FCPA Compliance and Ethics Blog

December 30, 2011

Top Ten 2011 Enforcement Actions-Corporate Division

As December is a time for reflection on the past twelve months, I have been considering the FCPA Enforcement Action year. I submit for your consideration my Top 10 FCPA Enforcement Actions for 2011 in the Corporate Division. Happy and Safe New Year to all and we will see you next week in 2012 with our list of Top FCPA issues from 2011.

1.         Alcatel-Lucent ($137MM) or non-cooperation will cost you.-the company lost between $10MM to $20MM in penalty reduction because its initial investigative counsel did not fully cooperate with the DOJ after self-disclosure.

2.         AON-($16.2MM)(NPA) or it’s still not a good thing to send that foreign official to Disneyland-the world wide insurer Aon was issued an NPA for setting up a “educational fund” which paid for travel and entertainment of Nicaraguan insurance officials and then not recording it properly.

 

3.         Armor Holdings ($10.29MM)(NPA) or you can step back from the abyss-the company which had 92 separate instances of disguising bribes yet was able to obtain a NPA, through self-disclose, cleaning house, remediation and implementing a best practices compliance program.

4.         Bridgestone ($28MM)-don’t double down a FCPA violation by adding Anti-Trust violationsthe company was found to have engaged in both bribery of foreign officials by using such corrupt acts in furtherance of bid-rigging.

5.         JGC ($218.8MM)-and then there were nonethe final corporate conclusion of the infamous Bonney Island, Nigeria Bribery Scandal. Joining with previously settled defendants, Halliburton, Technip and Snamprogetti/ENI to bring a total settlement amount of over $1.5 billion. Four of the top 6 FCPA settlements of all-time came out of this enforcement action and that does not even count the $147MM in disgorgement agreed to by Jeffery Tessler.

6.         Johnson and Johnson ($77MM)-enhanced compliance obligations, the new normal?-not only did J&J agree to implement a minimum best practices compliance program, it also agreed to “enhanced compliance obligations”.

7.         Maxwell Technologies ($14.3 MM) –start you day with a risk assessmentone of several cases where the DOJ specified some of the parameters of the risks you should assess to inform your compliance program. Further the implementation or enhancement of any anti-corruption compliance program should occur after and not before you complete your risk assessment. (Same holds true for the UK Bribery Act)

8.         SciClone ($2.5MM to date) or the plaintiff’s bar finds compliancenot an enforcement action but the settlement of a shareholder derivative action during the pendency of a FCPA investigation, where the company agreed to implement a best practices compliance program. Settlement of the enforcement action is yet to come.

9.         Tenaris ($8.9MM) or the SEC joins the DPA party-the first instance of the SEC entering into a Deferred Prosecution Agreement for the settlement of civil FCPA violations.

10.       Watts Water ($3.7MM) or it is a good thing to keep up with the news-the company’s General Counsel read about an enforcement action involving a non-related company in a different industry but with the same sales model as his company and wondered if it the same sales model might be a FCPA problem for his company. It was.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2011

June 27, 2011

Silver Lining to the FCPA or How to Create Jobs by Following the Law

As most baseball fans know, the Houston Astros, after being tied with the Boston Red Sox through the first six games of the season with joint 0-6 records, the teams have gone their separate ways. The Red Sox have gone 44-25 and now lead the American League East. The Astros have gone 27-43 and now have the worst record in baseball. I mention this for two reasons; the first is that the Red Sox come to Houston for a 3 game set of Interleague Play, beginning July 1, so please wish us some luck as we will need it; and the second is the stunning triumvirate of articles which appeared Friday and Saturday in the Wall Street Journal (WSJ) and New York Times (NYT) pointing out the positives of the Foreign Corrupt Practices Act (FCPA). For those of you keeping score at home; it was two in the WSJ and one in the NYT.

Even at this point I cannot pronounce which of the three articles was more stunning for they all had aspects which have not been previously seen in print; that is, at least not in print in America’s top two newspapers.

I.                WSJ-Defense of the FCPA

One thing I had not expected to see in the WSJ was any type of defense of the FCPA. On Friday, June 24, reporter John Bussey wrote an article entitled, “The Rule of Law Finds Its Way Abroad-However Painfully.” He began his article by noting the internal investigation that Avon is currently conducting regarding possible violations of the FCPA and that Avon has spent over $100 million on this internal investigation to-date.

However, Bussey, quite quickly, moved into one of the positive aspects of the FCPA. He stated:

The silver lining? The FCPA—passed in 1977 and still controversial with many U.S. companies—may be proving more effective than any other U.S. initiative in extending the rule of law into developing markets. For all its warts, the rules are changing the often lawless marketplace abroad.

He went on to report  that while the US was initially a leader in enacting anti-bribery and anti-corruption legislation, many other countries have now passed similar legislation. Many US companies operate  internationally and “now heavily vet their potential suppliers, partners and acquisitions abroad and have extensive training and compliance programs on the FCPA. U.S. business groups from Egypt to Singapore to China run briefings on the law.” Further many US companies are now the “greatest proselytizers” of rules and regulations against corruption and bribery across the globe.

He also reported that the FCPA is having an effect on the world-wide fight against corruption and bribery. Jeffrey Eglash, a lawyer for GE was quoted as stating, “It’s having an impact, and vendors and suppliers increasingly adopt our policies and embrace our training.” Alexandra Wrage stated that what may have been acceptable conduct in the past, regarding bribery to obtain business, was no longer acceptable, “If a Wal-Mart or General Electric or Pfizer can convey to tens of thousands of partners, suppliers, distributors and other intermediaries world-wide that antibribery compliance is valued, the norms would change.”

II.             WSJ-Alcoa Speaks

In a second article on Friday, June 24, in the WSJ online edition, entitled “Alcoa Exec Says Business Leaders Should Stick Up For The FCPA”. Alcoa Vice President for Sustainability and Environment, Health and Safety, Bill O’Rourke, was quoted in remarks he made to the Carnegie Council roundtable earlier this month, on a question about the importance of having these anti-corruption rules, such as in the FCPA, in place and the interest of America in having anti-corruption and anti-bribery laws in place globally. O’Rourke stated in part:

It’s myopic for the business leaders not to take a stance. Business is in a position now to make more of an influence on how the world is run than we have taken. Business needs to stand up and take positions, and not be afraid to. They should be standing up and taking these positions. It’s even in their own self-interest to have those rules in place to protect us when we are in certain jurisdictions and we can point to them. That could be self-interest.

But it’s the right thing to do. It’s myopia that is going on in an awful lot of corporate practices—that this might hurt me or my image might get distorted because of that. It’s just the opposite. Your image might get raised a little bit if you start speaking out on the right issues.

O’Rourke provided a concrete example of how the FCPA had helped Alcoa in Russia when faced with numerous solicitations for bribes from towns Alcoa was transporting equipment through. Alcoa simply said they would not pay. It told the Russian federal government that if it wanted Alcoa’s business, which included its modern equipment to refurbish aging Russian factories, that Alcoa would not pay bribes to transport Alcoa equipment on trucks through Russia. He said the Alcoa approach worked because the company was “sticking to our guns.” The people in Russia realized that it was a benefit to do business with Alcoa and that they would make money the old fashioned way-by earning it.

III.           NY Times – Tyson Foods – Why No Prosecution of Individuals?

Taking a somewhat different approach, and certainly a different view, was James Stewart, writing in the Saturday, June 25 edition of the NYT in an article entitled, “Bribery, but Nobody Was Charged”. In this article, Stewart detailed conduct not only violative of the FCPA in Tyson Food’s Mexican food processing facility but also detailed discussions internal to Tyson about ways to shift the illegal payments after they were initially discovered.

Stewart reported that Tyson Foods’ Mexican food processing facility was paying the wives of the Mexican food inspector as if they were employees while they did no work at the facility. After this was discovered, a “group of executives ‘were tasked with investigating how to shift the payroll payments to the veterinarians’ wives directly to the veterinarians,’ according to a subsequent statement of facts negotiated by Tyson’s lawyers and the Department of Justice (DOJ). Stewart then wrote that a subsequent memo written by Tyson’s audit department concluded that the “doctors [the wives] will submit one invoice which will include the special payments formally [sic] being made to their spouses along with there [sic] normal consulting services fee.” The invoices would be identified as “professional honoraria.” Stewart found this conduct by Tyson to be one of “only finding a new way” to make the same payments which violated the FCPA. Stewart did name some of the Tyson Foods’ executives involved in the meetings detailed in the above events:

  1. President of Tyson International Operation – Gregg Huett
  2. Vice President for Operations
  3. Vice President for Internal Audit
  4. Chief Administrative Officer – Greg Lee

Stewart reported that when he contacted Tyson Foods’, a company spokesman told him that all company officials involved with this matter were “either no longer with the company or were disciplined.” I certainly hope those folks who engaged in or approved any bribery scheme were terminated.

IV.            The Upshot

What is the upshot of these three articles and how do they relate to the Astros and Red Sox? Just as the Red Sox have clearly turned their season around by getting back to their strengths, the FCPA has many strong, positive aspects which were not discussed in the recent House Judiciary Committee hearings on FCPA enforcement. In contrast to last year’s Senate hearings, neither Chairman Sensenbrenner nor any of the other House panel members seemed concerned about the lack of individual prosecutions under the FCPA. Stewart’s article clearly names some of the Tyson Foods’ executives who were involved in the decisions around the company’s conduct which was found to violate the FCPA but none of the named individuals were charged.

However, it was the two WSJ articles which seemed to most directly contradict the thesis that the House Republicans were trying to articulate; that somehow the DOJ’s enforcement of the FCPA is costing US companies jobs. It is not the FCPA which costs US companies jobs, but the failure of other countries to adopt and enforce the Rule of Law which allows companies from other foreign countries to engage in bribery and corruption which causes US companies to lose business. Both Bill O’Rourke of Alcoa and several persons interviewed by John Bussey for his article pointed out the positive benefits of the FCPA and how it allows US companies to lead the world into a stance of greater rejection of corruption and bribery to successfully secure and transact business.

Indeed, the Alcoa example is one precisely anticipated by the legislators who enacted the FCPA. In the Preamble to the FCPA, one of the reasons listed for its enactment is that by having such robust anti-corruption legislation in place, US companies could more easily resist the demand for payment of bribes by corrupt foreign officials. One of the guiding principles of a robust FCPA compliance and ethics business program for a US company is to have a Code of Business Ethics which prohibits bribery and other forms of corruption of foreign governmental officials and most US companies doing business internationally have such a Code in place. These Codes uniformly cite FCPA inspired language which prohibits such conduct. This enables a US company employee transacting business overseas to correctly and accurately state that his or her employer specifically prohibits the payment of bribes and engaging in corruption. Such a strong statement of US policy, when delivered by an individual employee, may be the strongest manifestation of the goal of this final prong listed in the Preamble to the FCPA; a tangible business reason, why a US company must not, cannot, and will not engage in corruption of a foreign official.

The House Committee also focused the alleged loss of jobs by US companies due to the FCPA. Just imagine how many jobs that Avon could have created if it had not engaged in “possible” FCPA violations and did not have to spend north of $100 MM to internally investigate these “possible” FCPA violations. Even Tyson Foods, with a scorecard of no individual prosecutions for self-admitted violations, could have used some of its reported $5.2MM in fines and penalties paid to the DOJ and Securities and Exchange Commission (SEC) to create jobs. So maybe the answer to job creation is not to amend the FCPA but that US companies should do as DOJ witness Greg Andres stated at the House hearing and not engage in bribery.

Alas the Astros have now become the first team to reach the 50 loss mark in the Major Leagues this year. Unfortunately it does not appear that the Astros have such strong basics to a fall back on this year so the only way the Astros may relate to this discussion of the FCPA is to conclude that we may only be able to enjoy the show the rest of the year.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2011

February 15, 2011

Tyson Foods DPA-Part II: Compliance Program Best Practices under the FCPA

In this post we are concluding our review of the Tyson Foods settlement, which both the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) announced last week, of its violations of the Foreign Corrupt Practices Act (FCPA). In yesterday’s posting we discussed the reasons for the settlement and the specifics of the monetary penalty assessed against Tyson Foods. In today’s posting we will discuss the requirements set forth in the Corporate Compliance Program, which is found as Attachment C to the Tyson Foods Deferred Prosecution Agreement (DPA) and our thoughts on why the Tyson Foods matter falls directly into conduct which the FCPA is designed to prevent.

I. Corporate Compliance Program
As indicated the Corporate Compliance Program is set forth in Attachment C of the DPA. Although made specific to the facts and circumstances surrounding the Tyson Foods enforcement action, it nevertheless gives a full picture of the DOJ’s current thoughts on the minimum compliance policies and procedures for a best practices FCPA compliance program. Interestingly, the DOJ set out the basis for the Corporate Compliance reporting which Tyson Foods is required to make under its DPA. The five bases are:
1. Tyson Foods has “already engaged in significant remediation related to the misconduct” at issue and “implemented and enhanced compliance program”.
2. Approximately 85-90% of Tyson Foods sales are domestic.
3. Tyson Foods operates 6 production facilities outside the US; 3 in Brazil and 3 in Mexico. All 6 have had “rigorous FCPA reviews”.
4. Tyson Foods only direct government customers are domestic US. and
5. The problematic operations in Tyson Foods’ Mexican entity, which led to the underlying FCPA violations, comprise less than 1% of Tyson Foods global net sales.

In addition to more well-known factors that the DOJ/SEC utilizes in assessing a company’s conduct during a FCPA enforcement action are a couple of factors not previously discussed. Those are factors 3, 4 and 5 above. Recognizing that there is no de minimus requirement or defense in the FCPA, nevertheless these factors may set a precedent for examples a company may use in negotiations with the DOJ/SEC on a go-forward basis. They are:
1. FCPA Compliance Policy and Tone at the Top. The Company should develop and promulgate a clearly articulated and visible corporate policy against violations of the FCPA and a strong commitment from senior management.
2. Anti-Corruption Policies and Procedures. The Company should develop and promulgate compliance standards and procedures which shall include policies governing:
a. gifts;
b. hospitality, entertainment, and expenses;
c. customer travel;
d. political contributions;
e. charitable donations and sponsorships;
f. facilitation payments; and
g. solicitation and extortion.
3. Use of Risk Assessment. The Company should develop these compliance standards and procedures using a risk assessment.
4. Annual Review. The Company should review its anti-corruption compliance standards and procedures, on no less than an annual basis.
5. Senior Management Oversight and Reporting. The Company should assign responsibility to one or more senior corporate executives of the Company for the implementation and oversight of its Company’s anti-corruption policies.
6. Internal Controls. The Company should ensure that it has a system of internal controls for the purpose of foreign bribery or concealing bribery.
7. Training. FCPA training which shall include: (a) training for all directors and officers, and, where necessary and appropriate, employees, agents, and business partners; and (b) annual certifications, certifying compliance with the training requirements.
8. Ongoing Advice and Internal Reporting. The Company should establish or maintain an effective system for (a) Providing Guidance; (b) Internal Reporting; and (c) Response to such internal reporting.
9. Discipline. The Company should have appropriate disciplinary procedures to address, violations of the anti-corruption laws and the Company’s anti-corruption compliance code, policies, and procedures.
10. Foreign Business Representatives. The Company shall (1) Perform appropriate due diligence on foreign business representatives; (2) Inform foreign business partners on its FCPA compliance program; (3) Seek reciprocal anti-corruption and anti-bribery commitments from its foreign business partners.
11. Compliance Terms and Conditions. The Company should include FCPA terms and conditions in its contracts with foreign business partners.

12. Ongoing Assessment. The Company should conduct ongoing assessments of its FCPA compliance program.In the evolving best practices for a FCPA compliance program, as set forth in the Tyson Foods DPA, we would note a relatively new factor to be considered in a company’s risk assessment. That is found in Section 3 of Attachment C; wherein the risk assessment shall take into account the following factors when assessing the risks of foreign bribery: (1) the company’s geographic organization; (2) interaction with foreign governments; and (3) industrial sector of operation.

This final factor would appear to require a risk assessment to include the industry to which the company operation is embedded. Presumably this would include foreign government licenses, permits or other approvals which a US company would be required to obtain in operations overseas. As Tyson Foods required a veterinarian’s inspection of its Mexican food products, this requirement may focus directly on Tyson Foods. Noted FCPA specialist Michael Volkov, has opined he believes “that the DOJ is trying to refine its compliance program expectations and baseline requirements.” The addition of language reflects DOJ’s “experience with industry-wide investigations through which it learns basic practices in the industry and wants to ensure that compliance programs address specific risks arising from the industry practice.” Whatever the correct answer may be, this new factor is something which all US companies should now include in their overall FCPA risk assessment.

We would also note that will Tyson Foods is required to make three reports to the DOJ, which shall incorporate “the Department’s views and comments on Tyson’s prior reviews and reports, to further monitor and assess whether the policies and procedures of Tyson are reasonably designed to detect and prevent violations of the FCPA and other applicable anticorruption laws.” The reader will note that the most significant part of this obligation is that it does NOT include an external corporate monitor.

II. Applicability of FCPA
In his post entitled, “Tyson Foods Settles FCPA Enforcement Action Involving Mexican Veterinarians and Their No-Show Wives” our colleague the FCPA Professor stated:

Yet another FCPA enforcement action raises the issue of whether the FCPA’s “obtain or retain business” element means anything anymore or whether the FCPA, contrary to Congressional intent, has morphed into an all-purpose corporate ethics statute and – in a game of chicken – companies opt to settle rather than mount a legal defense.

We believe that the Tyson Foods enforcement action is precisely the type of matter that Congress intended to outlaw by passing the FCPA. In the DPA Attachment A, entitled “Statement of Facts”; it relates that fictitious and fraudulent payments were made to wives of federal meat inspectors who had regulatory supervision over the Tyson Foods Mexican food processing operation. Paragraph 19 of the “Statement of Facts” related that a Tyson Foods official noted that the payments to the wives were to keep the TIF [Mexican federal inspectors] veterinarians “from making trouble at the plant…” For a food processing plant, there does not sound like a much more solid basis for “keeping or retaining business” than by paying off, through their wives, the federal inspectors.

Although this “Statement of Facts” did not detail precisely just what the inspectors were paid to overlook, I think it is reasonable to assume that there was a quid pro quo for payments that were made. Even if there was no overt action, or commission by affirmatively approving food products which should have been destroyed because they did not meet code; the simple of fact of omission in failing to timely inspect can be equally troubling and illegal. I think it is also fair to assume that if Tyson Foods had adequate records of inspections, it would have produced them in this enforcement action.

The FCPA was passed in 1977 to deal with a US problem; that being US companies were paying bribes to foreign governmental officials to obtain or retain business. It is a supply side solution to a supply side problem. While the US government cannot control the fact that a federal food product inspector in Mexico may ask for or accept a bribe in exchange for not banning or quarantining an unsafe food product, the DOJ/SEC can and should prosecute companies which pay food inspectors to do so.

In an article, dated February 12, 2011 in the New York Times, entitled “Tyson Settles U.S. Charges of Bribery” Richard Cassin, author of the FCPA Blog, is quoted. He stated “It raises the question whether there were food safety issues in the plants that were overlooked because of the bribery.” He also stated that this information made him consider the safety of some of the food products which may have come out of this facility. These observations drive home one of the points which the FCPA Blog posts upon regularly, and did so again on Friday in a post entitled “Playing Chicken With The Rule Of Law”. It is that public graft is simply not a victimless crime. The posting quoted Elizabeth Spahn, on the issue of petty bribery, “Like it or not, we are all in this together. Everybody gets hurt.”

Here the actions of Tyson Foods executives may have put the American public at a health risk, by allowing us to eat food that was not been properly inspected, based upon simple bribery to keep the Mexican federal inspectors “from making trouble at the plant”. This certainly sounds like Tyson Foods was using this illegal scheme to obtain or retain the business of the American food eating public.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.
© Thomas R. Fox, 2011

February 14, 2011

Tyson Food’s DPA-Part I: A Lesson in Criminal Penalty Reduction under the FCPA

On February 10, 2011, Tyson Foods announced a settlement of outstanding violations of the Foreign Corrupt Practices Act (FCPA) with the Department of Justice (DOJ) and Securities and Exchange Commission (SEC). As reported by the FCPA Blog, the Tyson Foods agreed to pay a $4 million criminal penalty and $1.2 million in disgorgement and pre-judgment interest to resolve charges related to illegal payments by company representatives to government-employed inspection veterinarians in Mexico and a cover-up of the payments. This settlement had several interesting elements which should be noted by the FCPA practitioner. We will explore these developments in our next two postings. Today’s post will focus on the detailed discussion of the reasons for the settlement and the specifics of the monetary penalty assessed against Tyson Foods.

Initially we would note that in this settlement, the DOJ continues its recent course of action in providing greater specificity in the basis upon which the final settlement was concluded. We applaud the DOJ for this course of action and hope they will continue to do so. By providing such transparency, the DOJ affords greater information on its procedures to the compliance community.

I. The Facts

The fact pattern would seem to be precisely the scenario that the FCPA was designed to prevent. Tyson Food’s Mexican subsidiary, Tyson de Mexico, between the years of 2004 and 2006, paid $90,000 to two publicly-employed veterinarians who inspected its Mexican plants, generating profits for Tyson of $880,000. The payments went directly to the veterinarians and to their wives who were listed on the payroll of Tyson de Mexico. The bribes were intended to keep the veterinarians from disrupting the operations of the meat-production facilities. When these payments were discovered by Tyson Food’s in the US in 2004 and thereafter terminated, Tyson representatives made the same amounts of payments through the creation of fictitious invoices for veterinarian services to the wives of the inspectors to match the amount previously paid to their spouses.

II.        Tyson’s Conduct after Self-Disclosure

As stated in the Deferred Prosecution Agreement (DPA), the DOJ entered into the DPA with Tyson based, in large part, because of the conduct of Tyson Foods after it self-disclosed the matter to the DOJ. The DOJ noted the following factors:

a. Tyson voluntarily disclosed the misconduct described in the Information and Statement of Facts;

b. Tyson conducted a thorough internal investigation of that misconduct;

c. Tyson reported all of its findings to the DOJ;

d. Tyson cooperated in the DOJ’s investigation of this matter;

e. Tyson undertook remedial measures as described in the DPA;

f. Tyson agreed to continue to cooperate with the DOJ in any investigation of the conduct of Tyson and its directors, officers, employees, agents, consultants, subsidiaries, contractors, and subcontractors relating to violations of the FCPA;

g. Tyson cooperated and agreed to continue to cooperate with the SEC in its investigation of the conduct of Tyson and its directors, officers, employees, agents, consultants, subsidiaries, contractors, and subcontractors relating to corrupt payments and related false accounting and internal controls issues.

All of these actions by Tyson make clear that after disclosure, the best course of action that a company can engage in during an enforcement action is full cooperation with the DOJ and SEC. Followed immediately behind this full cooperation, a company should pro-actively institute remedial measures regarding the conduct which led to the FCPA violation; and a full review, assessment and audit of its FCPA compliance program. Companies which wait to be told what the DOJ wants to see in terms of a best practices FCPA compliance program would not be as likely to receive such credit by the DOJ in settlement negotiations regarding the penalty assessment.

III. Assessment of Monetary Penalty

We were very impressed that the DOJ set out in detail the calculation on how the monetary penalty was assessed. We set it out in full below.

6. Payment of Monetary Penalty: The Department and Tyson agree that application of the United States Sentencing Guidelines (“USSG” or “Sentencing Guidelines”) to determine the applicable fine range yields the following analysis:

a. The 2006 USSG are applicable to this matter.

b. Base Offense. Based upon USSG 2Cl.1, the total offense level is 28, calculated as follows:

(a)(2) Base Offense Level— 12

(b)(1) More than one bribe— +2

(b)(2) Value of benefit received more than $400,000— + 14

TOTAL OFFENSE LEVEL— 28

c. Base Fine. Based upon USSG §8C2.4(a)(l) and (d), the base fine is $6,300,000 (the fine indicated in the Offense Level Fine Table ($6,300,000) is used where such number is greater than the pecuniary gain to the organization from the offense ($880,000).

d. Culpability Score. Based upon USSG §§8C2.5, the culpability score is 4, calculated as follows:

(a) Base Culpability Score—5

(b)(1) Organization had 1,000 or more employees and 311individuals within high-level personnel of the organization participated in, condoned, or was willfully ignorant of the offense— +4

(g)(1) The organization, prior to an imminent threat of disclosure or government investigation, within a reasonably prompt time after becoming aware of the offense, reported the offense, fully cooperated, and clearly demonstrated recognition and affirmative acceptance of responsibility for its criminal conduct.— (negative)-5

e. Calculation of Fine Range.

Base Fine— $6,300,000

Multipliers 0.8— (minimum)/1.6(maximum)

Fine Range— $5,040,000 to $10,080,000.

Tyson agreed to pay a monetary penalty in the amount of $4,000,000. The key for the overall reduction in the criminal penalty paid by Tyson is found in the following: The organization, prior to an imminent threat of disclosure or government investigation, within a reasonably prompt time after becoming aware of the offense, reported the offense, fully cooperated, and clearly demonstrated recognition and affirmative acceptance of responsibility for its criminal conduct. So the three key points to be derived from this language are:

  1. Self-disclosure;
  2. Full cooperation; and
  3. Recognition and affirmative acceptance of responsibility.

Once again, we applaud the DOJ for setting forth in such full detail these calculations and this information in  Tyson Foods DPA. In tomorrow’s post we will review the best practices in a FCPA compliance program, as suggested by the Tyson Food’s DPA and some additional issues. Until then, Happy Valentine’s Day to all….

For a copy of the Tyson Food’s DPA, click here.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2011

 

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