Och-Ziff’s African (formerly lucrative) nightmare

Och-Ziff Capital Management Admits To Role In Africa Bribery Conspiracies And Agrees To Pay $213 Million Criminal Fine

From the U.S. Attorney’s Office for the Eastern District of New York: “Och-Ziff Enters into 3-Year Deferred Prosecution Agreement; Och-Ziff Subsidiary Pleads Guilty to Conspiracy to Violate the FCPA”

BROOKLYN, NY – The U.S. Attorney’s Office for the Eastern District of New York and the Criminal Division, Fraud Section are prosecuting a New-York alternative investment and hedge fund manager, Och-Ziff Capital Management Group, LLC (Och-Ziff), which has agreed to pay a $213 million criminal penalty and enter into multiple criminal resolutions with the Department of Justice to resolve charges related to widespread bribery of officials in Libya and the Democratic Republic of Congo.  As part of the resolution, Och-Ziff, the publicly traded parent company, entered into a three-year deferred prosecution agreement (DPA) with the Department of Justice.  An Och-Ziff subsidiary, OZ Africa Management GP, LLC (OZ Africa), pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA).  Today’s guilty plea and proceedings in connection with the DPA took place before United States District Judge Nicholas G. Garaufis in the U.S. District Court for the Eastern District of New York.  Sentencing for OZ Africa has been scheduled for March 29, 2017, at 2:00pm.

U.S. Attorney Robert L. Capers of the Eastern District of New York, Principal Deputy Assistant Attorney David Bitkower of the Justice Department’s Criminal Division, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Richard Weber, Chief, Internal Revenue Service, Criminal Investigation (IRS-CI), made the announcement.

“Och-Ziff, one of the largest hedge funds, positioned itself to profit from the corruption that is sadly endemic in certain parts of Africa, including in Libya, the Democratic Republic of the Congo, Chad, and Niger.  Despite knowing that bribes were being paid to senior government officials, Och-Ziff repeatedly funded corrupt transactions.  One Och-Ziff employee was so bold as to order the removal of language from their African joint venture’s internal audit report that called for an investigation of suspected bribery payments by a business partner.  Today’s corporate resolutions, which include a more than $213 million criminal penalty and an independent compliance monitor, hold Och-Ziff accountable for placing profits above the law and will help ensure that the conduct brought to light here never happens again at this company,” stated United States Attorney Capers.

“This case marks the first time a hedge fund has been held to account for violating the Foreign Corrupt Practices Act,” said Principal Deputy Assistant Attorney General Bitkower.  “In its pursuit of profits, Och-Ziff and its agents paid millions in bribes to high-level officials across Africa.  By exposing corruption in this industry, the Criminal Division’s Fraud Section continues to root out wrongdoing of all types in the financial sector.”

“Gaining the upper hand in a business venture by engaging in corrupt practices is bribery in its purest form,” said FBI Assistant Director in Charge Sweeney.  “Doing so with the intention of influencing a foreign official in his or her capacity is nothing short of corruption.  In this scheme, payments of millions of dollars were paid out to senior officials within certain parts of Africa in exchange for access to profitable investment opportunities.  This type of behavior can’t and won’t be tolerated.  I commend the investigators and prosecutors who continue to work together at home and abroad to vigorously enforce the law within the confines of the Foreign Corrupt Practices Act.”

“Today’s plea and deferred prosecution agreement result from the unraveling of complex financial transactions orchestrated by Och-Ziff Capital Management Group, LLC and its subsidiary to facilitate illegal payments to foreign government officials,” said IRS-CI Chief Weber.  “IRS-CI will continue to investigate pervasive bribery schemes used by corporations in the pursuit of attractive international investment opportunities.”

Under the DPA, Och-Ziff admitted to multiple conspiracy charges in a four-count criminal information, including two counts of conspiracy to violate the anti-bribery provisions of the FCPA, one count of falsifying its books and records and one count of failing to implement adequate internal controls.  Additionally, OZ Africa pleaded guilty to conspiring to bribe senior officials in the Democratic Republic of Congo in connection with obtaining valuable mining concessions.  Collectively, Och-Ziff and OZ Africa agreed to pay a criminal penalty of $213,055,689, and Och-Ziff agreed to retain an independent compliance monitor for a period of three years.

The DRC Bribery Scheme

Between 2005 and 2012, a businessman operating in the DRC with significant interests in the diamond and mining sectors in the DRC paid more than one-hundred million dollars in bribes to DRC officials for special access to attractive investment opportunities.  In late 2007, Och-Ziff employees began discussions to partner with the businessman based upon his special access to these investment opportunities.  Between 2008 and 2011, Och-Ziff entered into several DRC-related transactions with this businessman despite the fact that at least two Och-Ziff employees knew, and a senior Och-Ziff employee believed it was likely, that the businessman gained access to these attractive investment opportunities by making corrupt payments to government officials.  Och-Ziff personnel funded these transactions understanding that Och-Ziff’s funds would be used in part to pay substantial sums of money to high ranking DRC officials to secure access to and preferential treatment for the investment opportunities.  In late 2008, after an Och-Ziff employee was alerted that an audit of the businessman’s records revealed payments for DRC officials, that employee instructed that any references to those payments be removed from a final report of the audit.  The businessman did, in fact, make corrupt payments to and for the benefit of DRC officials to secure the investment opportunities.

The Libya Bribery Scheme

Separately, but also beginning in 2007, a senior Och-Ziff employee engaged a third-party agent to assist the company in securing an investment from the Libyan sovereign wealth fund, the Libyan Investment Authority (LIA).  At the time of the engagement, the senior Och-Ziff employee knew that the agent would need to make corrupt payments to Libyan officials to secure that investment.  The agent was engaged without formal approval by Och-Ziff and without any due diligence conducted on the agent by Och-Ziff.  From February 2007, the agent worked on behalf of Och-Ziff to obtain an asset placement from the LIA, including setting up a meeting between the senior Och-Ziff employee and the Libyan official who was empowered to make investment decisions for the LIA.  In late November 2007, Och-Ziff received a $300 million investment from the LIA into Och-Ziff hedge funds.  Shortly thereafter, Och-Ziff entered into a consulting agreement to pay a sham “finder’s fee” of $3.75 million, knowing that all or a portion of the fee would be paid to Libyan officials in return for their assistance in obtaining the LIA’s investment.  The agent did in fact make corrupt payments to and for the benefit of Libyan officials to influence the LIA’s investment.

Internal Controls Failures and Falsified Books and Records

Further, Och-Ziff admitted that it knowingly and willfully falsified and caused to be falsified records related to its retention and payment of the agent in Libya.  The falsified records concealed the true purpose of the payments, which purported to be for consulting purposes, but which actually would be used for corrupt payments to Libyan officials in return for their assistance in obtaining the LIA’s investment.  Och-Ziff also failed to implement and maintain an adequate system of internal accounting controls designed to detect and prevent the misappropriation of assets by its employees, agents, and business partners.  As a result, the company failed to prevent bribe payments from being made in the DRC, Libya, as well as in Chad and Niger, where an Och-Ziff joint venture made mining-related investments.  For all the criminal conduct included in these resolutions, Och-Ziff reaped more than $210 million in illegal profits.

The Corporate Resolutions

The Department entered into this resolution, in part, due to Och-Ziff’s failure to voluntarily self-disclose the offense conduct and the seriousness of the conduct including the high-dollar amount of bribes paid to foreign officials and involvement by a high level employee within Och-Ziff.  Notwithstanding, Och-Ziff received a 20 percent reduction off the bottom of the U.S. Sentencing Guidelines range for its cooperation with the government’s investigation.    Och-Ziff also committed to continue to enhance its compliance program and internal controls, to cooperate with the Department in ongoing investigations, and to retain an independent compliance monitor pursuant to the terms outlined in the DPA.

*          *          *

In connection with the government’s investigation, Samuel Mebiame, a Gabonese national, was charged on August 16, 2016, by criminal complaint with conspiring to bribe foreign government officials to obtain mining rights in Chad and Niger, as well as Guinea.[1]  According to documents filed in court, Mebiame worked as a “fixer” for a mining company that was owned by a joint venture between Och-Ziff and a Turks & Caicos incorporated entity.  In that capacity, Mebiame paid bribes to high-ranking government officials in Niger and Chad to obtain the mining rights.  During the charged conspiracy, Mebiame repeatedly traveled to the United States to further the scheme, including to meet with coconspirators at the Plaza Hotel in New York and to start companies and open bank accounts through which he could receive international wire transfers from coconspirators.

*          *          *

In a parallel proceeding announced today, the U.S. Securities and Exchange Commission (SEC) filed a cease and desist order against Och-Ziff Capital Management Group LLC and OZ Management LP, whereby Och-Ziff agreed to pay approximately $199 million in disgorgement to the SEC, including prejudgment interest.  The total amount of the global resolution is thus approximately $412 million.

The FBI’s New York Field Office and IRS-CI’s New York office are investigating the case.  The department appreciates the significant cooperation and assistance provided by the SEC in this matter.  The Swiss Federal Office of Justice, the British Virgin Islands Central Authority, the Maltese judicial authorities and authorities in Jersey and Guernsey also provided assistance.

*          *          *

The case is being prosecuted by Assistant U.S. Attorneys James P. Loonam, Jonathan P. Lax, and David Pitluck of the Business and Securities Fraud Section of the U.S. Attorney’s Office for the Eastern District of New York, and Assistant Deputy Chief Leo Tsao and Trial Attorney James P. McDonald of the Criminal Division’s Fraud Section.  The Criminal Division’s Office of International Affairs provided significant assistance in this matter.

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“Apartheid stole the past, corruption steals our future” – South Africa protests graft

Wake-up call for Zuma government?  Unlikely as ANC battles crises on many fronts

On September 30, 2015, several major South African cities saw a significant turnout of the Republic’s denizens taking to the streets, protesting rampant perceived corruption in their country: demonstrations took place, inter alia, in Pretoria, Cape Town, Polokwane, and Durban.  They numbered in the tens of thousands, signifying for the first time in years a substantive expression of unhappiness with the ruling African National Congress‘s politics and handling of graft.

Of note here is not merely the protest against problems of purely domestic or otherwise internal corruption (case in point, President Zuma’s infamous $22m+ renovation of his personal Nkandla country homestead), but the broader picture of governmental fraud, waste and abuse — notably including those involving foreign entities.

As The Economist poignantly observed in its current edition, “[t]housands marched in South Africa against corruption. The protest coincidentally took place soon after Hitachi, a Japanese engineering firm, agreed to pay $19m to settle charges brought by American regulators over payments made to the African National Congress, South Africa’s ruling party, in connection with contracts to build power stations.

The Hitachi investigation, spearheaded by the U.S. Securities and Exchange Commission (not the Department of Justice in this instance), is a fascinating one, and hits South Africans in a particularly hurtful spot: electricity has been scarce for years, and its availability has reached a new nadir in 2015.  For this particular industry to be affected by proven corruption is (if that is possible) “worse” for South Africans than the run-of-the-mill scandal: virtually every citizen has experienced dark nights, marred by rolling black-outs, which have necessitated the need for expensive household generators.

A “success fee” to the “Chancellor”…

The SEC’s settlement and complaint (read here) allege truly scandalous, yet entirely classic, corrupt conduct.  They read, in relevant part:

In 2005, Hitachi created a subsidiary in South Africa for the purpose of establishing a local presence in that country to pursue lucrative public and private contracts, including government contracts to build two new major power stations.

Hitachi sold 25% of the stock in the newly created subsidiary to Chancellor House Holdings (Pty) Ltd. (“Chancellor”), a local South African company that was a front for the African National Congress (“ANC”), South Africa’s ruling political party. Hitachi’s arrangement gave Chancellor- and by proxy the ANC- the ability to share in the profits from any power station contracts secured by Hitachi. Hitachi also entered into an undisclosed “success fee” arrangement with Chancellor, wherein Chancellor would be entitled to “success fees” in the event that the contract awards were “substantially as a result” of Chancellor’s efforts.

During the bidding process, Hitachi was aware that Chancellor was a funding vehicle for the ANC. Hitachi nevertheless continued to partner with Chancellor and encourage Chancellor’s use of its political influence to help obtain the government contracts.

As a result, Hitachi was awarded power station contracts in South Africa worth approximately $5.6 billion. In April and July 2008, Hitachi paid the ANC- through Chancellor- “success fees” totaling approximately $1 million.

Hitachi’s South African subsidiary inaccurately recorded its “success fee” payments to Chancellor as “consulting fees” in its books and records for the year ended December 31, 2008. The inaccurate books and records of Hitachi’s subsidiary were consolidated into Hitachi’s financial statements for the fiscal year ended March 31, 2009, which were filed with the Commission.

In 2010, Hitachi’s South African subsidiary also inaccurately recorded a dividend worth over a million dollars to be paid to Chancellor, its 25% shareholder. The journal entry recorded this dividend as “Dividends Declared” in the subsidiary’s books and records for the year ended December 31, 2010. The books and records did not reflect that the dividend was, in fact, an amount due for payment to a foreign political party in exchange for its political influence in assisting Hitachi land two government contracts. The subsidiary’s inaccurate books and records were consolidated into Hitachi’s financial statements for the fiscal year ended March 31, 2011, which were filed with the Commission.

Andreas Stargard, an attorney with Africa-based consultancy firm Pr1merio, observes that:

“Hitachi’s corporate tag line reads ‘inspire the next…’ — one can only hope that the inspiration resulting from this particular corruption scandal, is not one of imitation by others, but rather avoidance of the same mistakes.  On the local South African (government) front, we view it as  unlikely that these protests, well-intentioned as they may be, will have much of an impact on actual politics in Pretoria.  President Zuma is battling too many fires to focus on this particular issue in any different manner than what he has done thus far, which is simply firing those responsible for, and competent at, uncovering graft.”

Nota bene, the Hitachi electricity-generating scandal is not all that has rocked South African corruption news lately — just over a week ago, the opposition party Democratic Alliance launched corruption allegations over Danny Jordaan’s involvement with the FIFA mega-scandal (he was the head of the country’s 2010 football World Cup).

Stay tuned for more…

Increased anti-corruption enforcement across Africa?

Chimera

Chimera or Reality — Is Africa stepping up its anti-graft game?

If one is to believe the media attention that has been bestowed upon anti-corruption enforcement by various African jurisdictions, there has been an uptick in successful anti-graft campaigns across the continent.  Or is there…?  Has Africa truly embraced the prosecution of well-to-do businessmen and government officials?  As one practitioner observes, mere penalty statistics (albeit impressive in terms of pure figures) are far from enough:

“You will read about record-breaking fines imposed; and you will hear about ever-longer jail sentences for violators.  African nations are no different in this regard than the U.S., where the DOJ has an annual tradition, almost invariably touting record-setting numbers resulting from its various enforcement divisions.  Even a quarter billion dollars of cumulative fines in South Africa are insufficient evidence of true deterrence, however — what is needed going forward is a culture of anti-corruption compliance, which goes deeper and spreads its roots more widely throughout the business & governmental community than any single record fine or jail sentence can ever accomplish,” says Andreas Stargard, an attorney with Primerio, an Africa-focused law firm and boutique business consultancy, advising on anti-corruption and competition & regulatory matters across the continent.

Over the next weeks, AAF will be investigating this “trend” of enhanced enforcement — and analyse whether it is real or only perceived.  Today, we begin with two case examples, one from the East and one from the South, both of which have recently been featured in the media with seemingly impressive news to report…

The Ethics and Anti-Corruption Commission offices in Nairobi

The Ethics and Anti-Corruption Commission offices in Nairobi

Example ‘A’: Kenya

George Wachira, a director of Petroleum Focus Consultants, writes in the Business Daily that, “over the past six months a series of events have given Kenyans some hope that this time around we may be on the right path in shaking the roots of corruption.”  He cautions, however, that the ongoing fight against corruption will yield results only “if sufficiently supported by all,” echoing Andreas Stargard’s observation of the importance of a universal “culture of compliance”:

The fight against corruption cannot survive merely on the push of top leadership. There must be in place support from effective and sustainable systems and institutions that can routinely function without prompting or interference. And recently some of these institutions have been undergoing a real-life test. … With clear and strong messages and actions from the top leadership it becomes easier to address corruption. This is an essential and critical starting point.

Second in line in the crusade against corruption is certainly the media which has been consistent in its anti-corruption messages and analysis.

The other key anti-corruption voices have included the Opposition, civil society, and a number of foreign offices with well intentioned interests in Kenya.

… I judge that the D-Day on the fight against corruption occurred when the list of shame was published with names of senior public servants suspected to have engaged in corruption. … If this process succeeds and achieves these standards, then Kenya will have moved a major step ahead in the war against corruption. If the process is derailed by whatever causes, then I am afraid we shall have lost momentum on the war on corruption. … [Another] recently launched system with similar detective capacity is the e-procurement system that can document the audit trails of all public procurement.

It is evident from recent events that Kenya can and should keep on the path towards a country with reduced corruption. We need to appreciate the efforts of all the players in this anti-corruption crusade.

As a general matter, AAF concurs with Mr. Wachira’s comments and the tenor of this article: it takes  more than just one element to create an effective anti-corruption system that both prevents as well as detects and punishes violations swiftly.

As he points out, this system may well start “from the top,” as is the case with the Kenyan presidents recent pronouncements on his unwillingness to tolerate corrupt government dealings.  The question is, however, what happens if society cannot rely on its top officials to provide such guidance, nor rely on even lip-service paid to the anti-graft movement.  An example is South Africa, our next case study, where the recent worldwide FIFA corruption scandal resonated with particular momentum, given the country’s past hosting of the FIFA soccer World Cup.  As several news outlets have reported, the South African government (at its highest levels, including the Ministry of Sports and Recreation), has tried to keep details of the FIFA bribery allegations from the country’s public, specifically by instructing ex-Cup local organising committee (LOC) members not to give interviews and to hand over any evidence to the Ministry only.  Other corporate fraud scandals (ex.: Nedbank) continue to embroil the country, whose economy (and currency) appear on a perpetually and dangerously downward-sloping curve.

Example ‘B’: South Africa

In our FIFA article, we pointed out with significant concern that “the South African Government’s, particularly under the auspices of President Zuma, dismantling of key enforcement agencies, especially the National Prosecution Services … has effectively prevented proactive enforcement of corrupt activities.”

Nonetheless, in the South African daily Times, Babalo Ndenze recently summarised the “most successful year yet” for the country’s Asset Forfeiture Unit — some of the few corruption-busters that have remained intact since a sweeping and politically-driven “overhaul” of the anti-graft investigative units in Africa’s southernmost Republic has caused the effective number, quality and fervour of public fraud prosecutors to dwindle to dangerous lows.  As we observed in a prior article on the perception of corruption in the country causing less foreign direct investment, “a new report released by the Centre for Corporate Governance in Africa at the University of Stellenbosch Business School, concludes that corruption remains one of the major obstacles to Africa’s economic rise: among the Southern African Development Community (SADC), South Africa suffers particularly from the perception of a high prevalence of bribery and corruption in the granting of South African government contracts and procurement tenders …”

Nonetheless, the Times chimes in with healthy enforcement statistics, and we will conclude today’s instalment with a recitation of those numbers:

The crime-fighting unit recover R2.8-billion [that’s almost $250 million] during the 2014-2015 financial year. Its biggest haul involved freezing contracts worth R1.8-billion issued by the Gauteng health department.

The unit also froze orders worth R4.2-million against a company that was awarded a tender to transport mourners to Nelson Mandela commemoration events in the Eastern Cape. The tender process was rigged.

A number of Buffalo City Municipality officials, including former mayor Zukiswa Ncitha, were implicated in the case.

The unit also recovered a farm worth R1.5-million in the Free State that had been illicitly obtained by an SA Police Service detective.

The unit froze and recovered R59-million in various bank accounts of people who defrauded the Social Housing Regulatory Authority in East London . The unit also recovered some of the authority’s R4.8-million that had disappeared for “personal purposes”.

It was assisted by the National Treasury to recover more thanR61-million that was swindled from the authority’s coffers.

A list of the unit’s major recoveries appears in the National Prosecuting Authority’s latest annual report, which has been tabled in parliament.

According to legislation, the seized money goes into the central revenue fund.

“The unit achieved its best-ever performance, obtaining freezing orders to the value of R2.8-billion, significantly exceeding the annual target of R755-million by 265% and last year’s performance by 293%,” the report read.

The unit’s head, Willie Hofmeyr, said this success can be attributed to working closely with other crime-fighting institutions such as the Hawks, the police and the Special Investigating Unit.

“We’ve had a few good years in the past but this was probably our best,” he said.

“It’s true that working together has made a difference

Halliburton to Goodyear: FCPA risks and due diligence in foreign acquisitions

Averting their eyes from Africa: Goodyear’s $16m Kenya/Angola settlement highlights risk of insufficient due diligence

Andreas Stargard.

“Foreign acquirers must understand and — likely — challenge the status quo of their new African subsidiaries”

When acquiring an African company, nothing is “business as usual.”  Neither pre- nor post-acquisition can foreign parent corporations simply avert their eyes and let their newly acquired business units be run as before.  The status quo must be understood and – likely – challenged.

Case in point: Goodyear’s Africa troubles (plural, because they originate in both Kenya and Angola).

In its February 24, 2015 news release, the Securities and Exchange Commission (SEC) announced Goodyear’s disgorgement of over $14 million in profits, plus over $2 million in prejudgment interest, as well as reporting, remediation and compliance obligations for a period of 3 years: “Public companies must keep accurate accounting records, and Goodyear’s lax compliance controls enabled a routine of corrupt payments by African subsidiaries that were hidden in their books,” said Scott W. Friestad, Associate Director of the SEC’s Enforcement Division.”

The release details the following alleged violations of the two African subsidiaries, acquired by the Ohio-based Goodyear Tire Company incrementally between 2002 (minority shareholding) and 2006 (when it became a majority owner):

[The Kenyan subsidiary] bribed employees of the Kenya Ports Authority, Armed Forces Canteen Organization, Nzoia Sugar Company, Kenyan Air Force, Ministry of Roads, Ministry of State for Defense, East African Portland Cement Co., and Telkom Kenya Ltd.

Goodyear’s subsidiary in Angola bribed employees of the Catoca Diamond Mine, which is owned by a consortium of mining interests including Angola’s national mining company Endiama E.P. and Russian mining company ALROSA.  Others bribed in Angola worked at UNICARGAS, Engevia Construction and Public Works, Electric Company of Luanda, National Service of Alfadega, and Sonangol.

In the accompanying Order, the SEC alleges that:

1. … From 2007 through 2011, Goodyear subsidiaries in Kenya (Treadsetters Tyres Ltd., or “Treadsetters”) and Angola (Trentyre Angola Lda., or “Trentyre”) routinely paid bribes to employees of government-owned entities and private companies to obtain tire sales. These same subsidiaries also paid bribes to police, tax, and other local authorities. In all, between 2007 and 2011, Goodyear subsidiaries in Kenya and Angola made over $3.2 million in illicit payments.

2. All of these bribery payments were falsely recorded as legitimate business expenses in the books and records of these subsidiaries which were consolidated into Goodyear’s books and records. Goodyear did not prevent or detect these improper payments because it failed to implement adequate FCPA compliance controls at its subsidiaries in sub-Saharan Africa.

Failing to conduct proper due diligence on an African target company is risky at best.  Leaving its day-to-day operations thereafter unchecked and unaltered, however, is the downright equivalent of requesting a cease & desist order (or worse yet, a judgment) from an American or European enforcement agency or court.  As the SEC noted, “the day-to-day operations of Treadsetters continued to be run by Treadsetters’ founders and the local general manager.” (Id. at para. 7).  Goodyear notably “failed to implement adequate FCPA compliance training and controls after the acquisition.”

Luckily for Goodyear (which has since then shed its Kenyan business and is in the process of selling its Angolan interests), the Department of Justice decided not to pursue parallel criminal charges for the same conduct, and so the SEC went ahead solo, culminating in the Order quoted above.

Would Goodyear have benefited from Halliburton?

Generally speaking, a buyer acquires the target’s liabilities — neither the FCPA nor the antitrust laws provide a unique exception to this rule.  A quick look at General Electric’s experience (GE agreed to pay $23.4 million to settle the SEC’s charges, including against two subsidiaries for which GE assumed liability upon acquiring) and eLandia ($2 million payment for its subsidiary Latin Node’s bribery scheme pre-acquisition) amply prove the point.

That said, under certain circumstances where proper and fulsome due diligence is “severely compromised,” a future corporate parent may insulate itself from FCPA liability: flash-back to June of 2008, when the Department of Justice issued valuable FCPA guidance in the form of its Halliburton “opinion procedure release”: In it, the DOJ discussed how it would treat the liability of an acquiring company whose pre-closing investigative ability to conduct full-scale due diligence is, by (foreign) statute or other circumstance, insufficient to guarantee discovery of any existant FCPA liabilities of the acquisition target.  In particular, the DOJ said:

[A]n acquiring company may be held liable as a matter of law for any unlawful payments made by an acquired company or its personnel after the date of acquisition. … Under the
circumstances […] there is insufficient time and inadequate access to complete
appropriate pre-acquisition FCPA due diligence and remediation. As represented by Halliburton, under the application of the U.K. Takeover Code, it has no legal ability to require a specified level of due diligence or to insist upon remedial measures until after the acquisition is completed. As a result, Halliburton’s ability to take action to prevent unlawful payments by Target or its personnel during the period immediately after the closing has been severely compromised. Assuming that Halliburton, in the judgment of the Department, satisfactorily implements the post-closing plan and remediation detailed above, and assuming that no Halliburton employee or agent knowingly plays a role in approving or making any improper payment by Target, the Department does not presently intend to take any enforcement action against Halliburton for any postacquisition violations of the antibribery provisions of the FCPA committed by Target during the 180-day period after closing provided that Halliburton: (a) discloses suchconduct to the Department within 180 days of closing; (b) stops and remediates such conduct within 180 days of closing, or, if the alleged conduct, in the judgment of the Department, cannot be fully investigated within the 180-day period, stops and remediates such conduct as soon as it can reasonably be stopped; and (c) completes its due diligenceand remediation, including completing its investigation of any issues that are identifiedwithin the 180-day period, by no later than one year from the date of closing.

Setting aside the difference in enforcement agencies (SEC in Goodyear vs. DOJ in Halliburton), had Goodyear made an effort similar to that of Halliburton (which, of course, is no stranger to significant FCPA enforcement actions itself (see also here and here on the Bonny Island debacle), despite having sought and obtained this favorable opinion back in 2008), it would have stood to benefit from similar lenience — but only insofar as it concerned initial determination, through due diligence (ideally pre-acquisition, but potentially still within a 180-day window), whether or not its African acquisition posed a corruption risk back in the U.S.

In light of the ongoing nature of the FCPA-violative conduct post-acquisition, however, there appears to be little effort made on behalf of the parent entity to uncover (or, for that matter, halt) the offending actions in Goodyear.  In this regard, notably excluded from the DOJ’s relatively lenient position is, of course, similarly ongoing conduct.  The Department expressly reserves the right to enforce:

(a) any FCPA violations committed by Target during the 180-day period that are not disclosed to the Department during this same time period; (b) any FCPA violations committed by Target at any time where any Halliburton employee or agent knowingly participates in the unlawful conduct; and (c) any issues identified within the 180-day period which are not investigated to conclusion within one year of closing. In no event does this Opinion Release provide any protection for any conduct which occurs after the 180-day period.