2019 FCPA Enforcement Highlights (Part II of III)

In a record year, there are bound to be numerous interesting enforcement actions and principles.  I picked out a few to highlight. 

It is surprising to say the least that DOJ continues to return large enforcement actions against a number of global companies.  You would think after the last ten years of aggressive enforcement companies would refrain from bribery schemes or dedicate resources to cleaning up bribery schemes and implementing robust compliance solutions.  Yet, we continue to observe companies suffering from large-scale violations involving systemic conduct in multiple countries for long periods of time. 

Three corporate enforcement actions fall into this category – Ericsson, MTS Telesystems and Fresenius Medical. 

Ericsson suffered the largest penalty of $1 billion for a systemic course of bribery over a 17 year period involving at least five countries.  Ericsson paid bribes in money, gifts and hospitality/travel.  In a typical fashion, Ericsson relied on third-party agents and consultants to manage slush funds and paid through false invoices and sham contracts.

MTS, Russia’s largest cellular carrier, joined the Uzbekistan triumverate (Telia Sonera $865 million and Vimpelcom $795 million) and settled for $950 million.  At the center of the corrupt schemes was the notorious Gulnara Karimova, the daughter of the former Uzbekistan President, who orchestrated various bribery schemes and was eventually indicted.  MTS paid Karamova $420 million in bribes to enter the Uzbek market and operate for eight years.  MTS paid most of the bribes through acquisitions of Karimova-controlled companies.

Fresenius Medical ended up with an interesting mix – a DOJ non-prosecution agreement and paid $84 million; a $147 settlement with the SEC; and a two-year corporate monitor.  Fresenius, the nation’s leading dialysis company, was tagged for bribery in 17 countries.  Fresenius used a variety of schemes to funnel money to physicians and medical officials.

In a weird ending to a long and highly-charged case, DOJ and the SEC finally resolved the Walmart case.  While the settlement action ended with a whimper rather than a bang, DOJ insisted on a two-year corporate monitor, notwithstanding Walmart’s remediation efforts to design and implement a state-of-the-art ethics and compliance program.

After spending approximately $900 million over an eight year period on lawyers, consultants and accountants, Walmart settled with DOJ for $138 million and with the SEC for $144 million.  The Walmart enforcement action is an important reminder that companies are likely to suffer when they adopt an aggressive international growth plan without building a robust ethics and compliance program to support such efforts.

In an important enforcement action resulting in a declination, DOJ kicked off 2019 with an interesting prosecution of Cognizant Technology, resulting in the indictment of its former President and General Counsel, and a $25 million settlement with the SEC.  The Cognizant settlement demonstrated in dramatic terms the impact of DOJ’s FCPA Corporate Enforcement Policy.  Cognizant’s board disclosed the potential violation two weeks after learning about the bribery conduct.  By doing so, the board took a significant risk – it was not aware of the full scope of the bribery scheme and nonetheless reported the matter to DOJ and cooperated.  In the end, DOJ rewarded Cognizant with a declination.

DOJ’s consistent increase in criminal prosecution of individuals for FCPA violations is an important reminder to every company of the dangers of foreign bribery.  DOJ’s records here has been underscored by its recent strong of trial victories – 3 separate victories in criminal FCPA trials.

Perhaps its most successful initiative has been in unraveling the corruption at PDVSA in Venezuela.  DOJ has strung together over the course of the last three years a record number of indictments and guilty pleas, totaling 31 individuals who have been prosecuted in Houston and Miami.  DOJ’s investigations are continuing and more prosecutions are likely this upcoming year.

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