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.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.