Novartis, KBR at Center of New FCPA Allegations

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We’ve seen two big stories concerning the Foreign Corrupt Practices Act (FCPA) come to light in the news media over the past few days. A report by The Huffington Post has alleged that “[h]undreds of major international corporations” including KBR, Rolls-Royce and Samsung hired Unaoil and that the company engaged in bribery of foreign government officials. Additionally, an anonymous internal whistleblower has accused Novartis of paying bribes in Turkey via a consulting firm to secure drugs on formularies.

Novartis Settles FCPA Investigation into China for $25 Million

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Novartis agreed to settle civil charges with the U.S. Securities and Exchange Commission on Wednesday into its healthcare practices in China. The settlement of the investigation into the Foreign Corrupt Practices Act will result in a payment of more than $25 million to the SEC by Novartis.

Corruption Reports Highlight Worldwide Bribery Problem in 2016

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The global problem of bribery isn’t going away anytime soon. Forty percent of all compliance officers reported the risk of bribery and corruption at their company will increase this year, according to the Kroll and Ethisphere Institute report released this morning: The 2016 Anti-Bribery and Corruption Report. Just 8 percent believed that their corruption risks would decrease in 2016.

FCPA Investigation of JPM Intern Program Proceeding

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The Wall Street Journal has published a story on a document generated as part of the government’s FCPA investigation into J.P. Morgan Chase which details the hiring of family members or friends of executives in most of the major Chinese IPOs the investment bank took public in Hong Kong. The individuals were hired into the bank’s intern program, known internally as the Sons and Daughters program.

SEC Director Emphasizes Self-Reporting of FCPA Violations

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The SEC Director of the Division of Enforcement, Andrew Ceresney, sent companies a message in the keynote address of the ACI’s 32nd FCPA Conference: If they do not self-report violations, they will not be eligible for a deferred prosecution agreement (DPA) or non-prosecution agreement (NPA).

More Securities News on Bribery, Conflict of Interests, Debt Rigging

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There’s been a few smaller stories this first week of November that would be of interest to securities whistleblowers, so we thought that we would briefly touch on them in a mid-week update.

Canada Advances Securities Whistleblower Program

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The Ontario Securities Commission (OSC) has released the latest version of its proposal for rewards to securities whistleblowers in Canada. The proposal would authorize payments of between 5 and 15 percent of the total monetary sanctions imposed and/or voluntary payments made as a result of the whistleblower’s information.

FCPA Report: Little Bribery by WalMart Outside India

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The Wall Street Journal is reporting that internal and government investigations into suspected violations of the Foreign Corrupt Practices Act (FCPA) by Wal-Mart Stores have not turned up the evidence of a massive bribery scheme that many commentators expected. Instead, the FCPA investigation discovered millions of dollars in improper payments to Indian officials to speed goods through customs or secure real estate permits but most of these payments were in small amounts of between $5 and $200.

However, there is still time for additional evidence to be uncovered before government officials make up their mind as to the potential size of any fine for the FCPA violations. One event that might alter the landscape of potential penalties would be if a whistleblower came forward with additional evidence and testimony concerning. The SEC whistleblower program incentivizes individuals with the promise of rewards of between 10 and 30 percent of monetary sanctions over $1 million that result from the information provided.

This series of events happened during the Government’s investigation into Countrywide. One of the mortgage whistleblowers in the case came forward with information about the Hustle loan program after the government investigation did not reveal the major misconduct.

The Government investigation of Walmart started in 2012 following public revelations by the New York Times and involved two dozen attorneys, investigators and agents at the DOJ, SEC, FBI and IRS. The results of the federal investigation reportedly match the results of the company’s own investigation.

Wal-Mart has spent more than $650 million as part of its investigation and efforts to bolster compliance. Initially starting in Mexico, it expanded to include, at a minimum, China, India and Brazil. Siemens AG, which paid $800 million to settle the investigations by the DOJ and SEC into its own bribery charges, reportedly spent more than $1 billion on its investigation and global remediation.

The article predicts that the potential government fine of WalMart will be well below previous estimates. In 2012, a Business Insider article calculated how the penalty imposed on the world’s largest retailer could reach over $13 billion. Instead, the Wall Street Journal surmised that because most of the bribery occurred in India and the company earned little profits in the country, there would be a relatively limited fine.

The WSJ story also suggests that there may not be any criminal charges against executives of Wal-Mart. Following the New York Times story concerning the potential cover up of millions of dollars of bribery in Mexico, this seemed unlikely. A grand jury was convened in the case but the status of it was not revealed by the article.

If you have evidence of bribery by a publicly traded corporation, contact one of our FCPA whistleblower attorneys for assistance reporting it to the U.S. Government. An attorney can be reached via our contact form or by calling 1-800-590-4116.

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Sevan Marine Reports Suspected Kickbacks to Brazil’s Petrobras

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A Norwegian contractor of Petrobras has announced the results of an internal investigation into its connections with Brazil’s Petrobras, concluding it is more likely than not that irregular payments were made during contract negotiations with Petrobras. Because Petrobras American Depository Receipts trade on the New York Stock Exchange and it is subject to reporting requirements, Sevan Marine may have violated the Foreign Corrupt Practices Act (FCPA).

Sevan Marine designs and makes cylinder platforms for offshore drilling and floating production. The company’s shares trade on the Oslo stock exchange. As such, it would not normally be subject to the reach of the SEC and the DOJ through the FCPA unless it is operating in the United States. However, because Petrobras is both a state-owned enterprise and itself covered under the FCPA, authorities may choose to bring an enforcement action against the company under a conspiracy theory or another option.

Sevan Marine is not the first company to be implicated in the Petrobras scandal. Transocean, a fleet of mobile offshore drilling units that trades on the New York Stock Exchange under the symbol RIG, is among the companies that may have violated the FCPA through payments to executives of Petrobras to obtain contracts. A Petrobras executive in Brazil testified that he received payments from an agent of the company for a rig-operation contract.

Corruption in Brazil has been a major story over the past year, since the billion dollar Petrobras scandal broke in the media. Other companies are now investigating the possibility of corruption internally if they won contracts in connection with either the FIFA World Cup or the 2016 Summer Olympics. Brazil, last I checked, was second in the geographic rankings for the country that served as the source of the most FCPA investigations. China is #1, by a large amount.

Questions about this or other FCPA issues? We have put together an informational guide for FCPA whistleblowers that may answer your question. If you have need additional information, contact one of our FCPA whistleblower attorneys. We can also assist you in reporting your evidence of bribery by a publicly traded company or other covered entity to the Securities and Exchange Commission. Please contact an attorney via our contact form or call 1-800-590-4116.

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UK FCA Promotes Whistleblowing

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The Financial Conduct Authority is adding additional rules to promote whistleblowing among financial firms following banking scandals such as the Libor rate manipulation.

The rules will go into force next year (September 2016) and require the covered firms to, among other things, appoint a whistleblower’s champion in senior management, educate employees and contractors about government whistleblowing services, and make an annual report to the board on whistleblowing.

The law also includes a provision requiring text in employment and settlement agreements explaining that workers have a right to blow the whistleblower. Settlement agreements in the UK are similar to separation agreements here in the US.

The law did not adopt whistleblower incentives, which were earlier considered by the agency but rejected. Rewards and retaliation protections are the primary mechanisms in the U.S. to promote whistleblowing.

In some ways, the laws mimic certain provisions previously adopted by the United States to increase and protect the individuals reporting corporate wrongdoing:

Whistleblower Education in the U.S.

The U.S. has previously adopted a similar education review in the context of Medicaid fraud. The Deficit Reduction Act of 2005 required health care organizations receiving or making annual Medicaid payments of at least $5 million educate their managers, employees, contractors and agents of the rights of whistleblowers, the federal False Claims Act and the relevant state laws and protections. The requirement went into effect in 2007.

If an organization knows or should know that it is not meeting these educational requirements of the U.S. Government, then the Government may bring a claim under the False Claims Act for the recovery of all claims under Medicaid during the noncompliance.

Confidentiality Agreements in the U.S.

The SEC and Congress in the FY2015 Budget have put in place restrictions that prohibit companies from barring employees from reporting violations of the federal securities laws (SEC) or fraud, waste and abuse in government contracts (False Claims Act).

Separation Agreements

One area where the UK FCA might be going farther than the United States law is in the required language in separation agreements providing for whistleblowers. Here in the United States, companies are doing everything that they can to limit the ability of individuals to take advantage of the whistleblower programs in separation agreements.

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