Data Systems & Solutions (Data Systems) has agreed to a settlement with the U.S. Department of Justice (DOJ) regarding allegations the company violated the U.S. Foreign Corrupt Practices Act (FCPA). According to court documents, the company bribed high level officials, through subcontractors in the U.S. and abroad, at the Ignalina Nuclear Power Plant, a state-owned power plant in Lithuania, in order to win contracts. According to the DOJ, one incident involved a Data Systems executive paying for the Florida vacation of an Ignalina official. The executive also sent an email to other executives about his feeling nervous about the incident. In another instance, the company purchased a $2,700 Cartier watch for another Ignalina official. The agreement requires Data Systems to pay $8.8 million in criminal penalties, implement an improved compliance program and report to the DOJ regarding its efforts. The DOJ cited the company’s cooperation with the investigation, its firing of those responsible for the payments and its implementation of a more rigorous compliance program. The revamped compliance program includes improved third party due diligence, training, and increased review of most foreign transactions.
Wall Street Journal: Data Systems & Solutions Pays $8.8 Million to Settle FCPA Violations. (18 June 2012)
(Source: Wall Street Journal)
FalconStor Software (FalconStor) has agreed to pay US$5.8 million to settle bribery charges. It was reportedly alleged that FalconStor offered in excess of $300,000 in FalconStor shares stock options, gambling vouchers, gift cards and golf perks to JP Morgan executives to obtain contracts worth US$12.2 million. According to Reuters, the company was also charges with "falsifying records to cover up the bribes", by labelling payments to JP Morgan executives as "employment bonuses" or "compensation to an advisor".
Reuters: FalconStor to pay $5.8 mln to settle bribe charges (27 June 2012)
David Edmonds, former vice president of worldwide customer service for Control Components Inc. (CCI), pleaded guilty last week to violating the Foreign Corrupt Practices Act (FCPA). He admitted to making corrupt payments to a government official in Greece. Edmonds’s sentencing is scheduled for November 19th. He faces up to 15 months in prison. He was accused of participating in a global bribery scheme aimed at winning contracts for CCI. Edmonds is the seventh of the eight CCI employees charged in the bribery conspiracy to plead guilty. In 2009, CCI pleaded guilty to violating the Travel Act, which prohibits commercial bribery, and the FCPA, and paid US$18.2 million in fines. CCI admitted to bribing officers and employees of state- and privately-owned customers in more than 30 countries.
Wall Street Journal: Seventh CCI Exec Pleads Guilty in FCPA Case (15 June 2012)
(Source: Wall Street Journal)
The United States (US) Department of Justice (DoJ) has announced that maintenance and design company Data Systems & Solutions (DSS) has agreed to pay US$8.82 million to settle allegations it breached the Foreign Corrupt Practices Act (FCPA). According to the DoJ, DSS bribed officials at a Lithuanian state-owned power plant, Ignalina Nuclear Power Plant, to obtain contracts to provide services for the plant. Bribes were allegedly routed through a number of US and overseas contractors. In addition to the monetary penalty, DSS is required to report periodically to the DoJ and implement a compliance program and internal controls designed to prevent FCPA violations.
DoJ's media release (18 June 2012)
According to a letter written by two Democratic congressmen, Wal-Mart has expanded their internal bribery investigation into additional countries beyond Mexico. Rep. Henry Waxman and Rep. Elijah Cummings said the company has retained outside counsel to examine the anti-corruption policies and operations in Brazil and China. Additionally, the attorneys recommended further expanding the probe into operations in India and South Africa. The investigation was launched due to allegations that the former CEO of Wal-Mart de Mexico arranged $24 million in bribes to streamline construction projects in Mexico. The letter also criticizes Wal-Mart’s Chief Executive for not handing over relevant documents to the government as well as not allowing Wal-Mart employees to testify in front of the congressional committee investigating the allegations. Through its spokesman, Wal-Mart claims to be fully cooperating with Congress as it looks into the company’s compliance with international corruption law.
CNNMoney: Wal-Mart expands foreign corruption probe (14 June 2012)
While the U.S. government’s enforcement of the Foreign Corrupt Practices Act (FCPA) continues to grow, its recent decision to not prosecute Morgan Stanley for the behavior of a rogue employee offers hope to companies who invest in their compliance program and behave correctly when problems are discovered. Despite the fact that its former employee, Garth Peterson, conspired to bribe a Chinese official in order to obtain business for the company, Morgan Stanley was able to show that it had an effective compliance program in place, convincing the government that the employee acted on his own and contrary to company policy, and avoided prosecution. Peterson had a pre-existing relationship with the chairman of a state owned real estate development arm of a local government office in Shanghai. He used this relationship to gain and expedite business for Morgan Stanley. Peterson and the official were also stealing from Morgan Stanley. When Morgan Stanley discovered Peterson’s conduct the company immediately conducted an intensive nine month investigation with the help of their outside counsel. Morgan Stanley also fired Peterson and voluntarily disclosed their findings to the Department of Justice and the Securities and Exchange Commission. The company went on to notify their shareholders, cooperate with the government’s investigation and further improve its compliance program. This April, the case came to a close when Peterson plead guilty in federal court and agreed to settle the charges filed by the SEC. The government publicly recognized that it chose not to prosecute Morgan Stanly due in part to the robust internal controls the company had in place. The three biggest takeaways from the Morgan Stanley case are:
- Invest in Compliance from Top to Bottom
- Make Sure Your Compliance Program Evolves with New Regulatory Developments and Industry Guidance
- Make Sure the Elements of an Effective Compliance Program are in Place and Working
The Morgan Stanley case proves that the government will credit companies for demonstrating a “consistent, deliberate, and clear” commitment to compliance “with support from the top.”
Law.com: The Big Three FCPA Lessons from the Morgan Stanley Case (14 June 2012)
Security Management: Compliance Program Protects Morgan Stanley in Corruption Probe (27 April 2012)
(Source: Law.com; Security Management)
According to a new survey released by Kroll, compliance professionals have seen investing in compliance increase but continue to be concerned about their companies’ exposure to risk. 95% of respondents stated their company’s vulnerability to bribery risk has remained the same or increased over the past few years. 85% believe this risk will continue to increase or remain the same moving forward. More than 50% of respondents indicated their compliance budgets had increased over the past year and nearly half (49%) stated their compliance departments increased their hiring. Kroll found that most compliance professionals believe that third parties pose the biggest overall risk to their companies, noting that 2011 was the first year in which every FCPA enforcement action involved a third party. While 99% of those responding to the survey stated their company’s code of conduct contained anti-bribery provisions for their employees only 73% had the same provisions for third parties. Kroll also found that the pharmaceutical industry had the most exposure to bribery risk but also found the industry was the most prepared to manage the risk. For example, 100% of respondents in the pharmaceutical industry indicated they screen third parties while only 65% of respondents in other industries screened their third parties.
Wall Street Journal: Kroll Study Finds Concern about Bribery Risk as Investment Increases (6 June 2012)
(Source: Wall Street Journal)
Paul Cosgrove pleaded guilty this week to violating the Foreign Corrupt Practices Act (FCPA). Cosgrove is the former director of international sales at Control Components Inc. (CCI). A total of eight former CCI employees were charged in connection with the bribery scheme or related matters in 2009. With Cosgrove’s plea, a total of six former executives have now pleaded guilty. Charges for the remaining two ex CCI employees are still pending. In 2009, CCI pleaded guilty to violating the Travel Act, which prohibits commercial bribery, and the FCPA. CCI admitted to bribing employees and public officials at both state and privately owned customers in over 30 countries. The company paid $18.2 million in penalties and agreed to put strict internal controls in place.
Wall Street Journal: Sixth Former CCI Exec Pleads Guilty In Foreign Bribery Case (29 May 2012)
(Source: Wall Street Journal)
According to a new survey released by Ernst & Young, executives were more willing to make cash payments to win international business this year (15%) than they were last year (9%). The study also revealed that forty-seven percent of the chief financial officers (CFOs) surveyed felt they could justify unethical practices in order to survive during an economic downturn. Sixteen percent of CFOs did not know that their companies could be held liable for the actions of third parties. Eighty-one percent of all respondents indicated their companies have anti-corruption policies, but only forty-one perent received training on those policies. The study also found corruption continues to be a broadly-used business practice in the developing world. According to Ernst & Young, the survey results emphasize the need for stronger internal corporate controls.
Wall Street Journal: Survey Finds Unethical Business Practices On The Rise (23 May 2012)
(Source: Wall Street Journal)
A BP global chartering manager, Lars Dencker Nielsen, has been put on leave of absence as his company looks into allegations of bribery. A whistleblower claims that Nielsen provided a shipping supplier with advantageous terms in exchange for cash payments. The whistleblower in question sent a letter both BP’s chief executive, Bob Dudley, and The Serious Fraud Office (SFO) claiming to have five years worth of evidence backing up the bribery allegations. BP has confirmed it is investigating the claims, and the SFO may well be conducting an investigation as well. Nielsen has denied any wrongdoing.
The Telegraph: BP suspends executive at centre of bribe allegations (30 April 2012)
(Source: The Telegraph)
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