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Fox’s Favorite Investigations

By Thomas Fox

Last week I picked my favorite FCPA enforcement actions for 2010. Here are my choices for the top ten investigations disclosed or making news this year:

1. Avon-What’s the cost of non-compliance?

Investigative Cost, Revenue or Earnings Loss in 2009/2010

Investigative Cost (2009)

$35 Million

Investigative Cost (anticipated-2010)

$95 Million

Drop in Q1 Earnings

$74.8 Million

Loss in Revenue from China Operations

$10 Million

Total

$214.8 Million

2. Gun Sting Case-Organized Crime Fighting Techniques Come to FCPA Enforcement-Undercover criminal enforcement techniques such as wire taps, video tapes of the defendants and a cooperating defendant were used in a sting operation resulting in the arrest of 22 persons. An undercover FBI Agent posed as a corrupt official from a country later identified as Gabon seeking to purchase a wide array of arms.

3. HP-To Report or Not to Report-allegations of a payment of an approximately $10.9 million bribe to obtain a $47.3 million computer hardware contract in Russia. HP did not self-report and the DOJ/SEC announced investigations after the WSJ reported German authorities were investigating the transaction.

4. Team Inc.-No de minimis exception in the FCPA-Team disclosed that an internal investigation that it made improper payments over the past five years that did not exceed $50,000. Its 2009 and 2010 investigation costs-reportedly at $6.2 million.

5. ALSTOMArrests in the Board Room-Three members of the Board of ALSTOM in the UK were arrested on suspicion of bribery and corruption, conspiracy to pay bribes, money laundering and false accounting.

6. PBSJ The Effect of an Ongoing FCPA Investigation in a Merger and Acquisition-PBSJ was required to accept a takeover offer of lease money rather than allow the purchaser to back out of the deal if the FCPA investigation goes south.

7. Schlumberger-Red Flags, Red Flags and More Red Flags-Investigation of allegations of possible bribery in Yemen by Schlumberger Ltd. regarding a contract with the government. The reported allegations stand out as classic Red Flags. (1) Agent proposed by customer at or near the time the contractual negotiations were nearing conclusion. (2) Agreed to pay the agent before contract was signed. (3) No written contract was executed for these services.

8. CB Richard Ellis-No business or industry is immune from the FCPA-CB Richard Ellis, global real estate firm, disclosed possible FCPA violations in China. Any company which does business overseas needs to have a full FCPA compliance program in place. 

9. Rino-Welcome to the (FCPA) Club. The first FCPA inquiry on a China-based issuer. 

10. SciClone-Hell hath no fury like an SEC Notice-SciClone received notice of a SEC investigation. Within one week, its stock dropped over 31% and five law firms announced that they were investigating the company for potential securities laws investigation. Within two weeks, seven different law firms had filed class actions suits against the company for securities violations.

Thomas Fox is an attorney in Houston, Texas, specializing in FCPA compliance, risk management and international transactions. His blog can be found here and he can be reached at [email protected].

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1 Comment

  1. Thanks for an informative post, once again. I think the Avon numbers are staggering. In training, I always mention Siemens: $1.2 billion penalties, $1.2 billion investigation costs. Or Daimler, $185 million penalty, $500 million investigation costs. Remember also that Siemens' compliance department went from 86 people to over 600. That's a huge run-rate cost increase.

    If I remember correctly, Faro Technologies also had a similar experience, where the investigative costs and stock price drop dwarfed the actual fines and penalties.

    Have a happy new year.


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