Corruption Crime & Compliance

The False Claims Act is a powerful enforcement tool.  The Justice Department with its partner agencies are ramping up enforcement efforts.  The Biden DOJ is preparing to implement an aggressive FCA program across healthcare, defense industries and other government contractors. The False Claims Act stands as a major risk – businesses that depend on government business, including healthcare, defense and other contractors, have to address proactively the risks associated with False Claims Act liability.  Compounding this situation is an active and major whistleblower bar that generates qui tam relators needed to fuel Lengthy and costly government investigations. In this Episode, Mike Volkov reviews the flurry of recent False Claims Act cases brought by the Justice Department.

The Justice Department and the Securities Exchange Commission are back in business.  The first corporate FCPA enforcement action in 2021 came after a six-month hiatus in 2021. The first case against a corporate entity in 2021 is an interesting one because it reflects a coordinated settlement not only between DOJ and the SEC but the U.K.’s Serious Fraud Office and Brazil’s Ministério Público Federal (MPF), the Controladoría-Geral da União (CGU) and the Advogado-Geral da União (AGU) in Brazil. Amec Foster Wheeler Energy, a subsidiary of the U.K. global engineering company, Wood Group, agreed to pay the United States $18.375 million to resolve criminal charges for bribery payments made in Brazil to win a $190 million contract to design a gas-to-chemicals facility.  Amec Foster entered into a three-year deferred prosecution agreement (DPA) in exchange for its payment of $18.375 million. In related settlements, Amec Foster agreed to pay the SEC approximately $22.7 million in disgorgement and prejudgment interest to the SEC to resolve FCPA charges.  The SEC agreed to offset up to $9.1 million paid to Brazil and $3.5 million to the SFO in the United Kingdom, leaving a minimum payment of approximately $10 million to the SEC. In this Episode, Michael Volkov reviews the Foster Wheeler FCPA enforcement action.

Under Armour settled its long-pending SEC investigation by agreeing to pay $9 million surrounding misleading statements and practices relating to its revenue growth and uncertainties as to future growth. As part of the settlement, the SEC declined to bring charges against its CEO, Kevin Plank, and its CFO, David Bergman. The Justice Department inquiry appears to have lost steam since the middle of last year, and DOJ likely declined prosecution. Under Armour had been the subject of a long-running probe since 2019 when Under Armour disclosed the DOJ and SEC investigations into its accounting practices. The SEC’s case eventually focused on its revenue projections and accounting practices. In this Episode, Jonathan Marks from Baker Tilly and Michael Volkov discuss the Under Armour case and financial accounting fraud.

In a far-reaching action, the Biden Administration elevated the global fight against corruption as a national security interest.  In an Executive Memorandum, the Biden Administration made a strong statement against corruption, citing the devastating impact that corruption has on democratic institutions, democratic governments, economic development, and other public interest objectives.  The Administration launched a robust inter-agency review of the anti-corruption battle, including increased international cooperation, anti-money laundering enforcement, increased support of the Anti-Kleptocracy Initiative, and increased focus on beneficial ownership. In this Episode, Michael Volkov reviews the Biden Administration anti-corruption initiative.

LRN and NAVEX Global recently released two important annual surveys.  LRN issues a yearly report on ethics and compliance program effectiveness.  NAVEX Global issues an important annual report on incident management trends based on its large database of hotline data. In this Episode, Michael Volkov review these two reports and the important ethics and compliance trends. The NAVEX Global report can be downloaded here. The LRN survey is here.

The ransomware attack on Colonial Pipeline demonstrated yet again the failure of government and business to anticipate cybersecurity issues through traditional tools – risk and vulnerability analysis, implementation of technology and planning to minimize a cyber event, and crisis response protocol.  In the aftermath of this debacle, the public lined up to purchase gallons of gasoline because of a short-term shortage in gasoline.  These scenes of panic were a reminder of the impact that poor government and business risk management can have on public reaction. The Biden Administration issued a response quickly to update the government’s cybersecurity practices.  Federal agencies were directed to take a variety of actions to share information, strengthen cybersecurity practice and use new technologies to reduce cyber vulnerabilities. All of that is well and good but until the private sector is subject to various requirements relating to cybersecurity, not much is going to change. For example, there still is no actual federal corporate disclosure requirement to notify law enforcement and the public after a company suffers a cyber-attack or suffers a cyber incident.  Similarly, there are no specific standards set for any industry sector that companies must meet to protect against cyber-attacks. Companies and corporate boards have to address the cyber risk situation.  To do so, careful planning, assessments and coordinated strategies have to be designed and implemented.

The Biden Administration is expected to increase antitrust enforcement against criminal cartels and bid-rigging conspiracies.  Global companies have to address this significant risk by implementing a compliance program that meets the Justice Department's 2019 Guidance on Antirust Compliance Programs. In this Episode, Michael Volkov reviews the Antitrust Division's Guidance and compliance program requirements.

The Justice Department and the SEC have a long history of focusing FCPA enforcement on pharmaceutical and medical device companies.  Starting with a broad "industry sweep" nearly a decade ago, DOJ and the SEC have brought numerous enforcement actions.  In response, drug and device companies have attempted to implement effective compliance programs. In this Episode, Mike Volkov discusses FCPA enforcement trends and compliance strategies.

Compliance programs are rapidly evolving.  One of the key drives of this transformation is the increased reliance on automated compliance functions that generate substantial data.  Relying on data analytic strategies, compliance officers are quickly identifying key ares for measurement, monitoring and assessment as an important means to intervene and prevent serious misconduct. In this Episode, Michael Volkov reviews the rapid movement toward proactive compliance and strategies built on data monitoring and intervention.

In a precedent-setting agreement, the Justice Department, OFAC and the Bureau of Industry Security announced a settlement with SAP SE for more than $8 million for numerous violations of the Iran Sanctions program. While the Justice Department’s National Security Division (“NSD”) has settled prior export control and sanctions cases against corporations for violations of the North Korea Sanctions program, the SAP case is the first in which DOJ’s NSD flexed its new Export Control and Sanctions Enforcement Policy for Business Organizations, crediting voluntary disclosure, cooperation and remediation. Further, the SAP settlement provides important insights into DOJ’s export control and sanctions compliance expectations. The SAP case pushes DOJ’s views and expectations for export control and sanctions compliance programs.  Like the past history of enforcement actions and compliance program requirements involving the FCPA, DOJ’s SAP settlement is the beginning of a new, aggressive approach to export and sanctions compliance standards beyond those required by OFAC and BIS. In this Episode, Michael Volkov review the SAP settlement and outlines new export control and sanctions compliance expectations.