October 7th, 2015

The Timing Of FCPA Enforcement Actions

3d small people - alarm clockLast week, as its fiscal year drew to a close, the SEC brought two Foreign Corrupt Practices Act enforcement actions.

This post noted the timing and I was motivated to “run the numbers” and analyze when FCPA enforcement actions are brought both by the SEC and DOJ.

In reviewing the charts below, do realize that information is pending for October, November and December 2015 (in SEC and DOJ charts 1), and thus for Q4 (in SEC and DOJ charts 2), and thus for the aggregate of Q3-Q4 (in SEC and DOJ charts 3). Do also keep in mind that the SEC’s fiscal year ends on September 30th.

Even so, with the existing data, it is clear that most SEC and DOJ FCPA enforcement actions are brought in the second half of the year and the current numbers depicted in the below charts for the second half of 2015 are only going to get bigger as October, November and December 2015 happen. (Indeed, since the first draft of this post was written the SEC brought an FCPA enforcement action on October 5th – see here).

The take-away points from the below charts?

(i) most FCPA enforcement actions take place in the second half of the year; and (2) as 2015 draws to a close, stay tuned to FCPA Professor as this website offers the most comprehensive, real-time analysis of FCPA enforcement actions.


[A few notes regarding the below statistics.  Consistent with other FCPA enforcement actions found on FCPA Professor, the below statistics largely follow the “core” approach.  In other words, when the SEC brought an enforcement action against PBSJ Corp. and Walid Hatoum (a former employee) on the same day in January 2015 based on the same core conduct (see here), this is counted as one enforcement action in the below charts. The same concept applies to the July 2015 DOJ enforcement action against Louis Berger International and former employees Richard Hirsch and James McClung (see here) – this is counted as one enforcement action in the below charts. However, if the SEC or DOJ brought an enforcement action against a company and employees based on the same core conduct that is separated by time (as occasionally happens – see here and here for instance) such an enforcement action (one “core” enforcement action for most other statistical purposes) is counted twice because the below charts seek to measure the timing of FCPA enforcement].

























































Posted by Mike Koehler at 12:01 am. Post Categories: FCPA Statistics

October 6th, 2015

Next Up – Bristol-Myers

BMSFirst it was Johnson & Johnson (see here – $70 million enforcement action in April 2011).

Then it was Smith & Nephew (see here - $22 million enforcement action in February 2012).

Then it was Biomet (see here – $22.8 million enforcement action in March 2012).

Then it was Pfizer / Wyeth (see here  – $60 million enforcement action in August 2012).

Then it was Eli Lilly (see here – $29 million enforcement action in December 2012).

Then it was Stryker (see here – $13.2 million enforcement action in October 2013).

Then it was Mead Johnson (see here – $12 million enforcement action in July 2015).

The latest of the most recent Foreign Corrupt Practices Act enforcement actions (there are many more than those listed above) premised on the theory that physicians of certain foreign health care systems are “foreign officials” under the FCPA is Bristol-Myers Squibb Co. (“BMS”).

Some will say this enforcement action – like certain of the others mentioned above – merely involved the FCPA’s books and records and internal controls provisions, but make no mistake about it, this action – as well as the prior actions – was all about the alleged “foreign officials.”

Yesterday, the SEC announced this administrative cease and desist order in which BMS agreed, without admitting or denying the SEC’s findings, to pay approximately $14.7 million.

The order states in summary fashion as follows.

“These proceedings arise out of violations of the internal controls and recordkeeping provisions of the FCPA by BMS and its majority-owned joint venture in China. Between 2009 and 2014, BMS failed to design and maintain effective internal controls relating to interactions with health care providers (“HCPs”) at state-owned and state-controlled hospitals in China. Through various mechanisms during this period, certain sales representatives of the joint venture improperly generated funds that were used to provide corrupt inducements to HCPs in the form of cash payments, gifts, meals, travel, entertainment, and sponsorships for conferences and meetings in order to secure new sales and increase existing sales. BMS falsely recorded the relevant transactions as legitimate business expenses in its books and records.”

The findings focus on Bristol-Myers Squibb (China) Investment Co. Limited (“BMS China), a company through which BMS conducts business in China, and how BMS China, in turn, primarily operates in China through Sino-American Shanghai Squibb Pharmaceuticals Limited (“SASS”), a majority-owned joint venture.

According to the Order:

“BMS holds a 60% equity interest in SASS and has held operational control over this entity since 2009 when it obtained the right to name the President of SASS and a majority of the members of SASS’s Board of Directors.

BMS began operating in China in 1982 when it formed SASS, the first SinoAmerican pharmaceutical joint venture. Following a successful product launch in 2005, BMS China’s business grew quickly. By 2009, BMS China had 1490 full-time employees and net sales of more than $200 million. This upward trend continued through 2014 when the number of full-time employees expanded to 2464 and net sales reached nearly $500 million.

Certain BMS China employees achieved their sales, in part, by providing HCPs and other government officials with cash and other inducements in exchange for prescriptions and drug listings.”

Under the heading “Failure to Respond to Red Flags,” the Order states:

“BMS China failed to respond effectively to red flags indicating that sales personnel provided improper payments and other benefits in order to generate sales from HCPs. In 2009, BMS China initiated a review of travel and entertainment expenses submitted for reimbursement by its sales personnel and found non-compliant claims, fake and altered invoices and receipts, and consecutively numbered receipts. Shortly thereafter, BMS China retained a local accounting firm to conduct monthly post-payment reviews of all claims for travel, entertainment, and meeting expenses to identify false, improperly documented, and unsubstantiated claims. BMS China brought this function in-house in early 2011 and the results of both the external and internal reviews were provided to management of BMS China as well as regional compliance and corporate business managers who reported directly to senior management of BMS.

During the period between mid-2009 and late 2013, BMS China identified numerous irregularities in travel and entertainment and event documentation, including fake and altered purchase orders, invoices, agendas, and attendance sheets for meetings with HCPs that likely had not occurred. BMS China inaccurately recorded the reimbursement of these false claims as legitimate business expenses in its books and records, which were then consolidated into the books and records of BMS.

Certain BMS China employees admitted that they had submitted false reimbursement claims and used the funds for the benefit of HCPs in support of sales by BMS China. They also alleged that the use of false reimbursement claims to fund payments to and for the benefit of HCPs in order to secure prescription sales was a widespread practice at BMS China. In emails to the BMS China President in November 2010 and January 2011, certain terminated employees wrote that they used the funds to pay rebates, provide entertainment, and fund gift cards for HCPs, as there was no other way to meet their sales targets. Citing the “open secret” that HCPs in China rely upon the “gray income” to maintain their livelihood, they said that they tried to meet the demands of the HCPs for the benefit of BMS China. Despite the widespread exceptions and serious allegations of potentially widespread bribery practices, BMS China did not investigate these claims.”

Under the heading “Compliance and Controls Environment,” the Order states:

“Despite its longstanding presence in China, BMS did not implement a formal FCPA compliance program until April 2006 when it adopted its first standalone anti-bribery policy and corresponding corporative directive. At approximately the same time, BMS began conducting compliance assessments and audits of BMS China that included a review of internal controls relating to anti-bribery risks. These internal reviews revealed weaknesses in the monitoring of payments made to HCPs, the lack of formal processes around the selection and compensation of HCPs as speakers, deficiencies in obtaining and documenting the approval of donations, sponsorships, and consulting arrangements with HCPs, and the failure to conduct post-event verification of meetings and conferences sponsored by sales representatives. Reports of these findings were provided to senior management of BMS China as well as members of BMS’s global compliance department.

These identified controls deficiencies were not timely remediated and compliance resources were minimal. The corporate compliance officer responsible for the Asia-Pacific region through 2012 was based in the U.S. and rarely traveled to China. There was no dedicated compliance officer for BMS China until 2008, and no permanent compliance position in China until 2010. In addition, the BMS sales force in China received limited training and much of it was inaccessible to a large number of sales representatives who worked in remote locations. For example, when BMS rolled out mandatory anti-bribery training in late 2009, 67% of employees in China failed to complete the training by the due date.

Annual internal audits of BMS China repeatedly identified substantial gaps in internal controls, and the results were reported to the Audit Committee and senior management of BMS. In connection with each audit, the audit team cited a lack of effective controls and documentation relating to interactions with HCPs and the monitoring of potential inappropriate payments to HCPs. Among Internal Audit’s conclusions were that BMS China’s controls around the review and approval of travel and entertainment expenses and gifts to HCPs were not effective and that it failed to track payments to HCPs, including high-risk payments, in its quarterly review of potential inappropriate payments, and to enforce controls relating to the documentation, approval, and payment of distributor rebates. Internal Audit also cited the lack of due diligence assessments of distributor compliance, including anti-bribery compliance, the failure to properly document and approve agreements with HCPs who served as speakers, and the lack of a mechanism to ensure that services were received in exchange for sponsorships. As a result, Internal Audit issued a series of qualified opinions in connection with its annual audits of BMS China between 2009 and 2013.”

Under the heading “Internal Documents Reveal Improper Benefits Provided to HCPs,” the Order states:

“Emails and other BMS China documents detail, among other things, proposed “activity plans,” “action plans,” and plans for “investments” in HCPs to increase prescription sales. These contemporaneous documents were prepared at the direction of, and sometimes transmitted to, district and regional sales managers of BMS China, and show that sales representatives used funds derived from travel and expense claims to make cash payments to HCPs and to provide gifts, meals, entertainment, and travel to HCPs in order to induce them to prescribe products sold and marketed by BMS China. The sales representatives provided a variety of benefits to HCPs, ranging from small food and personal care items to shopping cards, jewelry, sightseeing, and cash payments, in exchange for prescription sales. This kind of conduct was captured in a July 2013 email from a sales representative to a regional manager. The sales representative explained that a former sales representative had offered cash for sales to HCPs at a local hospital and “the attitude of the director of the infectious diseases department was extremely clear when I took over: ‘No money, no prescription.’” Similarly, the work plans prepared by other sales representatives also identified correlations between the value of the benefits provided to specific HCPs and the volume of prescription sales expected.

Certain documents within BMS China were replete with references to “investments” made in order to obtain sales, such as offering speaking engagements and sponsorships for domestic and international conferences and meetings in exchange for prescriptions. Some sales representatives also sought to increase prescription sales and maintain drug listings at pharmacies by hosting cash promotions and events for pharmacy employees. Based on the volume of prescriptions, certain BMS China sales representatives gave cash, shopping cards, and foodstuffs as promotional prizes to pharmacy employees; at least one sales representative characterized the expenses as a “departmental development fee” in contemporaneous documents.”

Based on the above, the Order finds:

“As described herein, BMS, through the actions of certain BMS China employees, violated [the FCPA's books and records provisions] by falsely recording, as advertising and promotional expenses, cash payments and expenses for gifts, meals, travel, entertainment, speaker fees, and sponsorships for conferences and meetings provided to foreign officials, such as HCPs at state-owned and state-controlled hospitals as well as employees of state-owned pharmacies in China, to secure prescription sales. BMS also violated [the FCPA's internal controls provisions] by failing to devise and maintain a system of internal accounting controls relating to payments and benefits provided by sales representatives at BMS China to these foreign officials. As identified in various internal reviews, audits, and investigations conducted since at least 2009, BMS lacked effective internal controls sufficient to provide reasonable assurances that funds advanced and reimbursed to employees of BMS China were used for appropriate and authorized purposes.”

Under the heading “Remedial Efforts,” the Order states:

“BMS has implemented significant measures to enhance its anti-bribery and general compliance training and policies and to strengthen its accounting and monitoring controls relating to interactions with HCPs, including travel and entertainment expenses, meetings, sponsorships, grants, and donations funded by BMS China. BMS took numerous steps to improve the internal controls and compliance program at BMS China. Examples include a 100% pre-reimbursement review of all expense claims; the implementation of an accounting system designed to track each expense claim, including the request, approval, and payment of each claim; and the retention of a third-party vendor to conduct surprise checks at events sponsored by sales representatives. Additionally, BMS terminated over ninety employees, and disciplined an additional ninety employees, including sales representatives and managers of BMS China, who failed to comply with or sufficiently supervise compliance with relevant policies. In addition, BMS replaced certain BMS China officers as part of an overall effort to enhance “tone at the top” and a culture of compliance. Further, BMS revised the compensation structure for BMS China employees by reducing the portion of incentive-based compensation for sales and distribution, eliminated gifts to HCPs, implemented enhanced due diligence procedures for third-party agents, implemented monitoring systems for speaker fees and third-party events, and incorporated risk assessments based on data analytics into its compliance program.”

As stated in the Order:

“Without admitting or denying the findings, Bristol-Myers Squibb consented to the order and agreed to return $11.4 million of profits plus prejudgment interest of $500,000 and pay a civil penalty of $2.75 million.  Bristol-Myers Squibb also agreed to report to the SEC for a two-year period on the status of its remediation and implementation of FCPA and anti-corruption compliance measures.”

In the SEC’s release Kara Krockmeyer (Chief of the SEC’s FCPA Unit stated):

“Bristol-Myers Squibb’s failure to institute an effective internal controls system and to respond promptly to indications of significant compliance gaps at its Chinese joint venture enabled a widespread practice of providing corrupt inducements in exchange for prescription sales to continue for years.”

Yesterday Bristol-Myers’s stock closed down .47%.

According to reports, Bristol-Myers was represented by F. Joseph Warin of Gibson Dunn.

October 5th, 2015

Compliance Practitioners: Are You Reading Foreign Newspapers?

NewspaperI’ve read every Foreign Corrupt Practices Act enforcement action in the public domain.

The recent Hitachi enforcement action (see here and here for prior posts) contained allegations I’ve never seen before.

In its settled civil complaint, the SEC mentioned several South African newspaper articles to support its allegations that Hitachi (a Japanese company) knew, or should have known, that Chancellor House was an African National Congress funding vehicle.

Specifically, the SEC alleged:

“In August 2006, an HPA [a majority-owned subsidiary of HPE based in South Africa, that executed power station orders in South Africa, HPE in turn is wholly-owned subsidiary of Hitachi based in Germany] director received a telephone call from a reporter with the Mail & Guardian, a South African weekly newspaper that focuses on political analysis, investigative reporting, and South African news and culture. The reporter asked HPA to comment on whether there was a link between HPA’s 25% shareholder, Chancellor, and the ANC. HPA declined to comment.

On November 10, 2006, the same day that Hitachi submitted its bid for the Medupi power station contract, the Mail & Guardian published an article entitled, The ANC’ s New Funding Front. The article exposed Chancellor as a business front set up by the ANC “to seek profit on its behalf,” generally by acquiring “empowerment” stakes in businesses seeking state procurements. “This means,” the Mail & Guardian stated, “the ANC, as ruling party, has been both player and referee.”

Both HPA and HPE were aware of the Mail & Guardian’s reporting on Chancellor’s relationship to the ANC. On November 13, 2006, an HPA director forwarded two HPE executives a copy of The ANC’s New Funding Front. The same HPA director reported to the HPE executives that he had spoken to Chancellor’s chairman, who had denied the allegations in the newspaper.

In January 2007, both the Mail & Guardian and a separate South African newspaper, the Financial Mail, published articles that confirmed Chancellor was a funding vehicle for the ANC. In Financing the ANC, published on January 19, 2007, the Financial Mail quoted the ANC Secretary General and organizational head of the ANC’s operations as admitting that Chancellor was an “ANC vehicle” that existed for the sole purpose of funding the ANC. The Mail & Guardian reported this same admission by the ANC Secretary General a week later, in an article entitled, ANC Admits It Used BEE Funding Front.


In December 2007, the Financial Mail published another article about Hitachi’s relationship with Chancellor. The Financial Mail quoted an HPE executive as saying that there was “no proof’ that Chancellor was an ANC front company and if Chancellor was indeed a front· for the ANC, “this would contradict our own governance rules.” In fact, as Hitachi knew well before December 2007, and as the ANC’s Secretary General had confirmed publicly eleven months earlier, Chancellor was an alter ego of the ANC.

A week after the publication of the Financial Mail article, on December 14, 2007, Eskom and Hitachi -through HPE and HPA- executed the second of two contracts: a $2.71 billion contract to build the boiler works for the Kusile power station.”

The above allegations were not necessary for the SEC to properly allege the claims it brought against Hitachi (violations of the FCPA’s books and records and internal controls provisions).

However, I take the position that when the SEC includes specific non-outcome determinative allegations in an FCPA enforcement action, the SEC is doing more than just practicing its typing skills.

Were the above allegations in the Hitachi enforcement action intended to send a message to compliance practitioners that they have constructive knowledge of information in foreign newspapers?

If so, this is troubling as journalists frequently get things wrong and/or take things out of context. Indeed, several FCPA articles in major U.S. newspapers have been wrong.

Posted by Mike Koehler at 12:03 am. Post Categories: ComplianceHitachi

October 2nd, 2015

What You Need To Know From Q3

q3This post provides a summary of Foreign Corrupt Practices Act enforcement activity and related events from the third quarter of 2015. (See similar posts here and here for Q1 and Q2).

DOJ Enforcement (Corporate)

There was one DOJ corporate FCPA enforcement action in the third quarter. DOJ recovery in this enforcement action was $17.1 million.

Year-to-date, the DOJ has brought two corporate enforcement actions. DOJ recovery in these enforcement actions has been approximately $24.2 million.

Louis Berger Int’l.  (July 17th)

See here for the prior post

Charges:  Conspiracy to violate the FCPA’s anti-bribery provisions

Resolution Vehicle:  DPA

Guidelines Range:  $17.1 million – $34.2 million

Penalty:  $17.1 million.

Disclosure:  The DPA states: “after the government had made [the company] … aware of a False Claim Act investigation, [the company] conducted an internal investigation, discovered potential FCPA violations, and voluntarily self-reported to the [DOJ] the misconduct”

Monitor:  Yes

Individuals Charged:  Yes

DOJ Enforcement (Individual)

In the third quarter, the DOJ: (i) brought an individual enforcement action against Richard Hirsch and James McClung in connection with the Louis Berger corporate enforcement action (see here); (ii) brought an enforcement action against Vicente Garcia, a former SAP sales exec, (see here); and (iii) announced an enforcement action against Daren Condrey, a former owner and executive of Maryland-based Transport Logistics International, (see here).

Year-to-date, the DOJ has brought five core individual enforcement actions.  The three mentioned above, in the second quarter, the DOJ brought an individual enforcement action against James Rama in connection with the IAP Worldwide Services Action, and in the first quarter the DOJ announced criminal charges against Dmitrij Harder, the former owner and President of Chestnut Consulting Group Inc.

SEC Enforcement (Corporate)

The SEC brought four corporate FCPA enforcement actions in the third quarter. SEC recovery in these actions was approximately $46 million.

Year-to-date, the SEC has brought eight corporate enforcement actions, all via administrative orders with the exception of Hitachi. SEC recovery in these enforcement actions has been approximately $100 million.

Hyperdynamics (Sept. 29th)

See here for the prior post

Charges:   None. Administrative cease and desist order finding violations of the FCPA’s books and records and internal controls provisions

Settlement:  $75,000

Disclosure: According to the company’s disclosure –  ”the SEC had issued a subpoena to Hyperdynamics concerning possible violations of the FCPA”

Individuals Charged:  No

Related DOJ Enforcement Action:  No.

Hitachi  (Sept. 28th)

See here and here for prior posts

Charges:   Settled civil complaint charging FCPA books and records and internal controls violations.

Settlement:  $19.1

Disclosure:   Not specified in the resolution documents.

Individuals Charged:  No

Related DOJ Enforcement Action:  No.

BNY Mellon (August 18th)

See here and here for prior posts.

Charges:   None.  Administrative cease and desist order finding violations of the FCPA’s anti-bribery and internal control provisions.

Settlement:  $14.8 million ($8.3 million in disgorgement, $1.5 million in prejudgment interest, and a $5 million penalty).

Disclosure:   Unclear from the resolution documents (perhaps the industry sweep of the financial services industry)

Individuals Charged:  No.

Related DOJ Enforcement Action:  No.

Mead Johnson (July 28th)

See here and here for prior posts.

Charges:   None.  Administrative cease and desist order finding violations of the FCPA’s books and records and internal controls provisions.

Settlement:  Approximately $12 million ($7.77 million in disgorgement, $1.26 million in prejudgment interest, and a $3 million penalty).

Disclosure:  The resolution documents state: “In 2011, Mead Johnson received an allegation of possible violations of the FCPA in connection with the Distributor Allowance in China. In response, Mead Johnson conducted an internal investigation, but failed to find evidence that Distributor Allowance funds were being used to make improper payments to HCPs. Thereafter, Mead Johnson China discontinued Distributor Allowance funding to reduce the likelihood of improper payments to HCPs, and discontinued all practices related to compensating HCPs by 2013. Mead Johnson did not initially self-report the 2011 allegation of potential FCPA violations and did not thereafter promptly disclose the existence of this allegation in response to the Commission’s inquiry into this matter.

Individuals Charged:  No.

Related DOJ Enforcement Action:  No.

SEC Enforcement (Individual)

The SEC brought one individual enforcement action in the third quarter against Vicente Garcia based on the same core conduct alleged in the DOJ action. Garcia agreed to resolve the SEC action by agreeing to pay approximately $93,000

Year-to-date there has been two FCPA enforcement actions against individuals. The above Garcia action and in the first quarter, in connection with the PBSJ enforcement action, the SEC also charged Walid Hatoum (a former executive of PBS&J International, Inc.).

Other Developments or Items of Interest

As highlighted here, after the Labor Day holiday the DOJ released a memo titled “Individual Accountability for Corporate Wrongdoing” - the so-called “Yates Memo.” Many viewed the Yates Memo as articulating new DOJ policy – and because of this – the memo generated significant news coverage.  However, the memo really did not articulate new DOJ policy and moreover merely restated DOJ’s long-standing rhetoric about the importance of individual prosecutions. For additional posts about the “Yates Memo” and related topics see hereherehere and here.

A basic rule of law principle is consistency. In other words, the same legal violation ought to be sanctioned in the same way. However, as highlighted in this post, the SEC routinely sanctions alleged FCPA books and records and internal controls violations in materially different ways.

To commemorate the start of the football season, this post discusses an article which highlights how understanding the game of football is not just a professional diversion, but one that can actually add professional value as well. The reason is because understanding what makes a football organization successful can also inform FCPA compliance in a business organization.

As highlighted here, the DOJ once again stumbled when put to its burden of proof as a judge trimmed the DOJ’s FCPA enforcement action against Lawrence Hoskins (a foreign national and former Alstom executive criminally charged in August 2013) by granting his motion to dismiss and denying a DOJ motion in limine.  The ruling primarily relied upon the FCPA’s legislative history regarding the category of defendants Congress sought to capture in the FCPA. As highlighted in this follow-up post, the recent ruling demonstrates once again the importance of the FCPA’s legislative history.

This post analyzes how the DOJ’s recent announcement of compliance counsel represents just the latest public relations move by the DOJ to hide its justified discomfort with respondeat superior corporate criminal liability principles and to make it appear that the DOJ is addressing the key core issue.

In this guest post, the adult daughter of Carlos Rodriguez reminds us that her father is more than just a name associated with the recent 11th Circuit “foreign official” decision.

Several posts in July (see hereherehere and here) explored double standards when it comes to enforcement of U.S. domestic bribery laws compared to FCPA enforcement.

This post examined the DOJ’s seeming unwillingness to accepts its recent FCPA trial court debacles.

Posted by Mike Koehler at 12:03 am. Post Categories: Year in Review 2015

October 1st, 2015

Issues To Consider From The Hitachi Enforcement Action

IssuesThis recent post highlighted the SEC’s FCPA enforcement action against Hitachi.

This post continues the analysis by highlighting various issues to consider from the enforcement action.

Too Lenient?

A $19 million FCPA enforcement action is nothing to yawn about.

However, it is not every Foreign Corrupt Practices Act enforcement action in which the SEC alleges that approximately $10.5 million in improper payments or benefits were provided in connection with two contracts worth approximately $5.6 billion in business.

Against this backdrop, a $19 million settlement amount appears at first blush to be very lenient.  Particularly because the SEC makes no mention of voluntary disclosure or cooperation in its resolution documents (something the SEC typically mentions in resolution documents if indeed it has occurred).  Moreover, most FCPA enforcement actions (even those that merely charge books and records and internal controls violations) typically include disgorgement.  There was no disgorgement in the Hitachi enforcement action, only a civil penalty.

Hitachi was represented by Linda Chatman Thomsen (a former SEC Director of Enforcement currently at Davis Polk & Wardwell).

Rare Civil Complaint

Since 2014, the SEC has brought, including the Hitachi action, 15 corporate FCPA enforcement actions. Along with Avon, Hitachi was the only enforcement action resolved through a settled SEC civil complaint filed in federal court.

Why? Presumably because the SEC wanted to invoke the injunctive powers of a federal court to enjoin Hitachi from future violations of the FCPA’s books and records and internal control provisions.

An FCPA First

The Hitachi enforcement action is believed to be the first FCPA enforcement action to allege improper conduct in South Africa.

Root Causes

The root causes of many FCPA enforcement are often foreign trade barriers or distortions.

As relevant to this topic, the SEC alleged:

“[I]n establishing a local presence in South Afiica, Hitachi [sought] to identify a local black-owned entity or entities with whom HPA could partner in connection with its submission of bids, or “tenders,” for government business. By partnering with a local black-owned entity, HPA would seek to qualify under the requirements of South Africa’s Black Economic Empowerment Act of 2003 (“BEE”), which promoted participation in the South African economy by companies that were at least 25% owned by black South Africans or black-owned South African entities. In general, companies that qualified under the terms of the BEE enjoyed preferential status in government procurements.”

No Anti-Bribery Charges

Certain readers may be surprised that the Hitachi enforcement action did not include violations of the FCPA’s anti-bribery provisions.

However, in order for the anti-bribery provisions to apply to a foreign issuer like Hitachi, the jurisdictional element of the provisions must be met – in other words “use of the mails or any means or instrumentality of interstate commerce” in furtherance of a payment scheme.

There is no allegation, inference or suggestion that the conduct at issue had a U.S. nexus.

Thus, based on the information in the SEC’s complaint, there were no anti-bribery charges to bring.

Posted by Mike Koehler at 12:04 am. Post Categories: HitachiRoot Causes