During the financial crisis, government enforcement agencies started taking a hard look at Wall Street institutions, and these days a company must respond proactively and dynamically when addressing the challenges of government investigations and litigation.  Perkins Coie’s Adam H. Schuman and Kraft Heinz’s Prasanth R. Akkapeddi detail some key takeaways for both in-house and outside

On December 26, 2018, the Securities and Exchange Commission (“SEC”) announced a settlement with communications technology firm Polycom, Inc. (“Polycom” or the “Company”) for violating the books and records and internal accounting controls provisions of the Foreign Corrupt Practices Act (“FCPA”) in connection with a scheme to bribe Chinese government officials. Under the settlement, Polycom agreed to pay the SEC approximately $12.5 million in disgorgement and prejudgment interest and a civil money penalty of $3.8 million. The Polycom settlement illustrates the liability that can arise from reliance on third-party agents such as distributors, but—as explored below—also presents a missed opportunity for the SEC to provide some clarifying guidance for companies looking to avoid similar outcomes.
Continue Reading SEC’s Polycom FCPA Settlement Leaves Unanswered Questions

Last month, a D.C. federal judge ordered the Department of Justice to turn over the names of prospective monitors nominated to oversee the corporate compliance programs of fifteen companies found to be in violation of the Foreign Corrupt Practices Act (FCPA).  While recognizing that these individuals have “more than a de minimis privacy interest in their anonymity,” the court found that any such privacy interest was outweighed by the public’s interest in learning their identities.

In April 2015, journalist Dylan Tokar filed a FOIA request seeking records related to the review and selection of corporate compliance monitors in FCPA settlement agreements between DOJ and fifteen corporate defendants.  Tokar, a reporter for the trade publication Just Anti-Corruption, hoped these records would shed light on the monitor selection process, including whether DOJ had been abiding by the guidelines for monitor selection set forth in its 2008 Morford Memorandum.  The Memorandum, which establishes several principles to avoid potential and actual conflicts of interest and address concerns of cronyism, prescribes the consideration of “at least three qualified monitor candidates” whenever practicable.  Accordingly, Tokar requested the names of the three monitor candidates and their associated firms for fifteen cases.

More than eighteen months later, DOJ provided Tokar with a table purportedly responding to his request, but redacted the names of the monitor candidates who were nominated but not selected, as well as their affiliated firms in some cases.  DOJ asserted that these redactions were necessary and justified under FOIA Exemptions 6 and 7(C), which exempt from disclosure certain information that would constitute an “unwarranted invasion of personal privacy.”

After both parties cross-moved for summary judgment, the court concluded that the redactions were improper and ordered DOJ to release the candidates’ names.  It found that while DOJ had demonstrated sufficient privacy interests to warrant coverage under Exemptions 6 and 7(C)—as it was “plausible that these individuals would prefer to have their consideration and ultimate[] non-selection withheld from the public’s view”—these interests were outweighed by the public’s interest in disclosure.  The court agreed with Tokar that without disclosure of the candidates’ names, it would be “difficult (if not impossible) to know whether either the government or the corporate entity under investigation is taking advantage of the selection process in a manner that undermines the objectives of the DPA” and the principles delineated in the Morford Memorandum.
Continue Reading Monitoring the Monitors: DOJ Ordered to Disclose Info on Monitor Selections

The DOJ recently took another step to encourage corporate self-disclosure for FCPA violations through the announcement of a new FCPA Enforcement Policy based on the eighteen month FCPA Pilot Program.  The DOJ’s Pilot Program proved to be successful—the FCPA Unit received over 30 voluntary disclosures in the 18-month period the Pilot was in place—compared to only 18 voluntary disclosures in the previous 18-month period, according to Deputy Attorney General Rosenstein.  The new Enforcement Policy contains many of the same incentives as the Pilot Program, with a few added benefits to sweeten the deal for corporations hoping to avoid hefty FCPA fines.

Presumption of Declination. Building on the cooperation credit offered under the Pilot Program—and barring aggravating circumstances—corporations will receive a presumption that the DOJ will resolve the case through a declination if they 1) voluntarily self-disclose; 2) fully cooperate; and 3) timely and appropriately remediate.  The Enforcement Policy delineates the DOJ’s expectations as to each of these requirements, many of which track the Pilot Program.  Evaluation of compliance programs, for example, will vary depending on the size and resources of a business and includes factors such as fostering a culture of compliance; dedicating sufficient resources to compliance activities; and ensuring that experienced compliance personnel have appropriate access to management and to the board.
Continue Reading DOJ Highlights Disclosure Incentives Under New FCPA Enforcement Policy

At the annual Food Safety Summit in Rosemont, Illinois, the Department of Justice’s increased focus on food safety enforcement was a key topic of discussion. While it was quite clear that the DOJ’s increased enforcement activity in high-profile food contamination cases involving companies such as Dole Foods and Chipotle Mexican Grill in 2016 caught the

In a controversial ruling, London’s High Court has held that interview notes and other documents created by outside legal counsel and forensic accountants as part of an internal investigation into foreign bribery allegations are not protected by the legal professional privilege.  While the appeals process is already underway, the May 8th decision by the Honourable Mrs Justice Andrews is a noteworthy victory for the U.K.’s Serious Fraud Office (SFO), an agency akin to the U.S. Department of Justice (DOJ).

Eurasian Natural Resources Corporation (ENRC), the U.K. division of a multinational mining conglomerate operating in the Middle East and Africa, is the subject of an ongoing SFO criminal investigation. At times, ENRC appears to have been in a cooperation posture with the SFO; but earlier this year, the SFO filed a petition seeking to force ENRC to produce documents the company claimed were privileged.  The London High Court agreed with the SFO, ruling that almost all of the documents at issue were not privileged and should be disclosed to the SFO.
Continue Reading U.K. Court Orders Disclosure of Internal Investigation Documents to Criminal Prosecutors

The U.S. Department of Justice (“DOJ”)’s Criminal Fraud Section recently issued guidance for corporate compliance programs in a document titled Evaluation of Corporate Compliance Programs (“Fraud Section Guidance”), which reflects a number of notable differences from prior guidance on similar issues. The Fraud Section Guidance contains a list of topics and questions used by the Fraud Section in evaluating corporate compliance programs. As several commentators have noted—and the Fraud Section acknowledges—many of the topics contained in this recent guidance are consistent with, among other things, the Resource Guide to the U.S. Foreign Corrupt Practices Act (“FCPA Guide”) and the current U.S. Sentencing Guidelines, both of which outline desired aspects of a corporate compliance program “best practices.” But it is the differences—areas where the DOJ has expanded on prior commentary—that may provide key insights into DOJ areas of concern.

Specifically, the Fraud Section Guidance provides more detail than prior guidance on three key topics, thereby providing companies with a roadmap for how to strengthen their compliance programs—at least from a DOJ perspective—through increased focus on (1) compliance functions, (2) training programs, and (3) testing of compliance programs.
Continue Reading Has the DOJ Perspective on Corporate Compliance Evolved?: Three Ways the DOJ’s Recent Guidance Differs from the FCPA Resource Guide and U.S. Sentencing Guidelines

President Donald Trump’s nominee for chairman of the U.S. Securities and Exchange Commission, Jay Clayton, testified before the Senate Banking Committee during his confirmation hearing on March 23, 2017.  In this two-part series, we recap the highlights of Clayton’s testimony regarding potential enforcement priorities and policy changes.

READ PART ONE HERE

The month of March has brought with it the first-ever criminal municipal bond securities fraud conviction, the resolution of enforcement actions targeting banks and senior executives accused of shirking duties to oversee municipal bond issuances, and proposed rule amendments intended to improve municipal securities disclosures—continuing a trend of intensified regulatory enforcement that targets industry “gatekeepers” such as auditors, bond underwriters, and others that serve investor clients entering the municipal bond market.   
Continue Reading March Madness in the Municipal Bond Market – A Focus on Gatekeepers

For many corporate executives in the food industry, the U.S. Department of Justice (DOJ’s) increasing focus on prosecuting “responsible corporate officers” under the criminal misdemeanor provision of the Food, Drug, and Cosmetic Act (FDCA) has warranted rapt attention, particularly in light of criminal investigations arising from nationwide contamination outbreaks at companies like ConAgra and Blue Bell Creameries.  Recent remarks by attorneys from the DOJ’s Consumer Protection Branch to industry audiences have underscored the government’s expectation that corporate food executives implement a “culture” of food-safety compliance in their companies, and provide timely, truthful responses to both formal and informal inquiries made by regulators at the Food & Drug Administration (FDA).

In December 2016, Principal Deputy Assistant Attorney General Benjamin Mizer addressed the Food and Drug Law Institute’s Enforcement, Litigation and Compliance Conference, reiterating the DOJ’s ability and determination to bring criminal charges in cases where companies sell contaminated products to consumers.  Separately, in remarks to the United Fresh Produce Association in September 2016, DOJ Assistant Director Jeffrey Steger provided a regulator’s viewpoint regarding several concrete ways that food companies can demonstrate their commitment to safety compliance.
Continue Reading DOJ Officials Offer Guidance for Food Company Execs Looking to Minimize Criminal Exposure