May 14th, 2015

Let’s Pause Before We Dole Out Dollars

Out of thin airPrevious posts here and here addressed the calls of some that settlement amounts in an FCPA enforcement action be, at least in part, returned to the so-called victims of the underlying bribery.

Today’s post is from Joe Murphy.

Murphy is the author of 501 Ideas for Your Compliance and Ethics Program (SCCE; 2008) and a frequent commentator on compliance issues.

*****

There was recently an online posting championing the idea of the Department of Justice using some of the $9 billion criminal penalty imposed on one company for violations of sanctions against Sudan, Iran and Cuba to compensate victims of the regimes in those countries.  The Department would explore who those victims were and determine how to compensate them.

As a student of political science, I find this worrisome.  Any figure with that many zeros behind it is real money.  And, it can fairly be said, that money is a form of power.  Here we would have unelected enforcement officials making policy decisions about how to spend large pools of funds. Determining exactly who were the victims of such systemic violations is not simply an administrative task; there will be important policy decisions to be made, including matters of foreign policy.

When the fines were small this could be considered an incidental function. But when the amounts are in the billions, this is cause for much more consideration. Sure, we are often frustrated by the slow process of legislative deliberation, but that is the governmental system we have chosen. The raising and allocation of funds is subject to a system of checks and balances.  We live in a democracy, not a government of selected elites who choose to spend money as they think best. Enforcement officials should be enforcing the law and taking steps to prevent violations. Courts should be hearing disputes and resolving conflicts. But they are not legislatures and should not be selecting where to dole out billions of dollars in funds.

As the size of criminal fines has ballooned we have passed the point where this issue can be ignored.  There are serious policy issues.  If, on the one hand, the funds were simply added to the general funds of the government we would also have the troublesome issue of law enforcement being converted into a revenue-raising operation.  This specter is seen in Europe, where the EU’s competition law enforcers sometimes seem more like revenue agents than public servants dedicated to preventing violations. Consider the institutional bias this would introduce if an enforcement agency is a funding source for government operations.  Instead of having an incentive to stamp out violations, there would at least appear to be an opposite interest:  let the violations ripen into large cases so there is more revenue to harvest.

On the other hand, if the proceeds go elsewhere, then what is done with the money and who decides?  In the US at the federal level the proceeds go to victim reimbursement.  But as the cases deal with systematic violations or ones where victims are not clearly defined, this is not so easy.  When the violations are not simply theft, how do we determine who the victims are?  Who makes those decisions?  Is there a process in place capable of handling this?  And in a system where the victims are capable of pursuing their own compensation through litigation, what happens to the penalty funds generated by government?

If enforcers are allocating billions of dollars, can lobbying for that money be far behind?  What alert non-profit would pass up the opportunity to have access to those funds? And, as the enforcers should know well, dealing in those sums eventually invites fraud.  Will the enforcers require reports on how the funds were spent?  Will they audit or investigate this?  Will they then be allocating resources to monitor their grants to the victims and those who purport to benefit the victims?  Is this a business we want enforcers conducting?

Giving this level of power to enforcement officials should at least cause us to stop and think more about the process. They were not trained in how to do this, they were not selected for this, and they are not accountable to the public for what they do. Up until now, this question has not only not been answered, but for the most part it is not even being asked.  I find this at least a cause for concern.

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




May 13th, 2015

U.K. Serious Fraud Office Announces Corruption Charges Against Individual Well-Known In The Compliance Community

SurpriseTalk about a head-scratching moment.

If you are even an occasional attendee or participant of anti-bribery and corruption conferences you likely know or recognize Jean-Daniel Lainé who, prior to his retirement in April 2013, was Senior Vice President Ethics & Compliance, and a director of Alstom International Limited.  Laine currently runs jdl.ethiconsult.

As highlighted in this 2010 article, “since 2006, Laine has overseen the rapid development of Alstom’s compliance and ethics programmes, as the threat of corruption investigations has risen up the agenda for companies around the world.”

The article quotes him as follows. ”I know a lot of my peers in the compliance community. I participate in a lot of conferences on the anti-corruption subject. I have the opportunity to review all these topics and issues, and I consider that we are among the best in class.”

Among other things, Laine co-authored the Risk Assessment Chapter of the International Chamber of Commerce’s Ethics and Compliance Training Handbook (see here for a video interview) and Laine was a frequent writer on compliance topics, see here for instance “How Do You Manage Third Party Relationship Risks?”

Against this backdrop, it comes as a shocker to say the least that yesterday the U.K. Serious Fraud Office announced:

“Mr Lainé, 68, … a French national … attended court to answer two charges of corruption contrary to section 1 of the Prevention of Corruption Act 1906, as well as two offences of conspiracy to corrupt contrary to section 1 of the Criminal Law Act 1977. The alleged offences are said to have taken place between 1 January 2006 and 18 October 2007 and concern the supply of trains to the Budapest Metro.”

As noted in the SFO release, also charged was Michael John Anderson and named as a co-conspirator with Mr Anderson and Mr Lainé is Altan Cledwyn-Davies, director and company secretary of Alstom International Ltd. Mr Cledwyn-Davies died in 2010 before charges were brought.

As further noted in the SFO release:

“In July 2014 the SFO charged Alstom Network UK Ltd, and British nationals Graham Hill and Robert Hallett with corruption in India, Poland and Tunisia. That matter awaits trial in May 2016. In addition, the SFO charged Alstom Power Ltd, Nicholas Reynolds and Johanes Venskus with corruption in Lithuania. That matter awaits trial in January 2017.”

See prior posts here and here for recent Alstom-related enforcement actions in the U.S.

Posted by Mike Koehler at 12:04 am. Post Categories: ALSTOMJean-Daniel LainéMichael John AndersonSerious Fraud OfficeUnited Kingdom




May 12th, 2015

Book Review – “The Foreign Corrupt Practices Act In A New Era”

New EraToday’s post is a book review by Professor Peter Reilly (Texas A&M University School of Law and author of several FCPA articles) of my book “The Foreign Corrupt Practices Act In A New Era.”  The review originally appeared in a recent volume of International Trade Law and Regulation.

*****

The Foreign Corrupt Practices Act in a New Era, by law professor Mike Koehler, provides a fascinating and thorough analysis of the Foreign Corrupt Practices Act (“FCPA”).  But the book does far more than that; this volume attempts to educate readers in such a manner that they understand not only the motivation and thought processes behind the initial passage of the Act, but also the ongoing policy debates surrounding this important and controversial piece of legislation.

While some books on the FCPA appear to target a particular audience, such as academics for example, this volume will prove useful to anyone, in whatever field, who wants to thoroughly understand the past, present, and future of the FCPA, whether that person is engaged in business, law, government, academia, public policy, or any other pursuit or profession.

Professor Koehler’s insightful presentation and analysis of material on the FCPA likely comes from his unique background in the field.  Prior to academia, Koehler was an FCPA attorney in private practice where he advised clients on FCPA compliance matters, conducted FCPA investigations around the globe, and negotiated resolutions to FCPA enforcement actions with government agencies including the U.S. Department of Justice and the U.S. Securities and Exchange Commission.  Professor Koehler explains how his work in private practice led to an intense interest in “asking the why questions” regarding the FCPA and “injecting a candid and informed scholarly voice into the issues.”

This, in turn, led to a career in academia with a near-singular focus on mastering the complex and fascinating topics surrounding the FCPA and other anti-corruption laws and initiatives.  In this capacity, Koehler has testified before the U.S. Congress on the FCPA, published articles on the topic in leading law reviews and journals, been cited in legal briefs, judicial decisions, policy papers, and Congressional testimony, and been a featured source in various national and international media.  In short, Professor Koehler has become one of the most knowledgeable and influential thinkers in the field, both domestically and internationally, and this volume represents the fruit of a number of years of thoughtful research, writing, and teaching on the subject.

The depth and breadth of material covered in the book is ambitious, including the FCPA’s legislative history; enforcement agency policies and practices, including various alternative dispute resolution vehicles commonly used by enforcement agencies; FCPA legal authority, as well as administrative and other sources of guidance concerning the law; the FCPA’s anti-bribery provisions, as well as its books and records and internal controls provisions; reasons for the increase in FCPA enforcement during the past decade; compliance and best practices information; and suggested FCPA reform measures.

At the beginning of the book, Professor Koehler sets forth numerous questions, many of which could take an entire law review article to answer.   These questions include: (1) Who decides what bribery is? (2) Are business organizations that are subject to FCPA scrutiny ‘bad’ or ‘unethical’? (3) Is it still ‘bribery’ if the conduct in question was supported by the highest levels of the U.S. government? (4) If bribery is ‘bad,’ does that mean that all attempts to punish bribery and deter future misconduct are ‘good’? (5) Why has FCPA enforcement increased to the point that it is now a top legal and compliance concern for companies doing business in the global marketplace? (6) Has the quantity of FCPA enforcement actions become a higher priority for enforcement agencies than the quality of those actions? (7) Why does FCPA compliance remain difficult for even the most well-managed and well-intentioned companies? (8) Has this ‘new era’ of FCPA enforcement actually resulted in wasteful over compliance, with companies viewing every foreign business partner with irrational suspicion? (9) Is this ‘new era’ of FCPA enforcement—along with the ‘thriving and lucrative anti-bribery complex’ that has emerged simultaneously—desirable from a legal or policy perspective? (10) Has this ‘new era’ of FCPA enforcement been successful in actually reducing bribery?  And if not, could the FCPA be amended, or could certain enforcement agency policies and procedures be revised, in order to better achieve the original aims of the FCPA?

The book addresses the issues surrounding these questions at a surprisingly detailed and in-depth level, especially with respect to those questions requiring answers that are more subtle and complex in nature.  The fact is there can be strong disagreement regarding the answers to many of these questions.  One of the more interesting aspects of studying the FCPA is to consider how much a person’s political or economic interests can influence his or her reasoning in answering the various questions posed by Koehler.  The key is that Professor Koehler, ever the law school teacher who is more fond of questioning, probing, and analyzing an issue than of trying to force feed his own conclusions in the matter, concentrates on building knowledge and skill-level within readers so they themselves can successfully grapple with the questions presented in the book, as well as their own questions involving the FCPA.

Specifically, Professor Koehler relies on numerous vehicles and texts to build what he calls “FCPA goggles” for readers, enabling them to understand the FCPA to the extent necessary to make their own assessments of the strengths and weaknesses of the law, and to be able to pinpoint areas where the FCPA might be changed for improvement.  Readers are introduced to the FCPA’s statutory text, legislative history, judicial decisions, enforcement agency guidance, and various enforcement actions.  Koehler believes that analyzing these various authorities, and figuring out their impact upon how the FCPA is understood and enforced, are key aspects of providing readers with the knowledge they need to continue their own questioning, probing, and analyzing of this controversial law.  As Professor Koehler says to the reader, “[W]ith your FCPA goggles you now have a sharper focus to critically analyze various aspects of this new era, including whether the current FCPA and its enforcement best advance the laudable objectives of the FCPA.”

It is these ‘FCPA goggles’ that allow readers to judge the two suggestions for reform put forth by Professor Koehler toward the end of the volume:  a compliance defense, as well as the abolition of Non-Prosecution and Deferred Prosecution Agreements (NPAs and DPAs) within the context of FCPA enforcement.  I will leave it to readers of the book to determine for themselves, through their own ‘FCPA goggles,’ whether Koehler has made a strong case for either suggested reform measure.  I will say, however, that Professor Koehler seems to be aware that he has well-equipped readers to subject his ideas to deep and knowledgeable scrutiny based upon what he has taught them to that point in the book.  With that in mind, Koehler has to carefully explain why, for example, a compliance defense is neither a new nor novel idea; how in some respects the Department of Justice already recognizes a ‘de facto’ compliance defense; how numerous former high-ranking government officials support such a defense; and which important policy objectives would be advanced through an FCPA compliance defense.  Koehler builds and bolsters his argument by relying upon various testimony and legal and policy authority.  It almost feels like an academic ‘capstone’ exercise for the book, where the Professor puts forth his arguments and then turns to the reader/student and asks, “Have I done what I set out to do in this project?  Are you now able to thoroughly question, analyze, and criticize my arguments based upon what you have learned through this book?”

The answer is unequivocally yes; and the contribution this new volume makes to the field is unequivocally substantial.

*****

For additional reviews of the book, see here.

To order a hard copy of the book, see here and here; to order an e-copy of the book, see here and here.

 

Posted by Mike Koehler at 12:03 am. Post Categories: FCPA ScholarshipGuest Posts




May 11th, 2015

SEC Potpourri

SECLast week, the SEC released this document titled “Division of Enforcement Approach to Forum Selection in Contested Actions.”

In Foreign Corrupt Practices Act history, one can count the number of “contested” SEC FCPA enforcement actions on one hand, but the recent document is nevertheless an interesting read as it sets forth the SEC’s approach in determining whether an action proceeds as a civil action in federal court or an SEC administrative proceeding.

According to the document:

“There is no rigid formula dictating the choice of forum.  The Division considers a number of factors when evaluating the choice of forum and its recommendation depends on the specific facts and circumstances of the case.  Not all factors will apply in every case and, in any particular case, some factors may deserve more weight than others, or more weight than they might in another case.  Indeed, in some circumstances, a single factor may be sufficiently important to lead to a decision to recommend a particular forum. While the list of potentially relevant considerations set out below is not (and could not be) exhaustive, the Division may in its discretion consider any or all of the factors in assessing whether to recommend that a contested case be brought in the administrative forum or in federal district court.”

  • The document then sets forth the following factors;
  • The availability of the desired claims, legal theories, and forms of relief in each forum;
  • Whether any charged party is a registered entity or an individual associated with a registered entity;
  • The cost‐, resource‐, and time‐effectiveness of litigation in each forum;
  • Fair, consistent, and effective resolution of securities law issues and matters.

Under the last factors, the document states:

“If a contested matter is likely to raise unsettled and complex legal issues under the federal securities laws, or interpretation of the Commission’s rules, consideration should be given to whether, in light of the Commission’s expertise concerning those matters, obtaining a Commission decision on such issues, subject to appellate review in the federal courts, may facilitate development of the law.”

This statement is beyond concerning.

Unsettled and complex legal issues are deserving of an independent judiciary, not the SEC’s own administrative law judges. Contrary to the SEC’s assertion, the above preference does not facilitate the development of law, it hinders the development of law.

*****

Speaking of SEC administrative actions, no surprise here – the SEC wins a very high percentage of its cases when brought before its own administrative law judges. According to this recent Wall Street Journal article:

“An analysis by The Wall Street Journal of hundreds of decisions shows how much of a home-court advantage the SEC enjoys when it sends cases to its own judges rather than federal courts. That is a practice the agency increasingly follows, the Journal has found.

The SEC won against 90% of defendants before its own judges in contested cases from October 2010 through March of this year, according to the Journal analysis. That was markedly higher than the 69% success the agency obtained against defendants in federal court over the same period, based on SEC data.”

As highlighted in prior posts (see here for instance), the predominate method by which the SEC has brought FCPA enforcement actions over the past few years have been through its own administrative process.  This is against the backdrop of the SEC never prevailing in an FCPA enforcement action when put to its ultimate burden of proof. (See here).

*****

In this recent speech, SEC Chair Mary Jo White talks about the SEC’s whistleblower program:

“There have always been mixed feelings about whistleblowers and many companies tolerate, at best, their existence because the law requires it.  I would urge that, especially in the post-financial crisis era when regulators and right-minded companies are searching for new, more aggressive ways to improve corporate culture and compliance, it is past time to stop wringing our hands about whistleblowers.  They provide an invaluable public service, and they should be supported.  And, we at the SEC increasingly see ourselves as the whistleblower’s advocate.

It has been nearly four years since the SEC implemented its whistleblower program.  While still evolving and improving, we have enough experience now to take a hard look at how the program is working and what we have learned.  Overall, I am here to say that the program is a success – and we will work hard at the SEC to build on that success.

The volume of tips has been greater and of higher quality than expected when the program was first adopted.  We have seen enough to know that whistleblowers increase our efficiency and conserve our scarce resources.  Importantly, internal compliance programs at companies also remain vibrant and effective ways to detect and report wrongdoing.  But despite the success of our program, the decision to come forward, especially in the face of internal pressure, is not an easy one.

The ambivalence about whistleblowers can indeed sometimes manifest itself in an unlawful response by a corporate employer and we are very focused at the SEC on cracking down on such misconduct.  We want whistleblowers – and their employers – to know that employees are free to come forward without fear of reprisals.  In 2014, we brought our first retaliation case and, this month, our first case involving the use of a confidentiality agreement that can impede whistleblowers from communicating with us.  This latter case has generated some controversy, which I will address shortly.  But, first, let’s look a bit closer at the four-year track record of the program.”

A portion of White’s speech also focused on “supporting internal compliance” and she stated:

“Let me say a bit more about company compliance programs.  When the Commission was considering its whistleblower rules, concerns were raised about undermining companies’ internal compliance programs.  Some commenters urged that internal reporting be made a pre-condition to a whistleblower award.  That was not done, but the final whistleblower rules established a framework to incentivize employees to report internally first.  A whistleblower’s participation in internal compliance systems is thus a factor that will generally increase an award, whereas interference with those systems will surely decrease an award. And, a whistleblower who internally reports, and at the same time or within 120 days reports to the Commission, will receive credit for any information the company subsequently self-reports to the SEC.

All indications are that internal compliance functions are as strong as ever – if not stronger – and that insiders continue to report possible violations internally first.  Although there is no requirement under our rules that the whistleblower be a current or former employee, several of the individuals who have received awards were, in fact, company insiders.  Notably, of these, over 80% first raised their concerns internally to their supervisors or compliance personnel before reporting to the Commission.

Many in-house lawyers, compliance professionals, and law firms representing companies have told us that since the implementation of our program, companies have taken fresh looks at their internal compliance functions and made enhancements to further encourage their employees to view internal reporting as an effective means to address potential wrongdoing without fear of reprisal or retaliation.  That is a very good thing, and, so far, we believe that the whistleblower program has achieved the right balance between the need of companies to be given an opportunity to address possible violations of law and the SEC’s law enforcement interests.”

In conclusion, White stated:

“The bottom line is that is that responsible companies with strong compliance cultures and programs should not fear bona fide whistleblowers, but embrace them as a constructive part of the process to expose the wrongdoing that can harm a company and its reputation.  Gone are the days when corporate wrongdoing can be pushed into the dark corners of an organization.  Fraudsters rarely act alone, unobserved and, these days, the employee who sees or is asked to make the questionable accounting entry or to distribute the false offering materials may refuse to do it or just decide that they are better off telling the SEC.  Better yet, either there are no questionable accounting entries or false offering materials to be reported in the first place or companies themselves self-report the unlawful conduct to the SEC.”

*****

If SEC enforcement is an area of interest, you will want to check out this recent article in Securities Regulation Journal about Stanley Sporkin.

Among Sporkin’s other notable accomplishments, he was the Director of Enforcement at the SEC in the mid-1970′s when the so-called foreign corporate payments problem arose and he championed what would become the FCPA’s books and records and internal controls provisions.

Many have called Sporkin the “father of the FCPA” – a label I have always found curious given that Sporkin and his enforcement division were opposed to the FCPA’s anti-bribery provisions and wanted no part in enforcing those provisions.

To learn more about this, see “The Story of the Foreign Corrupt Practices Act.”

Posted by Mike Koehler at 12:03 am. Post Categories: Enforcement Agency PolicyEnforcement Agency SpeechesLegislative HistorySECWhistleblowers




May 8th, 2015

Friday Roundup

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.”

Quotable

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

Bilfinger

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.

Siemens

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.”

Bio-Rad

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.”

Nortek

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.