So far, 2020 has seen around the same amount of activity in terms of enforcement actions under the Foreign Corrupt Practices Act ("FCPA"), compared to 2019. In 2020, the United States Department of Justice ("DOJ") took a total of 22 enforcement actions,1 and the Securities and Exchange Commission2 ("SEC") took a total of 5 enforcement actions.3
According to the FCPA Blog's "2020 FCPA Enforcement Index," 7 companies paid a total of $2.6 billion to resolve FCPA cases in 2020, including resolutions with the DOJ and the SEC, which includes the largest FCPA penalty paid to date.4 In terms of the sectoral concentration of FCPA enforcement actions in 2020, we observe that the sector mainly affected by the actions appears to be the healthcare sector.
I. DOJ Declinations
The DOJ had been investigating violations of the FCPA by World Acceptance Corporation ("World"), due to the fact that it had uncovered evidence that, between 2010 and 2017, World's Mexican subsidiary has paid over $4,000,000 to third party intermediaries partly in bribes to Mexican government officials to obtain contracts with Mexican unions and state government officials involving making loans to union members and receiving payments on these loans withholding the amount of repaid loan amount from the paychecks. In August 2020, the DOJ announced that it declined to proceed with the prosecution taking into account (i) World's prompt and voluntary self-disclosure and full cooperation, (ii) the nature and seriousness of the offense, (iii) World's full remediation which included additional FCPA training and discontinuation of relations with the relevant third parties in Mexico, and (iv) World's agreement to disgorge to the SEC for the full amount of its ill-gotten gains.
II. DOJ Enforcement Actions - Highlights
In January 2020, Airbus SE ("Airbus"), a global provider of civilian and military aircrafts based in France, agreed to pay a combined penalty of approximately $3.9 billion to resolve foreign bribery charges with authorities in the United States, France and the United Kingdom, becoming the largest global foreign bribery resolution to date. According to the DOJ's report, Airbus was involved in a bribery scheme where it used third-party business partners to bribe government officials and non-governmental airline executives around the world in order to enhance its business interests and obtain business advantages, also violating the Arms Export Control Act and its implementing regulations, the International Traffic in Arms Regulations, in the United States. The DOJ's investigation proceeded in parallel with the joint investigations conducted by the U.K. Serious Fraud Office and the French Parquet National Financier.
In August 2020, the DOJ closed its investigation with regard to Herbalife Nutrition Ltd. ("Herbalife"), a U.S. based publicly traded global nutrition company. According to the DOJ's report, between 2007 and 2016, Herbalife has engaged in a scheme to falsify its books and records to conceal its corrupt and other improper payments and benefits provided to Chinese officials and state-owned entities. Herbalife carried out the scheme for the purpose of obtaining, retaining, and expanding Herbalife's business in China, which included obtaining and retaining direct selling licenses for its subsidiaries in China and influencing certain Chinese governmental investigations into Herbalife China's compliance with Chinese laws. Herbalife agreed to pay a criminal penalty of over $55.7 million to the DOJ and approximately $67 million to the SEC to resolve its violations of the FCPA. Herbalife also agreed to cooperate in any ongoing or future criminal investigations concerning Herbalife, and to enhance its compliance program and to report to the government on the implementation of its enhanced compliance program.
In June 2020, Novartis AG ("Novartis"), a global pharmaceutical and healthcare company based in Switzerland, and its former subsidiary Alcon Pte Ltd ("Alcon") (current subsidiary of Alcon Inc.), have agreed to pay a combined penalty of $112.8 million to the SEC, as well as to pay more than $233 million in criminal fines, to settle charges arising out of violations of the FCPA. Novartis also agreed to an undertaking to the SEC of self-reporting on the status of its remediation and implementation of compliance measures. According to the reports, local subsidiaries of Novartis, which included Alcon at the time, engaged in schemes to make improper payments or to provide benefits to public and private healthcare providers in South Korea, Vietnam, and Greece in exchange for prescribing or using Novartis-branded pharmaceuticals and Alcon surgical products between 2012 and 2016.
In September 2020, the DOJ closed its investigation with regard to Sargeant Marine Inc. ("Sargeant"), an asphalt company formerly based in Florida. Sargeant agreed to pay a criminal fine of $16.6 million to resolve charges for violating the anti-bribery provisions of the FCPA. According to the DOJ, between 2010 and 2018, Sargeant paid millions of dollars in bribes to foreign officials in Brazil, Venezuela, and Ecuador to obtain contracts to purchase or sell asphalt to the countries' state-owned and state-controlled oil companies. Sargeant Marine admitted to bribing a Minister in the Brazilian government, a high-ranking member of the Brazilian Congress, and senior executives at Petróleo Brasileiro S.A.-Petrobras to obtain valuable contracts to sell asphalt. Between 2012 and 2018, it bribed four Petróleos de Venezuela, S.A. officials in Venezuela in exchange for inside information, and for their assistance in steering contracts to purchase asphalt. Sargeant also bribed an official at Ecuador's state-owned oil company EP Petroecuador to secure a 2014 contract to supply asphalt.
III. SEC Enforcement Actions
In February 2020, Cardinal Health, Inc. ("Cardinal"), an Ohio-based pharmaceutical company has consented to pay $5.4 million in disgorgement, $916,887 in prejudgment interest, and a civil penalty of $2.5 million to resolve charges for violating the books and records and internal accounting controls provisions of the FCPA. According to the SEC's order, between 2010 and 2016, Cardinal's former Chinese subsidiary managed two large marketing accounts for the benefit of a European dermocosmetic company whose products Cardinal China distributed. The dermocosmetic company directed the day-to-day activities of the Cardinal China employees, who used the marketing account funds to promote the dermocosmetic company's products. The employees directed payments to government-employed healthcare professionals and to employees of state-owned retail companies who had influence over purchasing decisions.
In April 2020, the SEC charged Asante K. Berko, a former executive of a foreign-based subsidiary of a U.S. bank holding company, for arranging for a Turkish client, an energy company, to funnel at least $2.5 million to a Ghana-based intermediary to pay illicit bribes to various Ghanaian government officials in order to gain their approval of an electrical power plant project.
In April 2020, Eni S.p.A. ("Eni"), an Italian oil and gas company whose American depositary receipts are listed on the New York Stock Exchange, agreed to pay $24.5 million in disgorgement and prejudgment interest on the grounds that it violated the books and records and internal accounting controls provisions of the FCPA. According to the SEC, Saipem S.p.A., Eni's minority-owned subsidiary in Algeria entered into four sham contracts with an intermediary between 2007 and 2010 to assist in obtaining contracts awarded by Algeria's state-owned oil company, paying approximately €198 million to the intermediary. Sapiem S.p.A. was awarded at least seven contracts from the Algerian state-owned oil company.
In July 2020, Boston-based pharmaceutical company Alexion Pharmaceuticals Inc. ("Alexion") has agreed to cease and desist and to pay $14,210,194 in disgorgement, $3,766,337 in prejudgment interest, and a $3.5 million penalty to resolve charges that it violated the books and records and internal accounting controls provisions of the FCPA. Among other findings, the SEC order finds that Alexion subsidiaries in Turkey and Russia made payments to foreign government officials to secure favorable treatment for Alexion's primary drug, "Soliris". Between 2010 and 2015, Alexion Turkey paid Turkish government officials to improperly influence them to approve patient prescriptions and provide other favorable regulatory treatment for "Soliris".
This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in December 2020. A link to the full Legal Insight Quarterly may be found here
1 See https://www.justice.gov/criminal-fraud/case/related-enforcement-actions/2020 (Last accessed on October 18, 2020).
In%202010%2C%20the%20SEC's%20Enforcement,government%20contracts%20and%20other%20business (Last accessed on October 18, 2020).
3 These figures reflect the statistics as of the date on which Legal Insights Quarterly (December 2020) went to press.
4 See https://fcpablog.com/2020/09/01/heres-the-ytd-2020-enforcement-index-another-record-year-for-the-fcpa/ (Last accessed on November 17, 2020)
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