Approximately 100 companies are publicly known to be the subject of FCPA scrutiny. This figure is likely a conservative estimate given that little is often known of private company FCPA scrutiny until an enforcement action is announced. For instance, other than those involved, who knew that NORDAM Group or Data Systems & Solutions (two companies that recently resolved enforcement actions – see here and here) were the subject of FCPA scrutiny?
Add two more companies to the list: Nielsen Company and Olympus Corp.
It is not the traditional way companies become the subject of the FCPA scrutiny, but then again it is not unheard of for FCPA scrutiny to begin with a civil complaint.
Last week in a lengthy civil complaint (here) filed by New Delhi Television Limited (“NDTV”) in New York State Court, NDTV (which describes itself as India’s first and most respected private broadcaster of news, current affairs and lifestyle television and a pioneer in India’s news television) accused Nielsen and a host of related entities and individuals of “negligence, gross negligence, false representations, prima facie tort and negligence per se (based on violations of the Foreign Corrupt Practices Act and the Dutch Corporate Governance Code).”
The 37th cause of action against Nielsen is for negligence per se arising from violations of the FCPA and the complaint states in full as follows.
“The anti-bribery provisions of the Foreign Corrupt Practices Act … prohibit U.S. companies from giving anything of value, either directly or indirectly, to, inter alia, a foreign politician so as to induce such foreign politician to do or omit to do any act in violation of the lawful duty of such foreign politician; or to secure any improper advantage, or to continue the company’s business. Accordingly, since the formation of TAM [Television Audience Management, an Indian company which is a joint venture between a Nielson entity and others], Nielsen had a duty to comply with the provisions of the FCPA, so as to prevent the rampant corruption that has existed and currently exists within TAM. Nielsen has known or should have known, that politicians directly and indirectly own approximately one-third of the news channels in India; that approximately sixty-percent (60%) of Indian cable operations are owned, directly or indirectly, by politicians or their proxies; and that, at all relevant times, there were high levels of corruption in the Indian television ratings industry and in TAM’s operations. Nonetheless, since the inception of TAM, Nielsen has allowed TAM, using the Nielsen Process and/or Nielsen’s proprietary property and/or Nielsen’s name and logo, to publish corrupt data, which was known to be corrupt, which benefited politicians. Indeed, Nielsen knew or should have known and/or consciously disregarded the fact that the leakage of panel home identities yielded hundreds of millions of dollars for the benefit of several politicians. This has enabled TAM, Nielsen and Kantar [another entity in the joint venture] to maintain its monopoly power in India and/or steady revenues. The failure to stop publication of corrupt data continues to benefit politicians, TAM, Nielsen and Kantar. Since the formation of TAM, Nielsen has had intimate actual knowledge of such violations of the FCPA; knew of several red flags giving rise to an inference of actual knowledge of such violations of the FCPA; was willfully blind to such violations of the FCPA; and consciously avoided such violations of the FCPA. Indeed, Robert Messemer, Chief Global Security Officer for The Nielsen Company, and Paul Donato, Executive Vice President and Chief Research Officer for Nielsen, during the course of their several visits to India commencing January 2012, meetings there as described above, and in the course of investigations during and subsequent to such visits and meetings, had actual knowledge of, and/or consciously disregarded FCPA violations, including, but not limited to, representations made in person to them by the whistleblower whom they personally interviewed on February 28, 2012 …, that, at the very least, one of the parties engaged in obtaining and using highly sensitive identities of panel homes was a television network owned by a well known Indian politician. As a result of Nielsen’s willful disregard of such undeniable corrupt practices, such foreign politicians derived benefits by, inter alia, manipulation and skewing of TAM data in favor of broadcast channels and cable operations owned and/or operated by such local politicians or their proxies, from manipulation of rates based on knowledge of corrupt data and identity of panel homes, and various other means. Nielsen’s complete and utter failure and/or refusal to stop publication of manipulated TAM data has allowed such politicians to continue to benefit from the publication of such data. Thus, benefits were provided to those politicians, and TAM and/or Nielsen continued to enjoy the benefits of, inter alia, continued operations as a monopoly in the Indian market, and steady revenues. Such acts and omissions by Nielsen constitute violations of the FCPA by Nielsen, and, as a result, negligence per se.”
Yesterday, Bloomberg reported (here) that Olympus Corp., the world’s largest maker of endoscopes, uncovered irregularities at a doctor-training program in Brazil that may have violated U.S. law and reported them to the Department of Justice.” According to the article, “at issue in Brazil may be the way the company handled doctors’ expenses for travel, meals or entertainment.” The article quotes company Chairman Yasuyuki Kimoto as saying “we might agree to some sort of violation of the Foreign Corrupt Practices Act in Brazil. We understand DOJ is trying to gather lots of information on us.”
How can Tokyo based Olympus become subject to the FCPA? For starters, the company has Level 1 ADRs traded on the so-called “Pink Sheets.” Also, as noted in the Bloomberg article, the company has a U.S. based subsidiary and if it was involved in the conduct at issue, the DOJ may take the position that the subsidiary was acting as an agent of the parent company. Also, as I suggest in the Bloomberg article, under the dd-3 prong of the FCPA added by the 1998 amendments, any company can be subject to the FCPA’s anti-bribery provisions to the extent “while in the territory of the U.S.” conduct occurs in furtherance of the scheme. As noted in this prior post, the DOJ has asserted expansive theories under dd-3. Notwithstanding the DOJ’s dd-3 setback in the Africa Sting case (also noted in the prior post) it is likely to continue to assert such expansive theories until challenged.
Olympus’s FCPA scrutiny would appear to be based on the untested (and in the minds of many – see here - dubious) enforcement theory that anyone employed by a state-run health care system is a “foreign official” under the FCPA. Several prior enforcement actions, including against medical device companies, (see here for instance) have been based on this theory.