Category: Compliance

French Competition Authority will cut fines 10% for companies with compliance programs.

More recognition across Europe that a well-built and delivered compliance program is being taken into consideration by regulatory authorities comes from France today as the Competition Authority published notice that it would reduce fines for companies that put into place a competition law compliance program. They note and recommend that an “an efficient program” include the following basic elements:

  • The existence of a clear, firm and public position of support adopted by the company’s management bodies;
  • The commitment to appoint one or more persons responsible for the program’s development and operation;
  • Developing information tools, awareness raising measures and staff training;
  • Setting up management, audit and whistle blowing mechanisms;
  • Establishing a system for reviewing reports of misconduct and taking relevant followup actions.

It’s edifiying to witness the principal of reducing sanctions for companies with an effective compliance program spread out to other areas of corporations law. This is a very welcome development for compliance officers and legal departments who can leverage it to demonstrate the value of their programs.

Finally, it wouldn’t be a surprising to see 1) every market leader (or near-leader) in the EU adopt a compliance program and 2) compliance programs being considered in sanctions on in other aspects of corporate behavior, especially in the financial and energy sectors.


US DOJ brings in FBI to investigate News Corp bribes to Scotland Yard.

FOXNews Headquarters

When details emerged last July that employees of News International (the press arm of News Corp) had possibly bribed 5 Scotland Yard police officers, the FCPA red alert must surely have sounded in News Corp’s legal department. Since then, News has brought in a number of heavy hitters to cover them, including immediately hiring Mark Mendelsohn from Paul Weiss Rifkind (a former deputy chief of the Fraud Section in the DOJ’s Criminal Division –  who helped devise the FCPA enforcement program) and the D.C. firm of Williams & Connolly, specialists in corporate compliance matters.

That the US DOJ has been working closely with UK investigators should come as no surprise to anyone following this matter and last month’s arrest of five alleged bribery scheme participants on criminal charges likely gave the signal to make public FBI involvement in the investigation.

Legal coverage for a necessarily international internal compliance investigation and evidence gathering (as well as putting together multiple defenses) will obviously generate considerable business for all the firms involved.

Since News earned over $30 billion last year, it can probably afford the attorney fees and any fines it will incur. However, facing criminal charges is a different ballgame and News would be remiss to not leverage its populist news media outlets to portray the investigation as politically motivated. Serving time in prison is an incredible motivator.

If you are interested in delving into the details of the UK Leveson Inquiry and its rogues gallery of hackers, hacked and outright despicable characters, the Guardian (which broke the story) does it very well.

Photo: Jim Henderson

$16.8M fine for European device maker in FCPA settlement.





The US DOJ announced today that Smith & Nephew has admitted to and settled claims related to an offshore kickback scheme with a Greek distributor. Smith & Nephew also settled today with the US SEC, paying $5.4 million in disgorgement of profits, including interest.

This is one more in a line of FCPA cases where the weak link in a company’s compliance program turns out to be 3rd party distributors and pressure to bring in revenue.

A recurring motif in communications with resellers is a version of “all the other resellers are doing it, if I don’t, I can’t compete”.  It seems to be a trap that is too easy to fall into for some executives.

The DOJ noted that it will seek to have the original charges dismissed if Smith & Nephew abides by the terms of its settlement agreement.

P.I.P. Implants: French Health Authorities aware in 1996.

According to French daily Libération, a report delivered this morning to the French Ministry of Labor and Health confirms that P.I.P. implants were tested by independent physicians in 1996 who reported that they found leakage issues.

Moreover, the report cites 41 reported P.I.P. implant malfunctions that year (note that these were saline implants since silicone was banned at the time in France). French inspectors sent to P.I.P. HQ in 1996 noted in their file that “further investigations by qualified physicians would be needed” but the case was then dropped. No explanation as to why.

For those who are not aware, in 2000, the F.D.A. sent a letter to P.I.P. refusing to permit the marketing and sales of its implants in the U.S.

As noted in an earlier post on this subject, a change in device regulations is not the problem here. This is an issue of application of existing rules and better communication between health authorities, physicians and device manufacturers.


Don’t touch that. Dawn raids and the EU seal.

A costly mistake.

While reading a Bloomberg news story on the EU probe into possible collusion between Veolia, Suez and Saur to fix French water services prices, I was reminded that last year Suez’s subsidiary Lyonnaise des Eaux stumbled across one of EU Competition law’s most onerous and unusual provisions.

Suez was fined €8 million for opening a door.

Unless you have actually been raided, you probably are not aware that the Commission’s inspectors often seal rooms when carrying out dawn raids at corporations suspected of violating Competition law. In the Suez case, when the EU team returned the day after the initial raid to continue its search, it found that a seal on an office door had been removed.

Under EU regulations, the Commission can fine a company up to 1% of its total turnover (worldwide) for a seal broken either intentionally or negligently. You basically have no excuse.

Since Suez cooperated with the Commission, the fine is much lower than 1% of their global turnover. Still, I’m not sure their CFO was impressed with the savings.

This is not the first time a seal has been broken. In an even more costly “seal case”, the EU fined E.ON Energie €38 million. E.ON challenged the fine and lost on appeal.

The moral of the story?

Competition law compliance training should be adapted to each employee and contractor in your organization. In this case, a short and frank discussion with the administrative and cleaning staff would have been worth say, €8 million. These discussions should be renewed any time there is a change in staff or service providers.

Photo: European Union © 2012

When can an individual sue a corporation for corrupt practices?

When a company’s stock price dives or its reputation is besmirched due to a criminal investigation, what action can affected individuals or shareholders take to seek compensation? What about whistleblowers who suffer retaliation?

While the US Congress is considering legislation to allow private parties to seek compensation for damages (Foreign Business Bribery Prohibition Act of 2011), there is currently no statutory provision that specifically provides claimants the right to bring suit against a corporation convicted for violating anti-corruption laws.

However, a growing number of shareholder derivative actions are being filed against corporations and their officers for breach of fiduciary duty on the argument that the corporation did not have adequate internal controls to ensure regulatory compliance and prevent violations. While not per se a statutory remedy, a derivative suit can achieve some compensation.

In the case of whistleblowers, those retaliated against do in fact have an administrative remedy. By filing a complaint with the US OSHA within 90 days a plaintiff is entitled to “all relief necessary to make the employee whole” (while not providing for punitives). If the facts permit, there are other options, including RICO civil provisions:

  • In a disturbing case, a non-US whistleblower and his family sued a corporation under the Alien Tort Claims, Torture Victims Protection, and RICO Act for alleged torture and beatings to prevent him from exposing corruption and bribery;
  • In a widely noted ruling, the U.S. 7th Circuit found that an employee allegedly terminated for refusal to participate in violations of Sarbanes-Oxley could proceed with a RICO civil case against his former employer and the 2 employees who conspired to hide the illegal activity.

In any case, corporations (and their officiers) fighting alleged violations should be aware that once the smoke has cleared, private plaintiffs are indeed in a position to extend the pain for years after a case is concluded.

I don’t think that I need to further emphasize how important it is to put a proper compliance policy and training program in place and to document each employee and partner’s assent to and understanding of the policy. Moreover, constant auditing and internal controls must scale in proportion to the company’s business in risk areas.

Photo: Brian Turner

Cinergy FCPA case: It takes ‘guts’ to make this argument.

In the ongoing FCPA case related to Cinergy’s alleged bribery of Haitian officials, their lawyer is planning to bring in Prof. Edgardo Rotman of the University of Miami Law School to make the argument that the DOJ, in enforcing the FCPA, is “denying the realities of the world” and that certain business cultures apparently require bribery before a contract can be concluded.

Cinergy’s lawyer also said that countries like China ‘allow’ bribery, putting the U.S. at a disadvantage in global trade. 

Considering the fact that China has its own anti-corruption law that nearly mirrors the FCPA (and China is a member of the OECD Anti-Bribery Convention working group…), I don’t think that this testimony will go too far in convincing anyone. I am anxious to read an update. Or not.

photo: Christian Van Der Henst

The FCPA ‘Bad For Business’ Argument – Corruption Currents – WSJ.

PIP founder arrested at home. Denies industrial silicone was harmful.

Jean-Claude Mas was reported arrested this morning at dawn according to France Info radio. He admits using unapproved for human use industrial grade silicone in his breast implants but claims that they caused no harm. One of the charges the investigative judge  is bringing against him is involuntary homicide–this was the basis of his detention this morning.

More to follow.

Guardian story in English:

EU Telecoms Package Directive and Cookies: Some compliance tips.

The French Commission nationale de l’informatique et des libertés (CNIL) recently published some advice on how to implement the new requirement that web site users consent to the placement of cookies on their devices by sites they visit. According to the Directive, neither a warning in the site’s Terms of Service (ToS) or acceptance through browser settings are adequate compliance. So what does the CNIL recommend?

  • a banner at the top of a webpage (such as implemented on the website of the UK data protection commissioner: as well as the CNIL :;
  • a consent request zone constructed as an html overlay on the page;
  • a set of tick boxes presented during subscription to a online service.

In this lawyer’s opinion, the steps above will likely be too onerous for entities without a very clear EU-emphasis to implement and will grossly affect the usability of many sites. Moreover, are applications that use web APIs and never go through a browser are somehow exempt from the requirements? Personally, I’m chagrined by Internet technology-specific legislation that is so poorly thought through that it is outdated by the time its implementation begins. What’s a poor “data administrator” to do?