Rolls-Royce, the United Kingdom-based manufacturer and distributor of power systems for the aerospace, defense, marine and energy sectors, agreed to pay the United States nearly $170 million as part of an $800 million global resolution of investigations by the United Kingdom Serious Fraud Office (SFO), United States Department of Justice (DOJ) and Brazilian Federal Prosecution Service (MPF) into a long-running scheme to bribe government officials in exchange for government contracts. Rolls-Royce apologized after it was found paying bribes, including a luxury car and millions of pounds worth of cash, to middlemen in order to secure orders in countries including Indonesia, Russia, and China.
Rolls-Royce to Pay $817 Million to Resolve Bribery Investigation
JPMorgan Chase to Pay $264 Million to Settle Foreign Bribery Case
On November 17, 2016, the SEC announced that JPMorgan Chase agreed to pay $130 million to the SEC, $72 million to the Justice Department, and $61.9 million to the Federal Reserve Board of Governors, in order to settle the charges that it “won business from clients and corruptly influenced government officials in the Asia-Pacific region by giving jobs and internships to their relatives and friends in violation of the Foreign Corrupt Practices Act (FCPA).”
BCBLE Lecture Series: Compliance Risks and Pitfalls in China
On March 18, the Berkeley Center for Law, Business and the Economy (BCBLE) hosted a lunch presentation by Gregory C. Wajnowski, GE’s Managing Director of Mergers & Acquisitions and Chief Supervisor of Joint Ventures for GE Energy in Greater China and Mongolia. Wajnowski’s lecture on the “Compliance Risks and Pitfalls in China” provided an overview of the U.S. Foreign Corrupt Practices Act (FCPA) and its implications for doing business in China. Wajnowski explained how companies could manage risk and compete effectively within the confines of the FCPA and other domestic regulations.
China’s GlaxoSmithKline Investigation
GlaxoSmithKline’s (GSK) investigation serves as a cautionary tale to American companies, particularly health-focused companies, interested in operating in China. GSK’s pharmaceutical sales plummeted sixty percent in the third quarter due to a Chinese anti-corruption investigation. In July 2013, the Chinese government accused the pharmaceutical giant of funneling approximately $500 million to government officials, medical associations, hospitals, and doctors in order to boost sales of their products. China has arrested several GSK officials and will likely require the company to pay a fine above $2 billion. The investigation is part of China’s efforts to curb business corruption and clean up its health industry, which is undergoing a massive expansion.
IBM Settles With SEC Over Alleged FCPA Violations
Two years ago, the SEC alleged that IBM violated the Foreign Corrupt Practices Act (FCPA) by bribing government officials in South Korea and China. Last week the District Court for the District of Columbia issued a final judgment against IBM in settlement of these allegations. The settlement requires IBM to pay $10 million and satisfy reporting requirements for the next two years. The final judgment was entered without IBM admitting or denying the allegations of FCPA violations. (more…)
Weekly News Update: SEC Enforces FCPA and Regulates Shell Companies
Recently, the Securities and Exchange Commission charged France-based oil and gas company Total S.A. with violating the Foreign Corrupt Practices Act (FCPA) by paying $60 million in bribes to an Iranian government official. The official then exercised his influence to help the company obtain valuable contracts to develop significant oil and gas fields in Iran. The SEC alleges that the company profited more than $150 million through the bribery scheme. Total S.A. attempted to cover their illegal payments by entering into phony consulting agreements with the intermediaries of the Iranian official and concealing the bribes in its records as legitimate business expenses relating to these consulting agreements. Total S.A., whose securities are publicly traded on the New York Stock Exchange, agreed to pay more than $398 million to settle the SEC’s charges and a parallel criminal matter from the U.S. Department of Justice. The SEC’s order requires the oil company to pay $153 million in illegal profits and retain an independent consultant to review and report the company’s compliance with the FCPA. In the parallel criminal proceedings, Total S.A. agreed to pay a $245.2 million penalty as part of a deferred prosecution agreement.
The Securities and Exchange Commission has halted trading in the securities of 61 empty shell companies in the second-largest trading suspension in history. The suspension is part of the SEC’s ongoing “Operation Shell Expel” crackdown against the manipulation of microcap shell companies that the agency sees as ripe for fraud as the companies lay dormant in the over-the-counter market. The SEC is looking to thwart so-called pump and dump schemes which are among the most common types of fraud involving empty shell companies. By suspending the trading in these companies it obligates them to provide updated financial information to prove they are still operational, essentially rendering them useless to scam artists. This latest round of suspensions follows one under the same operation last year, in which 379 companies were suspended by the SEC before they could be manipulated for fraudulent activity to harm investors.
Firm Advice: Your Weekly Update
According to a recent Wall Street Journal article, company executives continue to generate significant profits trading company stock, despite the presence of Rule 10b5-1 trading plans designed to prohibit insider trading. The article, combined with a petition by a group of pension funds urging reform of 10b5-1 trading plans, likely will increase pressure on corporate boards to monitor 10b5-1 trading plans and trades made under such plans. In a recent client alert, Wilson Sonsini explains the 10b5-1 reform proposal. Wilson Sonsini attorneys Steve Bochner and Nicki Locker also will be hosting a webinar focused on managing the risks associated with these developments.
As mentioned previously, FCPA and other corruption-related enforcement of foreign transactions is on the rise. Additionally, while emerging markets often present the best growth opportunities, they also present the greatest corruption risks. In a recent client alert, Skadden explains the substance and scope of the FCPA as applied to international mergers, focusing on those in emerging markets. The alert specifies potential high-risk areas and the role of due diligence and an effective compliance program in uncovering and remedying these risks.
“Institutional Shareholder Services (“ISS”) and Glass, Lewis & Co., Inc. (“Glass Lewis”), the two major proxy advisory firms, recently released updates to their proxy voting policies for the 2013 proxy season. A summary of the updates to the Glass Lewis Guidelines is available here.” Gibson Dunn’s recent client alert “reviews the most significant ISS and Glass Lewis updates and suggested steps for companies to consider in light of these updated proxy voting policies.”
Firm Advice: Your Weekly Update
Recently, the DOJ and SEC issued A Resource Guide to the U.S. Foreign Corrupt Practices Act. The FCPA prohibits U.S. persons and businesses and all companies listed on U.S. stock exchanges from making corrupt payments to foreign official to obtain or retain business. The FCPA also mandates that these companies maintain accurate books and a system of internal accounting controls. The goal of the Resource Guide is to help companies “abide by the law, detect and prevent FCPA violations, and implement effective compliance programs.” The Resource Guide explains the intricacies of which companies are subject to the law and the types of transactions are likely to violate the law. In a recent Client Alert, Latham & Watkins provides a summary of the Resource Guide and the nine most relevant and important areas. The Client Alert is available for download here.
The Fiscal Cliff is looming in 2013, and with it is the specter of increased taxes. Both the cliff itself and any potential compromise are likely to include increased marginal tax rates and capital gains taxes. While some people may wish to accelerate income into 2012 to avoid the increased taxes, Section 409A of the Internal Revenue Code severely limits the “ability of employers and employees to change the time of payment for most types of compensation.” In a recent Client Alert, Skadden presents “Strategies for Accelerating Incoming into 2012,” focusing on methods of accelerating income that avoid the limitations of 409A.
The U.S. Secretary of the Treasury recently exempted foreign exchange swaps from certain regulations under the Commodity Exchange Act. These swaps will not be subject to central clearing, margin or exchange trading requirements. In a recent Client Alert, Mayer Brown explains the qualifications for foreign exchange swaps and the consequences of their exemption.