Tag: corruption

The Department of Justice (DOJ) and Securities and Exchange Commission (SEC) announced a Foreign Corrupt Practices Act (FCPA) enforcement action. To say that the respondent company, Stericycle, Inc. (Stericycle) had a culture of non-compliance throughout its entire Latin American (LATAM) business unit belies those companies which only have a dysfunctional culture. Stericycle had a culture of corruption burned into the DNA of the LATAM business unit which was so thorough that it was documented via bribery spreadsheets and analysis of revenue based on payments of bribes in LATAM.
Yet even with this corrupt culture, Stericycle also demonstrated how a company can take advantage of the discounts available under the FCPA Corporate Enforcement Policy by extensive cooperation and remediation during the pendency of the FCPA investigation, as the criminal penalty reflects a 25% reduction off the bottom of the applicable US Sentencing Guidelines fine range.
The Stericycle enforcement action also provides insights into how the DOJ will implement the remarks made by Lisa Monaco last October on their new approach to FCPA enforcement. Finally, Stericycle agreed to a two-year corporate monitor under both the DOJ and SEC settlements. In short, there is much to unpack from this enforcement action which I will do so over the next few blog posts.
According to the Information and Deferred Prosecution Agreement (DPA), Stericycle entered into a three-year DPA. Stericycle agreed to a criminal Information, which charged the company with two counts of conspiracy to violate (1) the anti-bribery provision of the FCPA, and (2) the FCPA’s books and records provision. Stericycle agreed to a criminal penalty of $52.5 million. According to the DOJ Press Release, the DOJ agreed to credit up to one-third of the criminal penalty against fines the company pays to authorities in Brazil in related proceedings, including an amount of approximately $9.3 million to resolve investigations by the Controladoria-Geral da União (CGU) and the Advocacia-Geral de União (Attorney General’s Office). According to the SEC Press Release, Stericycle consented to the SEC’s cease-and-desist order that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA, and agreed to pay approximately $28.2 million in disgorgement and prejudgment interest. The SEC’s order provides for an offset of up to approximately $4.2 million of any disgorgement paid to Brazilian authorities.
Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division said in the DOJ Press Release, “Stericycle today accepted responsibility for its corrupt business practices in paying millions of dollars in bribes to foreign officials in multiple countries. The company also maintained false books and records to conceal corrupt and improper payments made by its subsidiaries in Brazil, Mexico, and Argentina. Today’s resolution demonstrates the Department of Justice’s continuing commitment to combating corruption and protecting the international marketplace.”
Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division said, “Today’s resolution with Stericycle shows that the FBI and our international law enforcement partners will not allow corruption to permeate domestic or international markets. The consequences of violating the FCPA are clear: Companies that bribe foreign officials for business advantage will be held accountable.” Finally, Eric I. Bustillo, Director of the SEC’s Miami Regional Office, said in the SEC Press Release, “Stericycle rapidly expanded in Latin America without any meaningful oversight or compliance measures, as evidenced by widespread bribery schemes lasting for many years in most of its Latin America operations. Companies in pursuit of global expansion cannot disregard the need for appropriate controls.” Damning words all but they had lessons for the compliance professional from this matter.
As part of the DPA, Stericycle has agreed to continue to cooperate with the department in any ongoing or future criminal investigations relating to this conduct. This could well mean additional criminal charges may be brought against any number of individuals known to the DOJ, as identified in the Information. In Brazil, the following persons, Stericycle LATAM Executives 1 & 2, Stericycle Brazilian Executives 1-3, and Stericycle Argentina Executive 1 were named in the Information. Also interesting was the active assistance of sister anti-corruption enforcement groups in Brazil and Mexico, which were both identified by the DOJ and SEC as helping.
It was also interesting to note that under the DOJ Press Release, it noted that while “Stericycle has taken extensive remedial measures, it has not fully implemented or tested its enhanced compliance program, necessitating the imposition of an independent compliance monitor for a term of two years. Stericycle agreed to continue to enhance its compliance program and to retain an independent compliance monitor for two years, followed by self-reporting to the department for the remainder of the term.”
Regarding the final settlements with the DOJ and SEC; they both agreed to their respective resolutions with Stericycle based on several factors, including, among others, the company’s failure to voluntarily and timely disclose the conduct that triggered the investigation and the nature, seriousness, and pervasiveness of the offense. Although Stericycle did not self-disclose their illegal conduct to the DOJ or SEC, they did receive full credit for cooperation with both the agency investigations and engaged in extensive remedial measures. As noted above, this led to a 25% discount off the range suggested under the Sentencing Guidelines, saving Stericycle between $25 million to $30 million from their final criminal fine.
Finally, the Stericycle FCPA enforcement action is notable for the company’s use of code words to discuss bribery in its routine emails and other business correspondence. While chocolates and incentive payments (IPs) have been used before by other companies, cookies are now added to the bribery lexicon as a moniker for payment bribes.
Join us in our next blog where we consider the bribery schemes.