The International Trade Commission (ITC) issued an order on January 27, 2017,  barring the import table saws produced by German tool manufacturer, Robert Bosch GmbH (“Bosch”). The ITC determined that the components of Bosch’s REAXX safety technology infringed the two patents held by US-based SawStop LLC (“SawStop”).  As described in a press release at the outset of the ITC’s investigation, both the saws produced by SawStop and by Bosch contain active injury mitigation technologies which are able to detect when a user comes into contact with the blade can avoid catastrophic injury.

As the ITC had previously determined that Bosch’s saws infringed two of SawStop’s patents, the ITCs recent order was limited to Bosch’s request that the ITC forego any penalties and permit the continued importation of its saws because: (1) SawStop did not have the manufacturing and distribution capacity to meet US demand and (2) by preventing the import of Bosch’s safer saw, the ITC would be increasing potential injuries to consumers.  Indeed, Bosch cited to “millions or billions of dollars” in societal costs for severe injuries from the use of unsafe saws. Ultimately, Bosch’s argument that US consumers should be afforded the ability to buy saws with the latest safety technology (leaving aside the countless antiquated table saws that fill factories and wood shops across the country) was unpersuasive.  Further, the ITC appeared to accept that SawStop was capable of meeting demand and ordered that all of Bosch’s infringing saws be excluded.

In written responses released earlier this week, Senator Jeff Sessions of Alabama reaffirmed that he will enforce the Foreign Corrupt Practices Act and the International Anti-Bribery Act of 1988 if he is confirmed as US Attorney General.  Sen. Sessions was responding to the questions of Sen. Sheldon Whitehouse (D-RI), and others, following Sen. Session’s nomination hearing before the Senate Judiciary Committee.  Sen. Whitehouse’s question focused on a comment by President Trump during a 2012 interview in which President Trump referred to the FCPA as a “terrible law.”  [Editor’s note, President Trump refered to the FCPA as a “horrible law,” not a “terrible law,” during the 2012 interview].  Sen. Whitehouse asked:

13) President Trump has called the Foreign Corrupt Practices Act a “terrible law.” But the Act, as amended by the International Anti-Bribery Act of 1998, is the cornerstone of federal efforts to prevent and prosecute bribery of foreign officials by U.S. corporations, and to maintain a fair and level playing field for small and mid-size corporations doing business overseas. Since 2008, the federal government—DOJ, SEC, and the FBI—have maintained about 150 active investigations at any given time, resulting in $1.56 billion in fines in 2014.

Will you commit to continued vigorous enforcement of the Foreign Corrupt Practices Act and the International Anti-Bribery Act of 1998?

Sen. Sessions responded:

Yes, if confirmed as Attorney General, I will enforce all federal laws, including the Foreign Corrupt Practices Act and the International Anti-Bribery Act of 1998, as appropriate based on the facts and circumstances of each case.

One must take Sen. Sessions at his word and assume that the FCPA and Anti-Bribery Act will enforced to the letter of the law until there is an indication of a shift of DOJ priorities to the contrary.  As always, training and compliance programs remain the as a critical foundation for any company doing business abroad.

Earlier today, the Department of Justice announced that construction conglomerate Odebrecht SA and its affiliate Braskem SA have pleaded guilty to their maintenance of an elaborate bribery scheme which paid out approximately $788 million in bribes to government officials around the world since 2001.

To facilitate its massive bribery scheme, Odebrecht established its “Division of Structured Operations,” which federal prosecutors dubbed the “Department of Bribery.” The Division of Structured Operations operated on its own floor and used its own communication and computer networks. Code names and secure emails were used by those requesting bribes, bribe recipients, and financial institutions to make payments out of a ‘shadow budget.’ The shadow budget, which accounted for and tracked all bribe payments in complex spreadsheets, was comprised of funds funneled by Odebrecht into off-shore entities and then back into the Division of Structure Operations.

Under their respective plea agreements, Odebrecht and Braskem agreed to pay, at least, a combined $3.5 billion in penalties.  Odebrecht agreed with the DOJ that $4.5 billion would be an appropriate criminal fine, but has claimed that is unable to pay a fine of that amount.  Accordingly, the plea agreement states that Odebrecht will pay at least $2.6 billion, however, an ongoing review of Odebrecht’s ability to pay may result in Oberbrecht paying an amount closer to $4.5 billion. Braskem will pay approximately $957 million in criminal fines.  Brazil, where both of the companies are headquartered, will receive 80% of the fines and the United States and Switzerland will each receive 10%.  Notably, Oderbrecht was credited with 25% reduction in the fine sought based on its cooperation with investigators. Braskem was credited with a 15% reduction based on its partial cooperation.

This blockbuster plea agreement highlights the growing trend of global enforcement. While few companies will ever consider implementing a bribery scheme of the magnitude Odebrecht’s, even small acts to grease the wheels create a slippery slope and companies of all sizes must take precautions — through compliance and training programs — to make sure that a culture where bribery is condoned and supported never begins to gain momentum.

In a recently released report, TRACE International, an international anti-bribery business association, ranked 199 countries based on the risk of encountering bribery within the country’s public sector.

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Go to Interactive Map (credit: TRACE International)

The TRACE Matrix’s rating are based on four core domains: business interactions with government, anti-bribery laws and enforcement, government transparency, and capacity for civil oversight.  As part of the part of the business interactions with government domain, the report examines the extent to which business must interact with government officials and weight of regulatory burden which may increase the number of bribery opportunities as well as the reported expectation of businesses that they will have to pay a bribe somewhere along the way.  As part of the second domain, the report considers both enacted anti-bribery laws as well as the actual level of enforcement of any anti-bribery statutes. Government transparency is measured by indicators such as the public availability of government budgets and conflict of interest training conducted with civil servants.  Finally, the civil oversight domain examines the freedom of the press and social development.

Topping the list of least-bribery-prone countries were: (1) Sweden, (2) New Zealand, (3) Estonia, (4) Hong Kong, and (5) Norway.  The United States ranked 20th on the list, just behind Australia and Luxembourg and just ahead of Mauritius and Latvia.  Nigeria was ranked the most bribery prone country with Angola (198) and Yemen (197) rounding out the bottom three.

Assessing the potential risk of conducting business or routing supply chains through certain countries is the first step in managing potential liability under the Foreign Corrupt Practices Act. Even in the least risky countries, training and compliance programs are a necessity. However, in high risk countries, trainings must be tailored to anticipate the level of bribery and other corruption pressures which officers and employees will face with regularity.

The 15-member U.N. Security Council (the Council) imposed new sanctions on North Korea (also known as the Democratic People’s Republic of Korea or DPRK) on November 30, 2016 by unanimously approving a resolution imposing new sanctions — UN Security Council Resolution (UNSCR) 2321.

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The resolution is a clear response to North Korea carrying out its fifth and largest nuclear test so far in September 2016. The resolution tighten the sanctions adopted by the Council in March 2016 and is aimed at cutting North Korea’s hard currency that it uses to fund its prohibited weapons programs.

The sanctions impose a cap on coal exports, which is North Korea’s chief source of hard currency and constitutes about one third of North Korea’s export revenue. Pursuant to the resolution, North Korea can sell no more than 7.5 million metric tons of coal a year, or bring in no more than $400 million in sales, whichever comes first. In addition to restricting the export of coal, the resolution also bans North Korean copper, nickel, silver and zinc exports.

Two of the five permanent members of the Council, China and the United States, have been working together to pass the resolution. China is North Korea’s principal patron and coal customer. China’s permanent representative to the United Nations, Liu Jieyi, called on North Korea to halt its nuclear tests. He said the resolution demonstrated “the uniform stance of the international community.”

The U.S. Ambassador to the United Nations, Samantha Power, said that “the United States recognizes that China is working closely with us.” Power stated that “[n]o resolution in New York will likely, tomorrow, persuade Pyongyang to cease its relentless pursuit of nuclear weapons. But this resolution imposes unprecedented costs on the DPRK regime for defying this council’s demands.”

The resolution also requires countries to tell the United Nations how much North Korean coal they are buying and expands the list of banned items for import by North Korea, including luxury goods like rugs and tapestries valued over $500 and porcelain and bone china worth more than $100.

In addition to other export controls, the resolution also imposes banking restrictions and transportation restrictions. The resolution includes an expanded list of individuals and entities that are subject to travel bans and asset freezes, including North Korea’s ambassadors and envoys to Egypt, Sudan, Syria and Myanmar.

On December 2, 2016, the US Treasury Department’s Office of Foreign Assets Control announced related sanctions designations of additional individuals and entities with ties to the Government of North Korea or its nuclear and weapons proliferation efforts, and aircrafts blocked as property of a designated entity.

North Korea has been under United Nations sanctions since 2006 over its nuclear and ballistic missile tests. For United States businesses the resolution does not significantly change the status quo, as US law already prohibits nearly all activity involving North Korea. The resolution will primarily impact areas where North Korea has a strong international presence, including banking, transportation and commodities trade.

US President-elect Trump has promised to abandon the Trans-Pacific Partnership (TPP) trade deal as soon as he takes office. Trump has promised to leave the TPP, which took the Obama administration seven years to negotiate, and instead “negotiate fair bilateral trade deals that bring jobs and industry back on to American shores.”

The TPP is an agreement between 12 nations reached in October, 2015. The TPP sets forth a comprehensive trade framework covering goods and services, cross-border investments, intellectual property, the environment and many other topics of critical importance to companies engaged in international trade. The TPP aims to deepen economic ties between the member nations, cut tariffs and foster trade to boost economic growth.

The member nations are the US, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

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The text of the TPP still has to be signed and then ratified by all 12 signatories and then implemented by the individual nations’ legislatures. To take effect, the deal has to be ratified by February 2018 by at least six countries that account for 85% of the group’s economic output. This means that Japan and the US will need to be on board.

Earlier this month the TPP cleared its main hurdle in Japan’s parliament, but approval by the US is much less certain. It is likely that after the transition from President Obama to President-elect Trump, the US will no longer continue to work toward implementing the TPP.

Click here to learn more about the TPP.

In a pair of recent articles (available here and here), practitioners have been crunching the numbers, and 2016 is on near-record pace for Foreign Corrupt Practices Act (FCPA) enforcement action dispositions.  Through October, 2016 has seen 39 FCPA enforcement actions resolved, a pace that would have government agencies end the year with 48-plus dispositions and would be second only to the 72 dispositions in 2010.  Even if the number of enforcement action dispositions stays at 39, 2016 would still have as many or more dispositions than every other year since 2006.

The numbers are staggering, but what is driving this dramatic rise enforcement? A key contributing factor to this enforcement trend has been a significant increase in standalone FCPA enforcement actions brought by the SEC.  In fact, thus far in 2016, the SEC has resolved twice as many FCPA enforcement actions (26) than the DOJ (13). The SEC has not outpaced the DOJ in FCPA enforcement actions since 2007 when it resolved 20 actions to the DOJ’s 19.  Interestingly, the recent articles demonstrate that the SEC’s involvement in FCPA investigations is not a new phenomenon as the agency has been involved in 70% to 90% of FCPA investigations since 2006, though many of these were dubbed ‘parallel’ enforcement actions alongside the DOJ.  It also appears that the DOJ has recently turned its resources to pursuing high-value enforcement actions, potentially explaining the dramatic shift in the volume of actions resolved.

With enforcement at near record levels, companies must be more vigilant than ever with their FCPA compliance programs.  Further, as the SEC takes the lead in investigations and prosecutions, its agents may ask new questions and press compliance officers and their programs in new ways.  Therefore, it is imperative that companies continue to update and improve their FCPA compliance and training programs as there is no indication that this trend of enhanced enforcement is waning.

In an recent article on Law360, Robert W. Kent, Jr. looked at lessons to be learned from the first six months of the Department of Justice’s Foreign Corrupt Practices Act (FCPA) Pilot Program. Announced in April 2016, the year-long pilot program is designed to up the ante for companies during FCPA investigations by offering sentencing reductions or declinations (with disgorgement of all profits from the alleged misconduct) to companies that voluntarily disclose misconduct and cooperate fully while ostensibly restricting any cooperation credit for companies that no not meaningfully participate in an investigation.

Mr. Kent offers a number of insightful observations on the first six months of the pilot program. Among his many insights are a few key take-aways for companies of all sizes.

First, FCPA enforcement actions have increased dramatically. As of October, there have already been more enforcement actions announced in 2016 than in any full year prior. Whether this surge will continue remains to be seen, but companies must assume that this heightened level of vigilance is the new standard.

Second, the DOJ is publicizing the details of alleged misconduct with more detail in the past. The factual recitations of the alleged conduct, even in letters declining further investigation or prosecution, clearly outline the alleged schemes and those involved, and may tarnish a company’s relationship with partners and the public.

Third, the Yates Memo’s focus on individual accountability appears to be taking root as the DOJ and SEC have appeared to coordinate efforts, leading to SEC enforcement actions against four individuals in the past six months. The specter individual enforcement actions or criminal charges is a powerful deterrent and one the DOJ and SEC seem ready to use as part of the current enforcement push.

Finally, a bit of good news for companies in the midst of the government’s enforcement surge, the DOJ and SEC are recognizing and crediting the value of robust FCPA compliance programs. In numerous releases regarding FCPA resolution, the DOJ and SEC have focused on the responsiveness of compliance programs when allegations of misconduct arise internally. Subsequent internal investigations which include the strict preservation of evidence and aid from internal investigators to government agencies in deciphering global financial data are similarly lauded. Nevertheless, the ability to identify and report potential misconduct will always require training employees and executives at every level. Therefore, while the yield from the internal investigations may garner leniency from the DOJ or SEC, training which will allow the company to identify misconduct and start the process of internal investigation and self-disclosure must not be understated.

At the half-way point, the FCPA pilot program is proving to be a genuine catalyst for changing how FCPA violations are reported and investigated. In April, the DOJ said that it would re-evaluate the need to continue the pilot program after a year. However, another six months like this and we may have arrived at a new FCPA enforcement status quo, pilot program or none.

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On September 13, 2016, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) announced a $4.3 million settlement with international seed producer and exporter PanAmerican Seed Company (“PanAm Seed”). In its official statement regarding the enforcement action, OFAC alleges that PanAm Seed faced statutory and civil penalties in the amount of $12 million for “egregious” violations of US sanctions against Iran.

OFAC alleges that between May 2009 and May 2012, PanAm Seed repeatedly violated US export controls by exporting seeds to two Iranian distributors. As part of the alleged scheme, PanAm Seed made 48 sales to consignees in unrestricted countries who would then reexport the seeds the Iranian distributors. Among the aggravating factors which led this case to be labeled “egregious,” OFAC noted that the Iranian sanctions program permits the export of certain agricultural products (likely including the seeds in question) under a specific license; however, PanAm Seed knowingly chose not apply for a specific license and instead chose to pursue its reexportation scheme. OFAC also cited PanAm Seed’s sophistication and substantial international sales when discussing its reckless disregard for its OFAC compliance responsibilities and knowledge of its mid-level managers of the intent to reexport seeds to Iran. Finally, despite mitigating efforts to implement compliance programs and PanAm Seed’s history of compliance, OFAC repeatedly noted that PanAm Seed did not self-report these violations and initially refused to cooperate in OFAC’s investigation.

It is difficult to understand why PanAm Seed chose not to seek a specific license which would have permitted the exports in question and avoided this significant fall out. Whether it was a lack of clarity regarding the scope of the Iranian sanctions program, a failure of the company’s employees to appreciate the ramifications of violating OFAC sanctions, or some combination of the two, this “egregious” case likely could have been avoided with comprehensive training and compliance structures which could not be evaded by transparent sales to consignees. Ensuring that training and compliance programs are up-to-date and genuinely robust may be the single most important thing a company to do to protect itself against future claims of misconduct, egregious or otherwise.

UK-Based biopharmaceutical company AstraZeneca agreed to pay the U.S. Securities and Exchange Commission (SEC) $5.5 million to settle claims that its Chinese and Russian subsidiaries had made improper payments to state-controlled health care providers in violation of the Foreign Corrupt Practices Act (FCPA).

In an order released earlier this week, the SEC outlined both the claims against AstraZeneca and the company’s cooperative and remedial efforts which were taken into account as part of the settlement.

Between 2007 and 2010 in China, sales staff made payments and gave gifts to physicians and administrators to ensure that state-owned health care providers would purchase AstraZeneca products. In one scheme described in the SEC Order, Chinese sales staff paid individuals for their appearance at fabricated speaking engagements. The conduct in Russia occurred between 2005 and 2010 and similarly paid members of state-owned health care providers to use AstraZeneca products.

AstraZeneca did not self-report its violations; however, it was still able to work toward a settlement based on its cooperation with the SEC. The SEC specifically noted that AstraZeneca disclosed documents and information collected during its own internal investigation including translations of key documents. The SEC also cited AstraZeneca’s remedial efforts including creation of a centralized compliance program with key compliance individuals placed in high-risk markets. AstraZeneca also took appropriate steps with regard to the employees involved ranging from trainings and reassignment to lower-risk areas of responsibility to voluntary separations and dismissals.

Yet again, full and complete cooperation appears to be the key to forging settlement of FCPA claims. Even after failing to self-report, the SEC lauded AstraZeneca’s cooperation and the information that the company’s internal investigation provided which would not have been discernable without the company’s assistance. In addition, the SEC recounted the numerous remedial steps that AstraZeneca undertook. If a company does not have the capacity to guide its own internal investigation or plan and implement remedial measures, it should contact a law firm that has the knowledge and resources to help the company make meaningful contributions to the investigation of any claims that arise.