Cooperation and Proactive Compliance Pay Off in FCPA Investigations; Troutman Sanders Adds Lawyer to FCPA Team
Recent FCPA Developments:
In the first of two recent cases illustrating the benefits of internal compliance programs and cooperation with government agencies in Foreign Corrupt Practice Act (FCPA) investigations, Parker Drilling Company (Parker) recently resolved allegations by the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) that it violated the FCPA by improperly influencing Nigerian officials in order to avoid a customs penalty. Parker agreed to pay a criminal penalty of $11.76 million to the DOJ, and $4.09 million in disgorgement and prejudgment interest to the SEC to settle a related civil suit.
The investigation of Parker stemmed from DOJ’s investigation of global logistics firm, Panalpina World Transport Ltd. (Panalpina), which, in 2010, resulted in criminal resolutions and more than $156 million in criminal penalties against Panalpina and five oil and gas service companies and subsidiaries.
In 2001 and 2002, Panalpina, on Parker’s behalf, avoided certain costs associated with complying with Nigeria’s customs laws by fraudulently claiming that Parker’s rigs had been exported and then re-imported into Nigeria. A Nigerian government commission commenced proceedings against Parker for violating customs laws and assessed Parker a $3.8 million fine. Rather than pay the fine, Parker contracted indirectly with an intermediary agent to resolve the customs issues, giving the agent $1.25 million. The agent spent that money on various things, including entertaining government officials, and Parker’s employees approved the agent’s invoices. The agent successfully reduced the company’s fine from $3.8 million to $750,000.
Parker entered into a three-year deferred prosecution agreement with DOJ, during which time Parker consented to put in place an enhanced compliance program and internal controls designed to detect and prevent FCPA violations, to report to DOJ periodically, and to cooperate in ongoing investigations.
In entering into the agreement, DOJ said it took into account a number of considerations: Parker conducted an extensive, multi-year investigation into the charged conduct; engaged in widespread remediation, including ending its business relationships with those primarily responsible for the corrupt payments, enhanced its scrutiny of high-risk third-party proposals and other transactional documents for all company contracts; significantly enhanced its compliance program and internal controls; and agreed to cooperate with all ongoing investigations of the conduct.
In another instance highlighting the benefits of cooperation, the SEC announced that it had entered into a non-prosecution agreement with Ralph Lauren Corporation to resolve a FCPA investigation. While DOJ also entered into a NPA with Ralph Lauren, it is the SEC’s NPA that is more noteworthy as it is only the fourth publicly reported NPA that the SEC has entered into since it announced that it would begin using NPAs – and is it the first NPA used in a FCPA case.
The FCPA violation occurred when employees of a Ralph Lauren subsidiary bribed government and custom officials in Argentina in order to import the company’s products without the necessary paperwork and to avoid mandated inspections. Ralph Lauren agreed to pay disgorgement in the amount of $593,000 and $141,845.79 in interest to the SEC. More importantly, the SEC’s press release spends a significant amount of time detailing its rationale for granting Ralph Lauren an NPA rather than proceeding against it in an enforcement action, including the steps taken by Ralph Lauren that the SEC said amounted to “exceptional” cooperation.
According to the SEC, the company discovered the misconduct during an internal review designed to improve internal controls and compliance efforts, which included FCPA training in Argentina. Within two weeks of the discovery, the company reported the violation to the SEC. Subsequently, Ralph Lauren quickly and voluntarily produced requested documents to the SEC having to do with the reported conduct. In addition, the company provided English translations for the documents, provided summaries of witness interviews conducted overseas, and made overseas witnesses available for SEC interviews in the United States. The company also implemented significant remedial measures, including terminating the employees involved in the conduct, strengthening internal controls and due diligence measures, and conducting a risk assessment of its worldwide operations.
Both cases illustrate the importance that DOJ and the SEC are placing on corporate compliance programs, strong internal controls, FCPA training, and cooperation during ongoing investigations.
Addition to Troutman’s FCPA Team:
Troutman Sanders LLP has expanded the firm’s White Collar and Government Investigations practice with the addition of partner Sharie A. Brown, who will be resident in the firm’s Washington, D.C. office.
Brown has an established reputation for her work representing clients in the area of the Foreign Corrupt Practices Act, as well as of corporate compliance, ethics and governance, and trade sanctions laws and regulations. Brown has extensive experience in the United States and around the world, including Africa, the Middle East, Asia, Latin America and Europe.
Prior to joining Troutman Sanders, Brown chaired the White Collar and FCPA practices of two major firms, served as ethics and compliance officer for Mobile Oil, and worked as a federal prosecutor. She is an elected Fellow of the Litigation Counsel of America and was named in 2009 to Ethisphere Council’s FCPA “Attorneys Who Matter.”
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