set of questions and is more complex to administer. Here, though, again, the three factors come into play: risk, practicality, and resource commitment. For all third parties, the practicality factor has to take into account the fact that a company does not control a third party in the way that it controls employees. This means for example that a company cannot reasonably be expected to train all third parties on the company s anticorruption compliance program in the way that, generally speaking, a company will be expected to provide at least some level of training to all or most employees (exceptions when it comes to employees might be, for example, a blue-collar workforce with no possibility of triggering or observing FCPA issues based on their job function). Third parties, however, with significant responsibility for interacting with government authorities on the company s behalf, and who operate in high-risk environments, must receive strong training at the inception of the business relationships, and periodic refreshers if the relationship continues over time. The only exception to such third party training requirements may be where the third party is itself a demonstrably sophisticated and compliant organization with its own rigorous anticorruption policies, procedures, and training. Regarding third parties who pose less risk, whether specific training and if so what kind of training should be provided will depend on the circumstances. Finally, the DOJ and SEC expect that training will be documented and verified, including through a certification process. 2

7 SMITH PACHTER McWHORTER PLC 3. What should an American company do to prevent misconduct by a non-u.s. subsidiary? From a compliance program perspective, American companies must treat wholly-owned and majority-owned or controlled subsidiaries as entirely their own. U.S. enforcement authorities will view the American parent company as responsible, full stop, for conduct by such subsidiaries. Occasionally there might be technical arguments about U.S. jurisdiction that could lead to a viable defense in litigation against an enforcement action involving a non-u.s. subsidiary. But a compliance program cannot be structured around the hypothetical, and typically remote, possibility of such a defense in the event of a problem in the future. Thus, the company s anticorruption compliance program should be implemented at such subsidiaries, subject to any tailoring or modification reasonably needed to address local risks and local laws. With respect to minority-owned subsidiaries, American companies will be expected to take all measures that are reasonable and practical under the circumstances to ensure a robust anti-corruption compliance program is in place. What that looks like will depend on the degree and nature of the American company s influence over the operations. But it should also be remembered that if an American company staffs the minority-owned subsidiary with its own personnel, for example as secondees, then misconduct by such personnel should be presumed to be directly attributable to the American company and to trigger corporate liability. Thus, particular care must be taken to ensure that such personnel are well-trained in the American company s anticorruption policies and practices, and that such personnel flag any potential misconduct that they observe at the minority-owned subsidiary. 4. What measures should be taken to prevent third party misconduct? Third party intermediaries, service providers, suppliers, subcontractors, distributors, and partners (e.g., JV partners) pose one of the most important risk areas for a company to focus on in its anticorruption compliance program. Quite simply, third parties have historically been used to cover up corruption schemes, because that is generally the easiest way to avoid detection within the company itself. In addition, no matter how close the relationship, third parties and their expenditures, communications, and actions are inherently subject to fewer controls and less oversight than company employees. All of this means that a company that works with third parties to conduct business abroad must take a hard look at which third parties pose a risk of getting the company into trouble based on the scope of the engagement, the location of the work, the size and sophistication of the third party from a compliance point of view, and the nature and significance of the government interaction that could occur on behalf of the company, for example, is the government a client? A regulator? Are the transactions at issue high value? Etc. Then the company must develop appropriate due diligence/vetting procedures, compliance requirements, training and monitoring for those third parties that pose risk. In order for such measures to be practical and capable of effective implementation and maintenance, a company needs to have a workable process for categorizing third parties by risk (typically, companies develop a process for categorizing them as low, medium and high risk), and a clear, standardized process for conducting due diligence, imposing contractual requirements related to ethics and compliance that both require and incentivize compliance (and provide remedies for non-compliance), and monitoring or auditing company payments to third parties and the activities conducted by those third parties. These processes need to be integrated into relevant procurement, vendor management and/or other partnering processes. A company must also have a mechanism for going beyond its standard approach to respond to warning signs that might be particular to a given third party or set of circumstances. All of this can require significant planning, care and, even more importantly, expenditure of company resources. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

8 Fortunately, there are many valuable lessons to be drawn from the enforcement cases and, in addition, for experienced practitioners, from our work over many years on any number of FCPA cases involving all types of third parties and associated compliance risks or problems. Tailoring a company s anticorruption compliance program to adequately address third-party risks in a way that is practical and sensitive to resource constraints, can be done effectively by bringing these lessons learned and experience to bear. 5. Can travel, entertainment, gifts, or product discounts be provided to non-u.s. government officials? These items can be provided to non-u.s. government officials under some circumstances. First, the FCPA provides an affirmative defense for providing such items where they constitute reasonable (in terms of the value and type of item) expenses to support the promotion, demonstration or explanation of a company s products or services, or in support of the performance of a contract. As an affirmative defense, this means that the burden will be on the company to show that the expenditure meets these requirements. There are quite a few published examples of permissible scenarios provided via the DOJ s published Opinion Releases, as well as in the DOJ/SEC Guide to the Foreign Corrupt Practices Act. Examples that we have dealt with in practicing in this area are many and varied, and have included, among other situations, product discounts, gifts of product samples, business dinners with individual officials or larger dinner events for groups of officials, travel to company facilities for training accompanied by modest entertainment as a professional courtesy, and business-class air travel where appropriate based on the length of travel, level of the official, and consistent with company policies for its own employees, among many others. At bottom, the core issues are: whether one or more of the recognized statutory purposes is truly in play; whether the type and value of the item or benefit to be provided is reasonable in light of the purpose or, in other words, whether a reasonable prosecutor or other enforcement authority could conclude that the value of a trip or other hospitality is high enough to begin to corruptly influence the recipient; whether there is appropriate review and approval within the company, including, typically, by legal or compliance or, at least, by management personnel with sufficient authority and training as to compliance issues; is there documented evidence that the expenditure is appropriate; and is there transparency with the foreign official s employer or otherwise associated government agency. Second, because FCPA liability is only triggered where the provision of the thing of value is corrupt, there may be circumstances where this element is not met. As a legal matter, that means that the government could not meet its burden of proof to show that there was an intent to influence the official to obtain or retain business. That said, this is a legal distinction that should make little difference for a company s anticorruption compliance program: the same factors that would support the affirmative defense typically would support an argument that the government cannot show a corrupt purpose in the first place. 6. Should a company s anticorruption compliance policy prohibit facilitation payments? It has become increasingly common for companies to prohibit facilitation payments, i.e., low value payments made to officials to perform or to expedite non-discretionary, routine government acts to which a company is entitled, but for which the official seeks in essence a tip to perform. Facilitation payments are permitted under the FCPA. The trend to prohibit them despite that fact appears to stem from one or more of the following reasons: first, in today s global economy and with heightened awareness of compliance issues more generally in the corporate world, companies are increasingly sensitive to the fact that such payments typically are not permitted under other nation s anti-corruption laws; second, some companies take the view, which is the view taken by the Organisation for Economic Co-operation and Development (OECD), that permitting such payments could lead to a sense of complacency amongst company employees about bribery and/or encourage more demands for these and other types of payments from officials; and 4

9 SMITH PACHTER McWHORTER PLC third, some companies have concluded that navigating permissible vs. impermissible payments is too difficult to be worth the burden in training, legal review, and oversight of relevant transactions. Ultimately, because these payments are legal under U.S. law, from a U.S. perspective it is a business decision rather than a legal decision whether or not to prohibit them. And the reality is that in some parts of the world, it can be extremely difficult to obtain routine government acts to which a company is entitled without paying such tips. Failure to do so can lead to delays or outright denials of the act to which the company is entitled. But, because the exception is narrow, clear controls and review by Compliance or Legal are recommended. If on the other hand a company chooses to prohibit such payments altogether, it is important to provide the support, including with respect to helping employees plan ahead for these obstacles and develop effective strategies for resisting such demands without unduly compromising the needs of the business. We have found that this can be done, but it does require thought and some dedication of internal training, legal guidance, and business planning resources to have a ban on facilitation payments that truly works in practice. 7. What is a company expected to do with respect to investigating potential corrupt payments? When a company has reason to think that an employee or a business partner may have made corrupt payments to a foreign official, the DOJ and SEC expect that the company will look into the issue with sufficient rigor and depth to be able to assess: did payments occur or, even if they did not occur, were they offered or authorized; what was the benefit obtained or sought by the company; which company employees were involved, and how high up did the knowledge go; were there supervisors who either knew, were willfully blind, or failed to adequately train or supervise subordinates who were involved; why did the compliance failure occur, e.g., was it a bad apple employee or were there also failures in company policies, procedures, training, internal reporting mechanisms, culture (is there a culture of the end justifying the means), or other process issues; did personnel who serve as compliance watchdogs and gatekeepers (legal, compliance, finance, procurement, human resources) fail in their responsibilities; is there evidence that the incident was isolated or one-off or, by contrast, evidence that it reflected a pattern or larger set of corruption issues; if a business partner was involved, what was their culpability and must the relationship be terminated or can the partner be trusted in the future; and are there disclosure obligations under local or U.S. law based on the nature of the conduct (there is no general legal obligation to disclose an FCPA violation to U.S. authorities; but there could be an obligation to disclose locally, or even to U.S. authorities, depending on the circumstances, e.g., if the payments were made to foreign officials in connection with performing a U.S. government contract, there might be mandatory disclosure obligation under the Federal Acquisition Regulations. It is also worth noting that a 2015 policy memorandum issued by former Deputy Attorney General, Sally Q. Yates, stresses that, if a company wants to be eligible for cooperation credit from the DOJ, the company must provide to the DOJ all relevant facts about the individuals involved in the corporate misconduct. This means the investigation must have inquired into the facts sufficient to provide such evidence. In truth, experienced practitioners have long structured their investigations in this manner in any case: identifying who at the company was involved and the degree of their culpability is a core element of any rigorous investigation, and critical to develop appropriate remediation. That said, the Yates memorandum serves to reiterate the importance of this element. Finally, a note on expectations as to investigation methods: there is no pre-set recipe for what constitutes sufficient investigation steps. But enforcement agencies expect to see rigorous scoping, independence and objectivity by the investigation team, strong evidence of preservation efforts, thorough and non- collection (including from servers, laptops, personal devices, and other media) and review, analysis of financial records, and interviews of employees, former employees and/or third parties if relevant, and analysis of root causes and appropriately structured remediation to address those causes. How far to go in any given case will depend on what is reasonable and can be defended as such if the need arises in the circumstances of the case. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

10 8. What do the DOJ/SEC expect a company to do to assess its FCPA compliance risk? The DOJ and SEC expect that a company will take specific steps to assess its FCPA compliance risk with respect to both ongoing and prospective business. The degree of formality and the complexity of this risk assessment will vary according to the size, nature and complexity of the company as well as factors such as the extent of the company s non-u.s. business and operations, the countries with the highest corruption risk in which the company has business, the degree of interaction with foreign government agencies and officials required to conduct the company s business, and the extent to which the company relies on third parties to assist in those interactions. Some large companies engage in very formal and structured FCPA risk assessment processes, for example, by conducting risk assessment workshops with leadership from the business and from key corporate functions that seek to address risk both on a company-wide basis and more specifically with respect to the operations in particular countries or for particular lines of business; synthesizing the results of these workshops; and developing risk mitigation plans based on the results. This type of risk assessment process is also accompanied by taking into account information generated by compliance-related investigations, consultations to Legal/Compliance raised by the business, the results of internal audit activity, and other information sources. Other companies, based on their size, complexity of the operations or extent of non-u.s. business, or stage of development of their risk assessment processes, may undertake a risk assessment process that is somewhat less complex. Even in those cases, however, it is important that the company undertake to identify who within the company is in a position to assist in identifying corruption risk in the company s business, and to develop a process for collecting information from such sources, organizing it, using it to inform the company s anti-corruption compliance program, and then updating this information on a periodic basis. Moreover, the DOJ in particular has become increasingly datafocused, expecting that companies will collect and analyze data about its risks, as well as make use of internal audit findings as well as the results of internal investigations, and periodically update its program accordingly. However, such practices are wise not only because enforcement agencies expect it, but also because such a process is necessary to be able to deploy precious compliance resources wisely: all of this costs time and money, and the primary purpose of a business is to be a successful business for the company s customers and clients, shareholders or owners, and employees. An effective risk assessment process will help the company focus those resources on where they are most needed. 9. Does an SEC-registered company have to take additional anticorruption compliance measures beyond those taken by non-registered companies? The short answer to this question is: Yes, but. Yes: because the FCPA places additional obligations on public companies, i.e., they are legally required to maintain accurate books and records, and an adequate system of internal accounting controls. Those obligations extend to all parts of a public company that it owns, including wholly owned and majority-owned subsidiaries and other corporate affiliates. Public companies are moreover strictly liable for failures to comply: no bad intent is required for civil liability, although it is for criminal liability under these provisions. 6

11 SMITH PACHTER McWHORTER PLC But: all companies should be aware that the DOJ has imported the books and records and internal controls legal standard into the Department s requirements, as a policy matter, for an effective anticorruption compliance program. This is manifested in the requirements that the DOJ imposes on all companies both public and private when it settles an FCPA matter with them. Those requirements now require as a standard measure that the company maintain an anticorruption compliance program that satisfies the elements laid out in guidance issued by the enforcement agencies (principally, by the DOJ). One of those elements is that the company maintain internal controls and financial and accounting procedures sufficient to provide reasonable assurances that: books and records accurately reflect the substance of any economic transaction, and are not used to mask slush funds or other inappropriate expenditures; execution and recordation of transactions is per management authorization; access to assets is authorized; and recorded assets are compared with existing assets at regular intervals. Finally, the greater the risk profile of the company or of certain business activities in which it engages, the more rigorous must be the controls. 10. Should a company s compliance program take into account non-u.s. anticorruption laws? Certainly, any company with non-u.s. business or operations must take into account applicable anti-corruption laws of the local country, and of other countries if their laws apply to the company and have extraterritorial applicability (such as the U.K. Bribery Act). Failure to do so means legal risk. That said, the U.S. remains the leading enforcer in this area, and is likely to remain so for many years to come. Thus, it is no surprise that companies subject to U.S. jurisdiction tend to focus their anticorruption compliance programs first and foremost on the FCPA. It is also worth noting that the core precepts of U.S. and non-u.s. anticorruption laws tend to be the same or very similar. And where there are differences, U.S. laws tend to be as complete, or more expansive. As one example, the U.K. Bribery Act criminalizes both government and private sector bribery (aka commercial bribery ), whereas the FCPA criminalizes only government bribery, other U.S. laws exist to prosecute commercial bribery, including when such bribery is committed outside of the U.S. As another example, while there are a number of countries in the world whose criminal law systems do not provide for corporate criminal liability absent high-level management involvement in the conduct, under U.S. law corporate liability is triggered by the acts of any employee, no matter how low in the company pecking order, or third party acting as the company s agent within the meaning of vicarious liability principles. Of course, there are some exceptions: the U.S. permits facilitation payments, whereas other nation s anticorruption laws tend not to do this; the U.K. Bribery Act goes even farther than the FCPA in terms of premising liability on the acts of third parties, through the U.K. Bribery Act corporate failure to prevent bribery provision; and others. It is for this reason that, while it is generally reasonable to focus a company s anticorruption compliance program on U.S. law, the laws of other countries must also be taken into account where applicable to the company s operations. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

12 IV. Enforcement and Policy Developments and Trends a. New Guidance from the DOJ on Corporate Compliance Programs On February 2, 2017, the Fraud Section of the DOJ published its latest guidance on compliance programs, Evaluation of Corporate Compliance Programs. The guidance, while not entirely new or novel, is nonetheless the Fraud Section s clearest statement to date regarding the questions it considers when assessing corporate compliance programs. Notably, this guidance comes a little over a year after the Fraud Section appointed Hui Chen as dedicated compliance counsel in late Among her designated duties, Chen was tasked with providing guidance to Fraud Section prosecutors and developing benchmarks for evaluating corporate compliance and remediation measures. The new guidance is clearly a step in that direction and has been designated by the DOJ, along with the appointment of Ms. Chen, as part of the DOJ s Compliance Initiative. 1 While the topics highlighted in the most recent guidance also appear in other U.S. government and international organization publications, 2 the guidance, through targeted questions, provides insight into the Fraud Section s analyses behind eleven primary compliance evaluation areas. While the introduction warns that the topics and questions are neither a checklist nor a formula, particularly as all the topics and questions may not be relevant in all situations, this guidance will undoubtedly serve as a useful tool for developing and implementing compliance programs as well as assessing risk after a violation. The new guidance, described in more detail in section VII, infra, focuses far more on details than past guidance. For example, it includes several questions regarding the company s specific past practices, e.g., under Autonomy and Resources, the guidance asks Have there been specific transactions or deals that were stopped, modified, or more closely examined as a result of compliance concerns? and Have there been times when requests for resources by the compliance and relevant control functions have been denied? ; under Incentives and Disciplinary Measures: Has the company ever terminated or otherwise disciplined anyone (reduced or eliminated bonuses, issued a warning letter, etc.) for the type of misconduct at issue? ; and under Senior and Middle Management Have the board of directors and/or external auditors held executive or private sessions with the compliance and control functions. The specificity of these questions, and others, indicate that the DOJ will no doubt seek answers to these questions in future enforcement actions. To ensure the best result, we are advising our clients to review the guidance in detail and to be prepared to answer the DOJ s questions with sufficient and satisfactory responses should the need arise. Overall, this latest guidance highlights the importance of ensuring adequate oversight and assessing risk within corporate compliance programs as well as securing sufficient support and autonomy for the program from company management. This guidance is the latest publication aimed at refining the DOJ s compliance guidance. With the continued employment of dedicated compliance counsel, such as Hui Chen, we expect this trend to continue and the DOJ s Compliance Initiative to expand. 1 See Department of Justice, Fraud Section, Strategy, Policy and Training Unit, Compliance Initiative, 2 The guidance cross-references the United States Attorneys Manual; the United States Sentencing Guidelines; A Resources Guide to the U.S. Foreign Corrupt Practices Act (FCPA Guide); the Good Practice Guidance on Internal Controls, Ethics, and Compliance adopted by the Organization for Economic Cooperation and Development (OECD); and the OECD Anti-Corruption Ethics and Compliance Handbook for Business. 8

13 SMITH PACHTER McWHORTER PLC b. Record-breaking Enforcement Activity in 2016 Significant and record-breaking corporate enforcement activity occurred in 2016 in terms of both the number of cases and the amount of the financial sanctions or remedies imposed. In total, the SEC brought 24 enforcement actions and the DOJ brought 14 prosecutions against companies in These totals were easily the highest in the past five years. FCPA Enforcement Actions Corporate Resolutions 24 DOJ SEC These numbers represent matters settled with an enforcement action, but in some cases a company may be successful in obtaining a declination. In that situation, while there would have been a government investigation, the matter does not result in an official settlement because the agency closes the file. Declinations are not automatically a matter of public record and so the total number cannot be known. the DOJ has however increasingly sought to publically announce its declinations as part of the Department s efforts to demonstrate that voluntary disclosure and strong cooperation will receive credit (though they certainly do not guarantee a declination). Declinations can only be made public if the company consents. Last year, the DOJ announced eleven declinations. Five of these were described as being consistent with the DOJ s pilot program on granting credit for self-reporting. As further discussed below, two of these declinations were accompanied by forfeiture orders. This is a new development in the DOJ s practice in this area. These two cases are included in our statistics of enforcement actions because they involved a monetary sanction even though prosecution was declined. We note that, in our experience, the DOJ is more amenable to declining an enforcement action even where a violation appears to have occurred, though the SEC can and does at times decline. The SEC is willing to enforce cases that the DOJ may not consider worth of criminal prosecution, e.g., because of relatively low bribe amounts or gains obtained through bribes. The SEC also has a greater ability to bring enforcement actions given the broad scope of the books and records and internal controls provisions, and uses that ability to bring cases where bribery may not be provable. In 2016, the total amounts imposed in monetary fines and remedies by the two agencies, the DOJ and SEC, exceeded any other prior year: $2.46 billion in fines, penalties, disgorgement and/or pre-judgment interest, $1.37 billion of which was assessed by the DOJ 3 and $1.09 billion of which was assessed by the SEC. In 2015, the government s recovery totaled $140 million. In 2014 the total was $1.6 billion. 3 This amount includes the $3.1 million in disgorgements required as part of the DOJ s declinations in HMT LLC and NCH Corporation. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

14 The high total amount of fines and remedies assessed in 2016 is attributable to both the higher number of cases and the large settlements extracted in several cases: Teva Pharmaceuticals, Och-Ziff Capital Management, VimpelCom, J.P. MorganChase, Braskem, and Embraer. Three of these settlements were among the ten highest settlements in the history of FCPA enforcement. 4 c. FCPA Hot Spots and Recurring Problem Areas The DOJ and SEC entered into corporate resolutions with companies across a broad range of industries. Geographically, the 2016 cases reflected conduct in China, Russia, India, Africa, and a number of countries in South America and Mexico. China and Latin America produced the greatest number of cases, reflecting the high risks associated with doing business in those areas and, at least in the case of China, also likely reflecting ever greater involvement in that country s economy by multinational companies subject to U.S. law enforcement jurisdiction. Below are notable geographic and industry highlights. i. International Anti-Corruption Enforcement This past year saw a demonstrable increase in anticorruption enforcement in some countries outside of the U.S., particularly China and Brazil. There was also significant collaboration between U.S. authorities and Brazilian authorities. While cross-border collaboration is not new, the coordination between the U.S. and Brazil is a newer phenomenon. Brazil Odebrecht (United States, Brazil, and Switzerland) The Odebrecht investigation was the first FCPA-related case to come out of Brazil s Operation Carwash, the ongoing and long-running corruption probe by Brazilian authorities into the Brazilian state-run oil company Petrobras that, along with the Clean Companies Act, Brazil s 2014 anti-corruption statute designed to respond to OECD recommendations made several years earlier, has transformed the country s anticorruption compliance landscape. Odebrecht, the Brazilian construction conglomerate, along with its petrochemical subsidiary Braskem SA pleaded guilty to paying bribes to government officials around the world and agreed to pay a combined $2.6 billion in a global settlement. Embraer (United States and Brazil) In another example of international cooperation, on October 24, 2016, U.S. and Brazilian authorities announced that the Brazilian aircraft manufacturer Embraer S.A. reached resolutions with the DOJ and SEC, and with the Brazil Federal Prosecution Ministry and the Brazilian Securities Commission. The $205 million global settlement stemmed from allegations that Embraer used third parties to make improper payments to government officials in the Dominican Republic, Mozambique, India, and Saudi Arabia to secure government contracts in those countries. Rolls-Royce (United States, Brazil, and the United Kingdom) In yet another example of international coordinated enforcement, on January 17, 2017, the DOJ announced that the British-based power-systems manufacturer Rolls-Royce PLC agreed to pay a combined $800 million in penalties, 4 With regard to the top 10 FCPA settlements rankings to date, Teva Pharmaceuticals is in fourth place ($519 million), Och-Ziff Capital Management is in fifth place ($412 million), and VimpelCom is in eighth place ($400 million). 10

15 SMITH PACHTER McWHORTER PLC including $170 million criminal penalty to the DOJ, as part of a multijurisdictional resolution with authorities in Brazil, the United Kingdom, and the United States over allegations that, between 2000 and 2013, Rolls-Royce paid $11 million to government officials in exchange for government contracts, including, approximately, $9.3 million to officials of the Brazilian state-owned petroleum company Petrobras. Payments were also paid to officials in Kazakhstan, Azerbaijan, Angola, and Iraq. China GlaxoSmithKline (United States and China) In a case of uncoordinated multijurisdictional enforcement, on September 30, 2016, the SEC announced that the U.K.- based pharmaceutical company GlaxoSmithKline plc (GSK) agreed to pay a $20 million civil penalty to settle allegations that the company violated the FCPA s internal controls and books and records provisions. According to the SEC, from 2010 to 2013 the pharmaceutical company s Chinese subsidiary provided money, gifts, and other things of value to health care professionals in exchange for prescribing GSK products in China and increasing sales to state healthcare providers. According to the company, the DOJ also conducted an investigation but took no further action. In September 2014, Chinese authorities had fined GSK about $489 million in 2014 for the same conduct alleged bribes to health officials and doctors to boost sales. Chinese authorities also sentenced certain GSK executives in China for the alleged misconduct. The GSK case was the first enforcement case of its scale in China, and it is no exaggeration to say that it caused shock waves in the business community there. ii. China and the Healthcare Industry Similar to prior years, China continued to be a hot spot in 2016 FCPA enforcement actions. In particular, US enforcement agencies are aggressively pursuing cases against companies that make improper payments to healthcare providers employed by Chinese state-owned healthcare institutions, as four of the six resolutions against healthcare companies (AstraZeneca, GlaxoSmithKline, Novartis and SciClone) included allegations of such payments. Such cases have been a recurring theme in FCPA cases involving China, and thus reflect that corruption risk in the healthcare sector in China remains high. This trend reminds science companies of the need for robust compliance policies and controls for interacting with such officials. d. First Hedge Fund Case Other notable activity included the September 2016 settlement with Och-Ziff Capital Management Group (Och- Ziff). Along with an African subsidiary, Och-Ziff, through third parties, admitted to paying bribes to officials in the Democratic Republic of Congo (DRC) to secure mining rights and in Libya to induce the Libyan sovereign wealth fund to invest at least $300 million in Och-Ziff managed funds. The resulting settlement, for approximately $412 million in fines and disgorgement to the DOJ and SEC. Notable features of this matter include: This was the first FCPA enforcement matter brought against a hedge fund. Och-Ziff was the first occasion in which the SEC resolved individual charges with a CEO in an FCPA case. In Och-Ziff, both the CEO and CFO reached individual settlements. the DOJ also charged Gabonese national Samuel Mebiame with conspiracy to bribe African government officials to win mining rights for a joint venture involving Och-Ziff. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

16 This matter represents the first settlement with a financial services firm relating to what has been a long-standing enforcement focus on corporations attempting to profit from investment in Africa in mineral extraction and other natural resource development. i. Hiring Relatives of Foreign Officials Over the past few years, the SEC has brought several FCPA cases involving hiring relatives of foreign officials. 5 In 2016, there were two more cases involving such conduct: Qualcomm and JP Morgan Chase. The latter case was prosecuted by the DOJ as well as the SEC. In JPMorgan, the bank had maintained a Sons and Daughters program to hire children of Chinese officials in exchange for business deals. There are several noteworthy aspects of this particular resolution: JP Morgan Chase was credited for its disciplinary decisions which resulted in firing six employees and disciplining 23 others. It is also important to note the involvement of the Federal Reserve of Governors (Federal Reserve) in the JPMorgan resolution. Here, there was a parallel action by the Federal Reserve in the form of a cease and desist order and civil penalty, albeit under a different statute. 6 As a result, a portion of the JPMorgan settlement, $61.9 million out of almost $264.5 million, was paid to the U.S. Federal Reserve Bank, which had never previously occurred in an FCPA settlement. While JPMorgan did not receive disclosure credit because JPMorgan did not voluntarily and timely disclose the FCPA offenses, the company did receive full credit for cooperation with the DOJ s criminal investigation. In Qualcomm, the SEC s settlement stemmed from allegations of FCPA bribery and accounting violations arising from purportedly corrupt hiring practices in China. According to the SEC, between 2002 and 2012, Qualcomm provided or offered full-time employment and paid internship opportunities to relatives and acquaintances of Chinese government officials. These benefits were allegedly provided to influence officials of the Chinese government and state-owned enterprises to adopt Qualcomm s mobile-network technologies. Noteworthy aspects of this particular resolution include: This is the first matter of this nature in which the SEC charged the conduct under the anti-bribery conduct and not only under the books and records and internal records provisions. Significantly, despite the billions in revenue that Qualcomm allegedly gained by inducing foreign officials and state-owned enterprise executives to license and adopt Qualcomm technologies, the $7.5 million settlement did not include a disgorgement component. A likely explanation may be that the SEC had difficulty tying the alleged improper benefits to specific contracts with profits that could be disgorged. The JP Morgan and Qualcomm settlements, like the August 2015 resolution with BNY Mellon, demonstrates the risk involved in hiring relatives of well-connected foreign officials. While the FCPA does not strictly prohibit hiring a relative of a foreign official, these cases show that decision whether to do so often benefits from close FCPA scrutiny. 5 Past cases include BNY Mellon, Daimler, Paradigm, and UTStarcom. 6 The Federal Reserve sanctioned the bank for its failures under both the FCPA and its own internal compliance regime. The Federal Reserve s Cease and Desist Order focused on the risk management issues raised by the bank s failures in its anti-corruption program. 12

17 SMITH PACHTER McWHORTER PLC e. The DOJ Pilot Program i. History and Status of the Program On April 5, 2014, the DOJ Criminal Division initiated a one-year FCPA Pilot Program to encourage voluntary disclosures and cooperation by corporations with FCPA matters. 7 The guidance delineated the type of credit that corporations could receive for disclosure and cooperation and sought to increase the DOJ s transparency in identifying the credit that companies may receive for self-disclosure, cooperation, and remediation. On March 10, 2017, the Acting Assistance Attorney General Kenneth A. Blanco announced in a speech at the American Bar Association s National Institute on White Collar Crime that the Pilot Program would remain in place after the expiration of the first year until the Fraud Section could evaluate the utility and efficacy of the Pilot Program, including, whether to extend it, and what, if any, revisions to make to the program. 8 One area of analysis is the DOJ s practice that companies hold off on their own internal investigations for a prolonged period while the government prepares to conduct interviews with company employees. The current head of the DOJ s Fraud Section, Andrew Weissmann, has questioned this practice, stating that defense counsel is often a friend to the government in getting to the bottom of what happened and also has better access to far-flung witnesses. 9 To that end, the former criminal division head, Leslie Caldwell, instructed prosecutors to limit those requests. However, a long case may be handled by several prosecutors, and, at this time, the DOJ won t promise a certain amount of credit for a company that agrees to hold off on its own investigation at the government s request. The onus on ensuring that it receives sufficient cooperation credit, is therefore with the company. As in any government investigation and, certainly, in order to be able to seek maximum credit under the Pilot Program, it is critical that companies and their counsel carefully track and document their cooperation throughout the course of the investigation. ii. Declinations The most favorable result possible in a government FCPA investigation is to obtain a declination from the enforcement agency. In 2016 the DOJ granted five declinations under the pilot program: 10 Nortek Inc.; Akamai Technologies, Inc.; Johnson Controls, Inc.; HMT LLC; and NCH Corporation. In all five cases, the DOJ noted the following factors it considered when reaching its decision to close the case: (1) prompt voluntary self-disclosure; (2) the company s thorough investigation; (3) the company s full cooperation, including the provision of all relevant facts about the individuals involved in or responsible for the misconduct, and the company s agreement to continue to cooperate in any ongoing investigations of individuals involved; (4) the steps the company took to enhance its compliance program and internal accounting controls; and (5) the company s full remediation, including the termination and discipline of employees at all levels including managers and executives. In the cases of HMT LLC and NCH Corporation, despite declining to prosecute the matter, the DOJ required the companies to disgorge profits from the underlying scheme. This is a new approach for the DOJ: in our experience, declinations have not historically involved exaction of any financial penalty or remedy. In that way, declinations under the pilot program are more akin to non-prosecution agreements than might have been expected, although, importantly, 7 See Andrew Weissmann, Chief, Fraud Section, the DOJ Criminal Division, The Fraud Section s Foreign Corruption Practices Act Enforcement Plan and Guidance (April 5, 2016). 8 See Kenneth A. Blanco, Acting Assistance Attorney General, Speech at the American Bar Association National Institute on White Collar Crime, available at justice.gov/opa/speech/acting-assistant-attorney-general-kenneth-blanco-speaks-american-bar-association-national. 9 See Jody Godoy, Law 360, DOJ to Continue FCPA Pilot Program While Reviewing Results, available at 10 Available at FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

18 declinations do not bring about various obligations that non-prosecution agreements typically entail, such as prospective reporting requirements. In Nortek, Akamai, and Johnson Controls, the DOJ noted that it relied on the disgorgement and civil penalty the companies would pay to the SEC, and did not exact any fine or monetary remedy. iii. Criminal Fine Discounts As discussed in the previous section, under the Pilot Program, in order to qualify for full mitigation credit, a company must: voluntarily self-disclose; fully cooperate with a DOJ investigation; remediate, as appropriate, internal controls and compliance programs; and disgorge ill-gotten gains. Full compliance with these requirements can result in up to a 50% reduction off the bottom end of the applicable U.S. Sentencing Guidelines (USSG) fine range. Companies that do not voluntarily self-disclose are eligible to receive no more than a 25% reduction off the bottom of the fine range suggested by the USSG. In its 2016 settlement with PTC China, the DOJ provided additional detail on how it determined what credit to give a company for voluntary disclosure, cooperation, and remediation. In that case, the DOJ stated that PTC China did not receive full cooperation credit because, even though the company self-reported in 2011, the DOJ concluded that the company failed to disclose certain facts that were known at the time of the self-report, and instead only disclosed those additional facts three years later, after the DOJ had uncovered salient facts regarding the Companies responsibility for the improper travel and entertainment expenditures at issue independently and brought them to the Companies attention. Ultimately, PTC China received a 15% discount off the bottom of the applicable USSG range as partial cooperation credit. In several other cases that were settled after the Pilot Program s announcement, the DOJ granted reductions varying between 20 to 25% to companies that cooperated but failed to voluntarily disclose. For example, Och-Ziff, Embraer, and Teva received 20% discounts off the bottom of the fine range. Teva obtained this discount despite allegedly having failed to cooperate in earlier stages of the investigation, including by making vastly overbroad assertions of attorney-client privilege and failing to provide documents on a timely basis. At the same time, however, in Odebrecht/ Braskem, the government awarded the maximum 25% discount even though it alleged that the company had engaged in obstruction of justice (and included a Sentencing Guidelines enhancement for that misconduct) including through the payment of additional bribes, prevention of the production of certain records, and efforts to destroy other records or degrade certain data. In our experience, there are various factors that can go into the government s weighing of the equities of a case, including ones beyond those set forth explicitly in the Pilot Program requirements. It is likely that the fact that the Odebrecht matter involved enforcement actions by multiple jurisdictions and fines of breathtaking proportions overall played a role in the DOJ s assessment of the size of the discount to which it agreed. f. Yates Memo and Enforcement Against Individuals On September 9, 2015, the DOJ issued a guidance memorandum (the Yates Memo ) underscoring the DOJ s stated focus on investigating and prosecuting individuals for roles in corporate misconduct. It has been over a year since the release of the Yates Memo. In 2016, approximately nine months after issuance of the guidance, Sally Yates, then-deputy Attorney General, commented: 14

19 SMITH PACHTER McWHORTER PLC I get that our Individual Accountability Policy has changed [the] rules slightly in some places and more significantly in others. I also understand those changes may result in some temporary uncertainty, as both prosecutors and defense attorneys adjust to the new expectations. But equilibrium will return. A new normal will exist. And with it, I expect that both the reality and the perception of how [DOJ] treats individual corporate wrongdoers will have been strengthened. 11 Questions remain as to the impact of the Yates Memo although, to be fair, such effects may take time to manifest themselves in clear, documentable enforcement practices. The greater number of the DOJ and SEC corporate resolutions in 2016 does not appear to have carried over directly to increased individual prosecutions. The DOJ brought FCPA charges against six individuals while the SEC brought charges against eight individuals. Overall, the rate of individual prosecutions since the Yates Memo is fairly consistent with the rate in prior years. FCPA Enforcement Actions Individual Actions DOJ SEC Looking at the numbers alone, however, can be misleading given the practical length of an FCPA investigation and the steps needed to be taken before charging individuals. Moreover, in many respects, the Yates Memo formalized a pre-existing policy towards prosecuting individuals as it relates to the FCPA arena. However, bearing in mind the government s explicit focus on individuals is critical to inform the way in which internal investigations are conducted and cooperation with a government investigation is handled. g. First Reported SEC Whistleblower Award for FCPA Tip The SEC continues to report high numbers of whistleblower tips. The SEC 2016 Annual Report to Congress stated that the SEC received over 4,200 tips. Those tips can and do form the basis for the initiation of an inquiry or investigation, including with respect to FCPA matters. In August 2016, the SEC may have made its first FCPA whistleblower award. The award was for $3.75 million and it was made in connection with BHP Billiton Beijing Olympics settlement. In 2015, the SEC charged BHP Billiton with violating books and records and internal controls provisions of the FCPA related to the company s sponsorship of the 11 Sally Q. Yates delivered remarks at the New York City Bar Association White Collar Crime Conference on May 10, 2016, available at deputy-attorney-general-sally-q-yates-delivers-remarks-new-york-city-bar-association. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

20 2008 Summer Olympic Games in Beijing. BHP Billiton sponsored 60 government officials and employees of stateowned enterprises, and their guests, at the Beijing Games. Reuters reported in August 2016 that the SEC paid the BHP Billiton whistleblower $3.75 million apparently in connection with the 2015 charges. For its part, BHP Billiton said that it had cooperated with the SEC inquiry and the DOJ investigation and was not aware of the involvement of any whistleblower as part of the SEC s or DOJ s investigation. 12 However, there are open questions regarding Reuter s account. BHP Billiton reports that the SEC inquiry began in As the whistleblower program was instituted in 2010 under Section 922 Dodd-Frank Wall Street Reform and Consumer Protection Act, the extent of the purported whistleblower s involvement is unclear. V Enforcement Actions: Case Summaries 13 Akamai Technologies 13 Enforcement Agency(ies): SEC Summary of Conduct: A subsidiary of Akamai Technologies (Akamai) arranged for third party partners to provide technology services in China. The subsidiary allegedly 14 used funds from one partner to pay customers, including employees of Chinese state-owned entities. The transactions resulted in end customers receiving technology services far exceeding their needs. The payments were improperly recorded as legitimate business expenses in Akamai s corporate books. Improper Payment: $187,500. Benefit Sought or Obtained: The SEC did not allege any specific benefit Akamai obtained from the improperly recorded payments. Disclosure, Cooperation, and Remediation: Akamai promptly self-reported the misconduct, took significant remedial measures, cooperated with the SEC s investigation, terminated the employees involved, and improved internal accounting controls. Charges or Allegations: Investigation into potential violations of the internal controls and books and records provisions, but no charges. Disposition: SEC: Non-Prosecution Agreement. DOJ: declination. Financial Sanctions or Remedies: Disgorgement $652K; prejudgment interest $19,400. Reporting Obligations or Other Significant Non-Financial Obligations: None. Analogic Corp., Lars Frost, and BK Medical ApS Enforcement Agency(ies): DOJ and SEC Summary of Conduct: In a settlement with the DOJ, Analogic Corp. s (Analogic) subsidiary, BK Medical ApS 12 Reuters, U.S. SEC paid $3.75 million to BHP Billiton whistleblower: report (Aug. 28, 2016), 13 All information regarding matters described in this Guide was obtained from publically available sources. 14 In SEC settlements, the respondent typically agrees neither to admit nor deny the SEC s findings in connection with the SEC proceeding. 16

21 SMITH PACHTER McWHORTER PLC (BK), admitted that it entered into hundreds of fake transactions that created risks for bribery, corruption, tax evasion, embezzlement, and other improper conduct. BK issued fictitious invoices to distributors and forwarded the corresponding overpayments to third parties identified by the distributors. BK channeled payments to individuals and shell companies in Russia, Belize, the British Virgin Islands, Cyprus, and Seychelles. Analogic incorporated the sham payments into its corporate books and records. The SEC also charged Lars Frost, BK s CFO, for his role in personally authorizing several of the sham transactions. The DOJ entered into a separate agreement with BK. Improper Payment: $20M in payments passed from the distributors through BK to third parties. Benefit Sought or Obtained: The SEC did not allege any specific benefit Analogic, Frost, or BK obtained from the improperly recorded payments made at the request of distributors. Disclosure, Cooperation, and Remediation: Analogic voluntarily disclosed the conduct, cooperated with the SEC s investigation, terminated the employees involved (including Frost), and improved BK s internal accounting controls. Charges or Allegations: Violations of the internal controls and books and records provisions. Disposition: SEC: Non-Prosecution Agreement (Analogic and Frost). DOJ Non-Prosecution Agreement (BK Medical). Financial Sanctions or Remedies: Analogic: Disgorgement $7.7M; prejudgment interest $ 3.8M. Frost: fine $20K. BK: civil penalty $3.4M. Reporting Obligations or Other Significant Non-Financial Obligations: None. Anheuser-Busch InBev Enforcement Agency(ies): SEC Summary of Conduct: Belgium-based brewing company, Anheuser-Busch InBev SA/NV (AB InBev), through its subsidiary, Crown Beers India Private Limited (Crown), and joint venture, InBev India International Private Limited (IIIPL), allegedly used sales promoters in India to make improper payments to government officials. In exchange, AB InBev allegedly saw increased sales of Crown beer and extended operating hours for Crown breweries. The SEC also alleged that AB InBev impeded a whistleblower by entering into a separation agreement prohibiting the departing employee from communicating with government enforcement authorities thereby deterring him from continuing to speak with the SEC about AB InBev s alleged misconduct in India. Improper Payment: The SEC did not quantify the amount of improper payments made. Benefit Sought or Obtained: The SEC did not explain the details of its disgorgement theory, but required AB InBev to disgorge approximately $2.7M in alleged profits from increased beer sales. Charges or Allegations: Violation of the books and records and internal controls provisions. Disclosure, Cooperation, and Remediation: AB InBev cooperated with the SEC investigation and took remedial measures, including improving internal controls at its Indian subsidiary and increasing controls over expenses and cash. AB InBev dissolved the IIIPL joint venture; consolidated its production, sale and marketing operations at Crown; conducted extensive FCPA training for employees in India; and implemented improved compliance policies and controls at Crown. AB InBev amended its separation agreements to make clear that departing employees are not prohibited from reporting possible violations of law to government agencies. The SEC noted AB InBev s untimely responses to subpoenas and overly broad assertions of privilege, but also that AB InBev s response to requests improved over time. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

22 Disposition: Cease and Desist Order. Financial Sanctions or Remedies: Disgorgement $2.7M; prejudgment interest $290K; civil penalty $3M. Reporting Obligations or Other Significant Non-Financial Obligations: Two year reporting requirement to the SEC on the company s anti-corruption compliance program. AstraZeneca PLC Enforcement Agency(ies): SEC Summary of Conduct: AstraZeneca PLC s (AstraZeneca s) subsidiaries in China and Russia allegedly made payments to healthcare professionals. The subsidiaries offered various items of value, including cash, travel, and other gifts, in order to increase sales of AstraZeneca pharmaceutical products and avoid regulatory fines. The transactions were improperly recorded in AstraZeneca s corporate books. Improper Payment: The SEC did not quantify the amount of improper benefits provided. Benefit Sought or Obtained: Increased sales of pharmaceutical products, resulting in millions of dollars of ill-gotten gains, and avoidance of regulatory fines. Disclosure, Cooperation, and Remediation: AstraZeneca did not self-report the violations, but received relatively low penalties because it cooperated with the SEC s investigation, disclosed the results of its internal investigation, and developed an improved compliance program. Charges or Allegations: Violations of the books and records and internal controls provisions. Disposition: Settled Administrative Proceeding. Financial Sanctions or Remedies: Disgorgement $4.325M; prejudgment interest $822K; civil penalty $375K. Reporting Obligations or Other Significant Non-Financial Obligations: None. 18

23 SMITH PACHTER McWHORTER PLC Joo Hyun Bahn, Malcom Harris, and Ban Ki Sang Enforcement Agency(ies): DOJ Summary of Conduct: Ban Ki Sang (Sang), an executive at a South Korean construction company, and his son Joo Hyun Bahn (Bahn), a broker at a Manhattan real estate firm, were charged in a foreign bribery scheme involving the sale of Vietnam s tallest building. The building was built and owned by a South Korean construction company that was facing a liquidity crisis. Sang, a senior executive at the company, allegedly convinced the company to retain his son to secure an investor for the building. According to the exclusive brokerage agreement between the company and Bahn, if he secured an investor, Bahn could earn a multimillion dollar commission. Sang and Bahn allegedly conspired to pay a foreign official in a Middle Eastern country to use his influence to convince the country s sovereign wealth fund to purchase the building in Vietnam for $800M. Malcolm Harris (Harris) allegedly represented himself to Bahn and Sang as an agent of the Middle Eastern foreign official and agreed to take bribes to the Middle Eastern country s foreign official, $500K upfront and $2M after the sale closed. However, Harris allegedly took the $500K bribe and spent it on renting a luxury penthouse apartment in Brooklyn for himself and other personal expenses. Once the sale of the building failed to materialize, Bahn allegedly stole $225K of the $500K that the South Korean company had paid his firm for brokerage expenses. Improper Payment: $500K. Benefit Sought or Obtained: Multimillion dollar commission. Charges or Allegations: Bahn and Sang: Conspiracy to violate the anti-bribery provision, violation of the anti-bribery provision, conspiracy to commit money laundering, and money laundering. Harris: Wire fraud and money laundering. Disposition: None at the time of this publication. Sentence and Financial Sanctions or Remedies: Open cases. Christian Javier Maldonado Barillas, Abraham Jose Shiera Bastidas, Jose Luis Ramos Castillo, Moises Abraham Millan Escobar, Roberto Enrique Rincon Fernandez, and Alfonzo Eliezer Gravina Enforcement Agency(ies): DOJ Summary of Conduct: Six individuals pleaded guilty in a conspiracy case involving bribery scheme to secure contracts with Venezuela s state-owned oil company Petróleos de Venezuela S.A. (PDVSA). The individuals included three former PDVSA officials: Jose Luis Ramos Castillo (Ramos), Christian Javier Maldonado Barillas (Maldonado), and Alfonzo Eliezer Gravina Munoz (Gravina); as well as three U.S. businesspeople: Roberto Enrique Rincon Fernandez (Rincon), Abraham Jose Shiera Bastidas (Shiera), and Moises Abraham Milan Escobar (Millan). Rincon and Shiera, owners of multiple U.S.-based energy companies, admitted to bribing officials to gain an advantage in obtaining energy contracts with PDVSA. Millan acted as an agent for Rincon and Sheira by facilitating the payment of bribes through a Panamanian bank account. On the other end of the scheme, Ramos, Maldonado, and Gravina admitted to conspiring with Rincon, Shiera, and Millan to receive bribes in exchange for using their influence within PDVSA to secure contracts for Rincon s and Shiera. Improper Payment: Rincon: $600K. Shiera: $190K. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

24 Benefit Sought or Obtained: Contracts with PDVSA and payment priority. Charges or Allegations: Rincon: Conspiracy to violate the anti-bribery provision, violation of the anti-bribery provision, and fraud. Shiera: Conspiracy to violate the anti-bribery provision and conspiracy to commit wire fraud. Millan: Conspiracy to violate the anti-bribery provision. Gravina: Conspiracy to commit money laundering and fraud. Maldonado and Ramos: Conspiracy to commit money laundering. Disposition: Plea agreements. Financial Sanctions or Remedies: Rincon and Shiera: Forfeiture order $18.8M. Gravina: Forfeiture order $590K. Millan: Forfeiture order $533K. Maldonado: Forfeiture order $165K. Ramos: Forfeiture order $10M. The six defendants are scheduled to be sentenced on July 14, Cisco Systems Enforcement Agency(ies): DOJ and SEC Summary of Conduct: Unknown. Cisco disclosed the declinations on its September 2016 Form 10-K filing. Disposition: Declination. Disclosure, Cooperation, and Remediation: Cisco Systems stated in its Form 10-K filing that it fully cooperated with the investigations. Embraer SA Enforcement Agency(ies): DOJ and SEC Summary of Conduct: In its settlement documents with the DOJ and SEC, Brazilian-based aircraft manufacturer Embraer SA (Embraer) admitted that it used third parties to make improper payments to government officials in the Dominican Republic, Mozambique, and Saudi Arabia and entered into a false agency agreement in India to secure government contracts in those countries. Improper Payment: $5.97M. Benefit Sought or Obtained: $84M in profits from government contracts. Disclosure, Cooperation, and Remediation: Embraer received a discount of 20% of the low end of the applicable range of the U.S. Sentencing Guidelines. Per the deferred prosecution agreement, the DOJ agreed to this discount by taking into account various factors. The DOJ noted that the company had no prior criminal history, fully cooperated with the government s investigation by providing information that led to successful prosecution of certain individuals by non- U.S. authorities, improving the company s anti-corruption compliance program and internal controls, and disciplining a number of employees including some executives. The company also agreed to disgorge profits from the contracts in question, agreed to continuing cooperation with the DOJ, and agreed to imposition of a monitor for its anti-corruption compliance program. Embraer did not voluntarily disclose the matter and, according to the DOJ, failed to discipline one executive-level employee who was aware of the alleged misconduct. Charges or Allegations: Conspiracy; violations of the anti-bribery, books and records, and internal controls provisions. 20

25 SMITH PACHTER McWHORTER PLC Disposition: DOJ: Deferred Prosecution Agreement. SEC: Consent Agreement. Financial Sanctions or Remedies: DOJ: Civil fine $107M. SEC: Disgorgement $83.8M; prejudgment interest $14.4M. Brazilian Authorities: Disgorgement R$58M; fine R$6M. Reporting Obligations or Other Significant Non-Financial Obligations: Three year independent corporate monitor. General Cable Corporation and Karl Zimmer Enforcement Agency(ies): DOJ and SEC Summary of Conduct: According to a settlement with the DOJ, between 2003 and 2015, General Cable Corporation (GCC), a global manufacturer of copper, aluminum, and cable products, admitted that its subsidiaries made payments to officials mostly at state-owned enterprises in Angola, Bangladesh, China, Indonesia, Thailand, and Egypt to obtain business in those countries. Payments were made directly and through third-party agents, primarily in cash but also in the form of non-cash gifts such as electronics. The payments were disguised as sales commissions, rebates, discounts, and other fees in the company s books. Additionally, the agencies found that GCC failed to implement proper internal controls to detect and prevent the alleged improper payments. The SEC separately charged Karl Zimmer, a former vice president at GCC, for allegedly approving commission payments to an agent on sales by a GCC subsidiary in Angola to officials at state-owned enterprises. The payments totaled $342K, nearly twice GCC s prescribed limits on third-party commissions. Improper Payment: $19M. Benefit Sought or Obtained: $51M in profits from sales to state-owned enterprises. Disclosure Cooperation, and Remediation: GCC received a discount of 50% of the low end of the applicable range of the U.S. Sentencing Guidelines. Per the non-prosecution agreement, the DOJ agreed to this discount by taking into account various factors. The DOJ noted that the company conducted a thorough internal investigation; made regular factual presentations and provided updates to the Fraud Section; voluntarily made foreign-based employees available for interviews in the U.S.; produced documents from foreign countries, including translations; collected, analyzed, and organized evidence and information for the Fraud Section that was outside of the scope of the initial disclosure; and ultimately provided all facts known about the misconduct. The company took extensive remedial measures, including disciplinary action against 13 employees resulting in their departure and terminated business relationships with 47 agents and distributors. Charges or Allegations: Violations of the anti-bribery, books and records, and internal controls provisions. Disposition: DOJ: Non-Prosecution Agreement. SEC: Cease and Desist Order. Financial Sanctions or Remedies: DOJ: Civil fine $20.5M. SEC: Disgorgement $51.2M; prejudgment interest $4.1M; Zimmer: Civil fine $20K. Reporting Obligations or Other Significant Non-Financial Obligations: DOJ: Agreement to continue implementation of anti-corruption compliance policies and procedures. SEC: Three year reporting requirement to the SEC on the company s enhanced anti-corruption policies. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

26 GlaxoSmithKline Enforcement Agency(ies): SEC Summary of Conduct: The SEC alleged that the Chinese subsidiary (GSK China) of British pharmaceutical company GlaxoSmithKiline (GSK) made improper payments in the form of money, gifts, travel expenses, and speaking fees to healthcare professionals to increase sales of GSK pharmaceutical products to China s state-owned health institutions. According to the SEC, the company failed to establish adequate internal controls and did not have a proper anticorruption compliance program to detect such payments and as a result the payments were not accurately reflected in GSK s books and records. Improper Payment: The SEC did not quantify the amount of improper payments made. Benefit Sought or Obtained: Increased sales, the SEC did not quantify the benefit obtained. Disclosure, Cooperation, and Remediation: The SEC noted GSK s cooperation, including prompt and regular briefings to the SEC regarding its internal investigation, timely conveyance of facts learned during the course of its internal investigation, prompt response to document requests, and providing translations of documents. GSK made remediation efforts, including enhancing its compliance program, elimination of most payments to doctors, eliminating incentivebased pay on the number of prescriptions generated by doctors, enhancing global risk assessment and monitoring, and improving the company s third-party oversight program. Charges or Allegations: Violations of the books and records and internal controls provisions. Disposition: Cease and Desist Order. Financial Sanctions or Remedies: $20M civil penalty. Reporting Obligations or Other Significant Non-Financial Obligations: Two year reporting requirement to the SEC on the company s remediation efforts and anti-corruption compliance measures. Grifols SA Enforcement Agency(ies): DOJ and SEC Summary of Conduct: Unknown Disposition: Declination Disclosure, Cooperation, and Remediation: The DOJ noted the company s full cooperation in the investigation. HMT LLC Enforcement Agency(ies): DOJ Summary of Conduct: According to the DOJ, HMT LLC (HMT), a U.S.-based oil and gas storage tank manufacturer, used third parties in China and Venezuela to make improper payments of approximately $500K to government officials in those countries to secure sales of HMT products. Two HMT managers in Houston were aware of a kickback scheme in which a sales agent marked up the price for HMT products sold to Venezuela s state-owned energy company PDVSA 22

27 SMITH PACHTER McWHORTER PLC and used the price difference to bribe PDVSA employees and other government officials. In China, a subsidiary of HMT engaged a local distributor to sell HMT products to state-owned enterprises. A regional manager responsible for overseeing sales in China was aware that the distributor was paying bribes to increase sales of the company s products. Improper Payment: $500K. Benefit Sought or Obtained: $2.7M. Charges or Allegations: Violation of the anti-bribery provision. Disclosure, Cooperation, and Remediation: The DOJ closed its investigation into the conduct of HMT under its FCPA Pilot Program based on a number of factors. In particular, the DOJ noted the company s timely and voluntary selfdisclosure; the company s thorough and comprehensive global investigation; the company s full cooperation in the investigation and its agreement to cooperate in any ongoing investigations of individuals arising from the matter; the company s agreement to disgorge all profits earned from the misconduct; the steps taken by the company to enhance its compliance program and internal accounting controls; and the company s full remediation including terminating eight employees involved in the misconduct, sanctioning ten employees, and severing business relationships with the Venezuelan agent and Chinese distributor. The DOJ also noted that HMT severed business relationships with seven other agents or distributors as a result of its internal investigation. Disposition: Letter of Declination under the FCPA Pilot Program with Disgorgement. Financial Sanctions or Remedies: Disgorgement $2.79M. Reporting Obligations or Other Significant Non-Financial Obligations: None. Johnson Controls Enforcement Agency(ies): SEC Summary of Conduct: A Chinese subsidiary of Johnson Controls allegedly conspired to make a series of small but fictitious payments to Chinese government-owned shipyards and ship-owners. Every member of the subsidiary was involved in the scheme. Johnson Controls failed to recognize the arrangement based on the low dollar value of each transaction. The improper payments were incorporated into Johnson Controls corporate books. Improper Payment: $4.9M. Benefit Sought or Obtained: Increased business transactions, resulting in $11.8M in ill-gotten profits. Disclosure, Cooperation, and Remediation: Johnson Controls voluntarily disclosed the conduct, cooperated with the SEC s investigation, and terminated the involved employees. Charges or Allegations: Violations of internal controls and books and records provisions. Disposition: SEC: Settled Administrative Proceeding. DOJ: declination. Financial Sanctions or Remedies: Disgorgement $11.8M; civil penalty $1.2M; prejudgment interest $1.3M. Reporting Obligations or Other Significant Non-Financial Obligations: One year self-reporting requirement to submit two status updates on Johnson Controls remediation efforts. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

28 JPMorgan Chase & Co. Enforcement Agency(ies): DOJ and SEC Summary of Conduct: In a settlement with the DOJ, JP Morgan Securities (Asia Pacific) Limited (JPMorgan APAC), a Hong Kong-based subsidiary of JP Morgan Chase & Co., admitted that, between 2006 and 2013, it operated a Sons and Daughters Program, which provided employment to unqualified individuals referred to the program by government officials, including senior officials at Chinese state-owned enterprises. In exchange, JPMorgan APAC received business opportunities. Improper Payment: Improper employment of about 200 employees and interns. Benefits Sought or Obtained: $100M. Charges or Allegations: Violations of the anti-bribery, books and records, and internal controls provisions. Disclosure, Cooperation, and Remediation: JPMorgan APAC received a discount of 25% of the low end of the applicable range of the U.S. Sentencing Guidelines. Per the deferred prosecution agreement, the DOJ agreed to this discount by taking into account various factors. The DOJ noted JPMorgan s cooperation, including conducting an internal investigation, making foreign-based employees available to the DOJ, and producing documents from foreign countries. The company also took remediation measures, including terminating business relationships with six employees involved in the misconduct and 23 employees who failed to detect the misconduct. The company imposed more than $18.3M in financial sanctions against current and former employees. The DOJ also noted the company s failure to disclose in a timely and voluntary basis. Disposition: DOJ: Non-Prosecution Agreement. SEC: Cease and Desist Order. Financial Sanctions or Remedies: DOJ: Criminal penalty $72M. SEC: Disgorgement $105.5M; prejudgment interest $25M. The Federal Reserve System s Board of Governors also issued a Cease and Desist Order and assessed a $61.9M civil penalty. Reporting Obligations or Other Significant Non-Financial Obligations: DOJ: Three year annual reporting requirement on revised corporate compliance program. SEC: Three year annual reporting on remediation progress every nine months. Key Energy Services, Inc. Enforcement Agency(ies): SEC Summary of Conduct: A Mexico-based subsidiary of Key Energy Services (Key Energy) allegedly made payments to employees at the Mexican state-owned oil company in order to receive non-public information and preferential treatment in contract negotiations. The subsidiary used a consulting firm to forward the payments. Key Energy had a FCPA policy in place, but failed to enforce the compliance program and lacked sufficient internal audit functions to identify and report the subsidiary s misconduct. Improper Payment: $229K payments made to the consulting firm. Benefit Sought or Obtained: Preferential treatment in contract negotiations for oil sales, resulting in $60M in increased contract value. 24

29 SMITH PACHTER McWHORTER PLC Disclosure, Cooperation, and Remediation: Key Energy voluntarily disclosed the conduct, cooperated with the SEC s investigation, reorganized its compliance oversight, and retained a chief compliance officer. Charges or Allegations: Violations of the internal controls and books and records provisions. Disposition: Settled Administrative Proceeding. Financial Sanctions or Remedies: $5M civil penalty, including undertaking reasonable efforts to obtain authorization to pay disgorgements in the event of Key Energy s bankruptcy filings. Reporting Obligations or Other Significant Non-Financial Obligations: None. LATAM Airlines Group S.A. and Ignacio Cueto Plaza Enforcement Agency(ies): DOJ and SEC Summary of Conduct: In 2012, LAN Airlines became LATAM Airlines Group S.A. (LATAM) following a merger with Brazil-based TAM Airlines. In 2005, executives of LAN airlines, including Ignacio Cueto Plaza, president and CEO at the time, decided to enter the Argentinian market. However, the airline was unable to reach an agreement on wages with Argentinian labor unions. According to LATAM s settlement with the DOJ, the company admitted that in 2006 in an effort to reach an agreement on wages, LAN hired a government official to negotiate with the unions. The airlines entered into a $1.15M consulting agreement with the official for a study of airline routes in Argentina. Executives at LAN, including Cueto, were aware that the studies would not be conducted; instead, part of the money would be used to make improper payments to union officials in exchange for an agreement with the unions that was more favorable for the airline. The SEC separately charged Cueto. Improper Payment: $1.15M consulting agreement. Benefit Sought or Obtained: $6.75M in profit as a result of paying lower wages. Charges or Allegations: Violations of the books and records and internal controls provisions. Disclosure, Cooperation and Remediation: The penalty LATAM received was 25% above the low end of the applicable range of the U.S. Sentencing Guidelines. Per the deferred prosecution agreement, the DOJ agreed to this penalty by taking into account various factors. the DOJ noted that, once the company began cooperating with the DOJ investigation, it did so fully and provided all relevant facts. The company did not voluntarily disclose the matter and failed to discipline employees responsible for the alleged misconduct. Disposition: DOJ: Deferred Prosecution Agreement. SEC: Cease and Desist Order. Financial Sanctions or Remedies: DOJ: $12.75M criminal penalty. SEC: $6.74M disgorgement; $2.7M prejudgment interest. Cueto: $75K civil penalty. Reporting Obligations or Other Significant Non-Financial Obligations: Independent corporate compliance monitor for 27 months. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

30 Las Vegas Sands Corp. Enforcement Agency(ies): SEC Summary of Conduct: Las Vegas Sands Corporation (Las Vegas Sands) hired a consultant to promote its casino and resort business in China and Macau, where casino gambling is illegal. The company allegedly failed to accurately authorize and record millions of dollars in payments made to the consultant for, among other items, the purchase of a Chinese basketball team, property management services that were not performed, cash advances, and artwork that was not purchased. Several hundred thousand dollars were improperly recorded as legitimate business expenses and may have been forwarded to Chinese government officials. Improper Payment: The SEC did not quantify the total amount of improper benefits provided, but noted that Las Vegas Sands failed to approve over $62M in payments to the consultant. Benefit Sought or Obtained: The SEC did not allege any specific benefit Las Vegas Sands obtained from the improperly recorded payments. Disclosure, Cooperation and Remediation: Las Vegas Sands retained outside counsel to conduct an internal investigation, cooperated with the SEC investigation by sharing concurrent findings from its own internal investigation, hired a new General Counsel and other management personnel, and established a Compliance Committee on its Board of Directors. Charges or Allegations: Violations of the internal controls and books and records provisions. Disposition: Settled Administrative Proceeding. Financial Sanctions or Remedies: $9M civil penalty. Reporting Obligations or Other Significant Non-Financial Obligations: Two year reporting requirement to the SEC on expanded internal controls, recordkeeping, and financial reporting policies. Ernesto Hernandez Montemayor, Ramiro Ascencio Nevarez, Daniel Perez, Victor Hugo Valdez Pinon, Victor Hugo Valdez Pinon, Kamta Ramnarine, and Douglas Ray Enforcement Agency(ies): DOJ Summary of Conduct: Daniel Perez (Perez), Victor Hugo Valdez Pinon (Pinon), Douglas Ray (Ray) and Kamta Ramnarine (Ramnarine) either owned or were associated with U.S. aviation companies providing aircraft maintenance and repair services to customers in the United States and Mexico. Ernesto Hernandez Montemayor (Montemayor) was the director of aviation for the government of the State of Tamaulipas, Mexico and was responsible for maintaining the state government s aircrafts. Ramiro Ascencio Nevarez (Nevarez) was an employee of the public university of the state of Tamaulipas, Mexico and was responsible for maintaining the university s aircraft. In a settlement with the DOJ, Perez, Pinon, Ray and Ramnarine admitted that they conspired to pay bribes to Montemayor and Nevarez in exchange for state government contracts. Improper Payment: $2M. 26

31 SMITH PACHTER McWHORTER PLC Benefit Sought or Obtained: Aviation maintenance, repair, and overhaul contracts. Charges or Allegations: Montemayor and Nevarez: Conspiracy to commit money laundering. Perez and Ramnarine: Conspiracy to violate anti-bribery provision. Pinon and Ray: Conspiracy to violate anti-bribery provision and conspiracy to commit wire fraud. Disposition: Plea agreements. Sentence and Financial Sanctions or Remedies: Montemayor: 24 months and a $2.02M forfeiture. Nevarez: 15 months. Perez and Ramnarine: 36 months. Pinon and Ray: sentences pending. Dmitrij Harder Enforcement Agency(ies): DOJ Summary of Conduct: In 2015, Dmitriji Harder, the former owner and President of Chestnut Consulting Group, Inc. and Chestnut Consulting Group Co., was charged with bribing an official of the European Bank for Reconstruction and Development, a public international organization, in exchange for influencing the official s actions on financing applications submitted by the Chestnut Group s clients. After Harder lost a motion to dismiss, the DOJ announced on April 20, 2016 that Harder pleaded guilty to two counts of violating the FCPA. Improper Payment: $3.5M. Benefit Sought or Obtained: Approved applications for financing, one resulting in an $85M investment and a $90M loan, and one resulting in a $40M investment and $60M loan. Charges or Allegations: Violations of the anti-bribery provision, money laundering, Travel Act violations, and conspiracy. Disposition: Plea Agreement. Sentence and Financial Sanctions or Remedies: Sentencing is scheduled for June 28, FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

32 Richard Hirsch and James McClung Enforcement Agency(ies): DOJ Summary of Conduct: In a settlement with the DOJ, Louis Berger International (LBI) admitted to paying foreign officials in India, Indonesia, Vietnam, and Kuwait in exchange for securing government construction management projects. Richard Hirsch was a LBI Senior Vice President. Hirsch admitted to making and concealing payments to officials in Indonesia and Vietnam to secure contracts in those countries from 2000 to James McClung was a LBI s Senior Vice President. McClung admitted to making and concealing payments to officials in India and Vietnam to secure contracts in those countries from 2000 to Charges or Allegations: Conspiracy to violate the anti-bribery provision and aiding and abetting violations of the antibribery provision. Disposition: Plea agreements. Sentence and Financial Sanctions or Remedies: Hirsch: two years of probation and $10K criminal fine. McClung: one year in prison. NCH Corporation Enforcement Agency(ies): DOJ Summary of Conduct: According to the DOJ, NCH Corporation, an industrial supply and maintenance company based in Texas, admitted that between 2011 and 2013 its Chinese subsidiary provided gifts, meals, entertainment, and money to Chinese government officials to influence their purchasing decisions leading to increased sales and profits. Improper Payment: $44K. Benefit Sought or Obtained: $335K in profits. Charges or Allegations: Violation of the anti-bribery provision. Disclosure, Cooperation, and Remediation: The DOJ closed its investigation into the conduct of NCH under its FCPA Pilot Program based on a number of factors. In particular, the DOJ noted the company s voluntary disclosure of the misconduct, thorough and comprehensive internal investigation, full cooperation in any ongoing investigations of individuals arising from the matter, agreement to disgorge all profits earned from the misconduct, enhancement of its compliance program and internal accounting controls, and full remediation (including terminating or taking disciplinary action against employees involved in the matter, including senior managers, lower-level employees, and executives at the company headquarters in the United States). Disposition: Letter of Declination under the FCPA Pilot Program with disgorgement. Financial Sanctions or Remedies: Disgorgement $335K. Reporting Obligations or Other Significant Non-Financial Obligations: None. 28

33 SMITH PACHTER McWHORTER PLC Nordion (Canada), Inc. and Mikhail Gourevitch Enforcement Agency(ies): SEC Summary of Conduct: Nordion and Mikhail Gourevitch, a former Nordion employee, allegedly used a third party agent to arrange bribes to Russian officials to gain government approval of the company s pharmaceutical products. Gourevitch allegedly concealed his conduct from Nordion and arranged to receive kickback payments from the Russian agent. Nordion allegedly did not have sufficient internal controls to identify and prevent the improper payments. The SEC separately investigated and charged Gourevitch. Improper Payment: $235,043. Benefit Sought or Obtained: Approval by Russian government to sell pharmaceutical products. Although Nordion obtained the necessary government approvals, the company was not able to sell the subject medication and did therefore not make profits from the scheme. Disclosure, Cooperation, and Remediation: Nordion disclosed Gourevitch s misconduct, terminated Gourevitch s employment, and cooperated with the SEC s investigation. Charges or Allegations: Nordion: Violations of the internal controls and books and records provisions. Gourevitch: Violations of the anti-bribery and books and records provisions. Disposition: Settled Administrative Proceedings. Financial Sanctions or Remedies: Nordion: $375K civil penalty. Gourevitch: disgorgement $100K, prejudgment interest $12,950, civil penalty $66K. Reporting Obligations or Other Significant Non-Financial Obligations: None. Nortek, Inc. Enforcement Agency(ies): SEC Summary of Conduct: A subsidiary of Nortek, Inc. (Nortek) allegedly made hundreds of payments to Chinese government officials in order to receive preferential treatment in the form of reduced customs fees and taxes. The payments allegedly involved various items of value, including cash, recreational travel, meals, and entertainment expenses. Nortek allegedly lacked sufficient internal controls to identify the transactions and the payments were improperly recorded in Nortek s corporate records. Improper Payment: $290K. Benefit Sought or Obtained: Preferential regulatory treatment. Disclosure, Cooperation, and Remediation: Nortek promptly self-reported the misconduct, took significant remedial measures, cooperated with the SEC s investigation, terminated the employees involved, and improved internal accounting controls. Charges or Allegations: Investigation into potential violations of the internal controls and books and records provisions, but no charges. Disposition: SEC: Non-Prosecution Agreement. DOJ: Declination. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

34 Financial Sanctions or Remedies: Disgorgement $291,400; prejudgment interest $30,650. Reporting Obligations or Other Significant Non-Financial Obligations: None. Novartis AG Enforcement Agency(ies): SEC Summary of Conduct: Two China-based subsidiaries of Novartis AG allegedly bribed healthcare professionals at Chinese state-owned hospitals to prescribe the company s pharmaceutical products. The bribes involved various items of value, including gifts, recreational vacation and travel expenses, and small cash payments. The payments were improperly recorded in Novartis AG s corporate records as legitimate travel expenses, entertainment, educational seminars, and medical studies. Improper Payment: The SEC did not quantify the total amount of improper benefits provided, but provided examples of the valuable items totaling several hundred thousand dollars. Benefit Sought or Obtained: Increased sales of pharmaceutical products, resulting in millions of dollars of ill-gotten gains. Disclosure, Cooperation, and Remediation: Novartis AG cooperated with the SEC investigation by conducting a thorough internal review of policies and relationships with third party agents in China. Charges or Allegations: Violations of the internal controls and books and records provisions. Disposition: Settled Administrative Proceeding. Financial Sanctions or Remedies: Disgorgement $21.5M; prejudgment interest $1.5M; $2M civil penalty. Reporting Obligations or Other Significant Non-Financial Obligations: Two year reporting requirement to the SEC on implementation of anti-corruption compliance measures. Nu Skin Enterprises, Inc. Enforcement Agency(ies): SEC Summary of Conduct: The Chinese subsidiary of the marketing and cosmetic manufacturing company Nu Skin Enterprises, Inc. (Nu Skin) allegedly made a charity donation to obtain the influence of a high-ranking Chinese official in an on-going investigation concerning the company s compliance with Chinese law. Nu Skin s Chinese subsidiary (Nu Skin China) allegedly held an unauthorized promotional meeting, in violation of China s direct selling laws, and triggered an investigation by a provincial regulatory body. During the course of the investigation, Nu Skin China was notified that the provincial authority had gathered sufficient evidence to support the allegations against the company and that a $431K fine would be imposed. The SEC alleged that certain employees of Nu Skin China approached a high-ranking government official requesting that he personally intervene in the provincial agency matter and, in exchange, Nu Skin China would make a donation to a charity identified by the official. Nu Skin China made a RMB 1M donation to a charity that the official was associated with and subsequently received notice that the provincial regulatory body would not charge nor fine the company. 30

35 SMITH PACHTER McWHORTER PLC Improper Payment: $154K. Benefit Sought or Obtained: $431K fine avoided. Charges or Allegations: Violations of the books and records and internal controls provisions. Disclosure, Cooperation, and Remediation: SEC noted Nu Skin s cooperation with the investigation and remedial actions taken by the company. Disposition: Cease and Desist Order Financial Sanctions or Remedies: Disgorgement $431K; prejudgment interest $34.6K; civil penalty $300K. Reporting Obligations or Other Significant Non-Financial Obligations: None. Och-Ziff Capital Management Group, OZ Africa Management GP LLC, OZ Management LP, Joel M. Frank and Daniel S. Och Enforcement Agency(ies): DOJ and SEC Summary of Conduct: According to settlement documents with the DOJ and SEC, Och-Ziff Capital Management Group (Och-Ziff), a U.S.-based hedge fund, and its wholly-owned subsidiaries, OZ Africa Management (OZ Africa) and OZ Management LP admitted to using agents, intermediaries, and business partners to bribe government officials in various countries in exchange for investment opportunities. In one example, between 2008 and 2012, Och-Ziff entered into financial transactions with a businessman in the Democratic Republic of Congo knowing that company funds would be used to make improper payments to high-ranking government officials to secure investment opportunities. In another example, the company used an agent in Libya to pay government officials in exchange for a $300M investment from Libya s sovereign wealth fund. Och-Ziff made improper payments in Chad and Niger as well. The SEC noted that senior executives of the hedge fund, including Och-Ziff CEO Daniel S. Och (Och) and CFO Joel M. Frank (Frank), ignored red flags and allowed improper payments to occur. The SEC separately charged Frank and Och. Improper Payment: The DOJ and SEC did not quantify the amount of improper payments made. Benefits Sought or Obtained: Investment by the Libyan sovereign wealth fund and mining rights in various countries. Charges or Allegations: DOJ: Conspiracy to violate the anti-bribery provision, and violations of the books and records and internal controls provisions. SEC: Violations of the anti-bribery, books and records, and internal controls provisions. Disclosure, Cooperation, and Remediation: Och-Ziff received a discount of 20% of the low end of the applicable range of the U.S. Sentencing Guidelines. Per the deferred prosecution agreement, the DOJ agreed to this discount by taking into account various factors. The DOJ noted Och-Ziff s cooperation with the investigation. The DOJ also noted the seriousness of the conduct, the high value of the bribes and the involvement by high level employees of the company. Disposition: DOJ: Deferred Prosecution Agreement. SEC: Cease and Desist Order. Financial Sanctions or Remedies: DOJ: Och-Ziff: Criminal penalty $213M. SEC: Och-Ziff and OZ Management: Disgorgement $173M; prejudgment interest $26M. Och: Disgorgement $1.9M; prejudgment interest $274K. Frank: To be determined at a later civil proceeding. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

36 Reporting Obligations or Other Significant Non-Financial Obligations: Three year independent corporate monitor. Odebrecht S.A. and Braskem S.A. Enforcement Agency(ies): Odebrecht: DOJ. Braskem: DOJ and SEC. Summary of Conduct: In its settlement with the DOJ, Odebrecht S.A. (Odebrecht), a Brazilian-based construction and engineering conglomerate, admitted that it engaged in a global bribery and bid-rigging scheme in which the company, between 2001 and 2016, paid approximately $788M in bribes to government officials and political parties in Angola, Argentina, Brazil, Colombia, the Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru, and Venezuela to secure primarily infrastructure projects in those countries. The bribes were paid through a network of shell companies and off-book transactions. The company established a standalone business unit, the Division of Structured Operations to manage and account for these off-book transactions. This division, described by the DOJ as a Department of Bribery, utilized separate communication and accounting systems for processing and managing the improper payments to officials and political parties in the various countries. Braskem S.A. (Braskem), a Brazilian-based petrochemical company controlled and partially owned by Odebrecht, diverted approximately $250M into Odebrecht s Division of Structured Operations between 2006 and Those funds, in part, were used to pay bribes in Brazil in exchange for benefits and contracts from Brazil s state-owned oil company Petrobras. Improper Payment: Odebrecht S.A.: $788M. Braskem S.A.: $250M Benefit Sought or Obtained: $3.336B in profits. Disclosure, Cooperation, and Remediation: Odebrecht received a discount of 25% of the low end of the applicable range of the U.S. Sentencing Guidelines. Per the plea agreement, the DOJ agreed to this discount by taking into account various factors. The DOJ noted Odebrecht s voluntary disclosure. The company cooperated with the investigation by gathering evidence and performing forensic data collection in various jurisdictions, producing documents including translations, collecting, analyzing, and producing evidence and information, providing non-privileged facts related to things obtained through bribery, providing non-privileged facts related to individuals and companies involved, and facilitating cooperation by current and former employees. The company took extensive remedial measures, including terminating 51 employees, disciplining 26 employees, requiring individualized anti-corruption compliance training for 26 employees, creating a Chief Compliance Officer position that reports to the Audit Committee of the Board, adopting heightened control and compliance protocols, increasing the amount of employees in the compliance department by 50%, and increasing the resources for compliance. Odebrecht also enhanced its compliance program and internal controls ensuring that they meet the minimum elements described in the Plea Agreement, agreed to a compliance monitor, and agreed to continue its cooperation. The DOJ noted the nature and seriousness of the scheme. Charges or Allegations: Odebrecht: Conspiracy to violate the anti-bribery provision. Braskem: DOJ: Conspiracy to violate the anti-bribery provision. SEC: violations of the anti-bribery, books and record, and internal controls provisions. Disposition: Odebrecht: Plea Agreement. Braskem: DOJ: Plea Agreement; SEC: Consent Agreement. Financial Sanctions or Remedies: Odebrecht: DOJ: $93M. Braskem: DOJ: $94.8M; SEC: $65M. The combined total amount of U.S., Brazilian, and Swiss criminal and civil penalties imposed on Odebrecht and Braskem is $3.5B. 32

37 SMITH PACHTER McWHORTER PLC Reporting Obligations or Other Significant Non-Financial Obligations: Each company must adopt enhanced compliance procedures and retain independent monitors for three years. Olympus Corporation of the Americas and Olympus Latin America Enforcement Agency(ies): DOJ Summary of Conduct: Olympus Latin America (OLA), a subsidiary of Olympus Corporation of the Americas (OCA), admitted that it made payments to healthcare professionals at state-owned hospitals across Central and South America. OLA established local training centers for healthcare professionals, which were used to provide improper payments, personal grants, travel expenses, and discounted medical equipment. The DOJ separately investigated OCA for violations of the Anti-Kickback and False Claims Acts. Improper Payment: Nearly $3M. Benefit Sought or Obtained: Increased sales of medical products, resulting in more than $7.5M of ill-gotten profits. Disclosure, Cooperation, and Remediation: OLA did not voluntarily disclose the misconduct, but still received a 20% discount off the U.S. Federal Sentencing Guidelines for complying with the investigations. OLA fired the individuals involved in the misconduct and enhanced its due diligence process for third party agents and consultants. Charges or Allegations: Conspiracy and violation of the anti-bribery provision. Disposition: Deferred Prosecution Agreements. Financial Sanctions or Remedies: $22.8M criminal penalty. Reporting Obligations or Other Significant Non-Financial Obligations: Three year independent corporate monitor. PTC, Inc., Parametric Technology (Shanghai) Software Co., Ltd. and Parametric Technology (Hong Kong) Ltd., and Yu Kai Yuan Enforcement Agency(ies): DOJ and SEC Summary of Conduct: According to settlement documents with the DOJ, subsidiaries of software company PTC, Inc. (PTC), admitted to paying local business partners to arrange travel plans for employees of Chinese state-owned entities to travel to the United States. The trips were purportedly for training sessions at PTC, Inc. headquarters in Massachusetts, but were predominately used to fund recreational travel to other locations in the United States. The subsidiaries recorded these travel costs as business partner commissions to avoid detection by PTC. Improper Payment: In total, PTC s subsidiaries and local business partners paid over $1.1M in travel expenses that included recreational expenditures for employees of Chinese state-owned entities. Benefit Sought or Obtained: During the period its subsidiaries improperly funded recreational travel, PTC entered into more than $13M of contracts with Chinese state-owned entities and made approximately $11.8M in profits. Disclosure, Cooperation, and Remediation: PTC s subsidiaries did not receive voluntary disclosure credit or full cooperation credit because they failed to disclose facts discovered in an internal investigation in their initial disclosure. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

38 Charges or Allegations: Violations of the anti-bribery, internal controls, and books and records provisions. Disposition: Parametric Technology (Shanghai) Software Co., Ltd. and Parametric Technology (Hong Kong) Ltd.: DOJ: Non-Prosecution Agreement. PTC: SEC: Settled Administrative Proceeding (PTC). Yuan: SEC: Deferred Prosecution Agreement. Financial Sanctions or Remedies: DOJ: Criminal penalty $14.54M. SEC: Disgorgement $11.8M; prejudgment interest $1.8M. Reporting Obligations or Other Significant Non-Financial Obligations: Three year reporting requirement to the DOJ for enhanced compliance program. The SEC entered into its first Deferred Prosecution Agreement with an individual by accepting Yuan s plea. Qualcomm, Inc. Enforcement Agency(ies): SEC Summary of Conduct: Qualcomm, Inc. (Qualcomm) allegedly hired relatives of Chinese government officials and provided them with gifts, meals, personal loans, travel, and entertainment in order to expedite regulatory decisions about the company s mobile technology products. The improper payments occurred over a ten year period, while Qualcomm attempted to gain entry and expand its market share in the Chinese telecommunication market. Qualcomm lacked sufficient internal controls to detect the improper payments and misrepresented the transactions as legitimate business expenses. Improper Payment: The SEC did not quantify the amount of improper benefits provided. Benefit Sought or Obtained: Increased sales of telecommunications products, resulting in billions of dollars of revenue. Disclosure, Cooperation, and Remediation: The SEC did not comment on Qualcomm s cooperation. Charges or Allegations: Violations of the anti-bribery, books and records, and internal controls provisions. Disposition: Settled Administrative Proceeding. Financial Sanctions or Remedies: Civil penalty $7.5M. Reporting Obligations or Other Significant Non-Financial Obligations: Two year reporting requirement to the SEC on improved anti-corruption compliance policies. 34

39 SMITH PACHTER McWHORTER PLC Rolls-Royce PLC Enforcement Agency(ies): DOJ Summary of Conduct: Rolls-Royce PLC, the U.K.-based power-systems manufacturer and its U.S.-based subsidiary Rolls-Royce Energy Systems, Inc. (RRESI) admitted that from about 2000 to 2013, it made approximately $35M in commission payments to third-party agents in Angola, Azerbaijan, Brazil, Kazakhstan, Iraq, and Thailand. These commission payments were used to pay government officials in those countries in exchange for business. Improper Payment: $35M. Benefit Sought or Obtained: Contracts, but the DOJ did not quantify the benefit obtained. Charges or Allegations: Conspiracy to violate the anti-bribery provision. Disclosure, Cooperation, and Remediation: Rolls-Royce received a discount of 25% of the low end of the applicable range of the U.S. Sentencing Guidelines. Per the deferred prosecution agreement, the DOJ agreed to this discount by taking into account various factors. The DOJ noted Rolls-Royce s cooperation. The company took remediation measures, including terminating business relationships with employees and third-parties involved in the misconduct; enhanced compliance procedures; and new and enhanced internal controls. The DOJ also noted Rolls-Royce s failure to disclose until after media reports surfaced. Additionally, the DOJ noted the parallel resolutions reached with British and Brazilian authorities. Disposition: Deferred Prosecution Agreement. Financial Sanctions or Remedies: DOJ: Criminal penalty $170M. Total Penalties in the U.S., U.K, and Brazil: $800M. Reporting Obligations or Other Significant Non-Financial Obligations: Annual reporting to the DOJ on the company s anti-corruption policies and procedures for a three-year term. SAP SE Enforcement Agency(ies): SEC Summary of Conduct: A former SAP SE executive, Vicente Garcia, allegedly agreed to pay bribes to government officials to secure contracts to sell software to the Panamanian government. SAP SE sold the software to a local partner in Panama at an 82% discount, enabling the partner to create a fund from its earnings to pay the bribes. SAP SE lacked sufficient internal controls to identify and prevent Garcia s misconduct. The SEC separately prosecuted Garcia in Improper Payment: $145K. Benefit Sought or Obtained: Software license sales to the government of Panama valued at $3.7M. Disclosure, Cooperation, and Remediation: SAP SE conducted an internal investigation, cooperated with the SEC s investigation, initiated a third party audit, and terminated Garcia. Charges or Allegations: Violations of the internal controls and books and records provisions. Disposition: Settled Administrative Proceeding. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

40 Financial Sanctions or Remedies: Disgorgement $3.7M; prejudgment interest $188,996. Reporting Obligations or Other Significant Non-Financial Obligations: None. SciClone Pharmaceuticals Enforcement Agency(ies): SEC Summary of Conduct: International subsidiaries of SciClone Pharmaceuticals (SciClone) allegedly gave money, gifts, and other valuable items (including travel and recreational expenses) to healthcare professionals in Chinese state-owned hospitals. The schemes allegedly increased sales of SciClone s pharmaceutical products over a five year period and were condoned by SciClone managers. SciClone did not have a sufficient anti-corruption compliance program to identify and prevent the schemes. The payments were improperly recorded in SciClone s corporate books and records as legitimate business expenses. Improper Payment: The SEC did not quantify the amount of improper benefits provided. Benefit Sought or Obtained: Increased sales of pharmaceutical products, resulting in $9.426M in ill-gotten gains. Disclosure, Cooperation, and Remediation: SciClone hired a compliance officer to monitor operations in China; improved its policies and procedures for third-party due diligence and payments; created internal audit and compliance departments; added anti-corruption provisions to its third party contracts; revised its policies and procedures for employee travel and entertainment; reduced its third party suppliers for travel and event planning; bolstered employee discipline for violation of internal policies; and created anti-corruption training programs for third party travel and event planning vendors. Charges or Allegations: Violations of the anti-bribery, internal controls, and books and records provisions. Disposition: Settled Administrative Proceeding. Financial Sanctions or Remedies: Disgorgement $9.426M; prejudgment interest $900K; civil penalty $2.5M. Reporting Obligations or Other Significant Non-Financial Obligations: Three year reporting requirement to the SEC on implementation of anti-corruption compliance measures. Ng Lap Seng and Jeff Yin Enforcement Agency(ies): DOJ Summary of Conduct: The DOJ superseded the 2015 indictment of Ng Lap Seng, a Macau-based real estate development, and his assistant Jeff Yin on domestic bribery, currency smuggling, and tax-related charges to include FCPA charges based on United Nations officials qualifying as foreign officials under the FCPA. The charges stem from an alleged bribery scheme whereby Seng and Yin made improper payments in cash and vacations to various U.N. officials, including the former president of the United Nations General Assembly, a former U.N. ambassador from Antigua and Barbuda, and the former deputy U.N. ambassador for the Dominican Republic in exchange for their influence, notably their support for a plan to build a U.N.-sponsored conference center in Macau. Improper Payment: $500K. 36

41 SMITH PACHTER McWHORTER PLC Benefit Sought or Obtained: Support to build a multi-million dollar U.N.-sponsored conference center in Macau. Charges or Allegations: Conspiracy to violate the anti-bribery provision, violation of the anti-bribery provision, bribery, and money laundering. Disposition: None at the time of this publication. Sentence and Financial Sanctions or Remedies: Open case. Teva Pharmaceuticals Industries Ltd. Enforcement Agency(ies): DOJ and SEC Summary of Conduct: In its settlement with the DOJ, Teva Pharmaceuticals Industries Ltd. (Teva), an-israeli-based pharmaceutical manufacturer, and its subsidiaries admitted to making improper payments to officials in Mexico, Russia, and the Ukraine. In its settlement documents with the DOJ, Teva s Russian subsidiary Teva LLC admitted that it entered into an exclusive distributor agreement with a company owned by a high-ranking Russian official s wife to repackage and distribute the company s multiple sclerosis drug, Copaxone. In exchange for inflated profit margins to his wife s company, the official used his influence within the Russian government to increase sales of Copaxone to the Russian Ministry of Health. According to the DOJ settlement documents, Teva admitted to engaging a senior government official in the Ukraine as a registration consultant and paying him over $200K in bribes in the form of monthly fees, vacations, and other things of value. In exchange, the government official used his position to influence the registration of Teva s pharmaceutical products, including Copaxone, with the Ukrainian Ministry of Health. In the DOJ settlement documents, Teva s wholly-owned subsidiary in Mexico admitted to using a distributor to pay doctors employed in government hospitals to prescribe Copaxone to their patients. Teva s executives in Israel were aware of the conduct and approved policies that they knew would be insufficient to detect or prevent these types of bribes. Improper Payment: Ukraine: $200K. Russia: $65M. Mexico: $159K. Benefit Sought or Obtained: $214M in profits. Disclosure, Cooperation, and Remediation: Teva received a discount of 20% of the low end of the applicable range of the U.S. Sentencing Guidelines. Per the non-prosecution agreement, the DOJ agreed to this discount by taking into account various factors. The DOJ noted Teva s substantial cooperation and remediation. The DOJ also noted delays in the early stages of the investigation, including broad assertions of attorney-client privilege and failure to produce documents on a timely basis. Charges or Allegations: DOJ: Conspiracy to violate the anti-bribery provision. SEC: Violation of the anti-bribery, internal controls, and books and records provisions. Disposition: DOJ: Plea Agreement. SEC: Consent Agreement. Financial Sanctions or Remedies: DOJ: $283M. SEC: $214M in disgorgement; $21.5M in prejudgment interest. Reporting Obligations or Other Significant Non-Financial Obligations: Three year independent compliance monitor. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

42 Mahmoud Thiam Enforcement Agency(ies): DOJ. Summary of Conduct: Former Minister of Mines and Geology of the Republic of Guinea and U.S. citizen, Mahmoud Thiam, allegedly participated in a scheme to launder bribes in the U.S. that he received from senior executives of a Chinese conglomerate in exchange for exclusive investment rights in various sectors of the Guinean economy, including the country s mining sector. Improper Payment: $8.5M. Benefit Sought or Obtained: Exclusive investment rights in valuable sectors of the Guinean economy. Charges or Allegations: Money laundering. Disposition: None at the time of this publication. Sentence and Financial Sanctions or Remedies: Open case. VimpelCom Limited and Unitel, LLC Enforcement Agency(ies): DOJ and SEC Summary of Conduct: In settlement documents with the DOJ, VimpelCom Limited (VimpelCom), admitted that its subsidiary Unitel, LLC (Unitel) made multiple payments to an Uzbek government official in order to secure favorable decisions from Uzbek telecommunications authorities. Between 2006 and 2012, Unitel paid over $114M in bribes to the foreign official. The payments were disguised as charitable donations and payments under sham contracts. The transactions were improperly recorded in VimpelCom s corporate books and records. Improper Payment: $114M. Benefit Sought or Obtained: Authorization to continue operating in the Uzbek telecommunications market. Disclosure, Cooperation, and Remediation: 45% discount off of the U.S. Federal Sentencing Guidelines for complying with the investigations. VimpelCom did not receive additional credits because it failed to voluntarily disclose the misconduct after an internal investigation. Charges or Allegations: Conspiracy and violations of the anti-bribery, books and records, and internal controls provisions. Disposition: DOJ: Deferred Prosecution Agreement. SEC: Settled Civil Action. Financial Sanctions or Remedies: DOJ: Criminal penalty $230.1M. SEC: disgorgement $167.5M. VimpelCom also agreed to pay $397.5M to Dutch regulators, totaling over $795M in global settlements. Reporting Obligations or Other Significant Non-Financial Obligations: Three year independent corporate monitor. 38

43 SMITH PACHTER McWHORTER PLC Jun Ping Zhang Enforcement Agency(ies): SEC Summary of Conduct: Jun Ping Zhang (Ping) is the former chairman and CEO of Hunan CareFx Information Technology, LLC (CareFx), a Chinese subsidiary of the international communications and information technology company, Harris Corporation (Harris). Allegedly, while serving as chairman and CEO of CareFx, Ping authorized and cultivated the practice of offering gifts to officials at state-owned hospitals in China. According to the SEC, Ping had knowledge that CareFx s sales staff falsified expense receipts to generate cash for the purchase of gifts, and that under Ping s management supervisors authorized and processed the falsified receipts for reimbursement. Improper Payment: $1M. Benefit Sought or Obtained: $9.6M in contracts with state-owned entities. Charges or Allegations: Violations of the anti-bribery, books and records, and internal controls provisions. Disclosure, Cooperation, and Remediation: According to the SEC, CareFx s books and records were consolidated into the Harris Corporation s books and records causing Harris Corporation to fail to keep accurate books and records in violation of the FCPA. The SEC noted that upon acquisition of CareFx, Harris took immediate and significant steps to train staff in China and integrate the subsidiary into Harris s system of internal accounting controls. As a result of these measures, Harris Corporation was able to discover the misconduct within five months of acquisition. The SEC noted these acquisition measures as well as Harris Corporation s self-reporting, remediation, and cooperation. Disposition: Cease and Desist Order. Sentence and Financial Sanctions or Remedies: Civil penalty $46K. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

44 VI. FCPA Statutory Provisions and Penalties The FCPA s anti-bribery provisions make it unlawful: To offer, pay, promise to pay, or authorize a corrupt payment or other thing of value; Directly or indirectly; To a foreign official, candidate for foreign political office, official of an international public organization, or a foreign political party; For the purpose of influencing any official act or decision, including any act or omission in violation of a lawful official duty, or securing an improper advantage; To assist in obtaining, retaining, or directing business to any person. See 15 U.S.C. 78dd-1 (public companies and persons associated with them), 78dd-2 (domestic companies and persons associated with them), and 78dd-3 (non-u.s., private held companies and foreign nationals). Criminal penalties for violation of the anti-bribery provision are: For individuals Up to five years imprisonment Fine of up to $250,000 For corporate entities Fine of up to $2,000,000, or up to double the amount of the bribe or the gain from the bribe. Non-monetary sanctions such as a monitorship or self-reporting obligations can also be imposed Criminal penalties for violation of the books and records and internal controls provisions are: For individuals Up to twenty years imprisonment Fine of up to $5 million For corporate entities Fine of up to $25 million Civil penalties and remedies for violation of the books and records and internal controls provisions are: Individuals $7,500 to $160,000 depending on the seriousness of the violation Disgorgement of ill-gotten gains Bar on serving as a director or officer of a public company For corporate entities $75,000 to $775,000 depending on the seriousness of the violation Disgorgement of ill-gotten gains Non-monetary sanctions such as a monitorship or self-reporting obligations can also be imposed 40

45 SMITH PACHTER McWHORTER PLC Additional Consequences In addition to the criminal and/or civil penalties, violations of the FCPA may spur other consequences, including suspension or debarment from federal government contracting. Suspension and Debarment for FCPA Violation The Federal Acquisition Regulation (FAR) the central body of rules governing federal contracts provides for the possibility of suspension or debarment of government contractors upon: (1) A criminal conviction or civil judgment for fraud or similar misconduct; (2) A serious violation of the terms of a public contract, subcontract, agreement, or transaction, such as a willful failure to perform in accordance with applicable provisions, or a history of failure to perform, or of unsatisfactory performance; or (3) Any other cause of so serious or compelling a nature that it affects the present responsibility of the individual or entity in question. See 48 C.F.R , Notably, for purposes of the general suspension and debarment provisions, SDOs take the position that the offense need not have been in connection with a U.S. government contract. Suspension and Debarment for Failure to Disclose Credible Evidence of an FCPA Violation if in Connection with a Government Contract The mandatory disclosure provisions of the FAR further provide that a contractor may be debarred or suspended for: Knowing failure by a principal, until 3 years after final payment on any Government contract awarded to the contractor, to timely disclose to the Government, in connection with the award, performance, or closeout of the contract or subcontract credible evidence of (A) Violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code... See 48 C.F.R Each federal agency has a suspension and debarment official (SDO) authorized to impose suspensions and/or debarments, which exclude entities from participating in government contracting at both the prime and subcontractor levels. See 48 C.F.R A debarment or suspension from procurement activities imposed by any federal agency automatically extends to procurement activities for all executive agencies. See 48 C.F.R (c), (d). The General Services Administration actively maintains a list of all debarred and suspended contractors, and government contractors generally must certify they are not suspended or debarred as a requirement of any contract award. Because suspension and debarment is designed to ensure the integrity of government contracts, the question is not whether the contractor is culpable for past conduct but whether the contractor can be trusted to act responsibly at present and in the future. See, e.g., Robinson v. Cheney, 876 F.2d 152 (D.C. Cir. 1989). Consistent with the purpose behind suspension and debarment, Federal regulations direct the SDO to consider the seriousness of the contractor s acts or omissions and any remedial measures or mitigating factors in making any debarment decision. See 48 C.F.R (a). It is typically wise to proactively inform the relevant SDO of any government investigation of the company for a potential FCPA violation, any FCPA disclosures made by the company, as well as the company s own investigative and remediation efforts. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

46 VII. The DOJ Evaluation of Corporate Compliance Programs In February 2017, the Department of Justice issued a guidance document entitled Evaluation of Corporate Compliance Programs, also discussed in section IV, supra, that sets forth the elements of an effective program and key questions to address in connection with each element from the Department s point of view. The content set forth in this guidance overlaps with the discussion of this subject in the U.S. Sentencing Guidelines, Chapter 8, as well as with the elements of an effective program set forth in FCPA settlements in recent years. However, the most recent guidance stresses to a greater degree the importance of companies collecting and analyzing data on their programs in order to assess their effectiveness. By posing specific questions, the recent guidance also provides a useful roadmap to the kinds of specific subjects that a company and its counsel should be prepared to address with the DOJ if the company s program is under any type of review, e.g., in connection with settling an enforcement matter or with reporting out to the Department as a condition of such a settlement. The topics discussed in the recent guidance are: 1. Analysis and Remediation of Underlying Misconduct This element is focused on the company s root cause analysis of the misconduct, the prior indications of misconduct and prior opportunities to detect the misconduct, and the specific remediation the company has put in place to reduce the risk of future occurrence. 2. Senior and Middle Management This element highlights the importance of analyzing whether misconduct occurred at the top levels of leadership, the concrete actions leadership has taken, whether there is a shared commitment to compliance from the different components of the company, and oversight by the Board. 3. Autonomy and Resources This element is focused on the role of the Compliance function in training of personnel, the stature of the Compliance function within the company, the experience and qualifications of Compliance and other gatekeepers, the autonomy of the compliance program and access by Compliance leadership to the Board, funding and resources allocated to compliance, and the extent to which the company has outsourced compliance functions and its rationale for doing so. 4. Policies and Procedures This topic is broken down into two primary subparts: (a) Design and Accessibility and (b) Operational Integration. The questions in subpart (a) focus on the design, implementation, application, guidance, and accessibility of the company s compliance program policies and procedures. The questions in subpart (b) are aimed at identifying those responsible for integrating the policies and procedures, the controls that failed or were absent that could have prevented the misconduct, the payment systems that funded the misconduct, the approval and certification processes relevant to the misconduct, and the company s vendor management system if vendors were involved in the misconduct. 42

47 SMITH PACHTER McWHORTER PLC 5. Risk Assessment These questions address the company s risk management process, the information the company has gathered and analyzed to help detect the type of misconduct in question, and how the company s risk assessment process has accounted for manifested risks. 6. Training and Communications This topic addresses the training the company has instituted and specifically asks questions regarding risk-based training, the form, content and effectiveness of such training, corporate communications around compliance, and the availability of compliance guidance to employees. 7. Confidential Reporting and Investigation The section concerns the effectiveness of the company s reporting mechanisms, the company s efforts to ensure that investigations have been properly scoped by qualified personnel, and the company s response to investigations. 8. Incentives and Disciplinary Measures This topic concerns whether and to what extent the actors responsible for the misconduct were disciplined, the company s history for terminating or disciplining employees for similar conduct, the individuals responsible for making the disciplinary decisions, whether disciplinary actions and incentives have been consistently applied, and the company s methods for incentivizing ethical behavior. 9. Continuous Improvement, Periodic Testing, and Review This topic includes questions relating to the internal audit function and the type of testing performed, the company s methods for reviewing and auditing its compliance program, and the extent to which the company regularly updates its compliance policies, procedures, and practices. 10. Third Party Management These questions analyze the company s third-party management processes in relation to the nature and level of the risk associated with the third party, the controls the company has in place to govern third parties, the management of relationships with third parties, and the identification of red flags in the due diligence process and subsequent follow-up. 11. Mergers and Acquisitions This last section focuses on the effectiveness of the due diligence process in identifying risk, the integration of the compliance function into merger and acquisition activity, and the process for connecting due diligence to implementation, including for tracking and remediating misconduct identified during the due diligence process. FCPA COMPLIANCE AND ENFORCEMENT TRENDS ANNUAL GUIDE: APRIL

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49 I. Smith Pachter McWhorter White Collar Practitioners Smith Pachter McWhorter White Collar Practitioners

50 Iris E. Bennett Member Ms. Bennett has deep experience counseling clients on the investigation, defense, and resolution of white collar matters, as well as the corporate compliance programs designed to avoid such liabilities. She has represented numerous Fortune 100 corporate and individual clients in matters relating to potential violations of criminal or civil fraud statutes, including the Foreign Corrupt Practices Act (FCPA), the False Claims Act, the Anti-Kickback Act, and antitrust laws. She has also represented companies in matters implicating the federal mandatory and voluntary disclosure rules and brought those matters to successful resolution. She has conducted internal investigations in cases across the globe and represented companies before the Criminal and Civil Divisions of the Department of Justice as well as the Securities and Exchange Commission, in all phases of U.S. government investigations and settlement. Ms. Bennett s fluency in Spanish has enabled her to conduct many investigations in that language. In addition to her extensive investigation and defense experience, Ms. Bennett has many years of FCPA compliance counseling experience. She regularly advises corporate clients on their anti-corruption compliance programs and on specific policies, procedures and compliance questions. She has also designed and led large-scale corporate compliance reviews and audits. Ms. Bennett clerked for the Honorable Robert W. Sweet of the United States District Court for the Southern District of New York, and for the Honorable David S. Tatel of the United States Court of Appeals for the District of Columbia. Ms. Bennett entered private practice after serving as a federal criminal defense lawyer in the District of Columbia Federal Public Defenders office. New York University School of Law (J.D., 1999; magna cum laude); Order of the Coif; New York University Law Review Harvard College (A.B., 1989; summa cum laude); Phi Beta Kappa SMITH PACHTER McWHORTER PLC 8000 Towers Crescent Drive, Suite 900 Tysons Corner, VA Telephone: (703) Fax: (703) ibennett@smithpachter.com

51 Joseph P. Covington Member Mr. Covington has over 35 years of white collar litigation and counseling experience in the domestic and international marketplaces, with expert knowledge of the Foreign Corrupt Practices Act (FCPA), the Anti- Kickback Act, the False Claims Act, and other criminal and civil fraud statutes and regulations. Mr. Covington s FCPA experience began in 1977 as a trial attorney in the Fraud Section at the Department of Justice investigating foreign bribery cases, and later served as head of DOJ s FCPA prosecution unit, after which Mr. Covington entered private practice. Mr. Covington has successfully represented hundreds of corporate clients in FCPA internal investigations, government investigations, and compliance matters, in countries ranging from Albania to Zimbabwe. He has counseled clients on post-violation remediation, guided them in establishing and maintaining compliance programs, and advised on third-party due diligence and contracting issues. Mr. Covington recently was appointed by the International Bank for Reconstruction and Development and International Development Association (World Bank) as the Independent Compliance Monitor for SNC-Lavalin Group Inc., with a mandate to review and evaluate the company s global anti-corruption compliance program. Mr. Covington also has two decades of experience with the False Claims Act (FCA) and its qui tam provisions. He has investigated and litigated numerous FCA cases, identifying and implementing strategies to resolve these cases. He has represented corporate and individual clients involving a range of other federal statutes and regulations, including those governing conflicts of interest, procurement integrity, and anticompetitive behavior. Mr. Covington is also well-versed in the mandatory and voluntary disclosure obligations of government contractors and has represented numerous clients in those matters. Mr. Covington has represented companies before government agencies including the Department of Justice Civil and Criminal Divisions, the Securities and Exchange Commission, the Special Investigator General for Afghan Reconstruction, and other investigatory bodies as well as suspension and debarment officials. SMITH PACHTER McWHORTER PLC 8000 Towers Crescent Drive, Suite 900 Tysons Corner, VA Telephone: (703) Fax: (703) jcovington@smithpachter.com Mr. Covington is AV Peer Review Rated, Martindale-Hubbell s highest peer recognition for ethical standards and legal ability. In 2012, Mr. Covington was named a DC Super Lawyer in White Collar Defense. Before his legal career, he served in the United States Army in combat in Vietnam and received a Purple Heart. University of Virginia School of Law (J.D., 1973) University of Virginia (B.A. History, 1968) Washington DC Super Lawyers, Criminal Defense: White Collar (2012)

52 Sean J. Hartigan Member Mr. Hartigan practices exclusively in the areas of federal and international law, specializing in white collar defense and compliance counseling. In the international compliance context he concentrates on the Foreign Corrupt Practices Act (FCPA) and in the domestic context on the False Claims Act, Procurement Integrity Act, Federal Acquisition Regulation (FAR), and other federal statutes and regulations governing the conduct of government contractors and their employees. Mr. Hartigan has represented corporate clients in the course of numerous internal and government investigations, including before the Department of Justice, Securities and Exchange Commission, and Office of the Inspector General. With bilingual skills, he has conducted many investigations in Spanish. Mr. Hartigan has also led teams in planning and conducting FCPA compliance audits and program reviews, and provides compliance counseling in this area. Mr. Hartigan has substantial in-house experience with a major government contractor in the areas of contract negotiation, investigation of potential voluntary and mandatory disclosures, and analysis of FAR clauses for flow-down to business partners. Mr. Hartigan clerked for the Honorable Jacques L. Wiener, Jr. of the United States Court of Appeals for the Fifth Circuit. University of Michigan Law School (J.D., 2003, cum laude); Book Review Editor, Michigan Law Review University of Michigan - Gerald R. Ford School of Public Policy (M.P.P., 2003) Dartmouth College (B.A., 1994) SMITH PACHTER McWHORTER PLC 8000 Towers Crescent Drive, Suite 900 Tysons Corner, VA Telephone: (703) Fax: (703) shartigan@smithpachter.com

53 Stephen D. Knight Member Mr. Knight counsels and represents clients in litigation on all aspects of government contracts. Mr. Knight places special emphasis on claims and disputes, government contract cost accounting, cost allowability, Cost Accounting Standards, defective pricing, government audits, and contract compliance. He has substantial expertise in performance issues, including defective specifications, delay and disruption, changes, and terminations. Mr. Knight also has significant experience in procurement fraud matters, representing clients during grand jury and Inspector General criminal investigations, as well as civil investigations and litigation pursuant to the Civil False Claims Act. Mr. Knight is a frequent author and speaker on government contract issues. Some of his publications include: Co-author, Metron, Inc.: A Primer for Proving Compensation Cost Reasonableness, 98 Federal Contracts Report 254, The Bureau of National Affairs, Inc., August 20, 2012; Co-author, Maropakis: The Federal Circuit Imposes Forfeiture of Defenses to Government Claims When Contractor Fails to Certify Them as Contractor Claims, 94 Federal Contracts Report 221, The Bureau of National Affairs, Inc., July 27, 2010; Certified Estimates and Mandatory Disclosure: A Bad Decision Makes for a Worse Regulation, The Procurement Lawyer, Vol. 44, No.4, Summer 2009; Geren v. Tecom, Inc.: The Federal Circuit Creates A New FAR Cost Principle, Government Contract Costs, Pricing & Accounting Report, Vol. 4, No. 4 27, July 2009 (with Richard C. Johnson, John S. Pachter and D. Joe Smith); Federal Circuit Cost Decisions Bode Ill for Contractors, The Procurement Lawyer, Vol. 39, No. 2, Winter 2004; and Compliance Problems for American Contractors in Iraq, The Construction Lawyer, Vol. 24, No. 2, Spring Mr. Knight is bilingual in English and French. As an adjunct professor of law with the George Washington University Law School, Mr. Knight teaches in the university s LL.M. in Government Procurement Law Program. University of Virginia School of Law (J. D., 1978) SMITH PACHTER McWHORTER PLC 8000 Towers Crescent Drive, Suite 900 Tysons Corner, Virginia Telephone: (703) Fax: (703) sknight@smithpachter.com University of Virginia (B.A. with Honors, 1975)

54 Kathryn T. Muldoon Member Ms. Muldoon represents clients in the government contracts and construction practice areas. Her experience includes contract claims and disputes, bid protests, resolution of prime-subcontractor disputes, audits and investigations, procurement fraud, government contract cost accounting, cost allowability, Cost Accounting Standards, Buy America issues, development of contractor ethics and compliance programs, and representation of contractors who have been suspended or proposed for debarment. She is experienced in the conduct of internal investigations and employee interviews pertaining to compliance issues and in support of independent monitor engagements. Ms. Muldoon s experience ranges from contract administration to claims and litigation, on federal, state, and private projects. She has experience in claim analysis and presentation, including work with technical experts, scheduling experts, and cost and pricing experts. She has also worked with national, international, and local construction and engineering firms on major contracting issues including defective specifications, differing site conditions, constructive changes, contractor performance evaluations, and liquidated damages. Pepperdine University School of Law (J.D., 2006) University of Virginia McIntire School of Commerce (B.S. Commerce Accounting Concentration, 2002) SMITH PACHTER McWHORTER PLC 8000 Towers Crescent Drive, Suite 900 Tysons Corner, Virginia Telephone: (703) Fax: (703) kmuldoon@smithpachter.com

55 Armani Vadiee Member Mr. Vadiee s practice focus is government contracts, commercial contracts, compliance, white collar and construction matters. Mr. Vadiee provides counsel to domestic and international clients on a wide range of issues including contract negotiation, contract terms and conditions, bid protests, contract changes and claim preparation, contract termination settlements, regulatory audit and compliance litigation and oversight on independent monitor engagements. Mr. Vadiee provides regulatory compliance counseling on wide range of areas including export controls, subcontractor evaluations and mandatory reporting requirements. Mr. Vadiee has experience litigating contract disputes in federal and state courts and administrative bodies including before the Civilian Board of Contract Appeals, the Armed Services Board of Contract Appeals, the United States Government Accountability Office, the United States Court of Federal Claims and the United States Court of Appeals for the Federal Circuit. Prior to law school, Mr. Vadiee was a contracting officer for a U.S. Department of Energy research laboratory and during law school clerked at the U.S. Government Accountability Office. Mr. Vadiee is multi-lingual in English, Farsi (Bilingual Proficiency), and Spanish (Limited Working Proficiency). As an active member of the American Bar Association Section of Public Contract Law and the Federal Bar Association s Government Contracts Section, Mr. Vadiee instructs courses in Cost and Price Realism in Government Contracts, Government Contracts Ethics and Compliance, and Cybersecurity and the impact on law firms. University of Maryland School of Law (J.D., 2010) University of New Mexico, Anderson Graduate School of Management (M.B.A., 2004) University of New Mexico, Anderson School of Management (B.B.A., 2002) SMITH PACHTER McWHORTER PLC 8000 Towers Crescent Drive, Suite 900 Tysons Corner, VA Telephone: (703) Fax: (703) avadiee@smithpachter.com

56 Erica J. Geibel Counsel Ms. Geibel represents clients in the white collar, government contracts, and construction practice areas. She has significant experience in the area of compliance counseling and regularly reviews ethics and compliance programs, assists in training, and evaluates and tests internal controls. Ms. Geibel works on contractor responsibility and integrity issues, internal investigations, Anti-Kickback Act issues, Foreign Corrupt Practices Act compliance counseling, civil False Claims Act issues, as well as all aspects of government contracts including small business issues, contract claims and disputes, bid protests, Service Contract Act disputes, contract negotiations, contract review and contract drafting, and costing and pricing issues involving cost allocability and allowability. In her construction practice, Ms. Geibel has represented major national and international contractors, as well as local contractors on a wide variety of construction issues. Ms. Geibel graduated cum laude from the George Mason University School of Law. She is an active member of the ABA Section of Public Contract Law and is Co-Chair of the Fairfax Bar Association Government Contracts Section Prior to joining Smith Pachter McWhorter, Ms. Geibel served as a law clerk for the United States Attorney s Office for the District of Columbia. George Mason University School of Law (J.D., cum laude; Moot Court Board; Trial Advocacy; Writing Fellow) George Mason University (B.A., Government & International Politics, Departmental Honors, cum laude) SMITH PACHTER McWHORTER PLC 8000 Towers Crescent Drive, Suite 900 Tysons Corner, VA Telephone: (703) Fax: (703) egeibel@smithpachter.com

57 Sean K. Griffin Associate Sean K. Griffin s practice areas include government contracts, construction, and white collar law. Prior to joining Smith Pachter McWhorter in 2015, he served as a Law Clerk, and then as an Honors Attorney, for the United States Civilian Board of Contract Appeals, focusing on government contract claims under the Contract Disputes Act. Mr. Griffin is experienced in the mediation and litigation of government contracts and construction disputes involving terminations, constructive changes, equitable adjustments, and delay damages. Mr. Griffin s white collar experience includes e-discovery collection, review, and production for internal investigations and audits on False Claims Act and Foreign Corrupt Practices Act matters. Mr. Griffin is a graduate of the American University, Washington College of Law, where he worked as a Dean s Fellow for the Business Law Program, and as Student Attorney for the Community and Economic Development Law Clinic. During law school, he served on the American Bar Association s Administrative Law Review, the Alternative Dispute Resolution Honor Society, and the Business Law Society s Executive Board. American University, Washington College of Law (J.D., 2014) University of California, Santa Cruz, Political Science (B.A., 2008) SMITH PACHTER McWHORTER PLC 8000 Towers Crescent Drive, Suite 900 Tysons Corner, VA Telephone: (703) Fax: (703) sgriffin@smithpachter.com

58 Paulo Gusmão Associate Paulo Gusmao s practice areas include government contracts and white collar law. Prior to joining Smith Pachter McWhorter in 2017, Mr. Gusmao worked in the corporate legal affairs department of the Inter- American Development Bank where he advised on various corporate and institutional matters, including human resources administration, mobilization of institutional resources, implementation of personnel and administrative policies, corporate governance, and tax. Mr. Gusmao also represented the Inter-American Development Bank in labor disputes before its administrative tribunal. While in law school, Mr. Gusmao was an intern at the Department of Labor s International Labor Affairs Bureau, a summer associate in the project finance practice group of a corporate law firm in Rio de Janeiro, Brazil, and a Student Attorney for the Community and Economic Development Law Clinic. Mr. Gusmao is multi-lingual in English, Portuguese and Spanish. J.D., American University, Washington College of Law ( J.D., 2014, cum laude); Senior Editor, Journal of Gender, Social Policy and the Law; Dean s Fellow, Legal Analysis Program. American University, School of International Service (M.A., 2016) University of Redlands, Johnston Center for Integrative Studies (B.A., 2007) SMITH PACHTER McWHORTER PLC 8000 Towers Crescent Drive, Suite 900 Tysons Corner, VA Telephone: (703) Fax: (703) pgusmao@smithpachter.com

59 Erica A. Reed Associate Ms. Reed has extensive experience representing corporate entities and their executives in connection with litigation and investigations arising out of white collar criminal prosecutions, grand jury investigations, criminal antitrust investigations, and corporate compliance matters. She has conducted numerous internal investigations and employee interviews across the globe pertaining to FCPA investigations, government investigations, and in support of independent monitor engagements. A seasoned litigator who has successfully handled numerous cases in federal and state courts, Ms. Reed has also represented her clients in civil matters such as breach of contract, tortious interference, business conspiracy, fraud, securities litigation and arbitration, and class actions. Prior to returning to private practice, Ms. Reed was an Assistant United States Attorney for the District of Columbia and the Northern District of Florida. Ms. Reed also served as a Trial Attorney in the Department of Justice s (DOJ) Civil Division, National Courts Section. While in the National Courts Section, Ms. Reed represented the United States in government contract and procurement dispute litigation. While in law school, Ms. Reed was an intern for the Hon. Eric Washington, Chief Judge, of the District of Columbia Court of Appeals Fordham University (B.A., 2002) New York University School of Law (J.D., 2005) New York University School of Law, Trade Regulation (L.L.M., 2009) SMITH PACHTER McWHORTER PLC 8000 Towers Crescent Drive, Suite 900 Tysons Corner, VA Telephone: (703) Fax: (703) ereed@smithpachter.com

60 Kristin A. Tisdelle Associate Ms. Tisdelle s practice focus is corporate compliance, commercial contracts, government contracts, and white collar matters. She provides counsel to domestic and international clients on a variety of issues including contract negotiations and awards, contract claims and disputes, interactions between prime contractors and subcontractors, and contract administration. Ms. Tisdelle s white collar experience includes internal corporate compliance matters, investigations under the False Claims Act and Foreign Corrupt Practices Act, debarment proceedings before federal Suspension and Debarment Officers, and regulatory reporting requirements. During law school, Ms. Tisdelle interned in the Bureau of Competition at the Federal Trade Commission investigating mergers and acquisitions among pharmaceutical companies for regulatory compliance and consumer protection issues. Prior to law school, she worked in-house for the General Counsel of a national transportation brokerage firm handling state and local procurement contracts, corporate compliance matters, and regulatory issues. Washington and Lee University School of Law (J.D., 2016) University of Mary Washington, Magna cum laude (B.S., Economics, Philosophy, 2011) SMITH PACHTER McWHORTER PLC 8000 Towers Crescent Drive, Suite 900 Tysons Corner, VA Telephone: (703) Fax: (703) ktisdelle@smithpachter.com