FCPA Cases This Year

FCPA Cases This Year


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Full video transcript available below:


So let's talk about some of what we're seeing and some of the cases. This rule was first enacted in 1977. I just wanted to put this slide up here so that you guys get a perspective of enforcement cases, and where we are today versus where we were when the legislation was first filed.

As you can see, enforcement is becoming more aggressive in this area. We are now, you know, the world is connected more so than it was before, right? There's social media, the Internet. We have all of these global relationships that are happening now, so you can see why we can get involved in more of these things and why the DOJ, why the trend line is where it is, and why they're using an aggressive approach, right? But we're still in 2017. We're in 2017, the beginning of 2017, so we still have a far way to go throughout the rest of the year, so I would suspect that we will see even more cases that are being brought forward.

Steve, if you could advance the slide, please.

Just wanted to give you guys another view so that you can clearly see the trend line there, and I just want you to note that this is overall enforcement cases under this rule, not just financial services. Good.

So let's take a look, because I know we're getting close on time, let's take a look at three significant cases over the last two years or so.

So we're going to start with the J.P. Morgan case, and as you can see November 2016 the Securities and Exchange Commission announced that J.P. Morgan has agreed to pay more than 130,000,000. That's not a small number to settle SEC charges. That it won business from clients and corruptly influenced government officials in Asia-Pacific, right? What was happening here is that J.P. Morgan and their subsidiaries, J.P. Morgan Asia in particular, created what they called a client referral hiring program, right? What that program was was a special internship program for the son, nephews in one example, and others of foreign officials, and the program was specifically designed and it was even tracked in terms of business that J.P. Morgan got from really giving internships to individuals they shouldn't have given internships to, right? But once again we talk about the quid quo pro, that's really what this was about. So it was a special program designed for kids and nephews of foreign officials that they would not have even qualified for those internship programs with J.P. Morgan Chase in Asia if they went through the traditional means, but here you had individuals within J.P. Morgan that was obviously hiring kids with anticipation of getting business from them. So DOJ, SEC came in, saw all of what was going on, and fined them 130,000,000. Not insignificant. 

Steve, if you want to go on to the next case.

So Och-Ziff was particularly interested. I mean that is a huge fine, over $200,000,000 to the SEC to settle these charges, and we could spend a whole session essentially talking about all of the things that Och-Ziff did in terms of creating essentially a bribery scheme in a number of countries, basically to get around this rule, but to get business. In 2007 through 2011, I'll just give you guys the basic. Och-Ziff, primarily due to misconduct of two of their senior employees, entered into a series of transactions and investments in which Och-Ziff paid bribes through intermediaries, agents, business partners to high ranking government officials in multiple African countries including Libya, Chad, Niger, Democratic Republic of Congo. And they were doing, Och-Ziff itself which signed off on this, were doing significant amount of business in these countries, but really the only reason, or one of the reasons they got the business is that they were willing to pay significant bribes to individuals, setting up whole structures through intermediaries, special vehicle accounts, offshore accounts to pay these bribes. Just tons of money. Now what did Och-Ziff get in return for that? Well, they got significant capital from the investment authority of Libya, for example, to the amount of 300,000,000 to invest on behalf of their funds, but they paid out 40,000,000 in bribes to some of these individuals.

So this is a very interesting case that you guys, if you guys have the opportunity, you should really take a look at it. This is really kind of financial espionage at its greatest height, in terms of all the things that were done here.

Steve, if we could move onto BNY Mellon.

So BNY Mellon we could see in August of 2015, they paid out 4.8 million to settle charges that it also violated the act, and once again this was around quid quo pro and setting up internships for individuals of foreign governments. So we're beginning to see that under this act setting up internships, getting your nephews, your sons, daughters jobs is something that seems to be, at least in these two out of three cases, a common theme in terms of the quid quo pro, but Mellon agreed to provide these internships to these kids of foreign officials, and I should say the commonality between all three of these cases is that senior officials of all of these firms knew what was going on, accepted that this was the way they were going to conduct business unfortunately in order to attract assets of the fund.

Steve, if you could just forward on.

So those are significant cases in financial services that I think you guys, given the opportunity, should go back and spend a little bit of time on, because it really brings out all of the intricacies of this particular act and the violations, right?


This webinar was co-hosted with MCG Consulting


Read our blog post: FCPA Fines in 2016 - Summary


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