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Harry Cassin
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How Alcoa avoided a $1 billion criminal fine while others got hammered

Leslie Caldwell, chief of the DOJ’s criminal division, talked at last week’s Annual Ethics and Compliance Conference in Atlanta. She covered the ten hallmarks of an effective compliance program and cooperation with the DOJ in FCPA and other white-collar investigations. Her examples of good and bad corporate behavior came from real life.

First her example of good behavior, then a few that didn’t cut it.

*     *     *

Alcoa — The parent company and a subsidiary, Alcoa World Alumina, paid a total of $384 million in early 2014 to resolve an FCPA enforcement action with the DOJ and SEC.

As part of the plea, the subsidiary paid $223 million in criminal fines and forfeiture. “Alcoa’s cooperation was mentioned specifically as a factor that lowered the size of the criminal fine,” Caldwell said. “In fact, absent cooperation, Alcoa could have faced a fine of more than $1 billion.”

Alcoa’s cooperation, she said, included “conducting an extensive internal investigation, making proffers to the government, voluntarily making current and former employees available for interviews, and providing relevant documents” to the DOJ.

*     *     *

Weatherford International — In November 2013, Weatherford companies paid $252 million in penalties and fines for FCPA and trade sanction violations.

“In this day and age,” Caldwell said, “more than a decade after the Sarbanes-Oxley Act, we come across very few companies that do not have any compliance program.”

But before 2008, Caldwell said, Switzerland-based oil services firm Weatherford, which trades on the New York Stock Exchange, “had little more than a weak paper compliance program.”

In their plea agreements, the subsidiaries admitted that Weatherford didn’t have a dedicated compliance officer or compliance personnel, didn’t conduct anti-corruption training, and didn’t have an effective system for investigating employee reports of ethics and compliance violations.

*     *     *

BNP Paribas — In July of this year, BNP pleaded guilty in federal court to criminal charges for supporting the sanctioned regimes in Sudan, Iran, and Cuba by letting them access U.S. banks.

BNP paid a record $8.8 billion penalty.

Caldwell used France’s biggest bank as an example of a company with a strong compliance program on paper but a weak program in practice.

BNP’s conduct represented “a massive disregard for compliance, both with the law and with its own internal policies,” Caldwell said. Violations occurred “despite concerns expressed on more than one occasion by compliance officers, and even in written opinions by outside counsel.”

For example, Caldwell said,

[O]ne senior compliance officer at BNP wrote to other high-level compliance and legal employees reminding them that certain Sudanese banks with which BNP dealt “play a pivotal part in the support of the Sudanese government which . . . has hosted Osama Bin Laden and refuses the United Nations intervention in Darfur.”

Another senior compliance officer further warned that a satellite bank system was being used to evade U.S. sanctions and stated, “As I understand it, we have a number of Arab Banks (nine identified) on our books that only carry out clearing transactions for Sudanese banks in dollars. . . .  This practice effectively means that we are circumventing the U.S. embargo on transactions in USD by Sudan.”

In response to another e-mail voicing the same concern, Caldwell said, “a high-level employee explained that these transactions had the ‘full support’ of management at BNP Paris.”

Caldwell said,

[U]nfortunately, rather than push back, the compliance personnel backed down, and continued to allow the illegal transactions.  An email . . . explained management’s thinking: “[t]he relationship with this body of counterparties (meaning the nine Arab banks) is a historical one and the commercial stakes are significant. For these reasons, Compliance does not want to stand in the way of maintaining this activity . . . .”

Caldwell said the tone at the top at BNP “was, frankly, not just unsupportive of compliance, but against it.” 

BNP was also penalized for not cooperating.

“Significantly, BNP affirmatively hampered the [DOJ’s] ability to prosecute individual executives and employees for their criminal misconduct.”

The lack of cooperation was mentioned in the plea agreement as a factor in the record penalties assessed against the bank.

*     *     *

Rabobank — The Dutch bank is one of five global banks that have collectively paid more than $4 billion to  resolve the DOJ’s criminal investigation of LIBOR manipulation. Each admitted their misconduct. The DOJ has also charged nine individuals, and two of them have pleaded guilty.

Rabobank’s LIBOR manipulation was described in emails. One banker wrote, “I’ll probably get a few phone calls but no worries mate… there’s bigger crooks in the market than us guys!”

Caldwell said some companies become part of an industry-wide race to the bottom. But the DOJ, she said, will prosecute individuals even when the excuse is that everyone else was doing it.

The DOJ’s LIBOR investigation is ongoing.


Assistant Attorney General for the Criminal Division Leslie R. Caldwell’s full remarks at the 22nd Annual Ethics and Compliance Conference in Atlanta, Georgia on October 1, 2014 are here.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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