2010 Mid-Year Update on Corporate Deferred Prosecution and Non-Prosecution Agreements

August 5, 2010

Consistent with the past several years, the first half of 2010 brought several Deferred Prosecution Agreements ("DPAs") and Non-Prosecution Agreements ("NPAs").  Although rarely used a decade ago, such agreements now are an important governmental tool in the fight against corporate crime.  DPAs and NPAs are agreements between the government and a corporation whereby the government agrees to defer or forgo criminal charges against the corporation in exchange for adherence to the terms of the agreement.[1] 

The purpose of DPAs and NPAs is to deter, punish, and reform corporate behavior without imposing collateral consequences on corporations and innocent parties such as employees, local community ties, and shareholders.  Not surprisingly, the Department of Justice’s ("DOJ") use of the agreements has increased dramatically since Arthur Andersen’s collapse in 2003 following the company’s indictment and conviction.  By the time the Supreme Court overturned the conviction in 2005, the company was merely a shell corporation, its employees scattered and its clients gone.  The increase in DPAs and NPAs that began in 2003 has begun to taper off, however, and appears to have reached a new equilibrium. 

Gibson Dunn has been at the forefront in representing corporations in negotiating DPAs and NPAs, handling some of the earliest cases, including Sears.  We also have written extensively on their use and policy implications.  This client update builds upon that earlier work.  See 2009 Year-End Update; 2008 Year-End Update.  It provides an overview of the DPAs and NPAs entered into during the first seven months of 2010 and examines trends in the agreements and implications for the future. 

Deferred Prosecution Agreements in 2010

There have been ten reported corporate DPAs[2] through the first seven months of 2010.  This level of activity is consistent with the past two years–in 2008, there were a total of nineteen reported DPAs, while in 2009, there were eighteen.  This is a significant drop from 2007 when there were a total of thirty-nine DPAs, but the large number of 2007 agreements seems increasingly like a statistical anomaly.  As reported in our 2009 Year-End Update, the large number of DPAs in 2007 was partially the result of resolutions stemming from the DOJ’s systematic investigations into FCPA violations in the Oil-for-Food program and healthcare fraud in the orthopedic manufacturing industry.  The following graph provides an illustration of the number of DPAs the DOJ has entered each year over the previous decade.

Assuming that the number of DPAs is consistent in the second half of 2010, this year’s total will be consistent with prior years.  Excluding (the anomalous) 2007, during the last five years the number of DPAs has ranged from thirteen to twenty-one.  This year, the number of agreements is on pace to be within that range.

Although the overall number of DPAs is on track to essentially match 2009, NPAs have been less prevalent in the early part of 2010.  NPAs accounted for half of all agreements in 2009, yet they account for only one-fifth of agreements so far in 2010.  Nevertheless, fewer NPAs relative to DPAs is consistent with long term averages.  In 2008, for example, NPAs accounted for only four of the eighteen total agreements.  It should be noted that it is difficult to draw trends from NPA data, because NPAs are less likely to be publicly reported since they are not filed with a court. 

In our 2009 Year-End Update, we suggested that the large number of NPAs in 2009 might be due to companies voluntarily disclosing violations to the DOJ, because some divisions of the DOJ had stated that they would be more likely to provide favorable treatment to self-disclosers.  We have no reason to think that this policy has changed.  Indeed, in a speech during the Compliance Week conference in Washington, D.C. this past May, Assistant Attorney General for the Criminal Division, Lanny A. Breuer, stated that companies that voluntarily report securities fraud and FCPA violations will receive "meaningful credit."  And the NPA entered by MetLife and the U.S. Attorney’s Office for the Southern District of California in April 2010 explicitly identified MetLife’s voluntary disclosure of violations as a justification for the agreement. 

The chart below summarizes the reported DPAs and NPAs in the first seven months of 2010.  A more detailed explanation of these agreements can be found in Appendix A.

Trends in the 2010 Agreements

Although the limited number of DPAs cautions against drawing too many conclusions, comparing data across several years allows us to identify certain trends in the agreements.  Some of the most significant trends include:  consolidation in the types of offenses receiving DPAs, different reliance on DPAs among particular DOJ divisions, continued but more strategic use of corporate monitors, and ever-increasing fines and penalties.

Concentration in the Type of Offenses Resulting in DPAs

Beginning in 2008, the variety of offenses resulting in DPAs began to decrease.  In 2006 there were fifteen different types of offenses resulting in DPAs, in 2008 there were nine, and in 2007 there were only seven.  Thus far in 2010, there have been six different types of offenses.  Consistent with prior years, the Foreign Corrupt Practices Act (FCPA) was one of the major areas of focus, garnering four agreements.  Additionally, violations of the International Emergency Economic Powers Act (IEEPA) have resulted in two agreements.  Prior to 2009, there were no DPAs relating to violations of the IEEPA; during 2009, there were two.  The IEEPA prohibits transactions in or export to countries with economic or export sanctions issued against them, such as Iran, Sudan, Syria, North Korea, and Cuba.  The four IEEPA agreements in 2009 and the first half of 2010 reveal that export and economic sanctions violations are growth areas for DPAs.  The continued government enforcement on companies who do business in Iran, combined with the recently enacted enhanced Congressional sanctions legislation regarding trade with Iran, will produce further cases ripe for deferred prosecution agreements.

The graph below illustrates the types of alleged violations that have resulted in DPAs during the first seven months of 2010.

Notably absent from the list of agreements so far in 2010 are DPAs relating to health care fraud.  Health care fraud has traditionally been one of the DOJ’s major areas of focus.  In fact, the DOJ recently stated publicly that it intends to focus even more heavily on health care fraud in the coming years, adding up to twenty new prosecutors who will specialize in the area.  Given this emphasis, the lack of any health care DPAs so far in 2010 is likely attributable to the normal ebb and flow of enforcement work, rather than a lack of DOJ interest in health care issues.  The new head of the DOJ Fraud Section’s healthcare fraud unit, Hank Walther, is an energetic and creative prosecutor who will initiate many new cases.  Similarly, although there has yet to be a DPA relating to fraud from last year’s stimulus package, this is likely to change.  After all, the DOJ has accepted at least forty-three fraud cases for prosecution and is investigating over one hundred more.  Finally, it is rare that there are DPAs in environmental and antitrust cases.  Environmental cases are primarily brought by the Environmental Crimes Section ("ECS") of the DOJ’s Environment and Natural Resources Division.  Historically, the ECS has not been receptive to DPAs.  The DOJ Antitrust Division generally does not rely on DPAs because it has an established leniency program for companies that self-report cartel activity.

Disparity in the Use of DPAs within the DOJ

Consistent with past years, Main Justice and the U.S. Attorney’s Offices continue to enter into DPAs in roughly equal numbers.  So far in 2010, Main Justice has entered into four solo DPAs, and U.S. Attorney’s Offices have entered into three.    

But this statistic does not accurately reflect the disparity in the use of DPAs within the DOJ.  Although they enter into roughly equal numbers of DPAs, Main Justice relies more heavily on DPAs than do U.S. Attorney’s Offices.  Before 2009, the DOJ did not track the use of DPAs, and the defense bar and academics were the only ones tracking their use.  Following continued pressure to further regulate DPAs (see F. Joseph Warin and Andrew S. Boutros, Deferred Prosecution Agreements: A View from the Trenches and a Proposal for Reform, 93 Va. L. R. In Brief 121 (2007)), the DOJ recently began to monitor the use of DPAs across Main Justice and the U.S. Attorney’s Offices.  A December 2009 Government Accountability Office ("GAO") report, released in January 2010, found that a small fraction of total corporate prosecutions result in DPAs for most U.S. Attorney’s Offices, while nearly fifty percent of all prosecutions by Main Justice result in a DPA.  For example, in fiscal year 2009, there was an average of 11.4 prosecutions for every DPA entered by the U.S. Attorney’s Offices, while Main Justice had only 1.3 prosecutions for every DPA.  

This data confirms what our prior updates have previously articulated:  There is tremendous variation within the DOJ in the use of DPAs to resolve criminal investigations.  Given that fact, it is crucial that any company facing a criminal investigation ensure that it has a keen understanding of the prosecutor’s practice, and is familiar with how that particular prosecutor’s office views the use of DPAs.

In addition to solo agreements, the DOJ has continued to enter into joint agreements with Main Justice and a U.S. Attorney’s Office.  Indeed, there have been two such agreements in the first seven months of 2010.  These joint agreements were common in past years, except 2008 when there were none.  The absence of joint agreements in 2008 appears to be an aberration.

Within Main Justice, the Fraud Section continues to be the leader in entering into DPAs.  All four solo agreements entered by Main Justice this year have been by the Fraud Section.  The two joint agreements were entered by the Money Laundering Section.  The Southern District of New York–traditionally the leader in DPAs among U.S. Attorney’s Offices–has not entered into any agreements so far this year.  Instead, agreements were entered by the U.S. Attorney’s Offices for the Southern District of California, the District of Delaware, and the Eastern District of North Carolina.  Joint agreements were entered by the U.S. Attorney’s Offices for the District of Columbia and the Southern District of Florida. 

Increasing Fines and Penalties

One incontrovertible trend continuing from 2009 is the ever-growing size of the monetary penalties associated with DPAs.  In 2008, the largest monetary penalty in a DPA was $75 million.  In 2009, five agreements exceeded this threshold.  Already in 2010, five agreements have surpassed $75 million:  ABN Amro Bank, $500 million; Technip, $240 million (plus $98 million in disgorgement to the SEC); Snamprogetti, $240 million; Wachovia, $160 million; and Daimler AG $93.6 million (plus $91.4 million fine to the SEC).  The DPA for DaimlerChrysler China contemplated a monetary penalty calculated at just over $5 million, but granted the company a reprieve in light of Daimler AG’s $93.6 million penalty.  Nevertheless, there is no reason to believe that the trend toward ever-increasing fines and penalties will slow in the second half of 2010.

Cautious But Continued Reliance on Corporate Monitors

As discussed in prior updates, the role of corporate monitors continues to receive attention.  This past March, during a plea colloquy on FCPA charges by Innospec Inc., U.S. District Judge Ellen Segal Huvelle, a highly respected jurist, publicly criticized the size of monitorship contracts and their lack of judicial oversight.  The judge accepted the plea agreement, including the corporate monitor requirement, but she mandated that the DOJ report to her the identity of the monitor and allow her to review the monitor’s work plans.  Judge Huvelle’s comments reflect a sense of unease with the lack of uniformity regarding the terms of independent monitors.  This same unease was evident in last year’s congressional hearings and GAO report criticizing the DOJ’s inconsistent use of monitors. 

Furthermore, in June of this year, the DOJ rejected BAE Systems plc’s candidates for corporate monitor.  The monitor provision of BAE’s plea agreement on FCPA charges provided that "an individual, a U.K. citizen who is eligible for the appropriate national security clearances and acceptable to BAE[] and the Department, will serve as an independent monitor" for three years.  The monitor’s "primary responsibility is to assess and monitor the Company’s compliance with the terms of th[e] agreement so as to specifically address and reduce the risk of any recurrence of the Company’s misconduct, including evaluating the Company’s corporate compliance program" with respect to the FCPA and other anti-corruption laws, and relevant export control laws.  Pursuant to the plea agreement, the company proffered three monitor candidates to the DOJ.  But the DOJ rejected all the three candidates, citing lack of:  (1) experience establishing or monitoring the effectiveness of compliance programs; (2) understanding of the operations or organizational structures of the defense industry; and (3) a legal, enforcement, or investigative background in relevant criminal law.  BAE now has until August 30, 2010 to find a monitor that is acceptable to the DOJ, and the monitor’s term will be extended 90 days to take account of the extra time required to choose the monitor.

Despite the criticism and attention surrounding the use of monitors, the DOJ appears poised to continue using them in the years to come.  In April 2010, Charles Duross, the newly appointed head of the Fraud Section’s FCPA team, publicly stated that "corporate monitors are not going away."  He added that, "I think we’ve become more sophisticated and refined with our use of [monitors]."  Mr. Duross is a seasoned, talented prosecutor who prosecuted Congressman William Jennings Jefferson for bribery, money laundering, and other charges.

In addition, this past May, Gary Grindler, the Acting Deputy Attorney General, provided additional guidance on the use of monitors (the "Grindler Memorandum").  This guidance builds on the guidance presented in the Morford Memorandum of 2008 (see 2008 Year-End Update), and was provided in reaction to a GAO report published in November 2009 that recommended that the DOJ explain what role it would play in resolving disputes between a company and its monitor.  The Grindler Memorandum makes clear that the DOJ will not "arbitrate contractual disputes between the company and the monitor."  It may, however, become involved in resolving disputes concerning "whether a company should adopt a particular compliance program enhancement recommended by the monitor."  To that end, the Grindler Memorandum permits prosecutors to include provisions in DPAs that allow a company that finds a monitor recommendation unduly burdensome to submit its own alternative to the DOJ.  Prosecutors may also include provisions that require company and DOJ representatives to meet annually to discuss the monitorship and any "suggestion, comments, or improvements."  These public statements and additional guidelines suggest that the DOJ has no intention to abandon corporate monitors.            

Consistent with the DOJ’s stated commitment to the use of monitors, four of the ten DPAs so far in 2010 contain a monitor requirement.  This represents a dramatic increase from 2009, when only one DPA out of a total of eighteen had a monitor requirement.  Indeed, so far in 2010, the percentage of DPAs that contain a monitor requirement is higher that is has been since 2007.         

The DOJ also has spoken more openly this year about the circumstances under which a monitor may be required.  In May, Criminal Fraud Section Chief Denis McInerney discussed the relationship between monitors and compliance regimes.  He explained that companies that have established, robust compliance programs are less likely to receive a monitor than those companies that do not have developed compliance programs.  He also stated that companies are more likely to receive a monitor under a DPA than under an NPA, noting that about fifty percent of Fraud Section DPAs required a monitor while only thirty percent of NPAs do so. 

The NPA entered by General Reinsurance Corporation ("General Re") in January 2010 provides an example of the benefits of a robust compliance program.  In light of the rigorous internal compliance measures General Re established in the wake of its alleged wrongdoing, the company was able to avoid the requirement of a formal corporate monitor.  Instead, the NPA requires General Re to name an independent director to its Board of Directors, who will also serve on the Audit Committee.  In addition, representatives of General Re’s parent company, Berkshire Hathaway Inc., must attend all Audit Committee meetings.  Finally, General Re will enhance the role of its Internal Audit Group by increasing staffing of the Group, and appointing outside audit specialists and consultants to assist the Group in its work. 

Daimler’s two DPAs require the company to use the same monitor under the same terms.  This is the first time that one monitor has been assigned to two subdivisions of the same parent company.  Another first is the provision in Sirchie Acquisition’s DPAs that allows the company to partially offset the cost of its monitor against the fine imposed under the DPA.  Sirchie was allowed up to a $1.5 million credit (against its $12.6 total payment obligation) for costs and expenses incurred in "preparing and implementing" the company’s compliance program as well as "the costs and expenses of retaining the Independent Compliance Monitor."  Although the projected cost of implementing a compliance program and retaining a monitor are often the subject of negotiation with the DOJ when entering into a DPA, this is the first DPA that has explicitly allowed a "credit" for such costs.

Conclusion

The rate of DPAs in 2010 is consistent with recent years.  Although the ten DPAs entered so far this year represents a steep decline from the thirty-nine agreements entered during 2007, the large number of DPAs entered that year increasingly appears to be an aberration.  As with past years, we expect the DOJ to continue to rely heavily on DPAs to resolve FCPA investigations, as well as other stated DOJ priorities, including securities fraud and health care fraud.  Furthermore, the DOJ has made clear that it intends to continue to require monitors for at least some companies.  Companies that cooperate with the DOJ and voluntarily establish robust compliance regimes appear best situated to avoid a monitor requirement, or at least to utilize a hybrid approach of a shorter duration with self-certification. 

Although DPAs and NPAs have advantages over corporate indictment and prosecution, they might not be the right solution for every company in every circumstance.  Moreover, the disparity in the terms and conditions of DPAs, the increasing fines and penalties, and the potential consequences of such agreements mandate that companies carefully consider the facts of their particular case before entering into a DPA or NPA.  Indeed, the requirement of a monitor can vary even within the same case.  For example, Technip and Kellogg, Brown & Root had monitors imposed as a part of their settlements of FCPA charges related to a scheme to bribe Nigerian government officials, while Snamprogetti, another co-conspirator in the Nigerian bribery, avoided a monitor requirement.  The devil is in the details in these agreements:  it is imperative for any company considering a DPA or NPA to fully understand the agreement as they have profound consequences. 

The White Collar Defense and Investigations Practice Group of Gibson, Dunn & Crutcher LLP successfully defends corporations, senior corporate executives, and public officials in a wide range of federal and state investigations and prosecutions, and conducts sensitive internal investigations for leading companies in almost every business sector.  The Group has members in every domestic office of the Firm and draws on more than 75 attorneys with deep government experience, including numerous former federal and state prosecutors and officials, many of whom served at high levels within the Department of Justice and the Securities and Exchange Commission.  Joe Warin, a former federal prosecutor, currently serves as the U.S. counsel for the compliance monitor for Siemens, and recently completed his role as the monitor for Statoil pursuant to a DOJ and SEC enforcement action.  Debra Wong Yang is the former United States Attorney for the Central District of California, and recently completed her role as a monitor pursuant to a DOJ enforcement action.

Washington, D.C.
F. Joseph Warin (202-887-3609, [email protected])
John H. Sturc (202-955-8243, [email protected])
Barry Goldsmith (202-955-8580, [email protected]) 
David P. Burns (202-887-3786, [email protected])
David Debold (202-955-8551, [email protected])
Brian C. Baldrate (202-887-3717, [email protected])

New York
Joel M. Cohen (212-351-2664, [email protected])
Lee G. Dunst (212-351-3824, [email protected])
Christopher M. Joralemon (212-351-2668, [email protected])
Mark A. Kirsch (212-351-2662, [email protected])
Randy M. Mastro (213-351-3825, [email protected])
Marc K. Schonfeld (212-351-2433, [email protected])
Orin Snyder (212-351-2400, [email protected])
Alexander H. Southwell (212-351-3981, [email protected])
Jim Walden (212-351-2300, [email protected])
Lawrence J. Zweifach (212-351-2625, [email protected])

Denver
Robert C. Blume (303-298-5758, [email protected])

Orange County
Nicola T. Hanna (949-451-4270, [email protected])

Los Angeles
Debra Wong Yang (213-229-7472, [email protected])
Marcellus McRae (213-229-7675, [email protected])
Michael M. Farhang (213-229-7005, [email protected])
Douglas Fuchs (213-229-7605, [email protected])

© 2010 Gibson, Dunn & Crutcher LLP

Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

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APPENDIX A

2010 DPAs and NPAs (January 1 – August 4)

ABN Amro Bank N.V. (now known as RBS (The Royal Bank of Scotland))

DOJ Office

• Department of Justice, Criminal Division, Asset Forfeiture and Money Laundering Section
• United States Attorney’s Office for the District of Columbia

Allegations

• ABN violated the International Emergency Economic Powers Act and the Trading with the Enemy Act by removing or altering names and references to sanctioned countries from payment messages thereby allowing U.S. sanctioned countries and entities to move hundreds of millions of dollars through the U.S. financial system.
• The New York branch of ABN violated the Bank Secrecy Act by failing to maintain an adequate anti-money laundering program to reflect the broader regulatory requirement as reflected in the DPA.  

Length of DPA

• One year

Penalties

• Forfeiture Amount — $500 million
• ABN paid $80 million in 2005, in a civil settlement with the Federal Reserve Board, Office of Foreign Assets Control, the New York State Banking Department, and the Illinois Department of Financial and Professional Regulation related to the same conduct.

Revised Compliance Program

• ABN provided prompt and substantial cooperation to the DOJ, and undertook extensive remedial actions.
• Implement compliance procedures and training to ensure that the ABN compliance officer in charge of sanctions is aware of any requests or attempts to circumvent U.S. sanctions law.
• Maintain appropriate and specific enhanced due diligence policies, procedures, and controls designed to detect and report money laundering through foreign correspondent and private banking accounts.
• To the extent reasonably possible, ensure that any subsidiary financial institution in which ABN holds an ownership interest:  (1) does and continues to apply and filter its clients and U.S. dollar transactions against the OFAC list; (2) does not conduct any U.S. dollar transactions with or on behalf of an OFAC person or entity except where permitted by law; and (3) complies with all U.S. laws in conducting any U.S. dollar transaction or any transaction through the United States.
• Completely and truthfully disclose all additional information and materials and cooperate fully with the U.S. government in any additional requests for information and testimony.

Ceramic Protection Corporation of America

DOJ Office

•  United States Attorney’s Office for the District of Delaware

Allegations

• Ceramic Protection made a false statement with respect to the manufacturing process of ceramic plates that were used in the production of U.S. military body armor. 

Length of DPA

• Fourteen months, or upon payment of Settlement Amount

Penalties

• Settlement Amount — $267,000

Revised Compliance Programs

• None–Ceramic Protection is no longer in the business of manufacturing ceramic based body armor plates and does not intend to resume such business.

Daimler AG

DOJ Office

• Department of Justice, Criminal Division, Fraud Section

Allegations

• Daimler allegedly violated the Foreign Corrupt Practices Act by making improper payments to foreign officials in various countries.  The alleged purpose of the payments was to secure contracts with government customers for the purchase of Daimler vehicles.  Daimler allegedly wired these payments to U.S. bank accounts or to the foreign bank accounts of U.S. shell companies.

Length of DPA

• Two years and seven days

Penalties

• Criminal Fine — $93.6 million
• Civil Fine to the SEC– $91.4 million

Revised Compliance Programs

• Cooperate fully with the DOJ and any other domestic or foreign law enforcement authorities in any investigation of Daimler relating to corrupt payments.  Disclose all relevant documents not protected by a valid claim of privilege.   
• Clearly articulated corporate policy against violations of applicable anti-corruption laws. 
• Develop financial and accounting procedures, including a system of internal accounting controls, designed to ensure the maintenance of fair and accurate books, records, and accounts.
• Periodic training for all directors, employees, agents, and business partners on anti-corruption laws.
• Periodic testing of the integrity code, and policies and procedures designed to evaluate their effectiveness.

Monitor

• Three year monitorship term, subject to extension or early termination by the DOJ.
• Review and evaluate the effectiveness of Daimler’s internal controls, record-keeping, and existing or new financial reporting policies. 
• Conduct an initial review and two follow-up reviews and make any recommendations reasonably designed to improve the policies and procedures necessary for compliance.
• Has access to all information, documents, records, facilities and employees that fall within the scope of the monitor’s duties.

DaimlerChrysler China Limited

DOJ Office

• Department of Justice, Criminal Division, Fraud Section

Allegations

• DaimlerChrysler China employees allegedly made improper payments in the form of "commissions," delegation travel, and gifts for the benefit of Chinese government officials in connection with the sale of commercial vehicles to Chinese government customers. 

Length of DPA

• Two years and seven days

Penalties

• None in light of the fine paid by Daimler AG.  The fine would have otherwise amounted to $5,040,000 according to calculations in the DPA.

Revised Compliance Programs and Monitor

• Terms are identical to those in the Daimler AG DPA.   

General Reinsurance Corporation

DOJ Office

• Department of Justice, Criminal Division, Fraud Section

Allegations

• Subsidiaries and senior management of General Re participated in a fraudulent reinsurance transaction with American International Group ("AIG").  AIG used this transaction to falsely report inflated loss reserves in its public financial statements. 

Length of NPA

• Three Years

Penalties

• Criminal Fine — $19.5 million to the U.S. Postal Inspection Service Consumer Fraud Fund
• Restitution — $60.5 million

Revised Compliance Program

• Cooperate fully with the SEC in any ongoing investigations of individuals who may have been involved.  Provide, upon request, all relevant non-privileged documents relating to the investigation to the DOJ and the SEC.
• Name an independent director to its Board of Directors, who will also serve on the Audit Committee of the Board of Directors.
• Audit Committee meetings must be attended by the CFO and Director of Internal Audit for Berkshire Hathaway, General Re’s parent company.
• Appoint a Global Head of Internal Audit who reports to both General Re and Berkshire Hathaway. 
• Establish a committee to review risk-transfer protocols and transactions for reinsurance contracts.  Two members of the committee must sign an annual attestation. 
• Enhance the review and reporting roles of the Internal Audit Group by appointing a Global Head of Internal Audit responsible for designing, implementing, managing and coordinating effective risk assessment on a global basis for all General Re companies; increasing the staffing of the Audit Group; and including as members of the Internal Audit Group outside audit specialists from a consulting firm.
• Establish a risk committee. 
• Institute training and ethical compliance across U.S. and worldwide subsidiaries. 

Metropolitan Life Insurance Company (MetLife)

DOJ Office

• United States Attorney’s Office for the Southern District of California

Allegations

• MetLife violated ERISA by knowingly implementing a program of undisclosed and unreported payments designed to induce a San Diego-based insurance brokerage firm and its CEO to recommend MetLife to the brokerage firm’s clients. 

Length of NPA

• Two years

Penalties

• Forfeiture — $13.5 million
• Restitution — $16.5 million
• Civil Fines — $2.5 million

Revised Compliance Program

• Cooperate fully with law enforcement agencies on matters relating to the allegations. Provide upon request all relevant information and documents that are not protected by a valid claim of privilege. 
• Publicly disclose broker compensation policies on company website and maintain a toll-free telephone number to enable policyholders to obtain information concerning broker compensation.
• Include a provision in contracts requiring brokers to comply with all applicable laws and regulations.
• Ensure compliance with Department of Labor regulations relating to the compensation of brokers. 
• Conduct annual training with respect to Department of Labor regulations for all employees who interact with brokers. 
• Require all employees to complete a fraud awareness course, including a discussion of required actions should an employee become aware of fraudulent activity.
• Conduct quarterly reviews of randomly selected materials that MetLife sends to group insurance customers. 

Sirchie Acquisition Company, LLC

DOJ Office

• United States Attorney’s Office for the Eastern District of North Carolina

Allegations

• Sirchie Acquisition violated the IEEPA when its CEO (who was also president and majority shareholder) violated a previously entered Department of Commerce Denial Order, which barred him from any involvement in the export of items subject to Export Administration Regulations, by participating in the pricing of goods intended for export.  The Denial Order was entered against the CEO because he violated the export laws by shipping to Italy forensic items, including fingerprint detection technology, with the purpose of disguising its eventual shipment to Hong Kong and China.   

Length of DPA

• Three years

Penalties

• Civil Fine — $2.5 million
• Criminal Fine — $10.1 million

Revised Compliance Program

• Cooperate fully with the United States Attorney’s Office in any ongoing investigations. 
• Company-wide export compliance training program implemented by the monitor, with twice-yearly refresher training, and twice-yearly report to the Department of Commerce and the United States Attorney’s Office. 
• Institute an employee whistle-blower email and telephone "hotline" for suspected export compliance problems.

Monitor

• The cost of implementing the compliance program, including the cost of retaining the independent monitor, is offset up to $1.5 million against the fine imposed under the agreement.
• Required to judge the effectiveness of compliance, and to record all failures and deficiencies.
• Twice-yearly written report on all observations, findings, and recommendations.
• Does not have access to documents and communications protected by attorney-client privilege or the work-product doctrine.

Snamprogetti Netherlands B.V.

DOJ Office

• Department of Justice, Criminal Division, Fraud Section

Allegations

• Snamprogetti violated the conspiracy and anti-bribery provisions of the FCPA by entering into a joint venture with Kellogg, Brown and Root, Inc., Technip S.A., and a Japanese engineering and construction company, which hired an agent to help it obtain business in Nigeria, including by offering and paying bribes to high-level Nigerian government officials.

Length of DPA

• Two years

Penalties

• Criminal Fine — $240 million

Revised Compliance Program

• Snamprogetti will, where necessary, adopt or modify existing internal controls to ensure that its books and records are accurate and that it has a rigorous anti-corruption compliance regime to detect and deter violations of the FCPA and other anti-corruption laws.
• Assignment of a senior corporate official responsible for the implementation and oversight of the compliance policies.
• Institute mechanisms to ensure that policies, standards, and procedures regarding the anti-corruption laws are communicated to directors, officers, employees, and agents.
• Institute an effective system for reporting suspected criminal conduct including violations of the anti-corruption compliance standards, policies, and procedures.
• Implementation of appropriate disciplinary procedures to address violations of the anti-corruption laws.
• Implementation of appropriate due diligence requirements for the retention of agents and business partners.

Technip S.A.

DOJ Office

• Department of Justice, Criminal Division, Fraud Section

Allegations

• Technip violated the anti-bribery provisions of the FCPA by hiring agents to pay bribes to Nigerian officials in order to win engineering, procurement, and construction contracts.

Length of DPA

• Two years

Penalties

• Criminal Fine — $240 million
• SEC Civil Disgorgement (separate civil settlement) — $98 million

Revised Compliance Program

• Technip will continue to implement its compliance and ethics program designed to prevent and detect violations of the FCPA, French anti-corruption laws, and other anti-corruption laws.
• Assignment of a senior corporate official responsible for the implementation and oversight of the compliance policies.
• Implementation of appropriate disciplinary procedures to address violations of the anti-corruption laws.
• Implementation of appropriate due diligence requirements for the retention of agents and business partners.

Monitor

• The monitor must be a French national.
• The DOJ has the right to choose the monitor from the selections proposed by Technip.
• The monitor may not be employed or associated with Technip for one year following the end of the monitorship.
• Technip is not required to allow the monitor access to its documents that are protected by attorney-client privilege or French data-privacy laws.
• The Monitor will prepare two annual reports which are to be shared with the Board of Directors and the DOJ.  The report may be redacted before being shared with the DOJ if necessary to avoid violation of French law.
• Monitorship may be extended for a third year if necessary.

Wachovia

DOJ Office

• Department of Justice, Criminal Division, Asset Forfeiture and Money Laundering Section
• United States Attorney’s Office for the Southern District of Florida

Allegations

• Wachovia failed to establish and maintain an effective the anti-money laundering program and file suspicious activity reports with respect to correspondent bank accounts held by Mexican casas de cambio (currency exchange houses) and third party processors that engaged in deceptive telemarketing practices. 
• Wachovia failed to properly monitor high-risk foreign correspondent banking accounts for its casa de cambio customers as required to fulfill suspicious activity reporting requirements, including of wire transfer, bulk cash, remote deposit capture, and pouch activity. 
• Failed to conduct enhanced due diligence and monitor the activity of third party processors that conducted wire transfers with high-risk countries and that processed remotely created checks with high numbers of returns.  
• Such failures allowed $110 million in drug proceeds to be funneled through accounts held at Wachovia.

Length of DPA

• One year

Penalties

• Forfeiture — $110 million (paid by Wells Fargo, which acquired Wachovia)
• Criminal Fine — $50 million (also paid by Wells Fargo)

Revised Compliance Program

• Although the revised compliance program applies to Wells Fargo through the terms of the DPA, the DPA acknowledges that there is no indication that Wells Fargo’s compliance programs are deficient or ineffective. 
• Provide, on request, all relevant non-privileged documents concerning matters relating to the investigation.
• Develop an action plan designed to address all deficiencies and violations of law.
• Develop a governance structure, with clear lines of responsibility, in which accountability for Bank Secrecy Act compliance is required and is clearly communicated and enforced.
• Conduct independent testing of compliance policies and procedures relating to foreign correspondent accounts.
• Establish risk-based controls, policies, and procedures for identifying, investigating, and resolving transactions that are identified as unusual.
• Periodic evaluations of the sufficiency of staffing resources that support the line of business for the purpose of identifying and investigating unusual and/or suspicious activities.
• After conducting a voluntary look-back, the bank filed over 4,300 suspicious activity reports involving suspicious transactions conducted through the bank by casas de cambio and high-risk foreign correspondent customers.