Last year, two executives of Herbalife Ltd. were charged after spending $25 million on entertainment and gifts for Chinese officials in 10 years period, to facilitate the company operations in some regions in China.
In November 2019, the DOJ charged two company executives with conspiracy to violate the FCPA, lying to the SEC and destroying pieces of evidence. The two executives paid briberies to key government officials and AIC (Administration for Industry and Commerce) to reduce the risk of regulatory reviews of the business. To protect Herbalife from negative press reports, they also paid journalists and media, spending approximately $150,000 on gifts for government and media officials.
To charge the involves, the DOJ focused on the use of specific emails accounts, involvement on making illegal payments to AIC and MOFCOM (Ministry of Commerce) officials and destruction of records for attempting to destroy his company laptop, since Herbalife executives erased more than 200 files at the time.
The FCPA Blog states that Herbalife has reserved $123 million to settle FCPA offences after last year’s executives’ charges. A potential resolution was disclosed; however, it needs final approval: “The company had reached an understanding in principle for the material terms of a settlement with both the SEC and DOJ.”
Herbalife will start an administrative resolution, to resolve alleged violations of the books, records, and internal controls. Moreover, the company will enter into a prosecution agreement with DOJ, for a conspiracy to violate the FCPA’s books and records provisions, says the FCPA Blog.
Since its executive’s indictment, Herbalife has replaced certain employees and implemented new policies and procedures in China. In a statement, the company said that the potential resolution needs approval from the board of directors, SEC, and DOJ and possibly court approval.
For more information, consider reading Herbalife case details at JD Supra or updates on the FCPA Blog.
RiskyWomen and MCO Podcast
MCO and RiskyWomen are hosting a series of podcasts. In the first episode of the series, our Asia Pacific Director, Kelly-Ann McHugh discuss the results of the MCO Gifts and Entertainment Survey Report and talks about Conflicts of Interest Compliance. The podcast includes:
- Key Issues for Financial and Corporate Sectors
- Gift & Entertainment Survey Results
- Best Practices for Gifts & Entertainment Policies
- Conflicts of Interests Policy Recommendations
- Technology’s Role
"I think people may have become complacent about a gifts and entertainment policy" - Kelly-Ann McHugh