ACC Austin Roundtable
FCPA Compliance & Enforcement:
Assessing Market Access Risks in Global Business
December 2013
Mark Rochon
Matteson Ellis
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FCPA ENFORCEMENT TRENDS
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FCPA Notable Corporate Penalties 2013
 Corporate penalties: Criminal and civil fines,
disgorgement of profits, prejudgment interest,
imposition of monitorship or reporting requirements
– Total S.A. -- $398 million; 3 year monitorship
– Weatherford -- $152 million (plus additional $100 million
relating to sanctions); 18 month monitorship + 18 months
self-reporting
– Stryker (SEC only) -- $13.3 million disgorgement
– Diebold -- $48 million combined penalties and
disgorgement; 18 month monitorship
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Significant Penalties Under the FCPA
Largest FCPA Settlements
(Combined Penalties/Disgorgement)
$900
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$800
$700
Millions
$600
$500
$400
$300
$200
$100
$0
$149 M
$152.6 M
Jeffrey Tesler Weatherford
(2011)
(2013)*
Amount
in Millions
$149
$153
$185 M
Daimler
(2010)
$218.8 M
JGC (2011)
$338 M
Technip
(2010)
$365 M
Snamprogett
i / ENI (2010)
$398 M
Total SA
(2013)
$400 M
BAE (FCPArelated)
(2010)
$579 M
Halliburton /
KBR (2009)
$185
$219
$338
$365
$398
$400
$579
$800 M
Siemens
(2008)
$800
*Weatherford was assessed an additional $100 million in penalties relating to sanctions violations.
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Prosecution of
Individual Corporate Officials
Overview of Enforcement Activity Involving Individuals
40
36
35
30
24
25
18
20
15
10
24
14
13
7
5
8
4
8
4
9
8
4
3
11
6
2
5
6
2
0
2007
2008
New individuals charged
2009
2010
2011
SEC enforcement actions
2012
2013
DOJ enforcement actions
Note: Updated through October 2013. The column “new individuals charged” includes all such individuals, irrespective of whether
they have resolved the charges. Individuals charged by both agencies are included in this column twice. These statistics include the
guilty plea of James Giffen, although this technically did not involve an FCPA charge..
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FCPA ELEMENTS
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Two Primary FCPA Elements
 Anti-Bribery Provisions
 Accounting Provisions
– Books and Records
Requirements
– Internal Controls
Requirements
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FCPA Anti-Bribery Provisions:
Elements of a Violation
 No issuer, domestic concern, person with sufficient U.S. nexus
 May corruptly
 Take any action in furtherance of a payment or a promise,
offer, or authorization of a payment
 Of a bribe or anything of value
 Directly or indirectly (with “knowledge”)
 To a foreign official
 To obtain or retain business or improper advantage
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Affirmative Defenses / Exception
 Local Law Defense: Payments permitted under the written
laws and regulations of the host country
 Expenditures on Behalf of Foreign Officials: Payments must
be bona fide, reasonable, AND directly related to the:
– Promotion, demonstration, or explanation of products or services, or
– Execution or performance of a contract with a foreign government or
agency thereof
 Facilitating Payment Exception: Small payments to secure
non-discretionary “routine governmental action”
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FCPA Accounting Requirements
 Maintain books, records, and accounts
that, in reasonable detail, accurately
reflect transactions and the disposition
of assets
 Maintain a system of internal
accounting controls sufficient to
reasonably assure that transactions are:
–
–
Consistent with management authorizations
Recorded so that financials can conform
with GAAP
 Primarily civil/administrative penalties,
but criminal for willful violations
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NOTABLE CORPORATE RESOLUTIONS
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Notable Corporate Resolutions
What they tell us about...




Voluntary Disclosure and Cooperation
Third Party Risk
Parent Liability
Effective Anti-Corruption Compliance
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Model of Benefits of Cooperation
Ralph Lauren NPA
 April 2013 Ralph Lauren enters into NPAs with DOJ and SEC
(first ever)
– $1.6 million in combined penalties, interest, and disgorgement
 Allegation that GM and others in Argentina approved over
$500,000 in payments to customs inspectors through
broker/freight forwarder
 Agencies lauded RL disclosure and cooperation
– Payments disclosed to agencies within 2 weeks of being discovered
– SEC later cited “exemplary cooperation” including providing English
translations of documents
– Discovery triggered global review of operations confirming Argentina
was “isolated incident”
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Parent Liability
Weatherford
 DOJ brought single count criminal information alleging criminal violation
of Internal Controls provisions of FCPA
– DOJ: “The company failed to implement these internal controls despite operating
in an industry with a substantial corruption risk profile, and despite growing its
global footprint in large part by purchasing existing companies, often themselves in
countries with high corruption risks.”
 Corrupt conduct of subsidiaries included:
– Phony JV with partners in Africa controlled by officials
– Sham consulting payments to fund payments to African official with power to
renew contract
– Improper “volume discounts” to supplier in Middle East, used to create slush fund
to bribe officials at NOC
– Oil for Food kickbacks
 $152.6 million in penalties, interest and disgorgement (additional $100
million in fines relating to sanctions violations)
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Diverse FCPA Risks
Stryker Corp.

Investigation began in 2007 as part of DOJ/SEC industry sweep.

Stryker subsidiaries in Argentina, Greece, Mexico, Poland, and Romania allegedly made
approx. $2.2M in illicit payments.
– Payments channeled through 3rd parties and reportedly generated $7.5M in illicit profits.
– Recorded as legitimate expenses (e.g., consulting, services, travel, charitable donations).

Highlights broad range of risks under FCPA, including:
– Diverse 3rd parties. Bribes in Mexico allegedly channeled through fees to local law firm.
– Charitable donations. Donation to fund lab at public university in Greece allegedly a quid
pro quo in exchange for an HCP’s promise to direct business to Stryker.
– Sponsorships/travel. Stryker allegedly provided unjustified travel and accommodations to
officials in several countries under guise of legitimate sponsorship / promotional efforts.


In settling with SEC, Stryker agreed to penalty/disgorgement of nearly $13.3M. DOJ reportedly
advised Stryker that it had closed its investigation.
Despite DOJ declination and (relatively) modest SEC amount, Stryker reported to have spent
$75 million on internal investigation
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KEY TAKEAWAYS
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How companies get in trouble...




Access to markets
Crossing the border with goods or people
Getting the business
Getting out of trouble
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It’s not just about the U.S. anymore...
 U.K. Bribery Act of 2010
 Developments in Latin America, Canada,
Europe
 Very local risk
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Contact Information
Mark Rochon
(202) 626-5819
mrochon@milchev.com
Matteson Ellis
(202) 626-1477
mellis@milchev.com
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