Like a Rolling StoneToday we celebrate one of the seminal achievements in rock and roll for it was on this day, 50 years ago, in 1965 that Bob Dylan recorded his single Like a Rolling Stone. Columbia Records executives initially rejected the song as too long to be released as a single because it came in at over 6 minutes in length. However, through a campaign of subterfuge, Dylan’s manager was able to have it played by New York City DJs. The popularity of the song became so great that the same Columbia Records executives were forced to release it and it went to Number 2 on the Top 40.

According to the site ThisDayInHistory.com, “The most important impact of “Like A Rolling Stone” was not commercial but creative. Rolling Stone magazine said Dylan “transformed popular song with the content and ambition of ‘Like a Rolling Stone.’” Or as Bruce Springsteen said of the first time he heard it, “[it] sounded like somebody’d kicked open the door to your mind.”” And my favorite part is the opening organ riffs played by a 21-year-old Al Kooper who was just sitting in on the session.

I thought about this odd convergence that came together to create what Rolling Stone magazine named as the greatest song of all time in 2004 in the context of the continuing fallout from the ongoing scandal involving the governing body of international soccer, the Fédération Internationale de Football Association (FIFA). In a BBC Online article, entitled “Fifa corruption: South Africa cash ‘worrisome”, Andrew Harding wrote “A key figure in South Africa’s football World Cup bid has broken ranks with the government to suggest there might be some truth to a claim that a $10m bribe was paid to secure the 2010 tournament.” That figure is Tokyo Sexwale who was “a member of both the World Cup bid team and local organising committee”. Sexwale has now questioned whether the $10MM payment made to Jack Warner of Trinidad was truly a donation.

Sexwale went on to ask, “”Where are the documents, where are the invoices, where are the budgets, where are the projects on the ground?””

I thought about those questions in the context of a Chief Compliance Officer (CCO) or compliance practitioner working under a Foreign Corrupt Practices Act (FCPA) or UK Bribery Act compliance program around charitable donations. There has been a paucity of FCPA enforcement actions around charitable donations. Both the Schering-Plough Corporation and Eli Lilly and Company enforcement actions centered in Poland were Securities and Exchange Commission (SEC) civil enforcement actions based upon violations of the books and records and internal controls provisions to the FCPA. There was no evidence of bribes being paid which rose to criminal conduct.

Generally, it is assumed that if you do the required review of the charitable organization that is due to receive a corporate donation and in this due diligence, there is no tie to a government official or family member, the donation can be made under the FCPA. However consider Sexwale’s comments around the evidence of whether a bribe was paid to Warner or if it was simply because “part of the feeling at the time – it’s a good thing, this [$10MM of] altruism (towards the African diaspora in the Caribbean)”. Yet even Sexwale noted the problem when he added, “The question is going to be: “What was done to make sure that your good intentions – you as the giver – have been realised?””

His comments gave me pause to think that companies who make charitable donations in foreign countries may now have to monitor these donations at a greater level and with greater scrutiny. The starting point may now well be as stated by Sexwale, “What was done to make sure that your good intentions – you as the giver – have been realized?” If this is now a standard of enquiry and oversight the Department of Justice (DOJ) will require validation on how your company can have assurances that your good intentions are realized? Once again you can look to the basic questions that Sexwale posed in the BBC online article, Where are the documents, where are the invoices, where are the budgets, where are the projects on the ground?

There have been four Opinion Releases around charitable donations under the FPCA. Opinion Release 95-01 was a request from a US-based energy company that planned to donate $10MM for equipment and other costs to a medical complex that was under construction near a large construction project. Opinion Release 97-02 dealt with a request from a US-based utility company who planned to donate $100K for construction and other costs to a government entity that proposed to build an elementary school near a facility. Before releasing funds, the utility company required certain guarantees from the government regarding the project, including that the funds would be used exclusively for the school. Also, the donation was directly to the foreign government and not a charity. Opinion Release 06-01 dealt with money to fund a pilot project in which the US Company would contribute $25,000 to the in country Ministry of Finance to improve local enforcement of anti-counterfeiting laws. The contribution was intended to provide incentive awards to local customs officials, needed because the African country involved was a major transit point for illicit trade and the local customs officials have no incentive to prevent the contraband. Finally, Opinion Release 10-02focused on the underlying due diligence engaged in by a US-based Micro Financial Institution (MFI) operating in an unnamed Eurasian country. The Release specified the three levels of due diligence that the US MFI had engaged in on the proposed locals MFIs which were listed as eligible to receive the funding. In addition to the specific discussion of the due diligence performed by the US MFI and noting the controls it had put in place after the funding was scheduled to be made the DOJ also listed several of the due diligence and/or controls that it had previously set forth in prior Opinion Releases relating to charitable donations.

While these Opinion Releases certainly imply a level of scrutiny at the post donation level, their primary focus is on who the donations are being made to and are they a government official. However, the DOJ may well expect both pre and post donation scrutiny, along the lines of Sexwale’s questions, which could demonstrate the legitimacy of the donation. However Sexwale’s questions also raise up something that the DOJ and SEC often say, that being that a good anti-corruption compliance program is really just good business. Shareholders and investors have the right to know how and where their money is begin spent. It would seem to behoove any company to want to the know the same thing that Sexwale wants to know about the $10MM payment to Jack Warner, What was done to make sure that your good intentions – you as the giver – have been realized? 

To hear the original version of Like a Rolling Stone 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, 2015

BB KingYes indeed the thrill is gone as BB King died last week. While I cannot aver he was the bluesman ever as Keith Richards would say that was Robert Johnson, or he was even the greatest bluesman during my lifetime as Muddy Waters lived until 1965, he was certainly the most well-known and prolific bluesman I ever heard and therefore he had the greatest influence on my passion for the blues than perhaps any other. My favorite BB King song is Mannish Boy and album is “Live in Cook County Jail” which I was introduced to in law school by a law school buddy and his wife who hailed from Chi-town. So even though BB King is dead, his music and name will live on forever. Read More

7K0A0032“Each case turns on its own facts.” How many times have you heard a representative of the Department of Justice (DOJ) or Securities and Exchange Commission (SEC) make that statement at a conference or other public event? The reality is that this is true and, in the context of Foreign Corrupt Practices Act (FCPA), both regulators look at the facts and circumstances around each case in making a wide range of assessments. While this is frustrating to business types, as a lawyer I find it to be not only an appropriate analysis but also an accurate way in which to look at things.

Late in 2013 the DOJ issued its only Opinion Release, that being Opinion Release 13-01. One of the things that this Opinion Release stands for is that each fact scenario presented under the FCPA must be evaluated on its own facts. While this maxim is certainly true, I believe that the Opinion Release goes further and provides significant information to the compliance practitioner for charitable donations going forward.

Facts

The Requestor is a partner with a US law firm which represents Foreign Country A in various international arbitrations. This business relationship has enabled the law firm to bill Foreign Country A for over $2 million throughout the past 18 month; it is further anticipated that in 2014, the fees on matters for Foreign Country A will exceed $2 million. During the course of representation, the Requestor has become a personal friend of Foreign Official, who works in Foreign Country A’s Office of the Attorney General (the “OAG”). This Foreign Official’s daughter suffers from a severe medical condition that cannot effectively be treated in Foreign Country A or anywhere in the region. The physicians treating Foreign Official’s daughter have recommended that she receive inpatient care at a specialized facility located in Foreign Country B. Requestor reports that the treatment will cost between approximately $13,500 and $20,500 and that Foreign Official lacks financial means to pay for this treatment for his daughter. The Requestor has proposed to pay the medical expenses of the daughter of this foreign office.

Representations

The Requestor made the following representations in submitting the request for an Opinion Release.

  • The Requestor’s intention in paying for the medical treatment of Foreign Official’s daughter is purely humanitarian, with no intent to influence the decision of any foreign official in Foreign Country A with regard to engaging the services of the Law Firm, Requestor, or any third person.
  • The funds used to pay for the medical treatment will be Requestor’s own personal funds. The Requestor will neither seek nor receive reimbursement from the Law Firm for such payments.
  • The Requestor will make all payments directly to the facility where Foreign Official’s daughter will receive treatment in Foreign Country B. Foreign Official will pay for the costs of his daughter’s related travel.
  • Foreign Country A is expected to retain the Law Firm to work on one new matter in the near future. Requestor is presently unaware of any additional, potential matters as to which Foreign Country A might retain the Law Firm. However, if such a matter develops, Requestor anticipates that Foreign Country A would likely retain the Law Firm given its successful track record and their strong relationship.
  • Under the law for Foreign Country A, any government agency, such as OAG, that hires an outside law firm must publicly publish a reasoned decision justifying the engagement. It is a crime punishable by imprisonment under the penal code of Foreign Country A for any civil servant or public employee to engage in corrupt behavior in connection with public contracting.

In addition to the representations made by the Requestor, there was also information presented which showed that the Foreign Official and Requestor have discussed this matter transparently with their respective employers. Both the government of Foreign Country A and the leadership of the Law Firm have expressly indicated that they have no objection to the proposed payment of medical expenses. Additionally, the Requestor has provided a certified letter from the Attorney General of Foreign Country A that represents the following:

  • The decision by the Requestor to pay for or not to pay for this medical treatment will have no impact on any current or future decisions of the OAG in deciding on the hiring of international legal counsel.
  • In the opinion of Foreign Country A’s Attorney General, the payment of medical expenses for Foreign Official’s daughter under these circumstances would not violate any provision of the laws of Foreign Country A.

DOJ Analysis

In its analysis, the DOJ noted that “A person may violate the FCPA by making a payment or gift to a foreign official’s family member as an indirect way of corruptly influencing that foreign official. See United States v. Liebo, 923 F.2d 1308, 1311 (8th Cir. 1991). However, “the FCPA does not per se prohibit business relationships with, or payments to, foreign officials.” FCPA Opinion Release 10-03 at 3 (Sept. 1, 2010). Rather “the Department typically looks to determine whether there are any indicia of corrupt intent, whether the arrangement is transparent to the foreign government and the general public, whether the arrangement is in conformity with local law, and whether there are safeguards to prevent the foreign official from improperly using his or her position to steer business to or otherwise assist the company, for example through a policy of recusal.”

But I found the meat of the analysis to the following line of the Opinion Release, “the facts represented suggest an absence of corrupt intent and provide adequate assurances that the proposed benefit to Foreign Official’s daughter will have no impact on Requestor’s or Requestor’s Law Firm’s present or future business with Foreign Country A.”

Discussion

This analysis was based on several factors which are worth highlighting:

  • No role in obtaining or retaining business – The Foreign Official involved does not play any role in the decision to award Foreign Country A’s legal business to Law Firm.
  • Full transparency – Both the Requestor and Foreign Official informed their respective employers of the proposed gift and neither has objected.
  • The gift is not illegal under local law – The Attorney General of Foreign Country A has expressly stated that the proposed gift is not illegal under Foreign Country A’s laws. This is further reinforced by Foreign Country A’s public contracting laws, which require transparent reasoning in contracting for legal work and criminally punish corrupt behavior.
  • Direct payment to third party provider – The Requestor will pay the medical provider directly, ensuring that the payments will not be improperly diverted to Foreign Official.

I believe that Opinion Release 13-01 demonstrates once again that there is significant room for creative lawyering in the realm of FCPA compliance. Obviously the DOJ responded favorably by its final decision that it would not prosecute under the facts presented to it. For the compliance practitioner, there are several key takeaways beyond simply noting that you are limited only by your legal imagination. First, and foremost, is transparency. Both the Requestor and Foreign Official openly discussed this issue with their employers and superiors. One or both of them went to the Attorney General of the country in question and sought an opinion on the legality of the payment of medical expenses so there was visibility at the highest levels of the Foreign Country’s government in addition to confirmation that the gift was in fact legal under the laws of the country involved. Next is that the Foreign Official in question did have decision making authority over the law firm obtaining or retaining business. Finally, the direct payment to the third party provider is always a critical element which should not be overlooked.

I know, understand and appreciate that this Opinion Release is limited to its facts and circumstances but it gives the compliance practitioner some excellent guidance on how to think through charitable donations under the FCPA.

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, 2014

Last week, it was announced by the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) that it had settled an enforcement action with Archer-Daniels-Midland Company (ADM). The DOJ resolved a criminal action when, according to the DOJ Press Release, a subsidiary of ADM pled guilty and agreed to pay more than $17 million in criminal fines to resolve charges that it paid bribes through vendors to Ukrainian government officials to obtain value-added tax (VAT) refunds, in violation of the Foreign Corrupt Practices Act (FCPA). In a parallel civil FCPA action settled with the SEC and the SEC Press Release noted that “The payments were then concealed by improperly recording the transactions in accounting records as insurance premiums and other purported business expenses. ADM had insufficient anti-bribery compliance controls and made approximately $33 million in illegal profits as a result of the bribery by its subsidiaries.” In addition to the DOJ fine of $17.8MM, ADM agreed to pay “disgorgement of $33,342,012 plus prejudgment interest of $3,125,354.”

At this point, the Non-Prosecution Agreement (NPA), Plea Agreement between the company and the DOJ and the Criminal Information is not available. However the SEC Civil Complaint is available, as are Press Releases from both the DOJ and SEC. In today’s blog I will review the underlying facts as set out in the SEC Civil Complaint. In a subsequent blog post, I will review the NPA, Plea Agreement and Criminal Information.

The underlying facts centered on ADM’s ongoing issues related to the receipt of VAT refunds in Ukraine. The company had many years of slow and no response to its application for refunds where goods purchased in Ukraine were then exported. From 2002 to 2010, the company’s Ukrainian subsidiary rolled up VAT receivables of up to $46MM. The company employed three different bribery schemes to help them get this money that they were owed out of the country. ADM’s two entities which were directly involved in the bribery scheme were Alfred C. Toepfer, International GmbH (“the German subsidiary”) and its affiliate, Alfred C. Toepfer International (Ukraine) Ltd. (“the Ukrainian subsidiary”).

Charitable Donation Scheme

According to the SEC Complaint, “an ADM executive in the tax department sent an e- mail to the head of an international tax organization and stated, “One of our affiliates operates in the Ukraine. In order to recover 100% of their input VAT they have to pay 30% of the amount to local charities.” While recognizing that this requirement was not illegal and that there were avenues for appeal and assistance with this issue through the US government and trade groups, the SEC Complaint noted that “Given ADM’s insufficient anti-bribery compliance policies and procedures at the time, it did not prevent or detect the improper payments made by” the German subsidiary or the Ukrainian subsidiary.

Use of Third Parties

A second bribery scheme entailed the German and Ukrainian subsidiaries making “payments to a stevedoring company in the port of Odessa (the “Shipping Company”) so that it could pass on nearly all of those payments to Ukrainian officials in order to obtain VAT refunds on behalf of ACTI Ukraine.” The Shipping Company would present inflated invoices to the German subsidiary and this inflated amount “represented a sum that was available for the Shipping Company to pass to Ukraine government officials.” Further, when the German subsidiary would receive an invoice from the Shipping Company, “it withheld payment of a portion of the amount in the invoice, and then upon receiving the relevant VAT refund, ACTI Hamburg released the funds to the Shipping Company.”

Mischaracterization of Write-offs

In yet another bribery scheme, the German subsidiary reported to the US parent that it would negotiate with the Ukrainian government over the amount of the VAT refund and if there was a negotiated settlement it would be less than the full refund due the company. The German subsidiary would then write-off 18% of the total amount of any VAT refund due to it from the Ukrainian government. However when the VAT refund was actually made it would be at 100% of the total due. As the German subsidiary would have taken a write off of 18% of this total, the corresponding amount of money would be funneled to “third-party vendors so that nearly all of those monies could be provided to Ukrainian government officials.”

Fake Insurance Premiums

In an inventive bribery scheme, the Ukrainian subsidiary General Manager “organized a scheme through which ACTI Ukraine used a Ukrainian insurance company (the “Insurance Company”) to funnel improper payments to Ukrainian government officials. ACTI Ukraine arranged for the Insurance Company to falsely bill it for crop insurance, which the Insurance Company never intended to honor, adjusting the premiums to be roughly 20% of the VAT refund.” This bribery scheme succeeded in the face of email reports from the Ukrainian subsidiary to the German subsidiary that said “The contracts completed here, either sporadically or ad hoc, include no kind of insurance protection, but serve the purpose only of generating a commission for the VAT repayment in this manner. Regardless of the wording of the contract, the content is completely different. That means that in case of conflict, claims could not be made successfully.”

Discussion

The problems that ADM subsidiaries faced in the VAT refund issue is one faced by many companies in many countries. Governments usually have little incentive to timely or otherwise process tax refunds, especially in the amounts which ADM was seeking. From the SEC Compliant it does appear there is not any issue that ADM was seeking or did obtain VAT refunds that it was not entitled to receive, only that the Ukrainian tax authorities were sitting on these refunds. In other words, it may be construed that ADM was involved in a situation where it was paying bribes for something it was otherwise entitled to receive but as noted in the SEC Civil Complaint it that the company received VAT refunds “earlier than they otherwise would have.”

While I might disagree that by speeding up the process, the company obtained some unfair business advantage, I do believe that the payments can in any way be considered legal or otherwise in compliance with the FCPA. Simply considering the amounts of money involved and the false accounting entries are enough to show a FCPA violation. In many ways, I found the most interesting sentence in the SEC Civil Complaint to be the following, “ADM violated Section 13(b)(2)(B) of the Exchange Act by failing to maintain an adequate system of internal controls to detect and prevent the illicit payments.” The SEC Complaint expanded on this when it stated, “ADM failed to implement sufficient anti-bribery compliance policies and procedures, including oversight of third-party vendor transactions, to prevent these payments” at the German and Ukrainian subsidiaries. The message from the SEC Civil Complaint is that your compliance program must have both a prevent and detect component and if it does not, you are susceptible to a books and records violation, with a fine and profit disgorgement assessment.

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, 2013

Last week was a heck of a week in the Foreign Corrupt Practices Act (FCPA) enforcement world. Both Diebold Incorporated (DBD) and the Stryker Corporation (SYK) agreed to resolutions of their outstanding FCPA violations.

A.     Diebold

The DBD resolution took the form of a Deferred Prosecution Agreement (DPA) with the Department of Justice (DOJ), along with a fine of $25.2MM, and a Corporate Monitor from the Securities and Exchange Commission (SEC) including $22.9MM in disgorgement and prejudgment interest to the SEC along with an agreed injunction to stop, once again, violating the FCPA. That’s a total fine of $48MM.

The conduct at issue was approved at the highest level of the company and involved multiple bribery schemes, in multiple countries for multiple years. The bribery box score is as follows:

DBD Bribery Box Score

List of DBD Executive, Employee or 3rd Party Involved in Bribery Schemes Illegal Conduct Around Type of Illegal Conduct Those Involved
Executive A Officials at Banks 1 & 2; both in China; Banking officials in Indonesia Approved payments of $1.75 MM over five years; improper trips, gifts and entertainment Executive A & B, Employee A & B
Executive B Officials at Banks 1 & 2; both in China; Banking officials in Indonesia Approved payments of $1.75 MM over five years; improper trips, gifts and entertainment
Executive C Banks in Russia Approved payments of at least $1.2MM
Employee A Banks in Russia Hid illegal payments in books and records
Employee B Hid illegal payments in books and records
Employee C Banks in Russia Distributor 1 & 2,  Executive A & C
Distributor 1 Banks in Russia Made illegal payments
Distributor 2 Banks in Russia Made illegal payments

B.     Stryker

SYK’s penalties were considerably less than those paid by DBD. According to the FCPA Blog, “The SEC said Stryker Corporation will pay $13.2 million to resolve FCPA violations. The bribes totaled about $2 million and were ‘incorrectly described as legitimate expenses in the company’s books and records,’ according to the SEC. Stryker will disgorge to the SEC $7.5 million and prejudgment interest of $2.28 million. It is also paying a penalty of $3.5 million.” SYK received only an Administrative Order, not even a SEC Complaint. Further, unlike DBD, SYK is not required to have a Corporate Monitor to assess its ongoing compliance efforts or its commitment to having a compliance program. The Stryker Bribery Box Score is as follows:

Stryker Entity Bribery Scheme Used Amount of Bribes Paid Illicit Profits
Stryker Mexico Cash payments $76,000 $2.1MM
Stryker Poland Cash payments, illegal travel, lodging, gifts and expenses; charitable donations $460,000 $2.4MM
Stryker Romania Illegal travel, lodging, gifts and expenses $500,000 $1.7MM
Stryker Argentina Commission Payments or Honoraria to Doctors $966,500 $1.04MM
Striker Greece Charitable Donations $197,055 $183,000

C.     Some Comments

1. DBD’s China Investigation

The FCPA Professor noted an interesting nugget from the DBD DPA, in a blog post entitled “Of Note From The Diebold Enforcement Action”, the “It is merely one paragraph in the SEC’s complaint, but it may be perhaps the most notable issue in the Diebold enforcement action (an action based primarily on excessive travel and entertainment payments by subsidiaries – the bulk of which occurred in China). Para. 28 of the SEC’s complaint states:

“Other executives at Diebold were on notice of potential corruption issues at Diebold China. In 2007, a regional government agency in China, the Chengdu Administration of Industry & Commerce (“CDAIC”), opened an investigation involving, among other issues, leisure trips and gifts Diebold China had provided to bank officials. Company executives in China and the U.S. learned of the investigation after a Diebold field office in Chengdu was raided by authorities. Executives A and B took the lead in responding to the investigation. Diebold was able to settle the matter with no corruption charges filed, by paying CDAIC an administrative penalty of 600,000 RMB (approximately $80,000) for business registration violations. Despite being on notice of potential corruption issues at Diebold China, Diebold failed to effectively investigate and remediate these problems.”

In short, the bulk of the conduct at issue in the $48 million Diebold enforcement action was previously investigated by a foreign law enforcement agency and was resolved without corruption charges.”

While I disagree that the bulk of DBD’s illegal conduct involved its Chinese operations, I do agree with the Professor that this is certainly interesting. Is this the mechanism by which the DOJ/SEC were informed about DBD’s conduct? DBD did receive a discount of -5 base points for self-disclosure, full cooperation and demonstrating responsibility for its conduct but it is not clear which, if any, of these three prongs were met. Or, indeed, all of them? Equally interesting is speculating on the level of cooperation between the Chengdu Administration of Industry and Commerce and the DOJ. Or perhaps did it go in a different direction, as the persons cited as taking the lead in responding to this Chinese investigation, Executives A & B, have something to do with resolving the matter at the relatively low cost of $80,000?

2.         Stryker Greece’s Donation to a Public University

From the SYK Cease and Desist Order, there is some interesting information regarding the bribery scheme the company used in Greece. Here the company made a “sizeable and atypical donation of $197,055 to a public university…” Normally I would say that donations to public, i.e. state-owned, universities would not be subject FCPA scrutiny because they are gifts directly to a foreign government. But here the Order specifies that “The donation was made pursuant to a quid pro quo arrangement with the foreign official, pursuant to which Stryker Greece understood it would obtain and retain business…in exchange for making the donation to the foreign official’s pet project. In addition to emails attesting to this quid pro quo nature of the donation, the Order specifies that the donation was “improperly booked as legitimate marketing expense in an account entitled “Donations and Grants.””

Readers will recall the gift of $135 Million by Wynn Resorts Ltd (WYNN) to a foundation which supports the University of Macau. A Wall Street Journal (WSJ) article on this donation, entitled “Macau School Ties Roil Wynn Resorts” and was co-authored by Kate O’Keefe and Alexandra Berzon, reported the Chairman of Wynn’s Board “told analysts last month that the donation was vetted in advance by outside experts,” relative to the FCPA. The donation is apparently not for construction or other infrastructure projects but “the gift will support academic activities.” The WSJ article also reports that the Board of the University foundation includes “current and former government officials” and “a member of the committee to elect Macau’s chief executive”, who is the chancellor of the university.” The SEC opened and closed an investigation into this matter with no enforcement action.

Perhaps it is the clear email trail showing the quid pro quo for the donation but I wish there was more information about the illegal nature of the Stryker Greece donation versus the apparent non-action in the Wynn donation.

For the compliance practitioner, I think there are several clear messages that the DOJ and SEC are communicating in these two enforcement actions. From the DBD enforcement action, if your company finds itself in an investigation which becomes an enforcement action, it must take serious remediation steps during the pendency of the enforcement action. If not you will probably have a Corporate Monitor appointed. So do not wait, remediate now. From the SYK enforcement action, the SEC once again emphasized the importance of internal controls and accurately recording your expenses in your books and records. Neither of these messages are new or earth-shattering but both bear repeating and perhaps providing to your management in a teaching moment.

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, 2013