StreetInsider.com – SciClone (SCLN) Tumbles on SEC Investigation, U.S. DOJ FCPA Compliance Issues
Shares of SciClone (Nasdaq: SCLN) are taking a tumble this morning as the company reported that they have been contacted by the U.S. SEC for an investigation. Shares are down 31% to $2.40 in the morning session.
According to the company’s Q210 earnings press release: “Subsequent to the end of the quarter, as disclosed in the Company’s 10Q to be filed today with the Securities and Exchange Commission (SEC), SciClone has been contacted by the SEC and advised that the SEC has initiated a formal, non-public investigation of SciClone. The Company has also been contacted by the Department of Justice (DOJ) who requested that the Company meet with the DOJ regarding its compliance with the Foreign Corrupt Practices Act (FCPA)…The Company intends to fully cooperate with the SEC and the DOJ in these matters.”
via StreetInsider.com – SciClone (SCLN) Tumbles on SEC Investigation, U.S. DOJ FCPA Compliance Issues.
Business Pays for Bribery Act – WSJ.com
Bribery should not be condoned. Few business people would dare take issue with this statement, hence the dearth of voices being raised against the U.K. Bribery Act 2010, which is now on the statute book and due to come into force in April next year. Taking issue with a piece of legislation which is intended to toughen up the existing law against bribery does not look like good corporate citizenship.
Nevertheless, plenty of reservations about the Act are being aired privately and with good reason. This is a piece of legislation with huge implications for the conduct of businesses and not just those that are British. The territorial ambitions of the Act are so far reaching that any company with operations in the U.K. could fall foul of it, wherever in the world the alleged offence may be committed. And so extreme is the Act in its attempt to wipe out corrupt practices that it does not even allow the exception for ‘facilitation’ payments that exists under the United States Foreign Corrupt Practices Act.
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BAE Systems paid heavy fines over bribery allegations.
That sensible exception ensures that in countries where officials demand and expect a payment for doing their jobs, such as processing customs forms or issuing visas, it is possible for US companies to operate without falling foul of the FCPA. The Bribery Act makes no such concession.
Cracking Down on Corruption | Opinion | The Moscow Times
The FCPA prohibits offering, giving or authorizing anything of value — whether cash or other tangible property or intangibles such as personal favors — to any non-U.S. official, including individuals serving state-controlled commercial enterprises, political party or political candidate to obtain some business advantage. The statute also requires companies to keep accurate books and maintain internal controls designed to prevent or detect improper payments.
Why is this relevant? First, non-U.S. companies are also subject to the FCPA if they conduct business in the United States, if their shares are listed on U.S. exchanges, or if they act on behalf of a U.S. company in connection with an illicit payment to a foreign public official.
Mercedes-Benz’s affiliate in Russia recently became the first Russian-based company to face criminal charges under the FCPA. It pleaded guilty in a Washington courtroom on April 2, agreeing to pay more than $27 million in criminal fines to settle charges arising out of bribes paid to Russian officials or relatives of Russian officials, in many cases through shell companies registered in the United States and into or through bank accounts located in the United States.
Second, Russian companies seeking to do business with U.S. partners and others subject to the FCPA must not present compliance risks that outweigh the potential benefits of cooperation. Faced with evidence that a partner is paying or considering bribes in connection with its business, the U.S. company must undertake an internal investigation that can take years to complete and cost tens of millions of dollars. Criminal and civil fines and remediation can add millions more. Given these risks to their reputation and to their bottom line, companies are increasingly saying “no” if they even suspect that a partner may subject them to risks of FCPA liability.
How can Russian companies make sure that they are saying “yes” instead of “no”? First, they must deal with potential compliance problems as quickly as possible and resolve any issues before their prospective partners begin performing due diligence. Second, it is important that companies institute strict and enforceable internal policies to regulate the use of cash, payments to charitable and political organizations at the request of public officials and the questionable use of intermediary companies.
All companies doing business in Russia should make a commitment to integrity and transparency. This means that if they make or made illicit payments or provided other benefits to any public officials, these practices must stop and remedial methods must be taken as soon as possible.
Russian companies must be committed to the elimination of illicit payments, and the institution of internal controls should be embodied in a comprehensive anti-corruption compliance program. This must be supported by leadership and updated as the company’s business and anti-corruption rules evolve. Employees must believe that there will be real rewards for compliance in terms of compensation and advancement, and there must be real consequences for failure to comply.
Russian companies must ensure that third parties with which it does business are legitimate companies, capable of performing the services for which they were contracted, and not merely conduits for improper payments. To the extent that a third party is connected to a government official, it should be confident that he will not misuse his position for the company’s benefit.
via Cracking Down on Corruption | Opinion | The Moscow Times.
UK Bribery Act broader than FCPA, but more guidelines needed – Risk.net
Firms in the UK will need more guidance on complying with the Bribery Act’s strict rules
The passing of the Bribery Act 2010 into UK law has created one of the toughest anti-corruption regimes in existence. Firms operating in the UK will no longer be allowed to make “facilitation payments”, which have often been thinly veiled bribes.
Previous UK anti-bribery legislation dated from the nineteenth century, whereas the new legislation goes beyond more modern laws such as the US Foreign Corrupt Practices Act (FCPA).
The FCPA was primarily aimed at targeting bribes to corrupt foreign government officials, whereas the scope of the UK’s Bribery Act more broadly targets corruption across the corporate gambit.
The UK Bribery Act allows unlimited fines against firms, while individual penalties are up to 10 years' imprisonment, compared with five years under the FCPA.
“All this bad activity has been illegal for a long time, but it’s the ability to prosecute companies and individuals that has been so difficult,” says Bob Hirth, vice-president and head of global internal audit at Protiviti, a financial services consultancy.
“One motive behind this Act was to provide for more effective prosecutions. It is broad and ambitious, but the devil is in the detail,” he says.
The Act requires systems and controls to be put in place to demonstrate compliance with the new regime. Compliance to the FCPA does not guarantee compliance to the Act.
via UK Bribery Act broader than FCPA, but more guidelines needed – Risk.net.
SEC Opens FCPA Unit in San Francisco | Compliance Week
The SEC’s creation in January 2010 of a specialized Foreign Corrupt Practice unit focused on violations of the FCPA and led by Cheryl J. Scarboro has been well-documented and discussed. Far less publicized, however, has been the SEC’s opening of a San Francisco unit that is solely dedicated to the enforcement of the FCPA.
Last month, the San Francisco Daily Journal reported that the SEC’s San Francisco Regional Office was putting the “finishing touches” on the new FCPA unit, which is part of the national SEC unit announced in January.
via Compliance Week: Enforcement Action from Compliance Week – » SEC Opens FCPA Unit in San Francisco.
Proposed Whistleblower Provision Could Dramatically Increase FCPA Risk | Sheppard Mullin Richter & Hampton LLP – JDSupra
An often-overlooked provision in the financial reform legislation now before Congress would allow employee whistleblowers to receive a reward of up to 30% of the fines collected by the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) from corporations who violate the Foreign Corrupt Practices Act (“FCPA”). We have reported in this blog on several occasions the increase in FCPA enforcement by the government in recent years. The passage of a bill containing this proposed whistleblower provision could lead to even more government enforcement, as well as multi-million dollar awards to whistleblowers.
The Role of Human Resources in FCPA Compliance-Part I | Thomas Fox – JDSupra
One sign of a mature Foreign Corrupt Practices Act (FCPA) compliance and ethics program is the extent to which a company’s Human Resources (HR) Department is involved in implementing a solution. While many practitioners do not immediately consider HR as a key component of a FCPA compliance solution, it can be one of the lynch-pins in spreading a company’s commitment to compliance throughout the employee base. HR can also be used to ‘connect the dots’ in many divergent elements of a FCPA compliance and ethics program. My next couple of postings will discuss the role of HR in such a program. The first installment will discuss training, employee evaluation, succession planning and hotlines and investigations. In the next posting, we will discuss background screening, doing ‘more with less’ and finally, what to do when the government comes calling.
via The Role of Human Resources in FCPA Compliance-Part I | Thomas Fox – JDSupra.
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Compliance comes calling | The Economic Times
Take an Indian conglomerate preparing to acquire a Belgian company. The last thing it needs to worry about is US criminal laws, right? Wrong — and indeed, buying the Belgian concern without thoroughly analysing its compliance profile could mean buying tens of millions of dollars in criminal liability.
The compliance challenges posed by the vigorous pursuit by the US of alleged Foreign Corrupt Practices Act (FCPA) transgressors have been compounded as other countries, most prominently Germany and the UK, have adopted and begun active enforcement of anti-foreign corruption laws of their own.
On January 19, for example, the US unveiled 22 indictments of individuals, including UK citizen Pankesh Patel, as a result of an undercover operation with FBI agents posing as sales agents offering to corruptly facilitate foreign contracts. Patel and 20 other defendants were handcuffed in front of their peers right on the floor of a Las Vegas trade show.
In his allegedly corrupt pursuit of defence contracts in Africa, Patel had meetings within the US, and sent paperwork in furtherance of the underlying scheme to the US. His indictment is an application of FCPA provisions catching foreign persons that take steps within the US to further overseas corruption.
For Indian companies that are issuers of US securities , no such actions within the US would even be required.
For our hypothetical Belgian marketing company, though not directly subject to the FCPA, it might have FCPA liability if it had corruptly carried out business operations for US companies, or sent dollar-denominated wire transfers for corrupt purposes.
Another trend worth noting for non-US companies is the expectation of active supervision on the part of senior corporate executives.
US enforcers have held executives at headquarters responsible for misconduct occurring in the field, on the basis that the executives failed to supervise far-flung personnel or failed to design internal controls to prevent misconduct.
Other countries are also raising the bar to prevent bribery. In part, this is due to diplomatic pressure from the US but also the efforts of the OECD and the UN, both of whom have sponsored conventions that are now in place mandating that their signatories take certain actions in the fight against corruption. India is party to the UN convention.
The Siemens case in which it paid a record settlement of $800 million in fines and disgorgement of profits was mirrored by a fine of equal magnitude paid to the German regulator.
Foreign Corrupt Practices Act Update | Sheppard Mullin Richter & Hampton LLP – JDSupra
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The Department of Justice (“DOJ” or “Department”) and the Securities and Exchange Commission (“SEC”) have dramatically stepped up their enforcement of the Foreign Corrupt Practices Act (“FCPA”). Perhaps the most noteworthy development this year was the first ever FCPA sting in which Federal Bureau of Investigations (“FBI”) agents posed as agents representing foreign government officials and solicited bribes from executives in the defense and law enforcement products industry. However, less sensational enforcement efforts—including investigations arising out of industry-wide probes and self-reporting—continue to be a focus for the DOJ and reports of more investigations surface seemingly every week. Most recently it has come to light that Australian natural resources firm, BHP Billiton, is under investigation by the SEC for possible violations of the FCPA, as well as by officials from the United Kingdom for possible corruption stemming from their operations in Cambodia and elsewhere.
via Foreign Corrupt Practices Act Update | Sheppard Mullin Richter & Hampton LLP – JDSupra.
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UK bribery law escalates business risk of regional companies – Business Intelligence Middle East
The UK Bribery Act, enacted in the United Kingdom on 8 April 2010, is one of the most significant issues to affect businesses and increases the risk of doing business for regional companies.
The law applies not only to British nationals and UK companies but to any commercial organisations even if they carry on only “part of a business” in the UK.
Under the new rules, companies with UK operations will be criminally liable for bribery and corruption in their business, supply chain or sales channels irrespective of where the bribery offences take place.
The bribe does not need to be directed at a government official, the provision is triggered even if the bribe relates to business activities amongst private entities.
The law creates a new strict liability offence for any commercial organization which has a “close connection” with the UK for failing to prevent bribery, with the defense of showing that it has adequate (anti-bribery) procedures in place.
This is without any requirement for the prosecuting authority to show that any directors or partners were directly involved in the crime.
The maximum jail term for bribery is now 10 years and companies convicted will also face unlimited fines.
Although some of its features are similar to the US Foreign Corrupt Practices Act (FCPA), this law is likely to have a bigger impact on regional businesses.
It uses UK standards of what constitutes bribery and disregards local custom and practice, unless the practice is permitted by written law. Unlike the FCPA, it also makes no allowances for small facilitation payments consistent with local culture.
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