Corporate Recidivism in the FCPA Context

by Bruce E. YannettAndrew M. Levine and Philip Rohlik and Maxwell K. Weiss

Introduction

Among the flurry of resolutions in the final days of the Obama administration, two “repeat offenders” settled FCPA cases: Zimmer Biomet Holdings, Inc. (“Zimmer Biomet”)[1] and Orthofix International N.V. (“Orthofix”).[2]  Zimmer Biomet and Orthofix are hardly the first such “repeat offenders.”  In July 2016, Johnson Controls Inc. (“JCI”) settled an enforcement action involving activities of a Chinese subsidiary with the Securities and Exchange Commission (“SEC”),[3] and the DOJ simultaneously “declined” to bring any charges.[4]  Each of these companies was a “repeat offender” in having previously settled FCPA-related allegations.

By analyzing and comparing these three recent resolutions, this Article highlights factors that may influence whether U.S. authorities bring follow-on FCPA enforcement actions and, if so, what penalties they seek to impose.  As discussed below, companies are well advised to make concrete compliance enhancements in an effort to avoid recidivist status and the significant penalties that can accompany a second resolution.

Recidivism Under the United States Sentencing Guidelines

Chapter Eight of the United States Sentencing Guidelines (“U.S.S.G.”) imposes higher penalty multipliers for recidivist corporate defendants.  Penalty multipliers are based on an organization’s “Culpability Score.”[5]  Beginning with a score of 5 (equivalent to a multiplier range from 1.00 – 2.00), the U.S.S.G. add 1 point if an organization or separately managed line of business committed any part of the instant offense less than 10 years after a criminal adjudication based on similar misconduct or a civil or administrative adjudication based on more than one instance of similar misconduct.[6]  For adjudications within 5 years, add 2 points.[7]  This alone raises the multiplier range to 1.20 – 2.40 or 1.40 – 2.80, respectively.[8]  The DOJ uses the guidelines in calculating monetary penalties in the context of deferred prosecution agreements (“DPAs”) and other resolutions.[9]  Given that the U.S.S.G. provides for recidivism penalties for different parts of a corporation, the key question is when and how the enforcement agencies exercise their prosecutorial discretion in bringing and resolving enforcement actions.  The three recent “repeat offender” cases shed some light on that issue.

Recent “Repeat Offenders”

In July 2016 and the early days of 2017, the SEC settled with three repeat FCPA violators: Zimmer Biomet, Orthofix International, and JCI.  Each had been subject to prior FCPA actions:

  • Zimmer Biomet (then Biomet Inc.) consented to a court order and a DPA requiring it to pay disgorgement, interest, and retain an independent compliance expert in 2012.[10]
  • The same year, Orthofix similarly settled with the SEC and DOJ[11] and consented to a court order requiring it to pay disgorgement and interest, and accept monitoring of its FCPA program.[12]
  • In 2007, York International (“York,” acquired by JCI in 2005) consented to similar terms,[13] including retaining an independent compliance monitor and paying disgorgement, interest, and a $2,000,000 fine.[14]

In 2016, the DOJ initiated a new enforcement action only against Zimmer Biomet,[15] providing a “declination”[16] to JCI, and taking no action against Orthofix.[17]

A. Zimmer Biomet Holdings

Zimmer Biomet, formerly two separate entities, is a medical device manufacturer based in Warsaw, Indiana.[18]  In 2012, Biomet resolved a FCPA investigation relating to improper payments made to Argentinian, Brazilian, and Chinese public healthcare providers.[19]  In July 2014, Biomet disclosed that it became aware of further improprieties in Brazil and Mexico.[20] Pursuant to the DPA, it informed its independent compliance monitor, the DOJ, and SEC.[21]  In March 2015, the term of Biomet’s DPA and independent compliance monitor were extended for an additional year.[22]

In January 2017, DOJ and SEC brought books and records enforcement actions against Zimmer Biomet,[23] a criminal information and plea agreement with a Biomet subsidiary,[24] a new DPA with Zimmer Biomet,[25] and an SEC administrative order against Biomet Inc.[26]  Penalties, disgorgement, and interest totaled $30.4 million including approximately $17.4 million to the DOJ[27] and $13 million to the SEC.[28]

The superseding information against Zimmer Biomet explicitly linked the violation of the internal controls provisions to red flags arising out of the earlier investigation and resolution.[29]  In fact, Biomet used the same Brazilian distributor (albeit in a somewhat different form) that committed the bribery resulting in the 2012 DPA.[30]

The 2017 DPA explained that because “the 2012 DPA obligated Biomet to disclose the conduct described in the [superseding information], and some of the conduct . . . predated the 2012 DPA,”[31] Zimmer Biomet did not receive voluntary disclosure credit.  However, Zimmer Biomet did receive credit for its cooperation with the DOJ,[32] despite the fact that the 2012 DPA obligated Biomet to cooperate.[33]

The DOJ imposed a fine of $17,460,300, a “criminal penalty at the middle of the United States Sentencing Guidelines fine range.”[34] Zimmer Biomet’s culpability score was raised by 2 for committing part of the instant offense within 5 years of a criminal adjudication based on similar conduct.[35]  The final culpability score was 10, resulting in a multiplier between 2.00 – 4.00, with 3.00 being applied. [36]

B. Orthofix International

Within a week of Zimmer Biomet’s second settlement, the SEC announced it settled claims with Orthofix International, a Texas-based medical device company.[37]  In 2012, Orthofix had settled claims by the SEC and DOJ related to corrupt payments in Mexico.[38]  The 2017 settlement related to Orthofix’s improper booking of revenue payments to doctors at government-owned hospitals in Brazil.[39]

In August 2013, Orthofix engaged outside counsel to review allegations of bribery with respect to its Brazilian subsidiary, Orthofix do Brasil Ltda.[40]  Orthofix self-reported the allegations to the SEC and DOJ.[41]  In September 2015, the DOJ extended the term of the DPA through July 2016.[42]

In January 2017, the SEC announced a settlement of books and records charges with Orthofix related to the Brazilian subsidiary’s conduct between 2011 and 2013.[43]  The order pointed out that the SEC charged Orthofix with violating the same FCPA provisions in 2012.[44]  Even though Orthofix took some steps after the 2012 allegations, it “did not start fully implementing sufficient remedial steps until after the discovery of the Brazilian conduct in late 2013.”[45]  Orthofix agreed to pay disgorgement of $2,928,000, prejudgment interest of $264,475, and a civil monetary penalty of $2,928,000.[46]  Orthofix announced that the DOJ had declined to take any “further action with respect to this matter.”[47]

C. Johnson Controls, Inc.

In July 2016, the SEC announced a settlement with Johnson Controls, Inc. related to one of its Chinese subsidiaries.[48]  JCI purchased York International Corporation in 2005, while it was under investigation for FCPA violations. [49] In October 2007, York International (then a part of JCI and parent of China Marine) settled[50] a complaint by the SEC and entered into a DPA with the DOJ. [51]  After it acquired York, JCI devoted additional resources to the compliance program,[52] terminated numerous employees at China Marine, and hired a new managing director (a Chinese national and resident).[53]  JCI also limited the use of agents in its China Marine business model and required that all sales go through its internal sales team based in China.”[54]

Despite these efforts, employees at the Chinese subsidiary “devised another avenue to continue the payments.”[55] When JCI learned of the conduct in December 2012, it self-reported and began an internal investigation.[56]  In July 2016, the SEC entered a cease-and-desist order accepting an offer of settlement from JCI.[57]  The Cease-and-Desist Order alleged that China Marine had used “low risk” / low value vendors that did not normally interface with government officials to disguise improper payments.[58]  These low value transactions did not require approval by the general manager’s superiors.[59]  As a result, JCI failed to detect the improper vendor scheme.[60]

JCI agreed to pay disgorgement of $11,800,000, prejudgment interest of $1,382,561, and a civil penalty of $1,180,000, for a total of $14,362,581.[61]  The SEC specifically stated that it was imposing the penalty (and not a greater amount) based on JCI’s cooperation[62] and remediation, including firing numerous employees, placing illicit vendors on a “do-not-use/do-not-pay list,” largely closing down the infracting offices, and bolstering its integrity testing and internal audits.[63]  For the same reasons, the DOJ granted JCI a “declination” under the FCPA Enforcement Plan and Guidance’s pilot program.[64]

Potential Lessons from Recent FCPA Recidivism

The 2016 – 2017 enforcement actions (or non-actions) against Zimmer Biomet, Orthofix, and JCI make it somewhat difficult to distinguish how the enforcement agencies view repeat offenders.  Relevant factors may include: (1) the jurisdiction or subsidiary in which the misconduct took place; (2) the nature and similarity of the repeated misconduct; (3) the relative ease or difficulty for subsequent misconduct to take place; (4) the amount of remediation actually occurring between the two violations; and, likely most importantly, (5) the actual or constructive knowledge of employees of the parent.  Although the SEC ultimately brought a second action against each of these three companies, these factors nevertheless may have played a role in the amount of civil penalty assessed.

Misconduct occurring in the same jurisdiction or by the same subsidiary could be relevant with regard to treating a parent as a repeat offender.  In Zimmer Biomet, the subsequent misconduct took place in the same jurisdiction as the original misconduct, while in Orthofix it did not, and the DOJ only took action against the former.  At the same time, the DOJ offered a “declination” to JCI, even though the misconduct took place at one of the same subsidiaries involved in the 2007 DPA.

The nature and relative similarity of the repeated misconduct may be relevant too.  In Zimmer Biomet, the same distributor (under a different name) was used again, while in JCI, local management devised and disguised a new payment scheme.  Relatedly, the ease with which these continuing payments are made also may be relevant.  Parent companies arguably are more culpable if a subsidiary easily continued corrupt payments with a similar scheme.  Enforcement agencies may view the parent as less culpable when elaborate, difficult to detect steps are taken to continue the corrupt payments (e.g., JCI).  For this reason, companies should consider conducting follow-up audits after shutting down payment mechanisms that raise FCPA concerns.[65]

In differentiating among the three repeat offenders, the enforcement agencies clearly considered the amount of remediation that actually occurred between the two violations.  The DOJ declined to proceed against JCI, which had implemented the recommendations of a monitor from its 2007 DPA.  With regard to the SEC, Orthofix’s failure to quickly implement global remediation clearly counted against it.[66]

Perhaps the most important factor for the enforcement agencies (especially the DOJ) is the knowledge or involvement of employees at the parent corporation, present in Zimmer Biomet, but not in Orthofix or JCI. [67]  The alleged significant level of knowledge and (at the least) acquiescence by a “Biomet Executive” may explain why the DOJ chose to bring a second enforcement action against Zimmer Biomet but declined to prosecute Orthofix or JCI a second time.

In assessing the impact (or lack thereof) of each factor, it is important to examine both the decision to bring an enforcement action, on the one hand, and the penalty assessed, on the other.  As the SEC brought enforcement actions in all three, a comparison of penalties is paramount.

All three companies were subject to disgorgement (now a standard remedy for the SEC) and civil penalties.  Out of the three corporations analyzed, Zimmer Biomet paid the highest civil penalty (measured as a percentage of disgorgement) of 112%.  This is consistent with the theory that the SEC and DOJ found Zimmer Biomet more culpable for its repeat offenses than the other corporate defendants (likely for the reasons set forth above).  However, Orthofix was close behind, paying a 100% penalty, perhaps also due to its repeat offender status.  JCI’s penalty was only 10% of its disgorgement.  The fact that numerous other factors (including cooperation) are considered in levying a civil penalty, it is difficult to draw conclusions regarding the monetary impact of repeat-offender status.

With regard to the DOJ, the penalty amount is more clearly related to the repeat-offender status of the only company subject to a DOJ enforcement action, Zimmer Biomet.  The DOJ fined Zimmer Biomet $17,460,300, a “criminal penalty at the middle of the United States Sentencing Guidelines fine range.”[68]  In calculating the fine, Zimmer Biomet’s culpability score was raised by 2 as a repeat offender.[69]  The final culpability score was 10, resulting in a multiplier between 2.00 – 4.00, with 3.00 being applied.  Without this higher culpability score (and applying the same methodology), the multiplier range would have been between 1.60 and 3.20, resulting in a likely penalty of $13,968,240.[70]  Further, without the 2012 DPA, Zimmer Biomet would have likely received voluntary reporting credit, resulting in a culpability score of only 5.[71]  The resulting penalty would likely have been only $8,730,150, half the fine actually imposed.[72]  In other words, the fact that a corporation has a prior FCPA violation can have a major impact on the fine imposed.[73]

Conclusion

Both the DOJ and SEC take corporate recidivism into account when determining whether to bring an enforcement action and in the type of penalty applied.[74]  Given the number of factors potentially influencing such decisions, it is difficult to draw firm conclusions as to which factors the enforcement agencies view as most important.  That said, what is most clear from the JCI, Orthofix, and Zimmer Biomet actions is that companies are advised to quickly implement remedial actions across their operations.  This should include follow-up audits, where appropriate, to check whether local employees have found new ways to make illicit payments.  In doing so, companies also should consider if there is some linkage between the discovery of any new violation and the remedial actions previously instituted.  Documenting such a linkage may enable a company to demonstrate the fact that the discovery of additional misconduct is a benefit of remediation and that, in those circumstances, an additional enforcement action or enhanced recidivism penalties would be inappropriate.

Footnotes

[1] In the Matter of Biomet, Inc., Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21 C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease & Desist Order, Securities Exchange Act Rel. No. 79780, Accounting and Auditing Enforcement Rel. No. 3843, Admin. Proc. File No. 3-17771 (Jan. 12, 2017); United States v. Zimmer Biomet Holdings, Inc., Superseding Information, No. 12-CR-00080 RBW (filed Jan. 12, 2017); United States v. Zimmer Biomet Holdings, Inc., Deferred Prosecution Agreement, No. 12-CR-00080 RBW (filed Jan. 12, 2017).

[2] In the Matter of Orthofix International N.V., Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21 C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease & Desist Order, Securities Exchange Act Rel. No. 79828, Accounting and Auditing Enforcement Rel. No. 3851, Admin. Proc. File No. 3-17800 (Jan. 18, 2017).

[3] In the Matter of Johnson Controls, Inc., Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order, Securities Exchange Act Rel. No. 78287; Admin Proc. File No. 3-17337 (July 11, 2016).

[4] Letter from Daniel Kahn, Deputy Chief, Fraud Section, Criminal Division, Department of Justice, to Jay Holtmeier, Esq, & Erin G.H. Sloane, Esp., WilmerHale regarding JCI (June 21, 2016) (PDF: 50 KB).

[5] U.S.S.G. § 8C2.6 (2016).

[6] Id. § 8C2.5(c)(1).  “‘Prior criminal adjudication’ means conviction by trial, plea of guilty (including an Alford plea), or plea of nolo contendere.”  Id. § 8A1.2 note 3(G).

[7] Id. § 8C2.5(c)(2).

[8] Id. § 8C2.6.

[9] For example, in the BK Medical ApS (“BK Medical”) Non-Prosecution Agreement (“NPA”), the DOJ noted that BK Medical received a discount off the fine range, but did not include the calculations in the NPA.  BK Medical ApS, Non-Prosecution Agreement, at 1–2 (June 21, 2016).  The U.S. Attorneys’ Manual outlines how prosecutors should consider the U.S.S.G. in determining the appropriateness of plea agreements and selecting plea charges.  DOJ, U.S. Attorneys’ Manual, § 9-27.400–430 (1997).

[10] SEC v. Biomet, Inc., Litigation Release, Civil Action No. 1: 12-CV-00454 (D.D.C.) (RMC) (March 26, 2012).

[11] United States v. Biomet, Inc., Deferred Prosecution Agreement, No. 12-CR-00080 RBW (filed Mar. 26, 2012); United States v. Orthofix International, N.V., Deferred Prosecution Agreement, No. 4:12-CR-00150-RAS-DDB-1 (July 10, 2012).

[12] SEC v. Orthofix International N.V., Litigation Release, Case No. 4:12-CV-419 (filed July 10, 2012).

[13] United States v. York Int’l Corp., Deferred Prosecution Agreement, No. 07-CR-00253 (Oct. 1, 2007).

[14] SEC v. York International Corporation, 07 CV 01750 (filed Oct. 1, 2007).

[15] United States v. Zimmer Biomet Holdings, Inc., Superseding Information, Crim. No. 12-CR-00080 RBW (filed Jan. 12, 2017).

[16] Letter from Daniel Kahn, Deputy Chief, Fraud Section, Criminal Division, Department of Justice, to Jay Holtmeier, Esq, regarding Johnson Controls (“JCI”), (June 21, 2016)  (PDF: 50 KB).

[17] Orthofix Announces Resolution of SEC Investigations (Jan. 18, 2017).

[18] Zimmer Biomet, About Us.

[19] See United States v. Biomet, Inc., Deferred Prosecution Agreement, No. 12-CR-00080 RBW, ¶ 5 (filed Mar. 26, 2012); SEC Charges Medical Device Company Biomet with Foreign Bribery (Mar. 26, 2012).

[20] Biomet, Inc. Current Report (Form 8-K), SEC (July 2, 2014).

[21] Id.

[22] Biomet, Inc. Current Report (Form 8-K), SEC (Mar. 13, 2015).

[23] United States v. Zimmer Biomet Holdings, Inc., Superseding Information, Crim. No. 12-CR-00080 RBW, ¶ 79 (filed Jan. 12, 2017).

[24] United States v. Jerds Luxembourg Holding S.A.R.L, Information, Docket No. 1:17-CR-00007-RBW, ¶¶ 41–42 (filed Jan. 12, 2017); United States v. Jerds Luxembourg Holding S.A.R.L, Plea Agreement, Docket No. 1:17-CR-00007-RBW (filed Jan. 12, 2017).

[25] United States v. Zimmer Biomet Holdings, Inc., Deferred Prosecution Agreement, Crim. No. 12-CR-00080 RBW (filed Jan. 12, 2017).

[26] In the Matter of Biomet, Inc., Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21 C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease & Desist Order, Securities Exchange Act Rel. No. 79780, Accounting and Auditing Enforcement Rel. No. 3843, Admin. Proc. File No. 3-17771 (Jan. 12, 2017).

[27] United States v. Zimmer Biomet Holdings, Inc., Deferred Prosecution Agreement, Crim. No. 12-CR-00080 RBW, ¶ 7 (filed Jan. 12, 2017).

[28] In the Matter of Biomet, Inc., Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21 C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease & Desist Order, Securities Exchange Act Rel. No. 79780, Accounting and Auditing Enforcement Rel. No. 3843, Admin. Proc. File No. 3-17771, at 11 (Jan. 12, 2017).

[29] United States. v. Zimmer Biomet Holdings, Inc., Superseding Information, Crim. No. 12-CR-00080 RBW, ¶ 19 (Jan. 12, 2017).

[30] Id. ¶¶ 19–20.

[31] Id. (emphasis added).

[32] Id.

[33] United States v. Biomet, Inc., Deferred Prosecution Agreement, No. 12-CR-00080 RBW, ¶ 4 (Mar. 26, 2012).

[34] United States v. Zimmer Biomet Holdings, Inc., Deferred Prosecution Agreement, No. 12-CR-00080 RBW, ¶ 4 (filed Jan. 12, 2017).

[35] Id. (citing U.S.S.G. § 8C2.5(c)(2)). Technically, the guideline did not apply because the 2012 DPA was not a “prior criminal adjudication” as defined by the sentencing guidelines. U.S.S.G. § 8A1.2 note 3(G) (“‘Prior criminal adjudication’ means conviction by trial, plea of guilty (including an Alford plea), or plea of nolo contendere.”).

[36] United States v. Zimmer Biomet Holdings, Inc., Deferred Prosecution Agreement, Crim. No. 12-CR-00080 RBW, ¶ 18 (filed Jan. 12, 2017).

[37] Medical Device Company Charged with Accounting Failures and FCPA Violations, SEC Press Release (January 17, 2017).

[38] United States v. Orthofix International N.V., Deferred Prosecution Agreement, No. 4:12-CR-00150-RAS-DDB-1  (filed July 10, 2012); SEC v. Orthofix International N.V., Consent of Defendant Orthofix International, Civ. Action No. 4:12-CV-419 (filed April 9, 2012).

[39] In the Matter of Orthofix International N.V., Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21 C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease & Desist Order, Securities Exchange Act Rel. No. 79828, Accounting and Auditing Enforcement Rel. No. 3851, Admin. Proc. File No. 3-17800, at 2 (Jan. 18, 2017).

[40] Orthofix Int’l N.V. Quarterly Report (Form 10-Q) (Aug. 1, 2016), at 14.

[41] Id.

[42] Id.

[43] In the Matter of Orthofix International N.V., Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21 C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease & Desist Order, Securities Exchange Act Rel. No. 79828, Accounting and Auditing Enforcement Rel. No. 3851, Admin. Proc. File No. 3-17800, at 2 (Jan. 18, 2017).

[44] Id.

[45] Id. at 6 ¶ 18.

[46] Id. at 7.

[47] Orthofix Announces Resolution of SEC Investigations (Jan. 18, 2017).

[48] In the Matter of Johnson Controls, Inc., Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order, Securities Exchange Act Rel. No. 78287; Admin Proc. File No. 3-17337, ¶¶ 2–3 (July 11, 2016).

[49] United States v. York Int’l Corp., Deferred Prosecution Agreement, No. 07-CR-00253 (Oct. 1, 2007).

[50] SEC v. York Int’l Corp., Litigation Release, No. 1:07-cv-01750 (RCL) (Oct. 1, 2007).

[51] United States v. York Int’l Corp., Deferred Prosecution Agreement, No. 07-CR-00253, ¶¶ 2, 5 (Oct. 1, 2007).

[52] In the Matter of Johnson Controls, Inc., Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order, Securities Exchange Act Rel. No. 78287; Admin Proc. File No. 3-17337,  ¶ 5 (July 11, 2016).

[53] Id.

[54] Id.

[55] Id.

[56] Id. ¶ 11.

[57] Id. at 1.

[58] Id. ¶ 8.

[59] Id. ¶ 9.

[60] Id. ¶ 15.

[61] Id. at 6–7.  Johnson Controls was further required to report to the SEC periodically for one year and submit a report to the SEC. Id. at 8.

[62] Id.

[63] Id. ¶¶ 19–20.

[64] Letter from Daniel Kahn, Deputy Chief, Fraud Section, Criminal Division, Department of Justice, to Jay Holtmeier, Esq, & Erin G.H. Sloane, Esp., WilmerHale regarding JCI (June 21, 2016) (PDF: 50 KB).

[65] While the relative similarities between the initial and subsequent schemes help explain the DOJ’s decision to bring a second enforcement action against Zimmer Biomet and not JCI, the timing of the corrupt conduct does not.  The discovery of the continued misconduct by Zimmer Biomet occurred within two years of the original DPA (a timeline consistent with reasonable follow-up); the misconduct in JCI continued for five years after the original DPA, perhaps suggesting that Zimmer Biomet deserved more credit than it received.

[66] See supra note 71.

[67] United States v. Zimmer Biomet Holdings, Inc., Superseding Information, No. 12-CR-00080 RBW ¶ 15 (filed Jan. 12, 2017).

[68] United States v. Zimmer Biomet Holdings, Inc., Deferred Prosecution Agreement, No. 12-CR-00080 RBW, ¶ 4 (filed Jan. 12, 2017).

[69] Id. ¶ 7 (citing U.S.S.G. § 8C2.5).  As noted above, technically the guideline did not apply because the 2012 DPA was not a “prior criminal adjudication” as defined by the sentencing guidelines. U.S.S.G. § 8A1.2 note 3(G) (“‘Prior criminal adjudication’ means conviction by trial, plea of guilty (including an Alford plea), or plea of nolo contendere.”).

[70] $5,820,100 (base fine) * 2.4 (the middle of 1.60-3.20) = $13,968,240. See U.S.S.G. § 8C2.6.

[71] See id. § 8C2.5g(1).

[72] $5,820,100 (base fine) * 1.5 (the middle of 1.00-2.00) = $8,730150. See id. § 8C2.6.

[73] In fact, the DOJ cited a lack of criminal history as one of the “Relevant Considerations” in Embraer S.A.’s October 2016 DPA, which assessed a fine 20% below the U.S.S.G. range.  United States v. Embraer S.A., Deferred Prosecution Agreement, Case No. 16-60294-CR-COHN, ¶ 4(g), (j) (filed Oct. 24, 2016).

[74] As then-director of the SEC’s Division of Enforcement Linda Chatman Thomsen made clear: “recidivists will be punished.” SEC Charges Baker Hughes with Foreign Bribery and with Violating 2001 Commission Cease-and-Desist Order (Apr. 26, 2007), (“The $10 million penalty demonstrates that companies must adhere to Commission Orders.”).

Bruce E. Yannett and Andrew M. Levine are partners in the New York office.  Philip Rohlik is a counsel in the Shanghai office.  Maxwell Weiss is an associate in the Litigation Department of the New York office. The authors may be reached at beyannett@debevoise.com, amlevine@debevoise.com, and prohlik@debevoise.com, and mkweiss@debevoise.com.  Full contact details for each author are available at www.debevoise.com.

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