A court in Paris Thursday acquitted 14 companies of bribing the former Iraqi regime to win contracts under the the U.N. oil-for-food program.
Entries in Novo Nordisk (7)
Pharmas have told their sales teams to halt all activity in China to avoid being caught in the nationwide “enforcement storm,” according to the Guangdong-based Yangcheng Evening News.
China state media reported Saturday that French drugmaker Sanofi SA is under investigation for allegedly bribing doctors to increase sales.
Larry Buterman (left) from Chadbourne & Parke's New York office sent us an article he published in the Bloomberg Law Reports. It explains why the Justice Department's enforcement actions in the U.N. oil for food cases don't allege antibribery offenses under the Foreign Corrupt Practices Act. The reason: the kickbacks typically went directly to the Iraqi government and not to foreign officials. "[B]y their express terms," he says, "the FCPA's antibribery provisions apply only to payments made to those connected to the government. Payments to a government itself, in contrast, are not covered by the FCPA." (Also see our post here.)
The oil for food program probably helped a lot of average Iraqis. But it also funded the pre-war regime in a systematic, unaccountable and illegal way. Buterman says, "According to a United Nations' Independent Inquiry Committee, between 1999 and 2003, over 2,200 separate companies abused the [program] by making improper payments, totaling over $1.5 billion, to the Iraqi government in order to obtain goods contracts." The entities charged with violations have settled, taken deferred prosecution agreements, and paid about $170 million in fines, penalties and disgorgements. "And," he says, "given the DOJ's July 31, 2009 announcement that it plans to seek extradition of Ousama Naaman—a Canadian national charged with violating the FCPA in connection with the OFFP—it appears the government's vigorous enforcement efforts in the area are continuing."
We turned to footnote 3 in the article for the following list of OFFP-related enforcement actions by the DOJ and SEC (we've added last week's case involving AGCO Corporation). The Netherlands, Denmark, and the U.K have also punished companies for violating the U.N. Iraqi sanctions.
Here's the DOJ / SEC list (with related cases grouped together and linked to our original posts):
U.S. v. AGCO Limited, No. 09-cr-00249 (D.D.C. 2009); U.S. Sec. & Exch. Comm'n v. AGCO Corporation, No. 09-cv-01865 (D.D.C. 2009) (here)
U.S. v. Novo Nordisk A/S, No. 09-cr-00126 (D.D.C. 2009); U.S. Sec. & Exch. Comm'n v. Novo Nordisk A/S, No. 09-cv-00862 (D.D.C. 2009) (here)
U.S. v. Naaman, No. 08-cr-00246 (D.D.C. 2008); U.S. v. CNH Frances S.A., No. 08-cr-00379 (D.D.C. 2008) (here)
U.S. v. CNH Italia S.p.A., No. 08-cr-00378 (D.D.C. 2008); U.S. v. Iveco S.p.A., No. 08-cr-00377 (D.D.C. 2008); U.S. Sec. & Exch. Comm'n v. Fiat S.p.A., No. 08-cv-02211 (D.D.C. 2008) (here)
U.S. v. Volvo Constr. Equip., AB, No. 08-cr-00069 (D.D.C. 2008); U.S. v. Renault Trucks SAS, No. 08-cr-00068 (D.D.C. 2008); U.S. Sec. & Exch. Comm'n v. AB Volvo, No. 08-cv-00473 (D.D.C. 2008) (here)
U.S. Sec. & Exch. Comm'n v. Flowserve Corp., No. 08-cv-00294 (D.D.C. 2008) (here)
U.S. Sec. & Exch. Comm'n v. Akzo Nobel, N.V., No. 07-cv-02293 (D.D.C. 2007) (here)
U.S. Sec. & Exch. Comm'n v. Chevron Corp., No. 07-cv-10299 (S.D.N.Y 2007) (here)
U.S. v. Ingersoll-Rand Italiana S.p.A., No. 07-cr-00294 (D.D.C. 2007); U.S. Sec. & Exch. Comm'n v. Ingersoll-Rand Co. Ltd., No. 07-cv-01955 (D.D.C. 2007) (here)
U.S. v. York Int'l Corp., No. 07-cr-00253 (D.D.C. 2007); U.S. Sec. & Exch. Comm'n v. York Int'l Corp., No. 07-cv-01750 (D.D.C. 2007) (here)
U.S. Sec. & Exch. Comm'n v. El Paso Corp., 07-cv-00899 (S.D.N.Y. 2007) (here)
U.S. Sec. & Exch. Comm'n v. Textron Inc., No. 07-cv-01505 (D.D.C. 2007) (here)
A copy of "Enforcement Without a Violation: FCPA Lessons From the Government's Investigation Into the Oil for Food Program," by Lawrence E. Buterman, originally published in the Vol. 1, No. 3 edition of the Bloomberg Law Reports—White Collar Crime, can be downloaded here.
RIP Craig Johnson. A founder of both Venture Law Group and, more recently, Virtual Law Partners, Craig was an inspirational figure in Silicon Valley and far beyond. He was many things -- great lawyer, venture capitalist and entrepreneur. With Guy Kawasaki and Rich Karlgaard he co-founded the influential Garage Technology Ventures. We knew him as a warm and engaging colleague, a man with the courage to think for himself; to many others he was a generous, good-humored mentor, unstinting with his encouragement. Our sympathies to his wife, RoseAnn Rotandaro, and his entire family.
During the second quarter there were, by our count, eleven Foreign Corrupt Practices Act enforcement actions. They involved four companies -- three firms resolved criminal or civil charges, or both, and one disclosed an investigation -- and 13 individuals who were either indicted, put on trial, pleaded guilty or sentenced. Here's the rundown:
Joseph T. Lukas (June 29, 2009) Guilty plea to a two-count criminal indictment.
Lukas, 60, a partner in Nexus Technologies Inc. until 2005, was indicted in September 2008 on one count of conspiracy to bribe Vietnamese public officials in violation of the Foreign Corrupt Practices Act and one substantive count of violating the FCPA. He admitted in his guilty plea that from 1999 to 2005, he and other Nexus employees agreed to pay, and knowingly paid, bribes to Vietnamese government officials in exchange for contracts with the officials' agencies. At his sentencing scheduled for April 2010, he faces up to 10 years in prison and a possible $350,000 fine.
The 2008 indictment also charged Nexus and alleged co-conspirators Nam Nguyen, Kim Nguyen and An Nguyen, all U.S. citizens, with similar violations. Their cases are still pending.
William Jefferson (June 9, 2009) The start of his federal criminal trial in Alexandria, Virginia.
It's the first time a former member of congress has been prosecuted under the Foreign Corrupt Practices Act. Jefferson, 62, faces up to 20 years in prison. He's accused of violating the FCPA by arranging bribes to African officials to win contracts for his family's companies, and with soliciting and accepting bribes, wire fraud, money laundering and obstruction of justice. He lost an election last year for a 10th term in the House of Representatives from a district that includes New Orleans.
Frederic Bourke (June 1, 2009) The start of his federal criminal trial in Manhattan.
The co-founder of luxury handbag brand Dooney & Bourke is accused of investing in a deal in Azerbaijan in 1998 that he knew involved paying bribes to officials there. He faces up to 30 years in jail for conspiring to violate the FCPA, money laundering and lying to federal investigators. Bourke says he didn't know about the bribery. His co-defendant Viktor Kozeny is a fugitive in the Bahamas.
United Industrial Corporation (UIC) (May 29, 2009) Civil enforcement action resolved.
The Securities and Exchange Commission filed a settled enforcement action against UIC, an aerospace and defense systems contractor. UIC agreed to pay $337,679.42 in disgorgement and prejudgment interest. (See also Thomas Wurzel below.)
Thomas Wurzel (May 29, 2009) Civil enforcement action resolved.
The SEC filed a settled enforcement action against Thomas Wurzel, the former president of UIC's one-time subsidiary, ACL Technologies, Inc.. He agreed to pay a $35,000 civil penalty. The SEC said Wurzel authorized illegal payments to Egyptian Air Force officials in 2001 and 2002 through an agent in return for business related to a military aircraft depot in Cairo.
Wurzel and UIC were charged with violating the antibribery, books and records and internal controls provisions of the Foreign Corrupt Practices Act; Wurzel also faced aiding and abetting violations.
Novo Nordisk A/S (May 11, 2009) Criminal and civil enforcement actions resolved.
Denmark-based Novo Nordisk agreed to pay a $9 million criminal penalty and enter into a deferred prosecution agreement with the DOJ for illegal kickbacks paid to the former Iraqi government under the U.N. oil-for-food program. It also agreed to pay $3,025,066 in civil penalties and $6,005,079 in disgorgement of profits, including pre-judgment interest, to the SEC.
The DOJ charged Novo with one count of conspiracy to commit wire fraud and to violate the books and records provisions of the FCPA. In the civil enforcement action, the SEC charged Novo with violating the FCPA's books and records and internal controls provisions.
Sun Microsystems (May 7, 2009) Investigation disclosed.
Sun said in an SEC filing that it may have violated the FCPA. It didn't reveal where the payments might have occurred or how much the bribes amounted to. But it said the potential offenses, which it has reported to U.S. and other authorities, "could possibly have a material effect on our business."
Juan Diaz and Antonio Perez (April 27, 2009) Guilty pleas to a one-count criminal information.
Diaz and Perez, both 51 of Miami, pleaded guilty to a one-count criminal information. They were charged with conspiracy to violate the FCPA by making corrupt payments to officials from Telecommunications D'Haiti. Diaz paid and concealed $1,028,851 in bribes while acting as an intermediary for three private telecommunications companies. Perez arranged bribes of $674,193 to the Haitian officials while he worked as a controller at one of the companies from March 1998 to January 2002.
Stuart Carson, Hong (Rose) Carson, Paul Cosgrove, David Edmonds, Flavio Ricotti, and Han Yong Kim (April 9, 2009) Indicted by a federal grand jury.
The six former executives of Control Components Inc., an Orange County, Calif.-based valve company, were charged with conspiracy to violate the FCPA and the Travel Act, violating the FCPA, and as to Hong (Rose) Carson, one count of obstruction. It was the biggest multi-party indictment of individuals yet under the FCPA.
Earlier this year, two other former executives from Control Components admitted paying bribes to foreign officials and have been cooperating with authorities. Richard Morlok, 55, the former finance director, and Mario Covino, 44, the company's former director of worldwide factory sales, pleaded guilty to one count of conspiracy to violate the FCPA. They're sentencing is set for July 20, 2009.
Shu Quan-Sheng (April 7, 2009) Sentenced to prison.
The Virginia-based physicist who sold controlled space-launch technology to China by bribing government officials there was sentenced to 51 months in prison. Shu, 68, a native of China and naturalized U.S. citizen, pleaded guilty in November 2008 to one count of violating the FCPA and two counts of violating the Arms Export Control Act. Shu had already forfeited $386,740 to the federal government before being sentenced to prison.
Latin Node Inc. (April 7, 2009) Criminal enforcement action resolved.
The former privately held Florida telecommunications company pleaded guilty to a one-count criminal information and agreed to pay a fine of $2 million over the next three years. It was charged with violating the FCPA's antibribery provisions by making improper payments in Honduras and Yemen.
Click on the party names for the original posts, with links to the charging documents, plea agreements, and news and litigation releases.
View our enforcement report for Q1 '09 here.
View our 2008 enforcement index here.
Denmark-based Novo Nordisk A/S will pay a $9 million criminal penalty and enter into a deferred prosecution agreement with the Justice Department for illegal kickbacks paid to the former Iraqi government under the U.N. oil-for-food program. It will also pay $3,025,066 in civil penalties and $6,005,079 in disgorgement of profits, including pre-judgment interest, to the Securities and Exchange Commission.
The DOJ charged Novo in U.S. District Court for the District of Columbia with one count of conspiracy to commit wire fraud and to violate the books and records provisions of the Foreign Corrupt Practices Act.
Novo manufactures insulin, medicines and other pharmaceutical supplies. Between 2001 and 2003, it paid about $1.4 million to the former Iraqi government by inflating the price of contracts by 10 percent before submitting them to the United Nations for approval. It then concealed from the U.N. the amount of the kickbacks included in its prices. Novo also admitted it inaccurately recorded the kickback payments as commissions in its books and records.
The deferred prosecution agreement has a term of three years. The DOJ didn't charge the company under the FCPA's anti-bribery provisions. It said Novo conducted a "thorough review of the illicit payments" and implemented "enhanced compliance policies and procedures. "
In the civil enforcement action, the SEC charged Novo with violating Section 13(b)(2)(A) of the Exchange Act [15 U.S.C. §78m(b)(2)(A)] for failing to keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflected its transactions and dispositions of its assets. It also charged the company under Section13(b)(2)(A) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)] for failing to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (i) payments were made in accordance with management's general or specific authorization; and (ii) payments were recorded as necessary to maintain accountability for its assets.
The SEC said Novo paid kickbacks in three ways:
Initially, Novo Nordisk wired the kickback to [its] Agent's account at the Arab Bank in Amman, Jordan as an advance on his commission. The Agent would then Wire the funds to an official Kimadia account at the Rafidain Bank in Amman, Jordan. [Kimadia is the Iraq State Company for the Importation and Distribution of Drugs and Medical Appliances.] After Kimadia received the kickback payment, the Iraqis authorized the opening of a letter of credit and then Novo Nordisk shipped the goods to Iraq.Novo Nordisk's ADRs trade on the New York Stock Exchange under the symbol NVO.
Later, Novo Nordisk informed Kimadia that it could not pay the ten percent kickback before it received payment from the U.N. as it was not easy for [Novo's] Athens office to authorize large advance payments to the Agent.
Thereafter, Kimadia no longer required the kickback be made upfront, and instead insisted on a bank guarantee. [The Agent in Jordan] opened a bank guarantee from the Arab Bank payable to Kimadia's account at the Rafidain Bank in Jordan. Eventually, Kimadia informed Novo Nordisk that it would no longer accept bank guarantees paid to its account at the Rafidain Bank. Instead, Kimadia provided Novo Nordisk with an account number where the kickback was to be paid.
Download the DOJ's May 11, 2009 release here.
Download the May 11, 2009 criminal information against Novo Nordisk A/S here.
View the SEC's Litigation Release No. 21033 dated May 11, 2009 in Securities & Exchange Commission v. Novo Nordisk A/S, Civil Action No. 1:09-CV-00862 (D.D.C.) (EGS) here.
Download the SEC's civil complaint against Novo Nordisk here.