This Week in Compliance

This Week in Compliance: OSI Systems investigated for potential FCPA violations

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

Business

  • Korean court releases Samsung heir from prison: One year into detention, the South Korean appeals court released Samsung’s Vice Chairman Jay Y Lee from prison after suspending his bribery sentence. Lee had appealed his first 5-year sentence which the court reduced by half, but said that Lee would be on probation for four years. Former Samsung Corporate Strategy Office and former President also received suspended prison terms after being sentenced to four years in prison. The decision to release Lee is far from unfamiliar: over the years, other South Korean business executives, including Lee’s father, had been tried in court for corruption only to receive suspended sentences. The judge, however, denies allegations of collusion between business and politics and maintained that there was no evidence the defendants had requested or gained benefits from offering a bribe to former president Park and concluded that Park “browbeat” the defendants into giving the bribes.
  • Nestle ends relationship with Guatemalan company investigated for corruption: Nestle reported terminating its relationship with Guatemalan company Reforestadora de Palmas del Peten S.A. (Repsa) – a pioneer in palm cultivation in Central America – after the latter was accused by Guatemala’s prosecutors of bribery to receive tax credits. Nestle reported that it will follow through with all existing contracts with Repsa, which are set to end by September, yet will not renew any of these. The same statement was confirmed by Respa, which also confirmed that it will cooperate with authorities on the investigation. Last December, global commodities trader Cargill had also suspended purchases from Repsa.
  • OSI Systems investigated for potential FCPA violations: The DOJ and the SEC are investigating OSI Systems’ compliance with the Foreign Corrupt Practices Act. OSI Systems makes screening and inspection equipment for airport and border security, and for medical applications. The investigations were initiated following a report filed by short seller Muddy Waters last December alleging that OSI Systems had paid bribes using a joint venture with an Albanian construction company to secure major contracts in Albania. Reportedly, the SEC and DOJ are also investigating trading in the OSI’s securities. The OSI reported that it has taken action against a senior-level employee in relation to the trading allegations, yet the company denies the corruption allegations.

Government

  • Police recommends indictment of Prime Minister Netanyahu: The Israeli press reported that the police would recommend the indictment of Prime Minister Netanyahu on charges of bribery and breach of trust. Netanyahu confirmed that he could be implicated in a police corruption investigation but reassured his supporters in a Facebook video message that the allegations against him would amount to nothing and that they were merely part of a political campaign to unseat him. The police have also recommended that his wife, Sara, be indicted on a charge of misuse of funds. According to a police spokesman, the two investigations – dubbed case 1000 and case 2000 – in which Netanyahu has been named suspect are also coming to an end. The allegations revolved around whether Netanyahu accepted lavish gifts in exchange for political favors, or cut a deal with a newspaper publisher to receive favorable coverage.
  • Nigerian judge and chairman of the Code of Conduct tribunal accused of bribery: Nigeria’s anti-graft body EFCC accused the country’s top judge overseeing corruption cases against public officials, Danladi Umar, of demanding NGN 10 million (USD 27,800) from a suspect to afterwards return the favour in relation to a pending charge. The judge had allegedly also received NGN 1.8 million in 2012 from the same suspect through his personal assistant. Danladi Umar chairs the Code of Conduct tribunal, and had, last year, acquitted Senate president Bukola Saraki of corruption charges linked to false asset declaration and money laundering during his time as a state governor between 2003 and 2011. The EFCC appealed the acquittal of the senate president and a panel of judges ordered a retrial of three out of the 18 charges against him.

Noteworthy

  • SFO deepens probe into Petrofac: The UK Serious Fraud Office (SFO) is expected to deepen its corruption probe into Petrofac by questioning more members of its top management in connection with the Unaoil scandal. The SFO launched an investigation into Petrofac already in May last year on allegations that the company secured service contracts worth USD 2 billion in Kazakhstan via Unaoil. At the time, the company’s chief executive Ayman Asfari and chief operating officer Marwan Chedid were arrested for questioning before being released without charge. The investigation saw USD billions wiped from Petrofac’s market value, and despite that the company has denied the allegations, its share price is still almost half what it was prior to the investigation. Petrofac investors have been warned that other senior members of the board, directors and employees, are expected to be questioned leading Petrofac shares to further slump by 3.5pc to 506p.
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