Last week’s announcement by the Securities and Exchange Commission (SEC) of the resolution of its outstanding Foreign Corrupt Practices Act (FCPA) enforcement action with Halliburton Company continues to resonate and provide lessons for the compliance practitioner. [Full disclosure – I am a Halliburton shareholder] I wanted to continue to explore the enforcement action around the issue of internal controls, their effectiveness (or lack thereof) and management over-ride of internal controls.

In a Cease and Desist Order which also covered former employee Jeannot Lorenz, the SEC spelled out a bribery scheme facilitated by both a failure and over-ride of company internal controls. The matter involved Halliburton’s work in Angola with the national oil company Sonangol, which had a local content requirement. The nefarious acts giving rise to the FCPA violation involved a third-party agent for Halliburton’s contracts with the state-owned enterprise.

According the SEC Press Release, this matter initially began in 2008 when officials at Sonangol, Angola’s state oil company, informed Halliburton management it had to partner with more local Angolan-owned businesses to satisfy local content regulations. The company was successful in meeting the requirement for the 2008 contracting period.

However, when a new round of oil company projects came up for bid in 2009, Sonangol indicated, “Halliburton needed to partner with more local Angolan-owned businesses in order to satisfy content requirements.” The prior work Halliburton had on local content was deemed insufficient and “Sonangol remained extremely dissatisfied” with the company’s efforts. Sonangol backed up this dissatisfaction with a potential threat to veto further work by Halliburton for Sonangol. It was under this backdrop that the local business team moved forward with a lengthy effort to retain a local Angolan company (Angolan agent) owned by a former Halliburton employee who was a friend and neighbor of the Sonangol official who would ultimately approve the award of the business to Halliburton.

In each of these attempts, the company bumped up against its own internal controls around third parties, both on the sales side and through the supply chain. The first attempt to hire the Angolan agent was as a third-party sales agent, which under Halliburton parlance is called a “commercial agent”. In this initial attempt, the internal control held as the business folks abandoned their efforts to contract with the Angolan agent.

The first attempt to hire the Angolan agent was rejected because the local Business Development (BD) team wanted to pay a percentage fee based, in part, upon work previously secured under the 2008 contract and not new work going forward. Additional fees would be paid on new business secured under the 2009 contract. This payment scheme for the Angolan agent was rejected as the company generally paid commercial agents for work they helped obtain and not work secured in the past. Further, the company was not seeking to increase its commercial agents during this time frame (Halliburton had entered into a Deferred Prosecution Agreement (DPA) for FCPA violations in December 2008 for the actions of its subsidiary KBR in Nigeria).

Finally, “As outlined by Halliburton’s legal department, to retain the local Angolan company as a commercial agent, it would be required to undergo a lengthy due diligence and review process that included retaining outside U.S. legal counsel experienced in FCPA compliance to conduct interviews. Halliburton’s in-house counsel noted that “[t]his is undoubtedly a tortuous, painful administrative process, but given our company’s recent US Department of Justice/SEC settlement, the board of directors has mandated this high level of review.”” In other words, the internal controls held and were not circumvented or over-ridden.

The Angolan agent was then moved from commercial agent status to that of a supplier so the approval process would be easier. The proposed reason for this switch in designations was that the Angolan agent would provide “real estate maintenance, travel and ground transportation services” to the company in Angola. However, the internal controls process around using a supplier also had rigor as they required a competitive bidding process which would take several months to complete. Over-riding this internal control, the local business team was able to contract with the Angolan agent for these services in September 2009 and increase the contract price, all without the Angolan agent going through the procurement internal controls.

A second internal control which was over-ridden was the procurement requirement that the supplier procurement process begin with “an assessment of the critically or risk of a material or services”; not with a particular supplier and certainly not without “competitive bids or providing an adequate single source justification.” However, as the Order noted, the process was taken backwards, with the Angolan agent selected and then “backed into a list of services it could provide.” Finally, there was a separate internal control that required “contracts over $10,000 in countries with a high risk of corruption, such as Angola, to be reviewed and approved by a Tender Review Committee.” Inexplicably this internal control was also circumvented or over-ridden.

Yet this arrangement was not deemed sufficient local content by Sonangol officials. After all of this and further negotiations, Halliburton entered into another agreement with the Angolan agent, where the company would lease commercial and residential real estate and then sublease the properties back to Halliburton at a substantial markup, and also provide real estate transaction management consulting services (the “Real Estate” contract).

This Real Estate contract also had to go through an internal control process. Initially, there were questions by the company about the Real Estate contract as a single source for the procurement function, the upfront payment terms to the Angolan agent, the high costs, and the rationale for entering into subleases for properties that would cost less if leased directly from the landlord. Indeed, “One Finance & Accounting reviewer at headquarters noted that he could not think of any legitimate reason to pay the local Angolan company over $13 million under the Real Estate Transaction Management Agreement and that it would not have cost that much to run Halliburton’s entire real estate department in Angola.”

Halliburton internal controls required that when a single source was used by the company it had to be justified. This justification would require a showing of preference for quality, technical, execution or other reasons, none of which were demonstrated by the Angolan agent. Finally, if such a single source was used, the reasons had to be documented or in Halliburton’s internal controls language “identified and justified”. None were documented by the company.

Finally, as the internal controls were either circumvented or over-ridden; “As a consequence, internal audit was kept in the dark about the transactions and its late 2010 yearly review did not examine them.” This was yet another internal control failure but was built on the previous failures noted above.

So how many internal controls failures can you spot? Whatever the number, the lesson for the compliance practitioner is that you must do more than have internal controls. They must be followed and be effective. If you are doing business in high risk regions, you have to test the controls and then back up your testing by seeing if payments are being made in those regions. Perhaps the best concept would simply be Reaganian, trust but verify. 

 

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2017

June Foray died this week. You may not think you have heard of her but let me assure you; you have heard her. Foray was the voice of Rocket J. Squirrel in perhaps the greatest cartoon show ever, Rocky and Bullwinkle. According to her obituary in the New York Times (NYT), Foray’s work in voice animation won her the sobriquet “The First Lady of Animated Voicing”. Her work was prodigious, including big screen cartoon voices as Lucifer the cat in Walt Disney’s “Cinderella” (1950), a mermaid and a squaw in “Peter Pan” (1953), and Wheezy Weasel and Lena Hyena in “Who Framed Roger Rabbit” (1988). Yet it was on television where Foray was the most well-known, having voiced “Cindy-Lou Who in “How the Grinch Stole Christmas” (1966); Ursula in “George of the Jungle” (1967); and Aunt May Parker in “Spider-Man and His Amazing Friends.” As noted in her obituary in Variety, she also voiced “Looney Tunes’ Witch Hazel, Nell from “Dudley Do-Right,” Granny in the “Tweety and Sylvester” cartoons” among hundreds of others, many uncredited.”

At 94, she became the oldest person to win an Emmy, cited for her Mrs. Cauldron on “The Garfield Show,” and in 2013 she received an Emmy Governors Award. Perhaps the greatest tribute came from Chuck Jones, the legendary animator who proposed her star on Hollywood’s Walk of Fame and who was quoted in the NYT obit, “June Foray is not the female Mel Blanc. Mel Blanc was the male June Foray.”

Almost as interesting was yesterday’s announcement by the Securities and Exchange Commission (SEC) of the resolution of its outstanding Foreign Corrupt Practices Act (FCPA) enforcement action with Halliburton. [Full disclosure – I am a Halliburton shareholder] In a Cease and Desist Order which also covered former employee Jeannot Lorenz, the SEC spelled out a bribery scheme facilitated by both a failure and over-ride of company internal controls. The matter involved Halliburton’s work in Angola with the national oil company Sonangol, which had a local content requirement. The nefarious acts giving rise to the FCPA violation involved a third-party agent for Halliburton’s contracts with the state-owned enterprise.

Background

According the SEC Press Release, “officials at Angola’s state oil company Sonangol advised Halliburton management in 2008 that it was required to partner with more local Angolan-owned businesses to satisfy local content regulations for foreign firms operating in Angola. Halliburton tasked Lorenz to spearhead these efforts. When a new round of oil company projects came up for bid, Lorenz began a lengthy effort to retain a local Angolan company owned by a former Halliburton employee who was a friend and neighbor of the Sonangol official who would ultimately approve the award of the contracts. It took three attempts but Halliburton ultimately outsourced more than $13 million worth of business to the local Angolan company.”

Facts

There was an initial attempt to bring a local Angolan company in as a commercial agent for Halliburton but, as the Order noted, the idea was abandoned because of the lengthy internal process for approving agents at the company. The agent was then moved to a supplier so the approval process would be easier. The local Angolan company was to provide “real estate maintenance, travel and ground transportation services” but would be approved through the supplier process, which required the internal controls of business justification and competitive bidding, both which were over-ridded and a Consulting Contract was entered into with the local Angolan company. However, the true purpose of the Consulting Contract, “to provide bridge payments as a show of good faith to the Sonangol government official and the local Angolan company until the latter successfully emerged from the bidding process”, was never provided to the contract approvers. Instead a fictional purpose was articulated, as stated in the Order, “the scope of work falsely stated that the local Angolan company would be “developing reports with respect to findings and recommendations” addressing local content requirements and how Halliburton could meet those requirements with respect to areas of travel, local logistics, and real estate.” As the Order noted, this violated Halliburton’s internal controls which mandate “an assessment of the critically or risk of a material or services”; not with a particular supplier and certainly not without “competitive bids or providing an adequate single source justification.” There were also delegation of authority controls which were over-ridden.

Yet this Consulting Contract was not deemed sufficient local content by Sonangol officials. In an attempt to salvage the relationship, there was the involvement of an un-named senior executive of Halliburton who “flew to Portugal to meet the Sonangol government official at the vacation home of the Sonangol government official’s friend, the owner of the local Angolan company. Both Lorenz and the friend were present. The Halliburton senior executive explained to the Sonangol government official the delays associated with a large company’s procurement processes and affirmed that Halliburton was negotiating a deal with the local Angolan company to satisfy local content requirements. The Halliburton senior executive also asked the Sonangol government official for his support for the international oil company’s award of an upcoming contract to Halliburton, in light of progress Halliburton was making to satisfy Halliburton’s local content requirements.”

After all of this and further negotiations, Halliburton entered into a near agreement where the “local Angolan company would lease commercial and residential real estate and then sublease the properties to Halliburton at a substantial markup, and also provide real estate transaction management consulting services.” (the ‘Real Estate Transaction Management Agreement’). This proposed agreement was questioned internally by Halliburton for its use of a single source for procurement, the upfront payment terms, the high costs, and the rationale for entering into subleases for properties that would cost less if leased directly from the landlord.” Indeed, “One Finance & Accounting reviewer at headquarters noted that he could not think of any legitimate reason to pay the local Angolan company over $13 million under the Real Estate Transaction Management Agreement and that it would not have cost that much to run Halliburton’s entire real estate department in Angola.” Senior executives allowed the Real Estate Transaction Management Agreement to move forward to execution in May 2010.

After receipt of an anonymous email alleging “possible misconduct surrounding the transactions with the local Angolan company” Halliburton terminated the Real Estate Transaction Management Agreement in April 2011 after paying out some $3.705MM. As noted in the Order, “Between May and December 2010, Sonangol approved the award of seven lucrative subcontracts to Halliburton and Halliburton profited by approximately $14 million.”

Penalties

Halliburton agreed to pay some $29.2MM, consisting of  $14,000,000 for profit disgorgement, along with prejudgment interest of $1.2 million and a civil penalty of $14,000,000. The company also agreed to an 18 month Monitorship (termed ‘Independent Consultant’ in the Order) where the role “responsibility is to review and evaluate Respondent’s anti-corruption policies and procedures, including policies and procedures related to retaining local content and the use of single source justifications, for Respondent’s business operations in Africa” and to make recommendations on them. Additionally, “The Independent Consultant shall consider whether the ethics and compliance function has sufficient resources, authority, and independence, and provides sufficient training and guidance to the business operations in Africa”. The individual involved, Lorenz, agreed to a civil penalty of $75,000.

This FCPA enforcement action emphasizes that company’s must do more than have internal compliance controls, they must also be effective. The Order is replete with examples where the company allowed the internal controls to be disregarded or over-ridden. Even the company’s internal audit reports were not followed up on, when they noted deficiencies in the contracting process. As bribery and corruption schemes become more sophisticated, we will likely see more enforcement actions like this Halliburton FCPA enforcement action. Chief Compliance Officers (CCOs) and compliance professionals need to take note that in high risk jurisdictions internal controls must be enforced and followed to be effective. Additional auditing, monitoring and testing should be routinely performed to ensure that policies and procedures are not only in place, but being followed.

As for myself, I think this weekend I will settle down with the full five seasons of The Rocky and Bullwinkle Show as my personal tribute to June Foray.

To watch and listen to the Opening Theme of Rocky and Bullwinkle on YouTube, click here.

 

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2017

In two recent public appearances, Department of Justice (DOJ) representatives spoke to issues of concern to every compliance practitioner regarding one role of the DOJ going forward and how that role will continue to feed the need for robust compliance programs going forward. The first remarks were by Acting Assistant Attorney General Kenneth A. Blanco at the Atlantic Council Inter-American Dialogue Event on Lessons From Brazil: Crisis, Corruption and Global Cooperation (Blanco speech) and the second remarks were by Sandra Moser, Acting Chief, U.S. Department of Justice, Criminal Division, Fraud Section, at the Anti-Corruption Compliance in High-Risk Markets conference (Moser remarks).

Blanco highlighted the close cooperation between the US and Brazil in anti-corruption investigations and enforcements. The last 12 months has been a signature year for such corruption, with “the Criminal Division’s Fraud Section and the Brazilian Lava Jato task force have cooperated and coordinated resolutions in four FCPA cases: Embraer, Rolls Royce, Braskem, and Odebrecht.” The investigative cooperation is based upon a “strong relationship built on trust” between the prosecutors of the two counties. Blanco noted, “This trust allows prosecutors and agents to have direct communications regarding evidence. Given the close relationship between the Department and the Brazilian prosecutors, we don’t need to rely solely on formal processes such as mutual legal assistance treaties, which often take significant time and resources to draft, translate, formally transmit, and respond to.”

Blanco went on to detail some of the specific aspects of this cooperation. He said, “At the beginning of an investigation, a prosecutor or agent from a country’s financial intelligence unit can call his or her foreign counterpart and ask for financial information that, for example, may identify bank accounts. Once the investigation has progressed to the point where prosecutors are ready to proceed to trial, the evidence may be requested through the mutual legal assistance channel so that it can be admissible at trial. This prosecutor-to-prosecutor or law-enforcement-to-law-enforcement cooperation has allowed both countries to more effectively pursue their cases.”

Beyond simply the trust and cooperation is the coordination of penalties. He stated, “It is important to mention how the penalties were levied in these coordinated resolutions. By working together, Brazil and the Department not only assisted one another in gathering evidence and building the case, but made sure to credit the fines and penalties paid to each country, rather than imposing duplicative fines and penalties. This ensures fairness to the companies, and provides the right incentives for companies to cooperate fully with the relevant jurisdictions implicated in the case.”

As reported by Jimmy Hoover in an article in Law360 (sub req’d) entitled, “DOJ To Increase International Coordination In FCPA Fines” , Moser went further regarding the penalty aspects in international enforcement efforts.  She said, “the DOJ would work with its counterparts abroad to avoid “piling on” additional penalties for companies in Foreign Corrupt Practices Act cases, borrowing a phrase that Attorney General Jeff Sessions has used in the regulatory context to signal enforcement relief to corporations. Moser noted cases like the massive corruption investigation into Odebrecht SA and Braskem SA, where the department credited criminal penalties that the Brazilian conglomerates paid to Switzerland and Brazil authorities in calculating how much they owed the U.S.”

Moser emphasized “These cases are not an aberration.” She also noted, “the increased international coordination in assessing FCPA fines stems from the realization that the money for paying back multiple governments for corrupt practices comes from the same corporate accounts.” Even with the ongoing cooperation she added ““We are trying to do better,” Moser regarding about such coordination.”

Moser’s remarks followed on those from Daniel Kahn, Chief, FCPA Unit, Fraud Section, Criminal Division at the DOJ and Kara Brockmeyer, the former Chief, FCPA Unit, Division of Enforcement at the Securities and Exchange Commission (SEC) made at ACI’s 33rd International Conference on the Foreign Corrupt Practices Act in November 2016 (2016 ACI-FCPA Conference). At the 2016 ACI-FCPA Conference, they discussed the “one pie” concept. They explained that increasingly, enforcement authorities were moving towards one total cost to anti-corruption violators which would be equitably split up by authorities where the corruption occurred or by the countries which had jurisdiction. Kahn said that companies who self-disclosed to multiple regulators and extensively remediated, along the lines laid out in the FCPA Pilot Program, were more likely to garner credit with US regulators for fines paid to overseas authorities. A contra example was Alstom, which tried to settle piecemeal with a variety of countries and entities such as the World Bank. Under this approach, Alstom did not received credit from US authorities for any of their other payments.

The role of the DOJ and SEC in this one pie concept is critical. For it is only the US which has the track record in anti-corruption enforcement and cache to lead this international fight, most particularly in the enforcement phase. In the financial penalty phase the lion’s share of fines in the Rolls-Royce case went to the UK government and in the Odebrecht case to Brazil. It is critical interest to US companies that there be certainty in resolutions and the US government can help lead this initiative. Yet US companies will need to understand the requirements as set out by Brockmeyer last fall, which coincide with the requirements of the Pilot Program for self-disclosure, cooperation and remediation. Any US company doing business outside the US must have a compliance program to prevent, detect and remedy any corruption issues. Furthermore, if they want to receive the maximum credit from multiple regulatory bodies they will need such a best practices compliance program.

Blanco ended his speech with words which inspire every compliance professional and clearly speak to the current DOJ’s approach to anti-corruption enforcement. He stated, “People are demanding action, they are no longer silent. We at the Department of Justice will continue, like we have for years, pushing forward hard against corruption, wherever it is, and we welcome our fellow counterparts around the world who are fighting this important fight against corruption.  We are committed to working with our partners like Brazil – shoulder to shoulder – steadfast come what might. Together we will ensure that there is no place for corrupt individuals to hide, and no place for them to hide their money, assets or any kind of wealth. No refuge or rest for the wicked. That is the plan, this is our strategy, this is our goal. I hope you will all join us in this important and noble endeavor.”

I plan to continue with this endeavor and I hope you will join me.

 

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2017

This week, Jay and I return for a wide-ranging discussion on some of the week’s top compliance related stories, including:

  1. U.S. charges top Colombia anti-graft prosecutor with money laundering. See article by Dick Cassin the FCPA Blog.
  2. US Supreme Court may finally settle one of the fiercest debates arising from the Dodd-Frank Act: What is a whistleblower and when are they protected against corporate retaliation? See Joe Mont’s article in Compliance Week.
  3. Alstom obtains ISO 37001 certification but does it mean anything?
  4. Benefits of FCPA Pilot Program becoming clear after two 2017 declinations. See article by Jaclyn Jaeger in Compliance Week.
  5. Head of federal government ethics office to step down. See article in The Hill.
  6. At nearly the half-way mark, the Astros lead the majors with the best record. See Tom’s article on how and why in the FCPA Compliance Report.
  7. New eBook on Trump and Compliance: the First 100 Days is out. It collects the musings from the four amigos on the Everything Compliance podcast (+1). You can download your copy by clicking here.

Last week the Department of Justice (DOJ) issued its second Declination under the Sessions regime. Short with brevity, the matter nonetheless has some significant points for the compliance practitioner to help move their corporate compliance program forward. The matter involved CDM Smith Inc. (CDM) a privately held engineering and construction concern, headquartered in Massachusetts. As with Linde Gas, CDM obtained a superior result for obtaining a declination in the face of unrefuted violations of the Foreign Corrupt Practices Act (FCPA).

From 2011 until 2015, CDM’s India operations acted corruptly in paying bribes to employees at the National Highways Authority of India (NHAI), the country’s state-owned highway management agency. The bribe payments were reported to be “2-4% of the contract price and paid through fraudulent subcontractors, who provided no actual services and understood that payments were meant to solely benefit the officials.” In addition to these ongoing payments, the company’s division responsible for India and the Indian subsidiary “paid $25,000 to local officials in the Indian state of Goa in relation to a water project contract.”

This was not a situation of the non-existence ‘rogue employees’ but there was substantive involvement at the management level. The declination stated, “All senior management at CDM India (who also acted as employees and agents of CDM Smith and signed contracts on behalf of CDM Smith, including CDM India’s country manager) were aware of the bribes for CDM Smith and CDM India contracts, and approved or participated in the misconduct.”

As a part of the declination, CDM agreed to disgorge $4,037,138, which represented the “profit to CDM Smith from the illegally obtain contracts in India.” The payment was spread out over several months with $1,037,318 due within 10 days of the date of the declination and the remaining $3MM due in $1mm installments on August 1, September 1 and October 1. As with all DOJ declinations granted with disgorgement, CDM agreed that it would not seek any tax deduction with “any part of its payment or the Disgorgement Amount.”

The declination related that the DOJ made its decision to grant the close the investigation based upon six factors.

  1. CDM timely and voluntarily self-disclosed the matter;
  2. CEM engaged in a “thorough and comprehensive investigation”;
  3. CDM cooperated fully with the DOJ in the investigation of this matter;
  4. CDM agreed to disgorge all profits it made from its illegal conduct;
  5. The remediation engaged in by CDM, including enhancements to its compliance program and internal controls regime; and
  6. CDM’s termination of the executives and employees who were involved in or directed the illegal conduct.

In addition to agreeing to not seek favorable tax treatment for its disgorgement, CDM also agreed it “will not seek or accept directly or indirectly reimbursement or indemnification from any source with regard to the Disgorgement Amount.” As with the Linde Gas declination the company ceded its right to seek clawbacks from culpable senior executives or others who might have benefited financially from the illegal conduct. Also, the company appears to have given up the right to seek any type of insurance reimbursement for FCPA violations, if it had any such insurance which might cover the Disgorgement Amount.

While the conduct at CDM did not reach the invidious level as was demonstrated at Linde Gas, it was clear a large swath of company employees were aware or engaged in illegal conduct. It was not limited to the Indian subsidiary alone as both employees and agents of the CDM signed the contracts which were obtained through bribery and corruption. Also, the conduct occurred over a five-year period which certainly raises questions about oversight by the US parent. There was no information presented about when or how the illegal conduct came to the US parent’s attention, only that the company did timely disclose this matter in a voluntary manner.

For the compliance practitioner, the CDM case once again drives home and re-emphasizes the lessons to be drawn from the Linde Gas declination. The DOJ has now, for a second time, sent a clear message that it will reward companies which meet the four pillars under the FCPA Pilot Program through (a) self-disclosure, (b) extraordinary cooperation, (3) full remediation, and (d) profit disgorgement. Interestingly, the profit disgorgement in this case would appear to have been beyond the five year of limitations for profit disgorgement under the recent Supreme Court decision in Kokesh.

The CDM declination also reiterates what Jim McGrath used to say, a serious case requires a seriously good lawyer. Linde Gas had as its lead counsel, a lawyer who Howard Sklar characterized as “one of the Deans of the FCPA bar”, Lucinda Low from Steptoe & Johnson LLP, which led it to obtain a declination from the DOJ. CDM had Nat Edmonds currently the Chair of the Litigation Section at Paul Hastings LLP and formerly the head of the FCPA Unit at the Fraud Section of the DOJ, as its counsel and FCPA investigation counsel which led it to obtain a declination from the DOJ. These are both superior FCPA counsel who know what they are talking about when it comes to FCPA investigations, decisions to self-disclose and following the prescripts of the FCPA Pilot Program.

Yet the in-house compliance practitioner also has a role in obtaining such a superior result. As Hui Chen noted in her interview with Matt Kelly on the Radical Compliance podcast, it is more than simply having a paper compliance program in place. When she was Compliance Counsel for the DOJ, Chen was much more interested in how a compliance program was used in “actual operations” of the company. In other words, as made clear in the DOJ’s Evaluation of Corporate Compliance Programs, how is your compliance program operationalized in your company? This is something which a Chief Compliance Officer (CCO) can work to achieve so that if there is a FCPA violation, as occurred in Linde Gas and CDM, then your company has a fair chance of receiving such a superior result.

As we now have two FCPA matters resolved under the Trump Administration and Sessions’ DOJ, compliance practitioners and the compliance profession can only applaud the results. The DOJ has given clear incentives for companies to meet the four prongs of the FCPA Pilot Program. Companies now have a clear road map to resolve substantive FCPA violations with no criminal penalty.

 

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2017