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?

Good relations are key to Competition Law compliance.

Competition law compliance secret #2: Good relations with your distribution network, customers and competitors are good for your business.

While an informal complaint to DG COMP may not be investgated, its effect on your business will be immediate and possibly expensive should an inquiry be opened, whether or not the complaint has any merit.

Note that any individual can file an informal complaint via the DG COMP web site complaint form.

What do I recommend to preserve good relations?

1. Take any negative feedback from your partners, customers and competitors seriously. This means taking positive action to remedy any situation and documenting such actions;

2. Have a clear policy on communication with competitors, partners and customers and a defined escalation path (through compliance or legal) for complaints from any 3rd parties; and

3. Be honest with partners and customers and never show favoritism that can’t be justified by qualitative facts and only after vetting with your legal counsel.



Understanding the Eurozone crisis: it’s all about taxes.

The Eurozone is in trouble for only one reason and that is fiscal harmonization. I have been saying this for years but we unfortunately had to reach the point where democratic government is compromised before we take any action.

I think that anyone in the corporate community would agree that Ireland’s 12.5% corporate tax zone was a fantastic lure for multinationals to set up shop there – but was it truly sustainable over the long term? What about the citizens of Ireland who now have to abruptly cope with double doses of austerity? This situation was predictable but there was no will until recently to deal with setting it straight. Moreover, compliance with economic policies emanating from Brussels has been erratic and without solid enforcement.

For example, two years after the Stability and Growth Pact came into force, it was clear that some Member States would not stick to the criteria in the long term. France and Germany flagrantly violated it in 2005 and had the violations waived. Is the same thing going to happen with any new agreements that come out of the current crisis? Unless the sanctions can be applied without political interference, the big economies will continue to decide on their own if they need to comply. Is this why Great Britain is reluctant to sign on full force (domestic political concerns aside)?

This quote from an Irish citizen’s letter to the Independent illustrates the alienating effect of the crisis on public opinion of the EU:

“Our once-blissful, convivial relationship with the EU has turned into a nightmare of epic proportions with no light at the end of the tunnel for the foreseeable future because those in power haven’t a clue.”

Are “those in power” the elected leaders of government or has Europe’s shortsightedness transferred real power to private holders of public debt? Now is the time to reach some rough consensus throughout the EU on harmonizing corporate taxes based on factual qualitative and quantitative measures.

An excellent overview of the sovereign debt crisis is available (pdf, registration required) from Groupama Asset Management.


EU signals regulatory reform over PIP scandal

I’m all for regulatory reform to simplify and better manage devices across the EU but this seems less like reform than a knee-jerk reaction to a very specific and egregious violation of the regulations already in place.

Sadly, it seems like faits divers drive more regulation proposals than reasoned dialogue with experts, manufacturers and patients.

Europe wants regulatory reform over PIP implant scandal | InPharm.

DOJ leverages Sempra’s lawyers’ work in FCPA case.

I’m not sure if we need to be really worried about this.

Is it truly wrong for the DOJ to work with a company’s lawyers to figure out if there was a violation of the FCPA? My sense is that Sempra wanted to cooperate and the DOJ probably came to an agreement with them once Sempra took action to correct any problems in Mexico and deal with the employees involved. There is likely much more to this story than is described in this article. Perhaps a political shot at Atty Gen. Holder? Comments welcome.

U.S. probe relied heavily on firm’s own investigation, FBI memos show – The Washington Post.

Train your salesforce to compete fairly.

Competition law compliance secret #1:

Firstly, your salesforce needs to know that competition law is serious business and can affect their bottom line–even to the point where authorities can get involved in their personal lives.

Competition/Anti-trust legal penalties are SEVERE:

  • Fines (up to 10% of worldwide turnover)
  • Cease & Desist orders, consent decrees, authorities dictating your terms, conditions and prices
  • Personal liability for company officers
  • Searches of offices, laptops, and employee homes
I can put a training program together for your company or your legal department. Click feedback on the left of your screen and send me a message–I will immediately get back to you.