For The Defense, October 2010 - DRI Today
For The Defense, October 2010 - DRI Today
For The Defense, October 2010 - DRI Today
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G O V E R N M E N T E N F O R C E M E N T A N D C O R P O R AT E C O M P L I A N C Ewww. justice.gov/opa/pr/2005/May/05_crm_282.htm, and SEC Litigation Release No. 51724(May 20, 2005). In another case, the SECfiled a settled civil injunctive action againstMonty Fu, the founder and past chairmanof Syncor International Corporation,in connection with improper paymentsmade to doctors in state-owned hospitalsin Taiwan. See SEC Litigation Release No.“Anything of value” hasbeen broadly construedto include politicalcontributions, entertainment,travel, meals and lodging.20310, SEC Files Settled Books and Recordsand Internal Accounting Controls ChargesAgainst <strong>For</strong>mer Chairman of Syncor InternationalCorp. (Sept. 28, 2007), http://www.sec.gov/litigation/litreleases/2007/lr20310.htm. Asthese cases illustrate, any company doingbusiness in China must determine whetherit is doing business with a state-ownedenterprise. See United States v. SSI InternationalFar East Ltd., No. 3:06-cr-00398 (D.Ore. 2006) (defendant company consentsto a deferred- prosecution agreement withthe DOJ for payments made to managersof government- owned steel mill in China).More recently, the DOJ has used theFCPA’s expansive definition of foreign officialto announce an industrywide investigationof the pharmaceutical industry.In a speech on November 12, 2009, tothe Tenth Annual Pharmaceutical Regulatoryand Compliance Congress and BestPractices <strong>For</strong>um, Lanny Breuer warnedthat “[o]ur focus and resolve in the FCPAwill not abate, and we will be intenselyfocused on rooting out foreign briberyin your industry. That will mean investigationand, if warranted, prosecution ofcorporations to be sure, but also investigationand prosecution of senior executives.”Lanny A. Breuer, Assistant Attorney Generalfor the Criminal Division, U.S. Dep’tof Justice, Keynote Address at the TenthAnnual Pharmaceutical Regulatory and60 n <strong>For</strong> <strong>The</strong> <strong>Defense</strong> n <strong>October</strong> <strong>2010</strong>Compliance Congress and Best Practices<strong>For</strong>um (Nov. 12, 2009), http://www.justice.gov/criminal/pr/speeches-testimony/documents/11-12-09breuer-pharmaspeech.pdf. Mr. Breuer highlightedthe potential problems of engagingin business with foreign health care systemswhen he said that “under certaincircumstances and in certain countries,nearly every aspect of the approval, manufacture,import, export, pricing, salesand marketing of a drug product in a foreigncountry will involve a ‘foreign official’within the meaning of the FCPA.” Id.Of course, risks involving state-ownedor state- controlled enterprises are not limitedto the pharmaceutical or medical deviceindustry. In February 2009, KelloggBrown & Root LLC pled guilty to multipleFCPA- related criminal charges and settled aparallel SEC proceeding in connection withimproper payments to Nigerian governmentofficials, including employees of stateownedenterprises, the Nigerian NationalPetroleum Corporation and the Nigeria LNGLimited, to win and retain engineering, constructionand procurement contracts.Given the broad definition of “foreignofficial,” every company should knowwhether its business partners are employedby a state-owned or state- controlled enterpriseor if they perform public duties for aforeign country.Anything of ValueAlthough neither defined in the FCPA normade clear in the legislative history, “anythingof value” has been broadly construedto include political contributions, entertainment,travel, meals and lodging. Iteven includes intangible benefits, such asenhanced prestige associated with a charitablecontribution.What qualifies as “anything of value”is mutable because determining whethersomething of value has been offered or conferred,as well as its value, depends on thepersonal valuation of the receiving official.<strong>For</strong> example, an ostensibly routine businesstrip to the United States to visit a factorymay become the trip of a lifetime toa foreign official if Las Vegas and DisneyWorld are also on the itinerary. A FCPAviolation is not triggered by receipt by a foreignofficial of some objectively determinedpayment amount or a “gift” worth someobjectively determined amount.<strong>The</strong> outer reaches of “anything of value”has been highlighted in one enforcementaction involving a charitable donation, Inthe Matter of Schering- Plough Corp., FileNo. 3-11517 (June 9, 2004). In that case, theU.S. government took the position that adonation to a bona fide charitable organizationestablished to restore castles and otherhistoric sites violated the FCPA. A Polishsubsidiary donated to a foundation, and itsfounder became director of a governmenthealth fund. <strong>The</strong> donations constituted athing of value to the government healthofficial because they were subjectively valuedby the official and provided him withan intangible benefit, enhanced prestige.<strong>The</strong> Schering- Plough case shows that evendonations to bona fide charities that do notpass directly or filter indirectly to governmentofficials may violate the FCPA.Paying the expenses of certain individuals,such as travel and lodging, may also violatethe FCPA. On December 21, 2007, theSEC and the DOJ filed and settled chargesagainst Lucent Technologies Inc., whichspent over $10 million in travel, lodging,entertainment and related expenses for approximately1,000 employees of a Chinesestate-owned enterprise from which Lucentsought business. See DOJ Press Release No.07-1028, Lucent Technologies Inc. Agrees toPay $1 Million Fine to Resolve FCPA Allegations(Dec. 21, 2007), http://www.justice.gov/opa/pr/2007/December/07_crm_1028.html, andSEC Litigation Release No. 20414, SEC FilesSettled Action Against Lucent TechnologiesInc. in Connection With Payments of ChineseOfficials’ Travel and EntertainmentExpenses; Company Agrees to Pay $1.5Million Civil Penalty (Dec. 21, 2007), http://www.sec.gov/litigation/litreleases/2007/lr20414.htm. <strong>The</strong> trips were primarily for sightseeingand leisure rather than business purposes,although the expenses were notedin expense records as “factory inspections,”but in locations where no factories existed.Id. Similar trips were booked as “trainingexpenses” by UTStarcom, Inc., which latelast year resolved its FCPA matters with theDOJ and the SEC. See SEC Litigation ReleaseNo. 21357, SEC Charges California TelecomCompany with Bribery and Other FCPA Violations(Dec. 31 2009), http://www.sec.gov/litigation/litreleases/2009/lr21357.htm.<strong>The</strong> FCPA contains an affirmative defenseto a violation charge for expenditures