Recent Department of Justice (“DOJ” or “Department”) activity on bribery in Mexico and Latin America sends a warning and provides a roadmap to companies doing business there. By following the roadmap, companies may escape prosecution (or at least the imposition of a monitor) by enhancing their compliance programs. While there is no guarantee that either prosecution or a monitor can be avoided, compliance program improvements are well worth the effort. First let’s review key takeaways from DOJ enforcement activity and then outline areas to focus your organization’s compliance program.
First, in May 2023, Pfizer disclosed that that DOJ’s Foreign Corrupt Practices Act (“FCPA”) unit had made an informal request for documents related to its operations in Mexico. This followed disclosures of similar requests in 2019 related to operations in Russia and an expansion of that request in 2020 to operations in China.
In 2012, Pfizer paid DOJ and the Securities and Exchange Commission (“SEC”) $60 million and entered a deferred prosecution agreement for bribing officials in multiple countries. The 2012 agreement recognized Pfizer’s:
- Timely voluntary disclosure;
- Thorough and wide-reaching self-investigation;
- Significant cooperation;
- Early and extensive remediation efforts; and
- Substantial and continuing improvements . . . to its global anticorruption procedures.
For these reasons, DOJ did not require a monitor, but the agreement with Pfizer required periodic reporting “to the department on implementation of its remediation and enhanced compliance efforts.” The agreement also required Pfizer “to continue to implement rigorous internal controls and cooperate fully with the department.” Provided Pfizer has fully implemented the agreement, it should be well positioned to address DOJ’s recent inquiry related to Mexico.
DOJ has recognized these same considerations in resolving other matters in Mexico. In a recent case, DOJ declined to prosecute Lifecore Biomedical, Inc., a U.S.-based biotech firm, for violations of the FCPA. In declining to prosecute or impose a monitor, DOJ cited the following factors under its Corporate Enforcement Policy in its decision:
- Timely and voluntary disclosure within three months of first learning about the misconduct;
- Full, active, and ongoing cooperation in the investigation;
- Timely and appropriate remediation, including termination of the employee engaged in the bribery scheme, withholding the employee’s bonus and other compensation;
- Substantial improvements in its compliance program and internal controls; and
- Disgorgement of more than $400,000.
Almost contemporaneously, DOJ entered a deferred prosecution agreement with Tysers Insurance Brokers Ltd (“Tysers”) and H.W. Wood Ltd (“H.W. Wood”), two U.K-based reinsurance brokers resolving an investigation into a scheme to pay bribes to employees of the government of Ecuador. Citing similar considerations, no monitor is required under the DPA, and Tysers and H.W. Wood both received a 25 percent reduction off the bottom of the applicable guidelines fine range.
DOJ also continues to pursue charges against a former oil trader for Vitol, Inc. (“Vitol”) for his role in Vitol’s admitted bribery of officials in Mexico and Latin America. In 2020, Vitol paid $135 million and entered a deferred prosecution agreement to resolve the charges brought against Vitol.
Finally, in 2022, Stericycle, Inc, entered a deferred prosecution agreement and agreed to pay DOJ and the SEC $80.7 million to resolve FCPA charges related to activities in Argentina, Mexico, and Brazil. While the company did not receive any voluntary disclosure credit, the DPA provided for full credit for the company’s cooperation with the investigation, including the following:
- Disclosing evidence of which the government was previously unaware;
- Providing information from internal investigation;
- Making detailed factual presentations to the government
- Voluntarily facilitating interviews in the U.S. of foreign-based employees; and
- Collecting and producing large volumes of relevant documents, including documents outside the U.S., accompanied by translations.
Despite requiring a monitor, DOJ acknowledged that the company engaged in extensive remedial measures including:
- Commencing remedial actions even prior to the government’s investigation;
- Strengthening corporate governance through the appointment of new senior executives and members of the Board of Directors;
- Establishing a Safety, Operations, and Environmental Committee to enhance Board oversight;
- Strengthening its compliance organization by hiring additional compliance personnel, including a new Chief Ethics and Compliance Officer who reports directly to the CEO and the Chair of the Audit Committee;
- Updating its code of conduct, policies, procedures, and internal controls relating to anti-corruption, commercial agents and other third-parties, and gifts, travel, and entertainment;
- Enhancing its internal reporting, investigations, and risk assessment processes;
- Overhauling its compliance training and communications;
- Disciplining employees involved in the misconduct including termination of certain employees including senior managers; and
- Divesting subsidiaries in relevant countries.
While the Stericycle DPA required the appointment of a monitor for two years and periodic reporting for a year thereafter, it noted that the main outstanding compliance issue was that the program had not been tested thoroughly. At the same time, compliance improvements at Lifecore, Tysers, and H.W. Wood appear to have helped the companies avoid the appointment of a monitor.
These cases reflect both that DOJ remains intensely interested in investigating FCPA violations in Mexico and Latin America and that developing and maintaining an effective corporate compliance program is the best protection in a DOJ investigation. Companies doing business there would do well to review their compliance programs to ensure they meet the Department of Justice’s requirements for an effective corporate compliance program, namely that they are well designed, fully resourced, and work in practice. Companies should also strongly consider engaging third-party consultants with extensive FCPA knowledge and a strong Latin American presence to assist in evaluating their entire compliance program.
Compliance programs that meet these requirements might even detect or prevent violations in the first place. Even if they do not, it is clear that DOJ considers the state of a company’s compliance program to be a significant factor in any resolution, so significant that it might limit the scope of a monitorship or even allow a company to avoid one altogether.