The U.S. Department of Justice ("DOJ") and U.S. Securities and Exchange Commission ("SEC") continue to reevaluate and adapt their approach to FCPA enforcement. Specifically, recent months have provided insight to the DOJ and SEC's expanded approach to enforcement, including the exploration of new techniques and utilization of resources aimed at gathering a broad spectrum of information.
The DOJ and SEC appear to be directing increased attention to the demand side of improper payments. As part of this focus, the DOJ continues to pursue the extradition of Juthamas Siriwan, the former governor of the Thailand Tourism Authority, and her daughter in connection with allegedly accepting improper payments. Information disclosed this quarter also shows that U.S. authorities are committed to seizing any assets of foreign officials that are the proceeds of corruption through the DOJ's Kleptocracy Asset Recovery Initiative. In July, U.S. District Court Judge Lamberth of the District of Columbia unsealed a restraining order issued to protect U.S.-based assets of a former Nigerian official. The order prohibits the former Nigerian governor, James Onanefe Ibori, and his solicitor, Bhadresh Gohil, from disposing of or using any property or funds located in the United States until related criminal proceedings in the United Kingdom are concluded.
FCPA-related activity this quarter also reflects that authorities are using a number of new investigatory techniques. In August, the SEC voted in favor of requiring American oil and mining companies to disclose taxes and other fees paid to foreign governments. At this early stage, it is hard to predict how onerous the measure will be or how the SEC will design specific provisions to address FCPA-related concerns, if it chooses to do so.
Additionally, the SEC is seeking to obtain company audit papers from accounting firms. The Chinese branches of the Big Four accounting firms (Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers) continue to confront the SEC's attempts to access audit documents prepared for Chinese companies listed on American stock exchanges. From a FCPA perspective, this ongoing dispute may create another resource that U.S. authorities can use to obtain evidence related to possible improper payments abroad.
Summary of Recent Corporate Enforcement Actions
Orthofix International - Deferred Prosecution Agreement
On July 10, 2012, Orthofix International, a U.S.-based medical device company, reached an agreement with the DOJ and SEC to settle charges related to alleged improper payments made in Mexico. Orthofix agreed to pay a $2.22 million penalty and entered into a three-year deferred prosecution agreement ("DPA") to settle charges with the DOJ. Additionally, the company will pay $5.2 million to the SEC in disgorgement and pre-judgment interest to resolve related charges. The allegations stem from activities by Orthofix's Mexican subsidiary, Promeca S.A. de C.V. ("Promeca"). According to the SEC's civil complaint, Promeca made improper payments, internally referred to as "chocolates," to officials of the Mexican government-owned healthcare provider, Instituto Mexicano del Seguro Social ("IMSS"). The subsidiary also allegedly provided gifts, such as laptops, televisions, and vacation packages, in exchange for sales contracts at IMSS hospitals.
In June 2010, Orthofix voluntarily reported these issues to the DOJ and SEC after their discovery during a management review. In the DPA, the government noted the company's self-reporting and remedial measures, including the termination of the executives involved in the alleged activities, and the implementation of an enhanced compliance program. Likely as a result of these remedial efforts, neither the SEC nor DOJ required the appointment of an independent compliance monitor.
NORDAM Group Inc. - Non-Prosecution Agreement
On July 17, 2012, NORDAM Group Inc. ("NORDAM"), an aircraft maintenance, repair, and overhaul service provider based in Tulsa, Oklahoma, entered into a three-year, non-prosecution agreement ("NPA") with the DOJ and agreed to pay a $2 million penalty to resolve violations of the FCPA. NORDAM also agreed to cooperate with the DOJ to report periodically regarding its compliance efforts, and to continue to implement and enhance its compliance program.
According to the NPA, NORDAM, its subsidiaries, and its affiliates made improper payments to employees at Chinese state-owned airlines in order to secure contracts. To disguise the payments, employees of NORDAM's affiliates allegedly entered into sales representation agreements with fictitious entities, and then used the money from these fake agreements to make payments to the airline employees....