Shearman & Sterling LLP | Government Regulatory Enforcement Blog | The SEC Enters into Two FCPA Non-Prosecution Agreements in Light of Company Cooperation<br >  
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  • The SEC Enters into Two FCPA Non-Prosecution Agreements in Light of Company Cooperation
    On June 7, 2016, for only the second time in SEC history, the Commission announced non-prosecution agreements in a settlement of FCPA enforcement actions. As a result of the settlements, Akamai Technologies (Akamai) and Nortek Inc. (Nortek) will forfeit ill-gotten gains connected to bribes paid to Chinese officials by foreign subsidiaries. As a part of the settlements, Akamai will pay $652,452 in disgorgement plus $19,433 in interest and Nortek will pay $291,403 in disgorgement plus $30,655 in interest. Neither company, however, will pay monetary penalties because of the cooperation extended to the Commission in connection with the settlements.

    Both companies received declination letters issued under the DOJ’s new Pilot Program, which was announced in early April to encourage companies to self-report potential FCPA violations and cooperate in federal investigations. These declination letters may serve as helpful guidance for others companies who are deciding whether it is worth taking advantage of the new program. According to the SEC press release, the companies’ actions included:
    • Reporting the situation to the SEC on their own initiative in the early stages of internal investigations;
    • Sharing detailed findings of the internal investigations and providing timely updates to enforcement staff when new information is uncovered;
    • Providing summaries of witness interviews and voluntarily making witnesses available for interviews, including those in China;
    • Voluntarily translating documnets from Chinese to English;
    • Terminating employees responsible for the misconduct; and
    Strengthening their anti-corruption policies and conducting extensive mandatory training with employees around the world with a focus on bolstering internal audit procedures and testing protocols. What the Commission’s press releases omit, but the declination letters note, is that, as required by the Yates Memo, both companies were reported to have identified all individuals involved in or responsible for the misconduct and provided the SEC along with all the facts relating to that misconduct. Both companies also agreed to continue to cooperate in any investigation of the individuals.

    When the Department of Justice (DOJ) released the Yates Memo in September 2015, the legal industry predicted that it could significantly affect the way companies cooperate with the DOJ in criminal and civil investigations. Of particular concern was the provision that companies provide the DOJ with “all relevant facts about the individuals involved in corporate misconduct” in order to remain eligible for any cooperation credit and, in the ensuing months, the legal industry wondered what this type of cooperation would look like.

    Buried in the fine print, the DOJ and SEC’s declination letters for Akamai and Nortek provide some insight as to what standard of cooperation the SEC and DOJ will expect in future settlement negotiations. Indeed, Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, specifically said that these companies “handled it the right way.” In these instances, the “right way” appears to include providing the SEC with detailed findings of internal investigations, including summaries of witness interviews, factual chronologies, supporting documentation, and agreeing to voluntarily make witnesses available for interviews and testimony. Given that the settlements state that the companies shared “non-privileged documents,” these disclosures raise the question of whether the companies waived privilege as to the interview notes and factual chronologies, which are almost per se work product. This, coupled with the cooperation and disclosure of responsible employees, could certainly discourage employees from cooperating with internal investigations of companies facing regulatory scrutiny in the future.