Failing To Act: Lessons From 2012 FCPA Enforcement

by Michael Volkov

imagesCANAC725FCPA practitioners tend to repeat themselves.  Some of the points we make need to be repeated, and some do not.  Businesses are not able to react as quickly as they should in response to potential risks and possible violations.  Once the Justice Department initiates an inquiry, companies very often try to get their house in order by implementing a comprehensive compliance program.

One of the most significant dangers companies face is a failure to act when presented with significant red flags of ongoing corrupt conduct.  Two of the enforcement actions from last year illustrate the potential problem – Eli Lilly and Allianz SE.

The SEC charged Lilly  with FCPA violations for illegal bribes paid by its subsidiaries in Russia, Brazil, China, and Poland.  In Russia, the  SEC alleged that Lilly’s subsidiary used offshore “marketing agreements” to pay millions of dollars to third parties identified by the government, despite knowing little or nothing about the third parties other than their offshore address and bank account information. These offshore entities did not provide any  services and  were used to funnel money to government officials.  When Lilly became aware of possible FCPA violations in Russia, Lilly did  nothing for five year to terminate the conduct.

Antonia Chin, Associate Director of the SEC Enforcement Division explained, “When a parent company learns tell-tale signs of a bribery scheme involving a subsidiary, it must take immediate action to assure that the FCPA is not being violated.  We strongly caution company officials from averting their eyes from what they do not wish to see.”imagesCAP4QUSI

In a second action, the SEC charged Allianz with FCPA violations for making improper payments for seven years to government officials in Indonesia.  The SEC alleged that from 2001 to 2008, an Allianz subsidiary paid bribes to Indonesian government officials for insurance contracts for government projects.

Two complaints brought the misconduct to Allianz’s attention. The first complaint in 2005 reported unsupported payments to agents, and the second complaint to Allianz’s external auditor in 2009 uncovered that managers were using “special purpose accounts” to make illegal payments to government officials.  Allianz’s misconduct continued in spite of that audit. The SEC contacted Allianz in 2010 after receiving an anonymous complaint of possible FCPA violations.

In both cases, Lilly and Allianz failed to act when presented with facts suggesting that their respective companies were engaged in bribery.  Lilly learned of the improper activities in Russia but did not do anything for five years.  Allianz was aware of facts suggesting potential violations in 2005 and 2009, and did not act until the SEC contacted Allianz in 2010.

imagesCAVH9L47Companies should take heed from these cases – when presented with evidence suggesting that the company may be engaged in bribery, the sooner they act the better.

Launching an investigation does not mean voluntarily disclosing the potential problems to the government.  Instead, companies need to conduct internal reviews, and possibly internal investigations, to respond to the allegations.

An internal investigation will help a company to identify the nature and scope of the problem, if any, and give the company a chance to remediate the problem.  Defining the problem and adopting remedial measures is the most appropriate way for companies to minimize risks and the potential impact of an enforcement action.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

Written by:

Michael Volkov

The Volkov Law Group on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.