United States: Company Prosecutions

Koninklijke Philips Electronics N.V. Held Liable by SEC for Polish Subsidiary's Actions

On April 5, 2013, the SEC announced that it had reached an agree-ment with, and issued a Cease and Desist Order (the "Order") against, Koninklijke Philips Electronics N.V. ("Philips") for improper payments made by its Polish subsidiary Philips Polska sp. z. o.o. ("Philips Poland"). Philips, which is based out of the Netherlands, is a broad based manufacturer with numerous subsidiaries engaged in sectors ranging from healthcare goods and services, to consumer goods, to lighting fixtures and devices. It has shares registered on the New York Stock Exchange and files periodic reports with the SEC, thereby rendering itself an "issuer" as the term is used in the FCPA. Philips Poland, as Philips's subsidiary, bids on "public tenders" to provide medical equipment to "Polish healthcare facilities." Under the terms of the Order, Philips will be required to disgorge $3,120,597 and to pay $1,394,581 in prejudgment interest, for a total penalty of $4,515,178, to settle books and records and internal controls violations.

The conduct underlying the Order occurred between 1999 and 2007 and consisted of at least 30 "transactions" whereby improper payments were made to Polish officials to help secure medical supply contracts for Philips Poland. In addition to frequently using third party agents to facilitate these improper payments, Philips Poland, with the assistance of Polish healthcare officials, would insert the specifica-tions of its equipment into the public bid requirements. Consequently, the inclusion of these requirements greatly increased the odds that Philips would receive the contract. The improper payments gener-ally amounted to between 3% and 8% of the value of the contracts, and frequently were shared by both Polish officials and employees of Philips Poland. These improper payments were "falsely characterized and accounted for in Philips' books and records" and because "Philips Poland's financial statements are consolidated onto Philips' books and records," the parent's books and records were also incorrect. As the parent company, and because its own books were inaccurate, Philips was directly liable for the acts of its subsidiary.

The misconduct should have been uncovered in 2007, however, despite an internal audit, Philips did not uncover the improper payments. In 2009, Polish prosecutors indicted 23 individuals, including employees of Philips Poland and healthcare officials, for violating "laws related to public tenders." Thereafter, in 2009-2010, Philips reviewed the conduct of its subsidiary, uncovered the bribes, and then self-reported to both the SEC and the DOJ. In addition to self-reporting, Philips also affirmatively undertook to remedy and prevent future abuses. The company hired three law firms and two auditing firms to investigate the improper conduct, fired employees that violated the law, increased its due diligence procedures, over-hauled its contract administration and review processes and updated its anti-corruption training program.

Parker Drilling to Pay $15.8 Million Under Deferred Prosecution Agreement for Bribes to Nigerian Officials

On April 16, 2013, the DOJ and the SEC announced that they had entered into agreements with Parker Drilling Company ("Parker") to settle anti-bribery, books and records, and internal controls viola-tions under the FCPA. Parker, described in the DOJ Press Release as "a publicly listed drilling-services company, headquartered in Houston," agreed to pay an $11.76 million DOJ fine, as well as to disgorge $3,050,000 and to pay pre-judgment interest in the amount of $1,040,818 to the SEC. The DOJ filed a one count criminal informa-tion and entered into a three-year DPA with the company. The SEC charged the company and ultimately agreed to the above referenced penalties. Additionally, the SEC specifically noted the assistance of the DOJ's "Fraud Section, the Federal Bureau of Investigation, and the United Kingdom's Crown Prosecution Service and Metropolitan Police Service" in successfully investigating Parker.

The conduct at issue was uncovered through the previous investiga-tion of Panalpina World Transport Limited ("Panalpina"). Panalpina, in 2001-2002, improperly claimed to have exported and then re-imported drilling equipment for Parker into Nigeria. As a result, Parker was fined $3.8 million by the "Nigeria's Customs Service." To lessen this fine, Parker contracted an "intermediary agent" who was paid $1.25 million to reduce the violation. The agent then improperly used a portion of those funds to entertain government officials and ultimately managed to reduce Parker's fine by over $3 million to $750,000. The DOJ reported that email exchanges between this agent and Parker execu-tives referenced the agents' dealings with, among others, "Nigeria's Ministry of Finance, State Security Division, and a delegation from the president's office."

The DOJ and the SEC entered into the agreements with Parker based on a number of factors, including the company's "extensive, multi- year investigation," cessation of relationships with parties violating 6the law, increased and enhanced compliance procedures including greater "scrutiny of high-risk third-party agents and transactions" and ongoing cooperation with the government.

Ralph Lauren Enters First Dual Non-Prosecution Agreements with the SEC and the DOJ

On April 22, 2013, the DOJ and the SEC announced that they had both entered into NPAs with Ralph Lauren Corporation. This is the first time that the SEC has ever used an NPA. The conduct at issue concerns bribes paid by a wholly-owned Argentinian subsidiary of Ralph Lauren Corp., PRL S.R.L. The conduct and bribes were described by the DOJ as "[intended] to obtain paperwork necessary for goods to clear customs; permit clearance of items without the necessary paperwork and/ or the clearance of prohibited items; and, on occasion, to avoid inspection entirely." The conduct occurred from 2004 through 2009 and total payments amounted to $593,000. Under the NPA with the DOJ, Ralph Lauren has agreed to pay a total of $882,000, and under the NPA with the SEC, the company will disgorge $593,000 and pay prejudgment interest in the amount of $141,845.79.

Both the DOJ and the SEC acknowledged their agreement to the NPAs was based upon Ralph Lauren's willingness to cooperate with the government's investiga-tion. Ralph Lauren, which self-disclosed the conduct at issue within two weeks of its discovery, subsequently disclosed docu-ments and witness interviews to the government, conducted a worldwide risk assessment, made overseas staff available for interviews, and ended its opera-tions in Argentina. Additionally, Ralph Lauren implemented a new compliance program, which it did not have when the conduct occurred and terminated the employment of violating parties. Furthermore, the company committed itself to increasing the robustness of its internal controls and third-party due diligence, including establishing a whistle-blower hotline and retaining a compliance attorney.

Total S.A. to Pay $398 Million in FCPA Penalties, Fines, and Disgorgement

On May 29, 2013, the DOJ and the SEC announced agree-ments with Total S.A. ("Total") to settle alleged FCPA violations for a combined sum of more than $398 million. The DOJ filed a three-count information and DPA in the Eastern District of Virginia, whereby Total agreed to a $245.2 million penalty and to implement an improved compli-ance program. The SEC issued a Cease and Desist Order ("CDO") which requires, among other things, that Total pay $153 million in disgorgement.

Total, a French company head-quartered in Nanterre, France, is an oil and gas exploration and development firm with operations around the world. It is a publicly held company with SEC-registered American Depository Shares traded on the New York Stock Exchange. As a public company, Total is an "issuer" as defined by 15 U.S.C. § 78dd-1 for purposes of the FCPA, and accordingly, is subject to the anti-bribery, books and records and internal control provisions of the FCPA.

As described in both the DOJ's press release and the criminal information, between 1995 and 2004, Total paid $60 million in bribes through intermediaries to an Iranian Official who facilitated lucrative exploratory and devel-opment contracts between Total and National Iranian Oil Company ("NICO"). These contracts are alleged to have allowed Total to obtain access to the Sirri A and E Oil fields around or on Sirri Island, which is situated over the South Pars gas field, the largest national gas field in the world. These alleged bribes were improperly described on Total's books as "business development expenses."

As part of the DPA entered into with the DOJ, Total agreed to pay $254.2 million in fines, to continue implementing a compli-ance and ethics program and to hire a French national as a Corporate Compliance Monitor. The term of the DPA is three years and seven days and was granted based on three main factors: parallel investigations by French law enforcement, the evidentiary challenges presented, and the company's disclosure of its internal investigation and cooperation with the government. Under the CDO, the company will be required, among other things, to retain a compliance consul-tant and to pay $153 million in disgorgement.

This case represents a coopera- tive effort by both French and U.S. law enforcement to hold a company liable for its corrupt foreign activities and, as noted by the SEC's press release, "[c] harges also were recommended today by the prosecutor of Paris (François Molins, Procureur de la République) of the Tribunal de Grande Instance de Paris for violations of French Law." Investigations by French authori-ties are now likely against Total, its Chairman, CEO, and at least two unnamed individuals.

Keyuan Pharmaceuticals

In March 2013, the SEC entered into a joint settlement with Keyuan Pharmaceuticals, Inc. and its former CEO Aichun Li, over alleged violations of the books and records and internal controls provisions of the FCPA. Keyuan also settled in regards to violations of other anti-fraud, federal securities laws. The SEC's complaint against Keyuan alleged that from 2008 through 2011, the pharmaceu-tical company maintained an off-book account that was used to channel approximately $1 million that was used to fund gifts to Chinese government officials. The gifts ranged from household goods to direct cash handouts. Keyuan and Aichun agreed to an injunction of futures securities laws violations, as well as paying civil penalties of $1 million and $25,000, respectively. Keyuan is headquartered in Ningbo, China and was formed in April 2010.

To read this newsletter in full please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Mayer Brown
Paul Hastings LLP
Paul Hastings LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Mayer Brown
Paul Hastings LLP
Paul Hastings LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions