Overview
Enforcement of the Foreign Corrupt Practices Act (FCPA) in 2023 has been described as a lull, a continued downward trend, or a slump, but that may be “bullsh*t,” to quote an FCPA academic. However they are described, the 2023 FCPA statistics show a return to the median range in case numbers but an absence of any blockbuster cases with billion-dollar fines. The largest case, a joint enforcement action by the Department of Justice (DOJ) and Securities and Exchange Commission (SEC), resulted in a US$218 million penalty and, not surprisingly, involved a range of Asia Pacific countries. Out of the nine SEC actions in 2023, four involved companies with corporate conduct in Asia. Among the twelve DOJ actions, three involved an Asia nexus. These cases constituted 99.6% of the total US$521 million in SEC and DOJ fines in 2023.
Here are 2023’s top ten FCPA enforcement actions in the Asia-Pacific region.
1. Telefonaktiebolaget LM Ericsson
On March 2, 2023, Sweden-based telecommunications company Telefonaktiebolaget LM Ericsson pled guilty to two charges under the FCPA and agreed to pay over US$206 million for breaching its 2019 Deferred Prosecution Agreement (DPA) relating to alleged bribery schemes and other misconduct in China, Vietnam, Indonesia, Kuwait, and Djibouti. The DOJ also extended Ericsson’s monitorship an additional year.
In December 2019, Ericsson had agreed to a DPA under which it would pay over US$520 million in criminal penalties and submit to a three-year compliance monitor. It also paid US$540 million, in total, to the SEC for disgorgement and prejudgment interest, the second-largest FCPA settlement at the time. However, in October 2021, the DOJ notified Ericsson that the company had breached its DPA obligation in failing to disclose all factual information related to the China bribery scheme and other potential FCPA violations.
Also of note, media reports have linked a 2023 SEC award of nearly US$279 million to a whistleblower whose information and assistance led to the 2019 Ericsson settlement.
- Takeaway: Most DPAs are ultimately dismissed when a company fulfills the agreement terms, cooperates fully, and pays the required penalties, allowing the company to move forward without a tarnished record. While rare, companies should note that failure to comply with the terms of the DPA could potentially result in reinstated charges, additional penalties, and the extension of monitorship.
2. Albemarle Corporation
On September 29, 2023, Albemarle Corporation, a publicly-traded specialty chemicals manufacturing company headquartered in North Carolina, agreed to pay more than US$218 million to resolve DOJ and SEC FCPA investigations. According to the non-prosecution agreement (NPA), Albemarle bribed government officials to win businesses in Vietnam, Indonesia, and India by using third-party intermediaries.
Takeaway: The SEC pointed out that Albemarle failed to address the red flags in a series of internal audit reports in 2013, 2015, and 2016 that identified multiple gaps in Albemarle’s internal accounting controls.
3. 3M Company
On August 25, 2023, 3M Company agreed to pay more than US$6.5 million to resolve charges that its China-based wholly owned subsidiary violated the FCPA. The SEC’s order found that employees of the subsidiary, through a travel agency, provided Chinese government officials with overseas travel, including guided tours, shopping visits, and other leisure activities under the appearance of overseas conferences, educational events, and health care facility visits, for which it provided fake agendas to get approval and told the attendees to keep the true agenda private. In this way, the company induced employees of state-owned healthcare facilities to purchase 3M products.
Takeaway: 3M’s case exemplifies a practice in the healthcare sector – providing something of value to hospitals to secure the purchase of pharmaceuticals and, subsequently, concealing these payments in the financial records of third parties.
4. Clear Channel Outdoor
On September 28, 2023, Clear Channel Outdoor Holdings Inc. agreed to pay more than US$26 million to resolve charges that it bribed Chinese government officials to obtain outdoor advertising. Between 2012 and 2017, Clear Media, which, at the relevant time, was a Clear Channel majority-owned subsidiary in China, provided improper benefits to government officials, directly or indirectly, by using “cleaning and maintenance” vendors to obtain and renew concessions and advertising contracts in China. Despite repeated red flags raised by its internal auditors, Clear Channel failed to address the deficiency in internal accounting controls that allowed Clear Media to continue these improper payments for many years.
Takeaway: This case underscores the critical importance of diligently following up on the findings from internal audits; it also emphasizes the significance of conducting risk-based due diligence when dealing with third-party entities.
5. Koninklijke Philips N.V.
On May 11, 2023, Dutch medical supplier Koninklijke Philips N.V. agreed to pay more than US$62 million to resolve charges for violating the FCPA relating to its sales of medical diagnostic equipment in China. According to the SEC’s order, Philips’ subsidiaries in China used special price discounts with distributors that created a risk that excessive distributor margins could be used to fund improper payments to government employees. Moreover, employees, distributors, or sub-dealers of Philips’ subsidiaries in China engaged in improper conduct to influence hospital officials to draft technical specifications in public tenders to favor Philips’ products.
Takeaway: It is necessary for companies to design and implement internal accounting controls that are commensurate with the scope of their business operations – employees, distributors, and sub-dealers. In April 2013, the SEC charged Philips in connection with similar misconduct in Poland. Companies should recognize that internal accounting controls are not a one-time fix but an ongoing process that requires attention, adaptation, and resources to maintain compliance and financial integrity.
6. Samuel Bankman-Fried
In the first FCPA case involving cryptocurrency bribery, a superseding indictment against FTX founder Samuel Bankman-Fried (SBF) was issued on March 28, 2023, charging that he had authorized and directed the transfer of at least US$40 million in cryptocurrency to induce Chinese government officials to unfreeze certain cryptocurrency trading accounts, worth around US$1 billion. These bribery charges were severed from the seven fraud charges for which he was convicted in November 2023. SBF was supposed to go to trial on the FCPA charges in March 2024, but in December 2023, the DOJ announced it was dismissing the FCPA charges, given that he was already facing more than 110 years in jail.
Takeaway: “Anything of value” under the FCPA now refers also to cryptocurrency in addition to traditional cash, gifts, entertainment, employment opportunities, etc.
7. Ng Chong Hwa (Roger Ng)
On March 9, 2023, a former Malaysian Goldman Sachs banker, Ng Chong Hwa (a.k.a “Roger Ng”), involved in the 1 Malaysia Development Berhad (1MDB) case, was sentenced to 10 years in prison following his conviction for bribery and money laundering charges in April 2022. Ng conspired with others to circumvent Goldman Sachs’ internal accounting controls to launder billions of dollars, including funds 1MDB raised in 2012 and 2013 through three bond transactions it executed with Goldman Sachs. For further background, see our “The Top Ten Asia-Pacific FCPA Enforcement Actions” for 2019, 2020, and 2022.
Takeaway: Ng’s case illustrates the current trend in FCPA enforcement strategies to target not only corporate entities but also the individuals responsible for corrupt payments.
8. Trafigura
On December 6, 2023, Singapore-headquartered global commodities trader Trafigura said that it has been seeking to resolve investigations by regulatory authorities in the United States, Brazil, and Switzerland of payments made by former employees via third parties more than 10 years ago.
9. Inotiv
On May 23, 2023, Inotiv, an Indiana-based company providing non-clinical and analytical drug discovery and development services, received a voluntary request from the SEC seeking documents and information regarding possible bribery related to the importation of non-human primates from Asia.
10. Stryker
On May 2, 2023, Stryker, a Michigan-based corporation that manufactures and distributes medical devices and products around the world, disclosed that it had been contacted by the SEC and DOJ for possible FCPA violations. In 2013 and 2018, the SEC and Stryker settled two FCPA investigations related to violations of FCPA with fines of US$13.3 million and US$7.8 million, respectively, pertaining to bribes paid by Stryker subsidiaries in Argentina, Greece, Mexico, Poland, Romania, India, China, and Kuwait.
Conclusion
No record breakers or blockbusters among the 2023 FCPA enforcement actions, but they do include helpful reminders of traditional risks, such as third parties, gifts, hospitality, and overseas travel, but also of new risks, like cryptocurrency. Many of these cases also show that red flags, objective audit reports, DPAs, and monitorships actually provide opportunities to make things right before everything goes wrong. Finally, they demonstrate that there has not been a pivot away from Asia-Pacific, so expect similar numbers in 2024, probably in the healthcare sector.
