March 19th, 2015

Two Thoughts Regarding The Extension Of Biomet’s DPA

TwoOne reason to read FCPA Professor is it allows you to stay ahead of the curve and gain insight into the issues others will be talking about months or years later.

For instance, this July 2014 post highlighted how Biomet’s 2013 deferred prosecution agreement (concerned alleged conduct in Brazil, Argentina, and China) was at risk of being extended based on the company’s additional FCPA scrutiny in Brazil and Mexico.

Sure enough, recently Biomet disclosed:

“On March 13, 2015, the DOJ informed Biomet that the DPA and the independent compliance monitor’s appointment have been extended for an additional year.

Pursuant to the DPA, the DOJ has sole discretion to determine whether conduct by Biomet constitutes a violation or breach of the DPA. The DOJ has informed Biomet that it retains its rights under the DPA to bring further action against Biomet relating to the conduct in Brazil and Mexico disclosed in 2014 or the violations set forth in the DPA. The DOJ could, among other things, revoke the DPA or prosecute Biomet and/or the involved employees and executives. Biomet continues to cooperate with the SEC and DOJ and expects that discussions with the SEC and the DOJ will continue.”

Two thoughts regarding the extension of Biomet’s DPA.

First, the extension makes the DOJ look foolish.


Well, for many years the DOJ advanced the policy position that DPAs (and NPAs) “have had a truly transformative effect on particular companies and, more generally, on corporate culture across the globe.” (See here for the prior post). Specifically in the FCPA context, the DOJ stated that “the companies against which DPAs and NPAs have been brought have often undergone dramatic changes.”  (See here for the prior post).

Yet, Biomet’s post FCPA enforcement action FCPA scrutiny puts it in a category of several other companies (such as Orthofix International, Willbros Group, Marubeni, Diebold, IBM, Tyco, Aibel Group, and Ingersoll-Rand) that have become the subject of additional scrutiny or enforcement after resolving FCPA enforcement actions through a DPA or agreeing to an SEC permanent injunction.

Second, and completely distinct from the first point, is the extension of the Biomet DPA shows how difficult FCPA compliance can be.


Because Biomet’s post FCPA enforcement action FCPA scrutiny demonstrates that not even companies with the greatest incentive to comply with the FCPA because they are:

(i) subject to post-enforcement action compliance obligations; and

(ii) subject to “double prosecution” for failure to do so

are able to ensure FCPA compliance across its business organization or eliminate FCPA scrutiny.  In short, FCPA compliance can not be guaranteed in a business organization, rather steps can be taken that only minimize the risk of non-compliance occurring.

Posted by Mike Koehler at 12:03 am. Post Categories: BiometDeferred Prosecution AgreementsRepeat Offenders

March 18th, 2015

Time Out Regarding Certain Goodyear Commentary

TIme OutPardon me for being that guy, but in the Foreign Corrupt Practices Act space someone needs to put on the stripes because the information gatekeepers of much FCPA content tend to be non-lawyer journalists writing stories by cobbling together the views of experts who use the opportunity to comment as free marketing for FCPA compliance and investigative services.

And let’s call a spade a spade, FCPA practitioners often have a self-interest in more FCPA investigations, more voluntary disclosures, more enforcement actions and more post-enforcement action compliance obligations.

Much to my surprise, the recent SEC administrative action against Goodyear (see here for the prior post) has generated an unusual amount of commentary.  Indeed, in the days that followed I was contacted by numerous media outlets but my consistent response was along the following lines: ”There is nothing noteworthy or special about the Goodyear FCPA enforcement action.  The media and law firm coverage of this otherwise ordinary settlement is just the latest example of FCPA Inc. using enforcement actions as opportunities to market FCPA compliance services.”

So in the spirit of March Madness, I call a time out regarding certain Goodyear commentary.

A Law360 article titled “Attorneys React to SEC’s FCPA Action Against Goodyear” contained a roundup of sorts of attorney comments.

One practitioner stated:

“Today’s settlement demonstrates that the SEC and the DOJ are continuing to investigate and bring high-profile FCPA cases against large U.S. companies with multinational operations.”

Whoops, wrong talking point as the Goodyear enforcement action was SEC only with no DOJ component.

Another practitioner stated:

“In recent years … the SEC adopted an increasingly broad view of parent-subsidiary liability, now charging parent corporations with anti-bribery violations based on the acts of their subsidiaries without pleading any direct involvement by the parent in those violations. Goodyear is the latest example of this trend.”

Whoops, again the wrong talking point as Goodyear: (i) was not “charged” with anything (the enforcement action was an SEC cease and desist proceeding); and (ii) the SEC merely “found” violations of the books and records and internal controls provisions – not the anti-bribery provisions.

Another frequent observation from commentators was that the Goodyear action evidences how the SEC is “pursuing” commercial bribery cases given that the SEC enforcement action made generic references to alleged payments to private customers in connection with tire sales.

Let’s go to the monitor for this one.  The Goodyear enforcement action, like most corporate FCPA enforcement actions, was based on a voluntary disclosure.”  Can the word “pursue” really be used to describe enforcement actions that originate from voluntary disclosures?  Or would it be more accurate to say that the SEC “processed” the company’s voluntary disclosure?

Another frequent observation from commentators was how Goodyear “staved off criminal prosecution and fines” through its voluntary disclosure and cooperation.

Time out on this one, and not just a 30-second time out, but a full one.

There is no allegation or suggestion in the SEC enforcement action that Goodyear was involved in or had knowledge of the alleged improper conduct at its subsidiaries.  A parent company like Goodyear is a separate and distinct entity from its foreign subsidiaries and is not automatically liable for foreign subsidiary conduct – including potential anti-bribery violations – absent knowledge, approval, or participation in the bribery scheme.  In other words, criminal legal liability does not ordinary hop, skip and jump around a multinational corporation absent an alter ego analysis or control / participation in the underlying conduct.

On the other hand, the SEC takes the position that because foreign subsidiary books and records are consolidated with the parent company’s for purposes of financial reporting that subsidiary books and records issues are parent company issues.  As to internal controls, the SEC takes the seemingly simplistic position that because certain alleged payments were made by foreign subsidiaries, the parent company issuer must not have had effective internal controls.

In other words, based on the SEC’s allegations – or lack thereof – what criminal prosecution did Goodyear stave off?

And then there were the comments seeking to invoke fear – a common FCPA Inc. marketing device.  One practitioner stated:

“[The Goodyear action] could presage an uptick in enforcement activity in Africa, which has attracted increased global investment and, in certain countries, posted impressive recent economic growth. Despite these advancements, several African countries remain high on Transparency International’s Corruption Perceptions Index. As such, the [enforcement action] provides a clear reminder of the need to conduct appropriate pre- and post-acquisition due diligence on businesses operating in regions and industries that pose a high corruption risk.”

Another frequent comment, sure to induce March “madness” in informed readers, was the comparison to the settlement amount in Goodyear compared to say, Avon or Alcoa.

This article asserted as follows. ”For Goodyear … coming clean seems to have paid off—at least compared to the penalty imposed on Avon Products Inc. in December.”

For starters, the Avon enforcement action – like the Goodyear enforcement action – was the result of a voluntary disclosure.

Second, and most importantly, FCPA settlement amounts are largely a function of the net financial benefit obtained through the alleged improper payments.  Thus comparing one settlement to another is of little value.

A full time-out is also needed to comment on this Wall Street Journal Risk & Compliance Journal which carried the headline “Lawyers Point to Goodyear As a Model In Its Handling of Bribery Probe.”  Based on the views of two FCPA practitioners, the article asserts that the Goodyear enforcement action provides a ”model for companies to emulate when they discover misconduct in their own firms.”

I beg to differ.

The conduct at issue in the SEC’s enforcement action was very limited in scope (compared to Goodyear’s overall business operations) and the company learned of the alleged improper conduct through an effective internal control  - a report through the company’s confidential ethics hotline.

Given these circumstances, a perfectly acceptable, legitimate and legal response would have been for Goodyear to thoroughly investigate the issues, promptly implement remedial measures, and effectively revise and enhance compliance policies and procedures – all internally and without disclosing to the enforcement agencies.

Indeed, as recently noted in this Global Investigations Review article, James Koukios (Senior Deputy Chief of DOJ’s Fraud Section) recently stated: “We understand that sometimes companies choose not to self-report, and it is not always the wrong thing to do. I think a lot of it depends on how serious the issue is and whether it is an issue that can be investigated, addressed, remediated internally, and is more of a one-off versus systemic problem.”

Likewise, as former DOJ FCPA enforcement attorney Billy Jacobson notes in this recent WSJ Risk & Compliance Journal article “more and more companies are making the decision not to disclose instead they remediate controls, get rid of culpable individuals and clean up compliance internally.”

In short, Goodyear’s decision to voluntarily disclose was not necessarily a model for other companies to emulate.  Indeed a credible argument can be made that Goodyear’s decision was a poor decision that caused needless expenditure of shareholder money. Although, to my knowledge Goodyear did not disclose it pre-enforcement action professional fees and expenses, in a typical FCPA enforcement action, such professional fees and expenses exceed (often by ratios of 3, 5, or more) the enforcement action settlement amount – which in the case of Goodyear was $16 million.

Moreover, as a condition of settlement, Goodyear was required to report to the SEC, “at no less than 12 month intervals during a three year term” on the status of its remediation and implementation of compliance measures.”  As highlighted in this prior post, this is little more than a government required transfer of shareholder wealth to FCPA Inc.

Posted by Mike Koehler at 12:03 am. Post Categories: FCPA Inc.GoodyearVoluntary Disclosure

March 17th, 2015

Are You An FCPA Contender Or Pretender?

Contender or PretenderMarch Madness has arrived and over the next few weeks college basketball’s contenders will rise to the top over the pretenders. Sure, a cinderella team or two may emerge – after all anything can happen in 40 minutes of basketball – but the teams that make it to the Final Four will likely share the following traits: poise, discipline, focus and a bend-but-don’t-break attitude.

In the spirit of the season ask yourself – are you a Foreign Corrupt Practices Act contender or pretender?

An FCPA contender has a firm understanding of why the FCPA was enacted and is well-versed in FCPA legislative history.  If you do not know the story of the FCPA, it is here.

An FCPA contender has actually read the FCPA statute.  If you have not, it can be found here (in 50 different languages).

An FCPA contender has read every substantive FCPA judicial decision, after all there are not that many.  If you have not read, at a minimum, the following cases you have some work to do: U.S. v. Liebo, U.S. v. Esquenazi, U.S. v. Carson, U.S. v. Lindsey Manufacturing, SEC v. Straub, SEC v. Steffen, U.S. v. Kay, SEC v. Mattson, U.S. v. Bourke, SEC v. Jackson, U.S. v. Castle, and SEC v. World-Wide Coin.

An FCPA contender has studied every FCPA enforcement action.  If you have not done so, all DOJ FCPA enforcement actions can be found here and all SEC FCPA enforcement actions can be found here.

An FCPA contender has reviewed other information and sources of guidance relevant to the FCPA such as the SEC’s 1981 guidance concerning the FCPA’s books and records and internal controls provisions (here), the DOJ’s and SEC’s 2012 FCPA Guidance (here) and DOJ FCPA Opinion Procedure Releases (here).

An FCPA contender recognizes how foreign trade barriers and distortions are often the root causes of bribery and why the absolutist position of “just don’t bribe” is an uniformed fallacy and why even good, ethically sound companies are often the subject of FCPA enforcement or scrutiny.

An FCPA contender understands how FCPA enforcement or merely FCPA scrutiny has many ripple effects (see here).

An FCPA contender is well-versed on FCPA compliance best practices and benchmarking metrics such as the FCPA Guidance, the DOJ’s Principles of Prosecution of Business Organizations, the U.S. Sentencing Guidelines, and the OECD Good Practice Guidance on Internal Controls, Ethics, and Compliance.

In this season of contenders vs. pretenders, commit to being an FCPA contender. The above sources of information are not meant to be exhaustive, but rather comprise a solid core of FCPA legal authority as well as other sources of information or knowledge.

Posted by Mike Koehler at 3:04 am. Post Categories: Uncategorized

March 16th, 2015

Elevate Your FCPA Knowledge And Practical Skills At The FCPA Institute – Houston

FCPA InstituteA recent reader e-mail stated – I am from Mexico and want to learn more about the FCPA, do you “give any face-to-face training or courses”?

Another recent reader e-mail stated – “I am looking to transition to an FCPA practice.  I am trying to learn more, do you have any recommendation where to start”?

The answer to both questions is yes.

It is called the FCPA Institute and it is the most refreshing and cost-effective FCPA learning experience available for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills.

Here is what prior FCPA Institute participants had to say about their experience.

  • “Unlike other FCPA conferences where one leaves with a spinning head and unanswered questions, I left the FCPA Institute with a firm understanding of the nuts and bolts of the FCPA, the ability to spot issues, and knowledge of where resources can be found that offer guidance in resolving an issue.  The limited class size of the FCPA Institute ensured that all questions were answered and the interactive discussion among other compliance professionals was fantastic.” (Rob Foster, In-House Counsel, Oil and Gas Company)
  • “The FCPA Institute is very different than other FCPA conferences and seminars I have attended.  It was interactive, engaging, thought-provoking and at the completion of the Institute I left feeling like I had really learned something new and useful for my job.  The FCPA Institute is a must-attend for all compliance folks (in-house or external).” (Robert Wieck, CPA, CIA, CFE – Forensic Audit Senior Manager, Oracle Corporation)
  • The FCPA Institute is a top-flight conference that offers an insightful, comprehensive review of the FCPA enforcement landscape.  Professor Koehler’s focus on developing practical skills in an intimate setting really sets it apart from other FCPA conferences.  One of the best features of the FCPA Institute is its diversity of participants and the ability to learn alongside in-house counsel, company executives and finance professionals.  (Blair Albom, Associate, Debevoise & Plimpton)
  • “The FCPA Institute was a professionally enriching experience and substantially increased my understanding of the FCPA and its enforcement. Professor Koehler’s extensive insight and practical experience lends a unique view to analyzing enforcement actions and learning compliance best practices. I highly recommend the FCPA Institute to practitioners from all career stages.” (Sherbir Panag, MZM Legal, Mumbia, India)
  • “The FCPA Institute provided an in-depth look into the various forces that have shaped, and that are shaping, FCPA enforcement.  The diverse group of participants provided unique insight into how, at a practical level, various professionals evaluate risk and deal with FCPA issues on a day-to-day basis.  The small group setting, the interactive nature of the event, and the skills assessment test all set the FCPA Institute apart from other FCPA conferences or panel-based events.” (John Turlais, Senior Counsel, Foley & Lardner)
The next FCPA Institute will be in Houston on May 4th – 5th and will provide participants the opportunity to earn CLE credit as well as a value-added professional credential.

As highlighted by the above comments, the FCPA Institute is different than a typical FCPA conference.  At the FCPA Institute, information is presented in an integrated and cohesive manner by an expert instructor with FCPA practice and teaching experience.

Moreover, the FCPA Institute promotes active learning by participants through issue-spotting video exercises, skills exercises, small-group discussions and the sharing of real-world practices and experiences. To best facilitate the unique learning experience that the FCPA Institute represents, attendance at each FCPA Institute is capped at 30 participants.

In short, the FCPA Institute elevates the FCPA learning experience for a diverse group of professionals and is offered as a refreshing and cost-effective alternative to a typical FCPA conference. The goal of the FCPA Institute is simple: to develop and enhance fundamental skills relevant to the FCPA, FCPA enforcement, and FCPA compliance best practices in a stimulating and professional environment with a focus on learning.

The FCPA Institute presents the FCPA not merely as a legal issue, but also as a business, finance, accounting, and auditing issue. The FCPA Institute is thus ideal for a diverse group of professionals such as in-house and outside counsel; compliance professionals; finance, accounting, and auditing professionals; and others seeking sophisticated knowledge and enhanced skills relevant to the FCPA.

FCPA Institute participants not only gain knowledge, practical skills and peer insight, but can also elect to have their knowledge assessed and earn a certificate of completion upon passing a written assessment tool. In this way, successful completion of the FCPA Institute represents a value-added credential for professional development.  In addition, attorneys who complete the FCPA Institute may be eligible to receive Continuing Legal Education (“CLE”) credits. (King & Spalding LLP, the sponsor of the FCPA Institute – Houston, will be seeking CLE credit in CA, GA, NY, TX and if needed in NC and VA.  Actual CLE credit will be determined at the end of the program based on actual program time. Attorneys may be eligible to receive CLE credit through reciprocity or attorney self-submission in other states as well).

Click here to register for the FCPA Institute – Houston to elevate your FCPA knowledge and practical skills.

Posted by Mike Koehler at 12:07 am. Post Categories: Uncategorized

March 13th, 2015

For Your FCPA Listening Enjoyment

ListeningTired of reading about the Foreign Corrupt Practices Act?

Well sometimes I get tired writing about the FCPA.

Thus, today’s post is short on written content, but otherwise long on content as it contains links to several multi-media sources for your FCPA listening enjoyment.

An FCPA Fireside Chat of Sorts

David Yosifon is a law professor at Santa Clara University School of Law. Professor Yosifon also runs The Corporate Social Responsibility Podcast and I had the pleasure to recently visit with him in this February 25th recording available on iTunes.

During the approximate one hour conversation, we talk about the original goals of the FCPA, current approaches to enforcement, and areas of potential FCPA reform.

A Focus on DPAs

Recently, I had the pleasure to again visit with Thomas Fox for his Foreign Corrupt Practices Act Compliance and Ethics Report.

In this episode, we discuss recent writings and rulings concerning the DOJ’s use of deferred prosecution agreements.

Former FCPA Unit Chief Duross 

The Global Anticorruption Blog highlights a recent conference “Combating Grand Corruption: Is International Law the Answer” including comments by former FCPA Unit Chief Chuck Duross who speaks generally of his time at the DOJ.

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