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$47 Million Criminal Penalty for FCPA Violations

Monday, July 09, 2018
Sandler, Travis & Rosenberg Trade Report

The Department of Justice reports that a Hong Kong-based subsidiary of a multinational financial institution has agreed to pay a $47 million criminal penalty for its role in a scheme to corruptly win banking business by awarding employment to friends and family of Chinese officials. The subsidiary has also agreed to pay $25.0 million in disgorgement of profits and $4.3 million in prejudgment interest in a related settlement with the Securities and Exchange Commission.

According to a DOJ press release, between 2007 and 2013 several of the company’s senior managers in the Asia-Pacific region engaged in a practice to hire, promote, and retain candidates referred by or related to government officials and executives of clients that were state-owned entities. The company admitted that these referral hires were less-qualified than other employees hired at the same level, less-stringently vetted, and given benefits throughout the course of their employment due to the provision of business to the company by their referral sources. Employees of other subsidiaries were aware of this scheme, which netted at least $46 million in profits, and facilitated the conduct.

Under a non-prosecution agreement with the DOJ the subsidiary and its parent company have agreed to pay the criminal penalty, continue to cooperate in any ongoing investigations and prosecutions relating to the conduct, enhance their compliance programs, and report to the DOJ on the implementation of those programs. A DOJ press release states that the subsidiary received partial credit for its and its parent company’s cooperation with the criminal investigation but did not receive additional credit because that cooperation was reactive rather than proactive. The subsidiary also did not receive full credit for remediation because it failed to sufficiently discipline employees involved in the misconduct.

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