We already talked about some of the biggest compliance and enforcement stories from the year just ended. Here are five more.
Four of these stories show how compliance failures can instantly damage even the world’s best-known brands, that size and power can’t always protect a company or individual, and that in today’s interlocked global economy, graft scandals can spread like a virus.
One of the stories, on the other hand, shows that company leaders can achieve good outcomes even when bad deeds abound.
Here’s what happened:
VW screwed up big time. It rigged U.S. (and probably other) car emission tests by installing software designed to cheat. The company has set aside more than $7.23 billion to cover costs of repairing the cars and “other efforts to win back the trust of our customers.” More than 500,000 diesel cars in the U.S. were affected by the cheating and more than 10 million world wide. The DOJ filed a civil complaint this week that accused VW of four violations of the Clean Air Act. Penalties could reach $46 billion, according to Bloomberg. The scandal proves that no company can afford to live without Compliance 2.0, Mike Scher said. Independent compliance officers with direct reporting lines to the board are a no-brainer.
VimpelCom got ready for a top ten FCPA enforcement action. The Amsterdam-based telecoms firm said in November it has reserved $900 million for a possible settlement with U.S. and Dutch authorities. VimpelCom is under investigation for business in Uzbekistan and dealings with an offshore company linked to Gulnara Karimova, the eldest daughter of the Uzbek president. In August, the DOJ asked authorities in several European countries to freeze about $1 billion in assets tied to Karimova and alleged bribes from VimpelCom, MTS of Russia, and TeliaSonera of Sweden. Norway’s government controls a majority share of VimpelCom.
China’s anti-graft purge toppled the biggest tiger yet. Zhou Yongkang, the former domestic security czar and a member of the powerful Politburo Standing Committee, was jailed for life for graft and leaking state secrets. Zhou once also controlled state oil giant China National Petroleum Corporation. He’s the highest-ranking official to fall since President Xi Jinping’s anti-corruption campaign began in 2012. Guest contributor Jerry Yang reported that in 2015 more than 20 China state officials above provincial/ministerial level were investigated for corruption. “The total number of PML officials charged has now exceeded 120 since the 18th CPC National Congress in 2012.”
The Petrobras graft scandal spread from Brazil to the U.S. and Europe. In March, the Swiss attorney general froze $400 million in 300 Swiss bank accounts allegedly tied to corruption at the Brazil state oil company. Italian oil and gas services firm Saipem confirmed that Milan prosecutors are investigating alleged corruption tied to a 2011 contract with Petrobras. Houston-based Vantage Drilling Company said in an SEC filing in August that an agent it used in Brazil “has entered into a plea arrangement with the Brazilian authorities in connection with the agent’s role in obtaining bribes on behalf of former Petrobras executives.” Norway’s Sevan Marine said in October it “more likely than not” made improper payments to win business with Petrobras. In December, a former Allen & Overy partner in Amsterdam, Sietze Hepkema, was among a dozen people Brazil prosecutors charged in a new phase of their Petrobras investigation. Hepkema left Allen & Overy LLP in late 2011 and joined Netherlands-based SBM Offshore as chief governance and compliance officer. In November 2014, SBM Offshore paid Dutch authorities $240 million to settle allegations that it bribed government officials in Brazil, Angola, and Equatorial Guinea.
Rupert Murdoch’s 21st Century Fox Inc. and News Corp survived the UK hacking and bribery scandal. UK prosecutors did the heavy lifting in the case, winning convictions against eight defendants. Andy Coulson, a former editor of News Corp’s now-shuttered News of the World, spent five months in prison. To Rupert Murdoch’s credit, his response to the scandal was fast, open, and decisive. News Corp and 21st Century Fox — both issuers and U.S. domestic concerns for the FCPA — spent a combined $551 million in settlements and legal fees through June. The companies said in February the DOJ declined to prosecute them. And after a jury in London acquitted News Corp UK head Rebekah Brooks, UK prosecutors decided not to prosecute the companies.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.