Trends in FCPA Enforcement

      Trends in FCPA Enforcement


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      Full video transcript available below:

      Hello and welcome to today's webinar hosted by me, Joe Boyhan of MCO, and Paul Murdock of MCG Compliance Services. Today, we're going to be looking at the Foreign Corrupt Practices Act or the FCPA.

      I now want to pass you on to Paul, who's going to start today's webinar. 

      Okay. We took a couple slides here that really just, you know, capture somewhat of a trend line in terms of FCPA cases over the years starting back to when the Act was first enacted in 1977, to the present. You can see where the trend line is going, right? So, you know we're in mid 2017, so we don't know where it will end, but you can see where the line is going. Next slide, Joe.

      Alright. This points in perspective a number of cases over the last few years and, once again, you can see that trend line is up. That's another view into the enforcement trend that we're seeing. Next slide Joe.

      So, here this slide represents the top ten actions brought under FCPA and you can see the fines are significant with Siemens out of Germany leading the way with 800 million in 2008. For many people on this call, we're probably familiar with number five and we're going to talk about that today, but the Och-Ziff case, which was 412 million in 2016. You can see, we are not talking about chump change here folks. These are significant fines. These are not round in errors, I mean, you know, companies will feel the impact of paying 800 million in fines. Not to mention, just the press that you get from that, that's also damaging.

      There's a ... Just to keep track of these things for you folks here, there's a really good blog out there. In fact, it was a source for my slide here, but when you get a chance you should definitely try and go to that blog. They have a lot of good information and they keep it pretty current. So, I'd highly recommend that you do that. Okay.

      Next slide Joe. Okay, so let's talk about what one of the cases of this. So the SEC announced sometime back, they had a group that's agreed to pay nearly 200 million to settle civil charges and violations. That was in 2016 and the fined subsequently was raised since then, but just to talk about this case a little bit. I know we're, you know, cognizant of time here, so I'm going to give everyone here just a high level overview of the case. This is really one that's very interesting and a lot of intricate thoughts in terms of how monies and bribes were trying to be concealed. I'll just give you guys the basic background.

      So, it began in 2007 and continued through 2011. So, really over four years, the firm primarily, due to misconduct of two senior employees, entered into a series of transactions and investments in which they paid bribes, through intermediary agents, business partners, to high ranking government officials in multiple African countries including Libya, Chad, Niger and DR C. With all with an intent of getting those companies to invest in their funds, right?

      So, these bribes were paid with the specific knowledge of a senior employee who's the head of their offices in Europe and in certain cases, another investment professional who was also in the Och-Ziff European office. So, other executives were also a part of this whole scenario that ignored red flags of corrupt risk and permitted these transactions to happen, right? But, bribes were paid to corruptly influence foreign government officials in order to obtain, or retain, business with these two.

      Och-Ziff invested in countries and industries, known for corrupt business dealings and purposeful transactions with agents and business partners with a high level of connection to the foreign governments. What they were doing was really pretty egregious in terms of a lot of transactions and the schemes that they entered into. So, I mean, they were using an Israeli business man, who was, kind of, a front for paying bribes out of a number of their funds. So, they were using client funds to even pay some of these bribes to DR C, for example. Libya and you know, other countries.

      We're talking about significant bribes were being paid, right? 110 million dollars in one instance. 300 million in another. So, significant amounts of monies. This is interesting case, as I said, I just gave you guys an overview, but you should really read to see the depth of what was going on and the transactions here. Next slide, Joe.

      Okay. So, there's another case Las Vegas Sands, which is not in the financial services industry per se, but you know, just a background on this case where you could see that a criminal fine of seven million dollars was paid under FCPA offenses in China and Macau. The casino operator admitted paying fines of 5.8 million to a China consultant without any discernible, legitimate business purpose.

      So, here, in this situation, you had a guy that essentially was introduced to executives of Sands Corporation through the China liaison office in Macau. You had two entities from Sands, that basically gave this guy 60 million dollars and gave the consultants 60 million dollars. No one could really figure out the legitimate business purposes for them giving him the money, but obviously it was to, you know, get business in Macau and in China, right, obviously that casino business. He also asked them and received 7.5 million dollars to allegedly purchase on behalf of Sands, a basketball team, along with two junior teams in the China basketball association, CBA.

      There was another instance also, where he asked for money to purchase a building, and they just kept really giving him money, not asking a lot of questions. When someone got ahold of this information in finance and was asking, "Really, what's going on here? Can you show us the wires? Can you show us contracts?" None of that was coming up, and not only that, but the executive that it was being reported to did a couple of actions, right?

      One, is that they basically fired the people that kept raising these red flags and kept raising the issues, right? So, it's never good to decide. He also hired an accountant to, kind of, come and take a look at what was going on, but never really gave the accountant firm the authority to really look at everything. When the accountant firm finally created a report and brought up some of these violations, this person went to the board of Sands and gave them a, kind of, redacted report. Never invited the accountant there and the board itself, as far as they saw a report that wasn't that bad. Right?

      So, all of these things were found out and this guy was fired. They did a number of things in terms of how they would, kind of, clean up the possibility of it happening again, which they report to the DOJ. So, anyway, once again this is another case that I think would be worth your time taking a look at. Next slide, please.

      Okay, Victor Hugo just want to [inaudible 37:44], just want to say here that, you know, these violations do matter and people do go to jail. Here you had a Texas business man that was dealing with the Mexican government, you know, was in a relationship in terms of airplane maintenance contracts and was bribing the government officials in order to get the contract. There were more people involved in his office too, but essentially when all of this stuff was found out, he ended up going to jail, serving time, and the fines that you see here.

      So, those were just to introduce you guys to a number of cases. As I said, the blog, you know, you could always go to that blog and see more cases and read about those top ten, if you like. But, this is a very important law with a lot of teeth and a lot of, you know, significant impact about the firm and individual's jail time and fines, all of that, that we've talked about today.


      This webinar was co-hosted with MCG Consulting

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