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FCPA Enforcement Actions Settle at Year-End

U.S. and foreign regulators announced significant settlements involving the Foreign Corrupt Practices Act ("FCPA") and other anti-bribery laws. The penalties and disgorgement associated with these settlements total at least $3.5 billion, and comprise the largest-ever resolutions of global bribery charges.

On December 21, 2016, the U.S. Department of Justice ("DOJ"), the SEC and international regulators in Switzerland and Brazil agreed to a settlement with a Brazilian construction conglomerate and its subsidiary, a petrochemical company with American Depository Receipts traded on the New York Stock Exchange. Each company pleaded guilty to one count of conspiracy to violate the FCPA's anti-bribery provisions as charged in a criminal pleading ("criminal information"). The petrochemical subsidiary is alleged to have paid bribes throughout the world, but the criminal charges against it focus primarily on its illegal payments to a disgraced Brazilian national oil company that gave it favorable rates on materials and afforded it favored status in bids. According to the criminal information documents, the construction conglomerate's bribery scheme was so pervasive and entrenched that it had a separate Division of Structured Operations – managed and known by the highest-level executives in the company – through which it secretly managed and financed its worldwide bribery payments. The U.S., Brazilian and Swiss criminal and regulatory penalties imposed on the construction conglomerate will total at least $2.6 billion, and could go as high as $4.5 billion, subject to ongoing analysis by U.S. and Brazilian authorities of the companies' ability to pay. Additionally, each company has agreed to cooperate with regulators' continuing investigations into the individuals responsible for the criminal conduct, and to retain an independent monitor for three years as part of its plea agreement.

On December 22, 2016 the SEC announced that a pharmaceutical company entered into an agreement with the DOJ to settle civil and criminal charges for violations of the FCPA. The pharmaceutical company admitted to paying bribes to foreign government officials in Russia, Ukraine and Mexico. Its Russian subsidiary and a Russian pharmaceutical repackager entered knowingly into an exorbitantly priced contract in which a percentage of the subsidiary's payments for repackaging and marketing services would be paid in turn to a Russian Ministry of Health official in order to influence and facilitate the sale of company products in state-run tenders. In the settlement agreement, the pharmaceutical company admitted that the corrupt government official at the heart of the scheme received over $65 million in payments. In total, the company made over $214 million in illicit profits as a result of its bribery schemes. The $519 million settlement will consist of a $283 million criminal fine and $236 million in disgorgement and interest, to be paid by the pharmaceutical company to the SEC. The company also will cooperate with U.S. authorities' ongoing investigations of the individuals responsible for the criminal conduct.

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