This Week in Compliance

This Week in Compliance: DOJ Issues Declination for Possible FCPA Violations

Here’s what’s been going on in the compliance world this week: 

Business

  • DOJ issues declination for possible FCPA violations: The U.S. Department of Justice said on Monday that it will not prosecute U.K. engineering firm Guralp Systems Limited (GSL) for possible FCPA and money-laundering violations. The news comes after the U.K’s Serious Fraud Office (SFO) announced that it has charged Guralp’s founder (see story below) as well as a top official with the Korea Institute of Geoscience and Mineral Resources (KIGAM) with bribery offenses. The DOJ said that Guralp Systems voluntarily self-disclosed the offending conduct in a timely manner and the DOJ is satisfied that the company has undertaken significant remedies” efforts. The declination follows an announcement by the DOJ in May that it would avoid ‘piling on’ investigations underway at other agencies.
  • The UK’s Serious Fraud Office charges two people over South Korean bribes:Two former employees of an instrument and monitoring company were charged by the UK’s Serious Fraud Office (SFO) with bribery this week. The two employees, Dr. Cansun Guralp and Andrew Bell were charged with conspiring to bribe an employee of the Korea Institute of Geoscience and Natural Resources (KIGAM), based in South Korea. The SFO said the acts were committed between April 2002 and September 2015. In October 2017, KIGAM’s former director Heon-Cheol Chi was sentenced to 14 months in federal prison. The DOJ said he used a Southern Californian bank account to launder bribes received from two unnamed seismological companies.
  • Slovenia-based infrastructure firm debarred by World Bank: Slovenian firm Flycom d.o.o. has been debarred by the World Bank for 18 months for engaging in corrupt practices in relation to a project in the Democratic Republic of the Congo. The project in question is the Southern Africa Power Market Project, which was designed to build up the infrastructure for generating and transmitting electricity in the country. Flycom made improper payments to a consultant engineer between 2010 and 2014. The World Bank reduced Flycom’s debarment because it cooperated with the investigation and accepted responsibility for the actions. The company has also undertaken remedial efforts.
  • KPMG fined by UK’s Financial Reporting Council over audit: Auditing firm KPMG was fined GBP 2.1 million by the UK’s Financial Reporting Council (FRC) after it admitted misconduct in its audit of Ted Baker Plc’s financial statements in 2013 and 2014. The misconduct in question relates to KPMG supplying an expert witness to Ted Baker in a London lawsuit, which constituted a breach of ethical standards as KPMG lost its independence in respect to its audits for the company. One of KPMG’s partners, Michael Francis Barradell was fined GBP 46,800 over the misconduct. The fine follows a warning from the FRC in June that KPMG’s audit work is unacceptable, after being fined GBP 3.1 million for its audits in 2013 for tech firm Quindell Plc.

Government

  • Fat Leonard scandal sees three new indictments: A retired U.S. Navy captain and two other senior enlisted men have been charged with accepting bribes from a Singapore-based defense contractor. The men face up to twenty years in prison if convicted of the charges. The Fat Leonard scandal centers around Leonard Glenn Francis, the owner and CEO of Glenn Defense Marine Asia, a company that provides tugboats, security, fuel, and other services to U.S. Navy ships across Asia. Francis pled guilty in 2015 to running a decades-long conspiracy involving tens of millions of dollars in fraud and additional millions in bribes. The three indicted men are accused of, in exchange for bribes, using their influence with the Navy’s Seventh Fleet to approve inflated invoices from Glenn Defense Marine Asia and direct ships to ports controlled by the company.
  • President Trump’s former personal lawyer Michael Cohen pleads guilty: Michael Cohen, President Trump’s former personal lawyer reached a plea deal with prosecutors as he pleaded guilty to eight criminal charges in a Manhattan federal court. The charges included tax evasion, bank fraud, and campaign finance violations. Cohen told the judge that he had arranged to pay off two women for their silence “in coordination with, and at the direction of, a candidate for federal office […] for the principal purpose of influencing the election.” While Cohen did not name Trump in court, his lawyer later indicated Cohen was referring to the president. However, most legal experts say a sitting president cannot be indicted for a crime.
  • Belarus’ president fires prime minister over corruption: Andrei Kobyakov, Belarus’ prime minister was fired by strongman president Alexander Lukashenko. In addition to Kobyakov, several other vice-premiers and the ministers for economy and industry have been removed from their posts. The firing relates to a corruption scandal over the summer that involved the country’s health services. Authorities arrested dozens of top health officials, medics, and pharmaceutical representatives over charges that they had siphoned off millions in state funding. Lukashenko has ruled Belarus since 1994.

Noteworthy

  • Novartis hires new compliance chief from Siemens after compliance troubles: Swiss pharmaceutical giant Novartis has hired its new compliance chief from Siemens following settlements in corruption cases in China, South Korea, and the U.S. in the preceding years. The firm is still facing scrutiny in Greece, Russia, and Asia. Novartis has also come under scrutiny over payments it made to Michael Cohen, President Trump’s formal personal lawyer. The company has called these payments, which have been construed by some outsiders as paying for access to the administration, ‘a mistake’. Novartis’ general counsel resigned over the allegations in May. Novartis’ new chief compliance officer, Klaus Moosmayer, spent a decade at Siemens helping to build up its compliance program after widespread bribery practices were revealed at the firm.
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