Biggest Bribery Fines of 2020

Posted by

David Mangion

on 08 Dec 2020

Biggest Bribery Fines of 2020

In 2020 we saw some huge financial penalties for bribery and corruption. But one, in particular, ran into billions of dollars. Find out how to avoid hefty fines.

Key bribery settlements in 2020

  1. Airbus - £3.1 billion bribery settlement
  2. Novartis - £490 million settlement
  3. Herbalife - £89 million bribery settlement
  4. World Acceptance Corporation - £15.7 million bribery settlement

You may wonder why we describe bribery settlements here rather than simply fines. Because of the nature of the financial gains from bribery, often the disgorgement is the most significant penalty. Dwarfing the actual fines by an enormous amount.

1. Airbus - €3.6bn bribery settlement

In February 2020, Airbus confirmed it would pay €3.6bn to settle a long-running investigation by French, UK and US authorities into bribery and corruption. This case was unprecedented in its scale and chutzpah. It is also controversial that Airbus was let off with a DPA.

In 2012, a whistleblower alleged that Airbus's GPT subsidiary used gifts and bribes of over £14m to secure a contract to upgrade military communications in Saudi Arabia. In 2017, the French-based planemaker was also investigated over its use of intermediaries and third-party consultants to secure airline sales. The subsidiary at the centre of the allegations has ceased trading.

Key takeaways from this case

  • The case shines a spotlight on section 7 of the UKBA - Headquartered in France, registered in the Netherlands, Airbus admitted bribery and corruption outside of the UK and its "failure to put in place appropriate measures to prevent bribery". Would your own company meet the threshold? What control do you have over overseas subsidiaries? Do they get the same training as workers onshore?
  • Conduct proportionate due diligence - What due diligence checks do you make on consultants, intermediaries and third parties? Are they adequate?
  • Train employees to spot red flags - For example, gifts, hospitality, expenses, donations, etc.? A consultant with no proven track record in the industry? Payments being made via a company registered in Brunei? The signs were all there once the authorities started looking. Or, as someone close to the investigation put it, "It's not sophisticated once found. It was in plain sight". (see next point)
  • Don't try to bypass the rules - In this case, Airbus organised 30-minute marketing or business presentations before hitting the golf course to get around hospitality rules.
  • When you're in a hole, stop digging - Internal emails reveal the inner conflict employees faced in coming clean, "We know the truth, I suspect but is that what we are intending to inform UKEF?”. It shouldn't be difficult to do the right thing.
  • Compliance matters and needs to be integrated fully in all business processes - It must not be seen as something that merely stands in the way of making a profit. Dodgy payments flagged by compliance were brushed aside. An internal audit of the subsidiary at the centre of the corruption found "significant breaches of compliance policies" and projects that "performed poorly". Take note.
  • It's about deeds, not words - Airbus had compliance programs, policies, committees and astonishingly was even awarded a certificate for the design of its anti-bribery compliance program. But it was still not enough. Why? Was there a philosophy to get the business "at any cost"? Were senior managers setting a different example? It seems so.
  • Ensure adequate oversight - Some committee members were involved in misconduct and concealed material facts about business partners' remuneration, beneficial owners, and the process by which intermediaries were found. Essentially, the unit was marking its own homework.
  • "Tone from the top" matters- 63 of its top or senior management have left the company (31 were dismissed) in just five years. It looks like those good role models were in short supply.

Free Anti-Bribery Training Presentation

2. Novartis - $678 million bribery settlement

Novartis Pharmaceuticals has agreed to pay $678 million to close a case against them in which they were accused of bribing and paying kickbacks to thousands of doctors between 2002 and 2011.

As part of the deal, Novartis said that it "agreed to new corporate integrity obligations with the Office of Inspector General of the US Department of Health & Human Services that will change how the company delivers peer-to-peer programs in the U.S."

Novartis was accused of hosting tens of thousands of speaker programs and similar events "under the guise of providing educational content, when in fact the events served as nothing more than a means to provide bribes to doctors," the Department of Justice claimed.

Novartis paid doctors purportedly as compensation for delivering lectures regarding a Novartis drug. However, prosecutors claim that many such programs were little more than social events held at pricey restaurants, with little or no talk about healthcare or medicine. Prosecutors also revealed that some of the events had never even taken place.

"Giving these cash payments and other lavish goodies interferes with the duty of doctors to choose the best treatment for their patients and increase drug costs for everyone," stated Acting US Attorney Audrey Strauss for the Southern District of New York. "This office will continue to be vigilant in cracking down on kickbacks; however they may be dressed up, throughout the pharmaceutical industry."

Key takeaways from this case

  • Never offer money or anything of value in return for improper performance of any function.
  • Ensure that gifts, hospitality, donations, sponsorship and expenses are proportionate and in line with industry-standard policies and thresholds.
  • Never make facilitation payments to speed up processes or 'jump the queue'.
  • Make sure you report any suspicion or knowledge of bribery to the relevant authorities immediately.

Free Corporate Gifts Checklist

3. Herbalife - $123m bribery settlement

Herbalife Nutrition Ltd has agreed to pay $123.1 million to settle civil and criminal charges relating to the bribery of Chinese officials in media outlets and government agencies to boost its business in China. The multi-level marketing firm, most famous for its range of dietary supplements, entered a three-year deferred prosecution agreement after admitting to conspiring to violate the books and records provision of the FCPA.

US Authorities found that Herbalife schemed from 2007 to 2016 to bribe Chinese officials with entertainment, cash, holidays and dinners to reduce government scrutiny, gain direct selling licenses and suppress negative coverage by state-controlled media.

Apart from a $55.74 million criminal fine, Herbalife will also need to pay $67.31 million in disgorgement and interest to settle a related SEC case. The firm will also be required to upgrade its compliance procedures to ensure this case does not repeat itself.

Key takeaways from this case

  • Never give or offer any inducement, request, or accept one from others - keep in mind that bribery is a criminal offence and a predicate offence to money laundering.
  • Ensure that any gift or hospitality you give or accept is proportionate and in line with industry-standard policies and thresholds.
  • Conduct due diligence on all third parties and make your company's stance on bribery clear.
  • Never attempt to disguise a bribe as something legitimate, for instance, as a 'scholarship' or 'loan repayment'.

Free Anti-Bribery Good Practice Guide

4. WAC - $21.7 million bribery settlement

The World Acceptance Corporation (WAC) has agreed to pay the SEC $21.7 million in penalties and disgorgement to resolve FCPA offences in Mexico. What happened is that one of WAC's Mexican subsidiaries was found to have paid $4.1 million in bribes to Mexican government officials and union workers to obtain or keep business.

Of the $4.1 million in bribes, no less than $1.5 million was handed to government officials, $580,000 to union officials, and $480,000 to third-party intermediaries who used parts of it to bribe government and union officials. Due to insufficient record keeping, it is "unclear how the remaining $1.5 million in payments were split," the SEC said.

What is particularly noteworthy is how WAC attempted to disguise these bribes. WAC Mexico transferred money into accounts connected to officials and used an intermediary to "distribute large bags of cash" among the officials. According to the SEC, the payments were referred to as "scholarships", "royalty payments", or "support".

Key takeaways from this case

  • Never attempt to disguise a bribe as something legitimate, such as a 'scholarship' or 'royalty payment'.
  • Never offer money or anything of value in return for improper performance of any function.
  • Make sure that gifts and hospitality are proportionate and in line with industry-standard policies and thresholds.
  • Never make facilitation payments to speed up processes or 'jump the queue' unless you are in immediate physical danger.
  • Make sure you report any suspicion or knowledge of bribery to the relevant authorities immediately.

Anti-Bribery E-learning Module

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