While the resolution of the Telia Company (Telia) Foreign Corrupt Practices Act (FCPA) matter has long been awaited, the results announced yesterday by the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) were stunning nonetheless. As usual, Dick Cassin at the FCPA Blog was the first to get the story out and it was so big, it took him two blog posts. (Here and here.) Over the next few blog posts, I will be exploring the resolution and what lessons the compliance practitioner can draw from the case, the parallel actions and what it may portend for FCPA enforcement going forward under the Sessions DOJ. Today I will consider the underlying facts of the settlements.

The SEC settled via a Cease and Desist Order (Order). The SEC issued a Press Release. The DOJ issued an Information (Telia Information) and a Deferred Prosecution Agreement (Telia DPA), both for Telia. The DOJ issued an Information and DPA for Coscom LLC (Coscom Information), a Plea Agreement and also issued a Press Release. The breadth and scope of Telia’s illegal conduct was about as far-ranging as one could imagine. The fines and penalties certain bore this out. The below chart lists the fines and penalty amounts identified in the settlement documents and Press Releases.

Company Criminal Fine Civil Forfeiture Amt Paid to US Amt Paid to Netherlands Amt Paid to Sweden
Telia $500MM $475MM $699MM $274MM (not yet set)
Coscom $48.6MM
Subtotal $588.6 $475MM
Total Fines and Penalties to be paid by Telia to all countries $965MM

In a separate Press Release, Telia said in part, “The information being reported by media about the terms of the resolution is not complete. Telia Company has already announced that it has taken a provision with respect to the expected financial sanctions. It is correct that we are very close to a final resolution with all authorities (SEC, DOJ and the Dutch prosecutor), but cannot comment further at this time.” Cassin reported, “The company said in April it had adjusted its “estimate of the most likely outcome of the ongoing investigations into the company’s market entry and operations in Uzbekistan to $1 billion from $1.45 billion.””

The bribery scheme involved the company illegally buying its way into the Uzbekistan telecom market through its bribery of Gulnara Karimova, the eldest daughter of the late Uzbek President Islam Karimov. Karimova was also the bribery conduit in the VimpleCom matter, resolved in February 2016. In the Telia case Karimova parlayed her providing telecom licenses and upgrades into bribe payments of over $330MM to shell companies which she controlled.

In the DOJ Press Release, Acting US Attorney Joon H. Kim stated “Telia, whose securities traded publicly in New York, corruptly built a lucrative telecommunications business in Uzbekistan, using bribe payments wired around the world through accounts here in New York City. If your securities trade on our exchanges and you use our banks to move ill-gotten money, then you have to abide by our country’s laws. Telia and Coscom refused to do so, and they have been held accountable in Manhattan federal court today.”

The SEC Press Release stated, “Telia entered the Uzbek telecommunications market by offering and paying at least $330 million in bribes to a shell company under the guise of payments for lobbying and consulting services that never actually occurred. The shell company was controlled by an Uzbek government official who was a family member of the President of Uzbekistan and in a position to exert significant influence over other Uzbek officials, causing them to take official actions to benefit Telia’s business in Uzbekistan.”

The bribes were specifically approved by the highest level of Telia, including senior executives and the Board of Directors. There was an explicit awareness that the bribery scheme would violate the FCPA, so the company tried to navigate its way out of potential FCPA liability. Clearly those efforts were lacking. I will take a deep dive into the bribery scheme in a subsequent blog post.

A couple of other initial observations are important. The first was the truly international scope of the investigation and cooperation in the enforcement action. In the DOJ Press Release it noted involvement of “PPS, the Swedish Prosecution Authority, and the Office of the Attorney General in Switzerland, as well as law enforcement colleagues in Austria, Belgium, Cyprus, France, Ireland, the Isle of Man, Latvia, Luxembourg, Norway, Switzerland, the Isle of Man, and the United Kingdom.”

The SEC Press Released acknowledged and thank the following international enforcement actions, “Dutch Openbaar Ministerie, National Authority for Investigation and Prosecution of Economic and Environmental Crime in Norway, Swedish Prosecution Authority, Office of the Attorney General in Switzerland, and Corruption Prevention and Combating Bureau in Latvia. The SEC also appreciates the assistance from regulators and law enforcement in France, Spain, and Hong Kong as well as the Financial Conduct Authority, British Virgin Islands Financial Services Commission, Cayman Islands Monetary Authority, Bermuda Monetary Authority, Cyprus Securities and Exchange Commission, and Central Bank of Ireland.” Both the IRS and Department of Homeland Security were acknowledged to have been involved. Also noted was DOJ Money Laundering and Asset Recovery Section.

The DPA laid out the calculations which led to the criminal fine and forfeiture. It was noted the company did not self-disclose but did cooperate in the investigation and provided extensive remediation. This netted the company a 25% discount off the minimum penalty as calculated under the US Sentencing Guidelines.

As to Karimova, she has been under house arrest since 2014. In 2015, the DOJ won a federal court order to impound $300 million in bank accounts linked to her. The accounts were held by Bank of New York Mellon Corp. in Ireland, Luxembourg, and Belgium, and in accounts at Clearstream Banking SA. In 2014, prosecutors in Switzerland seized about $820 million as part of a money-laundering investigation into Karimova.

The Telia FCPA enforcement action continues a key theme from 2016-international cooperation. This cooperation was in both the investigation and enforcement aspects. All-in-all a stunning result for all the prosecutors involved.

 

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

Hunter S. Thompson once said that when the going gets weird, the weird turn pro. It turns out that amateurs can get weird too. The University of Mississippi football program, which is under a self-imposed postseason ban and is awaiting NCAA decisions on formal sanctions for recruiting violations has, as the Wall Street Journal (WSJ) recently reported, more salacious allegations surrounding the recently fired head coach Hugh Freeze. Andrew Beaton, in an article entitled “‘Burner Phone’ Accusation Marks New Chapter in Ole Miss Scandal”, wrote there are now allegations that Freeze and three of his assistant coaches purchased untraceable disposable “burner” phones for use in recruiting. They “used burner phones “on a regular basis” to hide communications with recruits that would violate NCAA rules.”

This allegation comes on the heels of the revelation that the now former head coach had made calls from his university provided cell phone to “escort services” while on recruiting trips. Initially the University said the calls were inadvertent (AKA ‘butt dials’) but within days the University and Coach Freeze parted ways when it turned out there was a pattern of such calls “over the course of several years.” The burner phone allegations were made in July and included “that coaches purchased phones with cash, sometimes at out of state locations or using fictitious names, that they used to conceal “communications with prospects that were prohibited by the NCAA’s rules.””

What makes this worthy of fratricides from the House of Atreus is that both allegations of phone misuses came from a former Ole Miss head coach, Houston Nutt. The University is under investigation by the NCAA for football recruiting violations and at least up until it dismissed Freeze in late July, stood by Freeze and blamed Nutt for the scandal. Nutt struck back with a defamation suit and in discovery obtained the phone records of Coach Freeze, as he is a state of Mississippi employee as the head coach. Those phone records revealed the calls to the escort services.

Nutt’s lawyer has told University officials he has a “sworn affidavit” backing up his claims on the burner phone use. The University has indicated that its “internal monitoring systems haven’t uncovered any evidence to support the claims about burner-phone use.” In August all of current coaching staff denied the burner phone allegations.

For the Chief Compliance Officer (CCO) and compliance professional there are some interesting lessons to be garnered from the weirdness at the University of Mississippi. The first lesson is when sales spike up from the ashes to the heights that the Mississippi football team achieved over the past few years, you might want to check into the reasons. Ole Miss football had not been relevant for many years and under Coach Freeze, “brought top-ranked recruiting classes to Oxford, Miss., beat Alabama in back-to-back seasons and won the Sugar Bowl just two years ago.” There might be a reason other than superior coaching for this renaissance. If you have a sales spike in a region which for 30 years or so has been an also-ran in marketing, you might want to inquire into what caused the change.

The response to such a sales spike requires that the corporate compliance function be made aware of such activity. That presupposes compliance has a seat at the senior management table, access to the data and the ability to interpret the data. This final point drives home why compliance officers need to have the ability to read a spreadsheet.

The second issue concerns the burner phones. While it may be conceivable that employees might still talk about paying bribes and engaging in corruption through work email, surely those types of employees have been consigned to the dustbin of Darwin Award winners. Instant messaging and other apps have become a favorite with many employees believing such communications are not archived. If college football coaches can think up using burner phones to avoid University detection and/or NCAA oversight so they can recruit illegally, it does not seem to be a stretch to think that an enterprising Business Development (BD) person to come up with the idea. You do not have to be Jason Bourne to use such a tool.

The first line of response here should be training. But more than simply compliance stand-alone training, such training should be a part of ongoing sales training. In an interview with Compliance Week Editor-in-Chief Bill Coffin, Hui Chen said “I think that in the ideal scenario I want there to be no dedicated compliance training because all of the compliance training is actually integrated into the different on the job training that every function does. If I am a sales person, for example, when I come into the company, I will be trained on how to do my job. This is our product, how we sell it…and part of that training, together with how to sell, is also how to not to sell. You incorporate anti-competition and anti-corruption training, price fixing…all the components are there. They’re just not called compliance training. They’re called how to do your job training.”

Next is the source of the allegations against the University and former coach Freeze. Nutt has sued Freeze and other school officials for defamation and engaged in discovery against them. The Department of Justice (DOJ) has previously communicated one source of information on potential Foreign Corrupt Practices Act (FCPA) violations is competitors. There is nothing that prevents a competitor (or former employee) from providing information to the Securities and Exchange Commission (SEC) and potentially receiving a bounty under the Dodd-Frank Whistleblower program.

Consider the case of Net1 UEPS Technologies, Inc. (Net1). In a client release from the law firm of BryanCave LLP, entitled “FCPA Investigations – Competitors Dropping the Dime”, it reported in a SEC EDGAR filing, “Net1 a company based in South Africa but listed on NASDAQ, filed an announcement that the Department of Justice had closed its investigation into possible FCPA violations. That investigation “was initiated largely as a result of one of the losing bidders for the contract, . . . referring unsubstantiated South African press articles to the DOJ, alleging or implying that the [] tender process [for a government contract] was tainted by corruption involving [Net1]’s subsidiary . . . .”” In other words, a competitor who lost a bid accused the company of violating the FCPA to win the award. While Net1 eventually received a Declination, it was five-year process with the legal costs not reported. Further, there is always the possibility of a state based unfair competition lawsuit.

The imbroglio that is currently engulfing the University of Mississippi football program may be a long way from conclusion. Yet even at this early stage of the Nutt lawsuit there are multiple and varied lessons for the compliance professional to synthesize and incorporate the lessons into his or her compliance program. And it is only going to get weirder.

 

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 this episode, I visit with Mike Skopets, from Miller & Chevalier on the firm’s Summer 2017 FCPA Report. We discuss the background to the Report and begin with what macro trends the firm identified. We discuss the numbers of resolutions, declinations and investigations and what they might demonstrate. We go into the Linde Gas and CDM Smith declinations with disgorgement and what these two superior decisions portend for the compliance practitioner. We consider the Kokesh decision by the US Supreme Court and what it may mean for not only FCPA enforcement but the compliance professionals decision making calculus for self-disclosure. It is a very interesting wrap up of the first six months of the FCPA world in 2017.

Miller & Chevalier’s Summer 2017 FCPA Report is available at no cost on the firm’s website. You can obtain a copy by clicking here.

In this episode, I visit with Mike Skopets on Miller’s Summer 2017 FCPA Report.

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