This Week in Compliance

Corruption-Plagued Odebrecht Files for Bankruptcy Proceedings

Welcome to This Week In Compliance: GAN’s weekly news roundup, where we curate the latest stories on compliance and anti-corruption to keep you informed. This week we cover Odebrecht’s bankruptcy proceedings. Read the full story and more news below:

Top Story

  • Corruption-Plagued Odebrecht Files for Bankruptcy Proceedings: Odebrecht, the Brazilian construction conglomerate, said it is filing for bankruptcy protection on Monday, aiming to restructure USD 13 billion in debt. Odebrecht has been struggling since 2014 when it was first revealed that the company was at the center of a massive kickbacks scheme involving many high-ranking politicians and executives at Petrobras. The company and it’s petrochemicals unit Braskem pleaded guilty to violating the FCPA and paid fines totalling USD 3.5 billion. Since the scandal broke, the number of employees at the company has decreased from 180,000 to 50,000 today, also reflecting broader difficulties in the Brazilian market. In a statement, Odebrecht said that the job losses are a result of “the economic crises that frustrated many of [our] investment plans, the reputational impact of the mistakes made and the difficulty for companies when they collaborate with the justice system,” The company has said it will continue to operate normally during the debt restructuring. Read more:

Business

  • KPMG settles SEC charges for USD 50 million: KPMG agreed to pay a USD 50 million fine to the SEC to settle civil charges that former partners used stolen information to learn about surprise regulatory reviews of the firm’s audits and allegations of cheating on exams. The charges were settled using an internal administrative order. KPMG admitted the SEC’s findings and allegations. In addition, KPMG agreed to hire and independent consultant to assess the remedial measures taken and compliance with ethics and integrity requirements. KPMG audit personnel who had passed mandatory training exams required by the Public Company Accounting Oversight Board (PCAOB) sent answers to colleagues to help them pass the exams. Six accountants were charged last year by the DOJ and SEC with misappropriation and utilizing confidential information about planned PCAOB inspections. A former KPMG partner and a former PCAOB official have both been convicted on criminal charges. KPMG fired five partners and another employee after the investigation started.
  • Expedia fined USD 325,000 for breaching Cuba sanctions: Travel agency Expedia Group has agreed to pay roughly USD 325,000 to the U.S. Treasury to resolve sanctions violations according to the Office of Foreign Assets Control (OFAC). Expedia violated U.S. sanctions between April 2011 and October 2014 by assisting 2,221 people, among them Cuban nationals, with travel or travel-related service for travel within Cuba or travel between Cuba and other locations outside the U.S. According to OFAC, the violations occurred because “certain Expedia foreign subsidiaries lacked an understanding of and familiarity with U.S. economic sanctions law […]”. In one case, Expedia failed to inform its subsidiary that it was subject to U.S. jurisdiction and law until 15 months after it had acquired it. Expedia voluntarily self-disclosed the violations to OFAC, cooperated with the investigation, and implemented remedial measures to strengthen its sanctions compliance program.
  • Novartis’ secret settlement talks revealed in accidental filing: Confidential settlement talks between the U.S Government and the Swiss pharmaceutical giant, Novartis concerning allegations that the company paid doctors to market its products, were accidentally made public this Tuesday. The information revealed that there is a ‘monetary aspect’ in the settlement procedures and that the company is currently negotiating a new corporate integrity agreement in order to upgrade their overall compliance efforts. Novartis is accused of paying thousands of doctors for speaking trips, fishing trips, and restaurant outings to boost sales of their diabetes medications. Under the proposed settlement, including enhanced compliance measures, Novartis would still be allowed to take part in US federal health care programs. A spokesman from the pharmaceutical company confirmed they are engaged in ongoing talks to settle the dispute in a litigation at the Southern District of NY.

Government

  • Former Paris mayor faces prison over corruption charges: Public prosecutors for the city of Paris have called for the former mayor of the affluent Paris suburb of Levallois, Patrick Balkany, to be sentenced to seven years in jail and a ten year bar from public office. The request, which also included the sentencing of Balkany’s wife for four years in prison, occurred after they were both found to be guilty of corruption, tax evasion and money laundering. Balkany, who has had a long political career tainted with scandals, was found, among other things, to have placed over USD 14.5 million in offshore accounts, having evaded wealth tax from 2010-2015, and having acquired a property in Marrakesh through money laundering by means of falsifying contracts.
  • OECD: Sweden must urgently implement reforms to boost fight against foreign bribery: The OECD Working Group on Bribery has continuously urged Sweden since 2012 to tighten its institutional efforts for the prosecution of companies engaging in bribery of foreign public officials in international business. Sweden’s current regulatory framework does not meet the OECD Anti-Bribery requirements on Combating Bribery of Foreign Public Officials in International Business Transactions. In a recent meeting with high level representatives of the OECD Working Group on Bribery, Swedish Ministers and Members of Parliament, Swedish authorities confirmed that revised legislation taking into account OECD key recommendations would be put into force in 2020.
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