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Foreign Corrupt Practices Act (FCPA) Spring Update

Posted in International Trade and Anti-Corruption Compliance

Stamping out foreign bribery is a Justice Department priority, and we are determined to continue our vigorous enforcement of the Foreign Corrupt Practices Act.

- DOJ Acting Assistant Attorney General Mythili Raman, April 16, 2013.

After a quiet first quarter, Foreign Corrupt Practices Act (FCPA) enforcement has roared back in recent weeks with numerous enforcement actions against corporations and individuals.  Notable examples are highlighted below:

Ralph Lauren

  • On April 22, Ralph Lauren Corporation agreed to pay $1.6 million in combined penalties to the DOJ and SEC in exchange for dual non-prosecution agreements after its Argentina subsidiary paid bribes to government officials in order to obtain improper customs clearance of merchandise.
  • Key Takeaway: Ralph Lauren marks the first time the SEC has resolved an FCPA case using a non-prosecution agreement (as opposed to a deferred prosecution agreement or injunctive action).  In its press release, the SEC explained that this decision was “due to the company’s prompt reporting of the violations on its own initiative, the completeness of the information it provided, and its extensive, thorough, and real-time cooperation with the SEC’s investigation.”  Interestingly, prior SEC settlements have expressed similar sentiments yet reached a different resolution (e.g., 2011 TenarisS.A. deferred prosecution agreement), so it remains to be seen whether Ralph Lauren represents a new SEC enforcement strategy.

Parker Drilling Company 

  • On April 16, Houston-based Parker Drilling Company resolved FCPA charges with the DOJ and SEC for bribes paid by its third-party agent to Nigerian officials in order to circumvent customs and tax laws.  As part of the settlement, Parker entered into a deferred prosecution agreement with the DOJ and paid $15.85 million in criminal and civil penalties.
  • Key Takeaway: Proper due diligence and monitoring of third-party agents are essential components of an FCPA compliance program.

Phillips

  • On April 5, Dutch medical equipment manufacturer Koninklijke Philips Electronics N.V. resolved FCPA violations with the SEC related to payments made by its Polish subsidiary to health care officials involved in purchasing medical equipment via public tenders.  Philips agreed to pay more than $4.5 million in disgorgement and pre-judgment interest and received an administrative cease-and-desist order from the SEC.  The DOJ’s investigation appears to be ongoing.
  • Key Takeaway: Even when the underlying payments have no U.S. nexus, the SEC will still enforce violations of the FCPA books and records and internal controls provisions.

BizJet Executives

  • On April 5, charges were unsealed against four former executives of BizJet International Sales and Support Inc., an Oklahoma-based subsidiary of Lufthansa Technik AG.  The charges are connected to a March 2012 BizJet and Lufthansa settlement with the DOJ arising out of allegations that BizJet paid bribes to government officials in Latin America in connection with contracts for aircraft maintenance, repair, and overhaul services.  Two of the four executives have been sentenced to date, with each receiving probation and eight months home detention.  The DOJ noted that their sentences were reduced based on their cooperation with the government’s investigation.
  • Key Takeaway:  As stressed in the DOJ’s press release, “[t]hese charges reflect our continued commitment to holding individuals accountable for violations of the FCPA, including, as in this instance, after entering into a deferred prosecution agreement with their employer.”
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