Archive for the ‘Dun & Bradstreet’ Category

Friday Roundup

Friday, May 8th, 2015

Roundup2The anti-bribery business, quotable, scrutiny alerts and updates, and for the reading stack.  It’s all here in the Friday Roundup.

“The Anti-Bribery Business”

Several articles have been written about FCPA Inc., a term I coined in April 2010 (see here), as well as the “facade of FCPA enforcement” (see here for my 2010 article of the same name).

The articles have included: “Cashing in on Corruption” (Washington Post); “The Bribery Racket” (Forbes); and “FCPA Inc. and the Business of Bribery” (Wall Street Journal).

I talked at length with The Economist about the above topics and certain of my comments are included in this recent article “The Anti-Bribery Business.”

“The huge amount of work generated for internal and external lawyers and for compliance staff is the result of firms bending over backwards to be co-operative, in the hope of negotiating reduced penalties. Some are even prepared to waive the statute of limitations for the conclusion of their cases. They want to be sure they have answered the “Where else?” question: where in the world might the firm have been engaging in similar practices?

In doing so, businesses are egged on by what Mr Koehler calls “FCPA Inc”. This is “a very aggressively marketed area of the law,” he says, “with no shortage of advisers financially incentivised to tell you the sky is falling in.” Convinced that it is, the bosses of accused companies will then agree to any measure, however excessive, to demonstrate that they have comprehensively answered the “Where else?” question. So much so that even some law enforcers have started telling them to calm down. Last year Leslie Caldwell, head of the DOJ’s criminal division, said internal investigations were sometimes needlessly broad and costly, delaying resolution of matters. “We do not expect companies to aimlessly boil the ocean,” she said.

Her words have provided scant comfort: defence lawyers say that their clients feel that if they investigate problems less exhaustively, they risk giving the impression that they are withholding information. Some say the DOJ is maddeningly ambiguous, encouraging firms to overreact when allegations surface.”


Assistant Attorney General Leslie Caldwell is spot-on in this recent Q&A in Fraud Magazine as to the importance of uniquely tailored compliance.

“I think companies have to tailor their compliance programs and their investigative mechanisms to their businesses. There’s no one-size-fits-all compliance program. Different businesses have different risks. And a company needs to do an assessment that’s very tailored to their risks and game out what could go wrong and figure out how to prevent that from happening.”

She is less than clear though when describing when the DOJ would like companies to voluntarily disclose:

“We don’t want a company to wait until they’ve completed their own investigation before they come to us. We’ll give them room to do that, but there may be investigative steps that we want to take that maybe the company is not even capable of taking. We definitely don’t want to send a message that the company should complete its own investigation and then come to us. However, we obviously don’t expect a company to report to us as soon as it receives a hotline report that it hasn’t even checked into yet.”

For your viewing pleasure, here is the video of a recent speech by Caldwell (previously highlighted here) along with Q&A.

Scrutiny Alerts and Updates


Reuters reports:

“German engineering firm Bilfinger has become the first international company to disclose to Brazil that it may have paid bribes as it seeks leniency under a new anti-corruption law, Comptroller General Valdir Simão said on Thursday. By reporting potential graft to the comptroller, known by the acronym CGU, Bilfinger hopes to continue operating in Brazil, Simão said, though it may still pay damages. ”The company knows it will be punished in Brazil; it is not exempt from fines,” Simao said at a conference in Sao Paulo adding that in exchange the company could be guaranteed the right to keep operating in Brazil. Companies that are convicted for bribery could be banned from future contracts in Brazilunder the law, which took effect in January 2014. Bilfinger said in March that it may have paid 1 million euros to public officials in Brazil in connection with orders for large screens for security control centers during the 2014 soccer World Cup. It is conducting an internal investigation and collaborating with Brazilian authorities, Bilfinger said in a statement at the time. Five companies are pursuing leniency deals with the CGU, Simao said, adding that such deals are “quite new” for the country. Four are tied to a scandal at Brazil’s state-run oil firm Petroleo Brasileiro SA, he said.”

As highlighted in this previous post, in December 2013 German-based Bilfinger paid approximately $32 million to resolve an FCPA enforcement action concerning alleged conduct in Nigeria.  The enforcement action was resolved via a three-year deferred prosecution agreement.


Reuters reports:

“A Chinese regulator investigated Siemens AG last year over whether the German group’s healthcare unit and its dealers bribed hospitals to buy expensive disposable products used in some of its medical devices, three people with knowledge of the probe told Reuters. The investigation, which has not previously been reported, follows a wide-reaching probe into the pharmaceutical industry in China that last year saw GlaxoSmithKline Plc fined nearly $500 million for bribing officials to push its medicine sales. China’s State Administration for Industry and Commerce (SAIC) accused Siemens and its dealers of having violated competition law by donating medical devices in return for agreements to exclusively buy the chemical reagents needed to run the machines from Siemens, the people said.”

In 2008, Siemens paid $800 million to resolve DOJ and SEC FCPA enforcement actions that were widespread in scope.  The enforcement action remains the largest of all-time in terms of overall settlement amount.

Dun & Bradstreet

The company recently disclosed the following update regarding its FCPA scrutiny.

“On March 18, 2012, we announced we had temporarily suspended our Shanghai Roadway D&B Marketing Services Co. Ltd. (“Roadway”) operations in China, pending an investigation into allegations that its data collection practices may have violated local Chinese consumer data privacy laws. Thereafter, the Company decided to permanently cease the operations of Roadway. In addition, we have been reviewing certain allegations that we may have violated the Foreign Corrupt Practices Act and certain other laws in our China operations. As previously reported, we have voluntarily contacted the Securities and Exchange Commission (“SEC”) and the United States Department of Justice (“DOJ”) to advise both agencies of our investigation, and we are continuing to meet with representatives of both the SEC and DOJ in connection therewith. Our investigation remains ongoing and is being conducted at the direction of the Audit Committee.

During the three months ended March 31, 2015 , we incurred $0.4 million of legal and other professional fees related to matters in China, as compared to $0.3 million of legal and other professional fees related to matters in China for the three months ended March 31, 2014.

As our investigation and our discussions with both the SEC and DOJ are ongoing, we cannot yet predict the ultimate outcome of the matter or its impact on our business, financial condition or results of operations. Based on our discussions with the SEC and DOJ, including an indication from the SEC in February and March 2015 of its initial estimate of the amount of net benefit potentially earned by the Company as a result of the challenged activities, we continue to believe that it is probable that the Company will incur a loss related to the government’s investigation. We will be meeting with the Staff of the SEC to obtain and to further understand the assumptions and methodologies underlying their current estimate of net benefit and will subsequently provide a responsive position. The DOJ also advised the Company in February 2015 that they will be proposing terms of a potential settlement, but we are unable to predict the timing or terms of any such proposal. Accordingly, we are unable at this time to reasonably estimate the amount or range of any loss, although it is possible that the amount of such loss could be material.”


The company disclosed as follows concerning civil litigation filed in the aftermath of its November 2014 FCPA enforcement action (see here for the prior post).

“On January 23, 2015, the City of Riviera Beach General Employees’ Retirement System filed a new shareholder derivative lawsuit in the Superior Court of Contra Costa County against three of our current directors and one former director. We are also named as a nominal defendant. In the complaint, the plaintiff alleges that our directors breached their fiduciary duty of loyalty by failing to ensure that we had sufficient internal controls and systems for compliance with the FCPA; that we failed to provide adequate training on the FCPA; and that based on these actions, the directors have been unjustly enriched. Purportedly seeking relief on our behalf, the plaintiff seeks an award of restitution and unspecified damages, costs and expenses (including attorneys’ fees). We and the individual defendants have filed a demurrer requesting dismissal of the complaint in this case.

On January 30, 2015, we received a demand pursuant to Section 220 of the Delaware General Corporation Law from the law firm of Scott + Scott LLP on behalf of International Brotherhood of Electrical Workers Local 38 Pension Fund to inspect certain of our books and records. The alleged purpose of the demand is to investigate potential wrongdoing, mismanagement, and breach of fiduciary duties by our directors and executive officers in connection with the matters relating to our FCPA settlement with the SEC and DOJ, and alleged lack of internal controls. We objected to the demand on procedural grounds by letter. On May 1, 2015, International Brotherhood of Electrical Workers Local 38 Pension Fund filed an action against us in the Delaware Court of Chancery to compel the inspection of the requested books and records.

On March 13, 2015, we received a demand pursuant to Section 220 of the Delaware General Corporation Law from the law firm of Kirby McInerney LLP on behalf of Wayne County Employees’ Retirement System to inspect certain of our books and records. The alleged purpose of the demand is to investigate potential wrongdoing, mismanagement, and breach of fiduciary duties by our directors and executive officers in connection with the matters relating to our FCPA settlement with the SEC and DOJ, and alleged lack of internal controls. We objected to the demand on procedural grounds by letter. On April 21, 2015, Wayne County Employees’ Retirement System filed an action against us in the Delaware Court of Chancery to compel the inspection of the requested books and records.”


The company disclosed its FCPA scrutiny earlier this year and stated as follows in its recent quarterly filing:

“For the first quarter of 2015 approximately $1 million was recorded for legal and other professional services incurred related to the internal investigation of this matter. The Company expects to incur additional costs relating to the investigation of this matter throughout 2015.”

For the Reading Stack

From Global Compliance News by Baker & McKenzie titled “When a DPA is DOA:  What The Increasing Judicial Disapproval of Corporate DPAs Means for Corporate Resolutions With the U.S. Government.”

“The legal setting in which corporations are negotiating with U.S. regulators is always evolving. Federal judges’ increasing willingness to second-guess negotiated settlements between the government and corporations is likely to encourage government attorneys to seek even more onerous settlements to ensure that judges do not reject them or criticize the agency in open court. Companies and their counsel should be ready to push back, using the judicial scrutiny to their advantage where possible.”


A good weekend to all.

Business Effects

Wednesday, March 21st, 2012

Previous posts have explored the FCPA’s long tentacles (here), collateral civil litigation resulting from FCPA scrutiny or enforcement actions (here and here), how FCPA scrutiny can impact mergers (here), how FCPA scrutiny can impact the cost of capital (here), and numerous prior posts have highlighted professional fees and expenses in connection with FCPA inquiries.

In short, failure to comply with the FCPA has real business effects in addition to any ultimate fine and penalty amount announced on resolution day.    This post summarizes several recent business effects associated with FCPA scrutiny.


As previously indicated in this Wall Street Journal Corruption Currents post by Samuel Rubenfeld, S&P  recently cut its debt rating on Avon Products Inc.  Among the reasons cited for the downgrade was “expenses related to the ongoing investigation under the Foreign Corrupt Practices Act.”  (See here).  As noted in this recent New York Times White Collar Watch piece by Professor Peter Henning, professional fees and expenses incured by Avon in connection with its internal FCPA review have approached $250 million – and there hasn’t even yet been an enforcement action.  Over the past three years and doing the math, Avon has spent approximately $225,000 per day on its FCPA inquiry.  One can debate whether such expenses (as well as the other business effects noted in this post) should happen or are truly necessary, but the point remains such effects are happening.

Sticking with the investigative fees issue, Weaterford International recently stated in its March 15th annual report (here) that since disclosure of its FCPA scrutiny (as well as Iraq Oil for Food and OFAC scrutiny) it has “incurred $123 million for legal and professional fees in connection with complying with and conducting” the on-going investigations.  According to the company, “this amount excludes the costs [the company has] incurred to augment and improve our compliance function.”


Diebold, which disclosed FCPA issues in July 2010 (see here), stated in March 14th proxy solicitation materials (here) that the cash bonus of Thomas Swidarski (President and CEO) was reduced by the Compensation Committee.  According to the materials, the Committee concluded that ”given the CEO’s ultimate responsibility for the oversight of the company, as a result of the impact to the company of the global FCPA investigation it was appropriate that Mr. Swidarski’s cash bonus be reduced.”  Nevertheless the materials indicate that Swidarski did receive a $1 million cash bonus (on top of his other compensation) … but it could have been more.  Another component of the proxy materials that caught my eye was discussion of the Board Special Committee set up to oversee the “global FCPA review.”  The materials note as follows.  “This committee met in person or telephonically seven times in 2011.


In other disclosure news, Dun & Bradstreet (the world’s leading source of commercial information and insight on businesses) announced earlier this week (see here) that it “has been reviewing certain allegations that local employees may have violated the Foreign Corrupt Practices Act and certain other laws in our China operations. D&B is cooperating with the  local Chinese investigation, and has voluntarily reported these matters to the U.S. Department of Justice and the U.S. Securities and Exchange  Commission.”

D&B’s FCPA disclosure was contained in the same release in which the company stated it “has temporarily suspended its Shanghai Roadway D&B Marketing Services Co Ltd. operations in China, pending an investigation into allegations that its data  collection practices may violate local Chinese consumer data privacy laws.”

D&B’s FCPA disclosure marks the third time in the last four weeks that a company has newly disclosed FCPA scrutiny.