The FCPA Report

The definitive source of actionable intelligence covering the Foreign Corrupt Practices Act

Articles By Topic

By Topic: Private Equity

  • From Vol. 6 No.3 (Feb. 15, 2017)

    SEC Brings Civil Enforcement Action Against Two Och-Ziff Employees 

    In the wake of the SEC’s September 2016 settlements with Daniel S. Och, Joel M. Frank, Och-Ziff Capital Management LLC (OZ) and OZ Management LP, the SEC has taken aim at two additional OZ employees – senior executive Michael L. Cohen and analyst Vanja Baros. In a Complaint filed in the U.S. District Court for the Eastern District of New York, the SEC alleges that Cohen and Baros arranged to pay tens of millions of dollars in bribes to numerous government officials in Africa to secure lucrative deals for OZ funds and misled an OZ investor in the process. For our full coverage of the OZ settlement, see “Och-Ziff’s Settlement Offers Five Compliance Lessons for Hedge Fund Managers and Private Equity Investors” (Nov. 9, 2016); and “Dirty Dealings in Africa Result in SEC and DOJ Settlements for Och-Ziff and Two Executives” (Oct. 26, 2016).

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  • From Vol. 5 No.22 (Nov. 9, 2016)

    Och-Ziff’s Settlement Offers Five Compliance Lessons for Hedge Fund Managers and Private Equity Investors 

    Och-Ziff’s recent settlements with both the SEC and DOJ for violations of the FCPA should be a wakeup call for hedge fund managers and private equity investors. “Although the enforcement authorities have historically focused their FCPA attention elsewhere, the DOJ and SEC are increasingly turning their attention to sophisticated financial firms,” Jason Jones, a partner at King & Spalding, explained. “Hedge funds, private equity firms, banks, and other firms often focus the majority of their compliance resources on anti-money laundering and sanctions programs, but anti-corruption must not be neglected,” he said. The details of the case, along with the terms of the company’s settlement, offer five key compliance lessons for firms in this industry. For details on the facts underlying the case and the terms of the settlement see our companion article “Dirty Dealings in Africa Result in SEC and DOJ Settlements for Och-Ziff and Two Executives” (Oct. 26, 2016).

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  • From Vol. 5 No.21 (Oct. 26, 2016)

    Dirty Dealings in Africa Result in SEC and DOJ Settlements for Och-Ziff and Two Executives

    After months of speculation, the SEC and DOJ recently announced a settlement with Och-Ziff Capital Management and two of its employees for more than $400 million. The settlement papers indicate that Och-Ziff’s varied dealings in Africa – both in terms of procuring investors and making private equity investments – were characterized by a nonchalant attitude toward compliance. The company routinely worked with intermediaries with questionable backgrounds and known ties to government officials. Once deals were made, little effort was put into ensuring that funds were spent appropriately. According to a team of attorneys at MoloLamken, the settlement is a “significant development” in both the FCPA and hedge fund worlds. “For a number of years, DOJ and the SEC have indicated that their FCPA enforcement efforts are focused on private equity and hedge funds,” they said, “but the Och-Ziff settlement is the first major move in that direction. And it’s a significant one: the case represents one of the largest FCPA settlements in history against one of the world’s largest hedge funds.” A companion article in our next issue will distill further compliance takeaways from the case. See “Addressing Corruption Risks and Compliance Strategies for Co-Investors (Part One of Two)” (Jun. 24, 2015); Part Two (Jul. 8, 2015). 

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  • From Vol. 4 No.17 (Aug. 19, 2015)

    Mayer Brown Attorneys Discuss Global Corruption Risk in the Financial Services Industry

    Financial services firms – including banks, financial advisors and private equity investors – have recently been the subjects of an increasing number of anti-corruption enforcement actions.  Will the enforcement agencies remain focused on the financial services industry, or is it just a passing phenomenon?  During a recent event hosted by Mayer Brown, a panel of experts discussed whether financial services firms are actually facing additional exposure and provided strategies for limiting that exposure.  The panel included three Mayer Brown partners: Alistair Graham of the firm’s London office, John Hickin, based in Hong Kong, and Laurence Urgenson, based in D.C.  See also “Five Corruption Risks in the Financial Services Industry,” The FCPA Report, Vol. 3, No. 15 (Jul. 23, 2014).

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  • From Vol. 4 No.14 (Jul. 8, 2015)

    Addressing Corruption Risks and Compliance Strategies for Co-Investors (Part Two of Two)

    Considerable uncertainty can arise when parties co-invest alongside one another in the same entity, leading to an array of potential corruption and compliance risks.  Co-investor relationships can take many forms – from garden-variety joint venture partnerships, to investments with state-owned entities, to sophisticated private equity transactions – each with different risk profiles.  Adding to the complexity, the DOJ and the SEC expect co-investors to self-police for corruption, even while co-investors are often left in the dark about the contours of appropriate compliance and anti-corruption efforts.  In a recent Practising Law Institute event, experts with diverse perspectives from Goldman Sachs, Cerberus Capital, Gibson Dunn, WilmerHale and Ropes & Gray discussed the complications that can occur throughout the lifecycle of co-investor relationships.  This article, the second of two, discusses essential compliance provisions when formalizing the new venture; the challenges of holding a minority stake in a joint venture; and best practices for conducting an investigation if there is a corruption issue.  The first article described important due diligence steps for both the co-investor and the target to take before the transaction.  See also “FCPA Compliance in Non-Controlled Joint Ventures,” The FCPA Report, Vol. 3, No. 10 (May 14, 2014).

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  • From Vol. 4 No.13 (Jun. 24, 2015)

    Addressing Corruption Risks and Compliance Strategies for Co-Investors (Part One of Two)

    Considerable uncertainty can arise when parties co-invest alongside one another in the same entity.  The sheer variety of co-investor relationships – from garden-variety joint venture partnerships to investments with state-owned entities to sophisticated private equity transactions – attests to the array of potential corruption and compliance risks created by co-investments and how to deal with them.  Adding to the confusion, the DOJ and the SEC expect co-investors to self-police for corruption, but co-investors are often left in the dark about the contours of appropriate compliance and anti-corruption efforts.  In a recent Practising Law Institute event, experts with diverse perspectives from Goldman Sachs, Cerberus Capital, Gibson Dunn, WilmerHale and Ropes & Gray discussed the complications that can occur throughout the lifecycle of co-investor relationships.  This article, the first of two, describes important due diligence steps for both the co-investor and the target to take before the transaction.  The second article will discuss essential compliance provisions when formalizing the new venture; the challenges of holding a minority stake in a joint venture; and best practices for conducting an investigation if there is a corruption issue.  See also “FCPA Compliance in Non-Controlled Joint Ventures,” The FCPA Report, Vol. 3, No. 10 (May 14, 2014).

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  • From Vol. 4 No.4 (Feb. 18, 2015)

    Private Equity FCPA Enforcement: High Risk or Hype?

    Extraction, engineering, pharmaceuticals and medical device manufacturers — FCPA prosecutors have already swept through these industries. Are private equity firms next?  In a guest article, Laurence A. Urgenson, Joseph De Simone, Audrey L. Harris, Matthew A. Rossi, Matthew Alexander and Melanie M. Burke, attorneys at Mayer Brown LLP, assert that, using Dodd-Frank and the SEC’s new presence exams, the government may very well turn its attention towards the private equity industry.  They detail the enforcement landscape, the bribery risks for private equity firms (among other things: hiring practices, sovereign wealth funds, acquisitions and joint ventures) and best practices to mitigate those risks.  See also “Buyer Beware: Understanding and Mitigating Parent Company FCPA Liability in the Context of Private Equity Acquisitions,” The FCPA Report, Vol. 2, No. 15 (Jul. 24, 2013).

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  • From Vol. 3 No.15 (Jul. 23, 2014)

    Five Corruption Risks in the Financial Services Industry

    Given the increased attention from the government, how can principals and employees of private equity firms, hedge fund managers, broker-dealers and other financial services firms – as well as their principals and employees – protect themselves from FCPA violations?  What are the most vulnerable parts of their businesses?  At a recent PracticeEdge session hosted by the Regulatory Compliance Association, “FCPA Regulation and Enforcement for Asset Managers,” Ronald Wood, a partner at Proskauer Rose; Kara Brockmeyer, Chief of the SEC’s FCPA Unit; Andrew Levine, a partner at Debevoise & Plimpton; and Paula Anderson, a partner at Shearman & Sterling, identified five major risk areas for the financial services industry and explained how companies can mitigate those risks.  See also “Compliance Leaders from Citgroup and Morgan Stanley Examine FCPA Risks and Solutions for Financial Institutions,” The FCPA Report, Vol. 3, No. 10 (May 14, 2014).

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  • From Vol. 3 No.15 (Jul. 23, 2014)

    Sanctions for Retaliating Against Whistleblower Highlight the Importance of Incentivizing Internal Reporting

    What, if anything, can companies do with respect to a whistleblower’s employment without violating the anti-retaliation provisions in the Exchange Act?  In a recent order, the first of its kind, the SEC sanctioned a private fund manager for taking adverse employment actions against a whistleblower who reported principal transaction compliance shortcomings to the SEC.  In light of this decision, what legal or operational options are available to a company that fails to incentivize internal reporting of FCPA and other compliance violations?  See also “Seven Steps Companies Can Take to Incentivize Internal Reporting of FCPA Violations,” The FCPA Report, Vol. 1, No. 3 (Jul. 11, 2012). 

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  • From Vol. 3 No.12 (Jun. 11, 2014)

    FCPA Compliance Strategies for Hedge Funds and Private Equity Firms

    Given today's investment environment, with an unabated government focus on the private fund industry and significant opportunities developing in emerging markets, private equity fund managers are hard-pressed to ignore corruption risks in their businesses.  Molo Lamken, together with The FCPA Report and The Hedge Fund Law Report, recently hosted a panel that addressed hot topics in FCPA enforcement and compliance for this industry.  The panelists, including outside and in-house counsel, discussed, among other things: the current FCPA enforcement climate for private equity and financial services firms; strategies for mitigating the risk associated with third parties and service providers in high-risk countries; handling facilitation payments; self-reporting violations; and the importance of continuously monitoring compliance programs.  See “Corruption Considerations for Private Fund Managers: An Interview with Molo Lamken Partner Justin Shur,” The FCPA Report, Vol. 3, No. 11 (May 28, 2014).

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  • From Vol. 3 No.11 (May 28, 2014)

    Corruption Considerations for Private Fund Managers: An Interview with Molo Lamken Partner Justin Shur

    Private fund managers are looking with increasing receptivity at emerging markets, and, in some cases, frontier markets where corruption risk is significant.  This has not gone unnoticed by the FCPA units in the SEC and DOJ, which have been focusing on bribery in the financial services industry.  See “Why the Direct Access Partners Case Matters for Financial Sector Anti-Corruption Compliance,” The FCPA Report, Vol. 2, No. 21 (Oct. 23, 2013).  The FCPA Report recently interviewed Justin V. Shur, a former federal prosecutor and now a partner at Molo Lamken LLP, about the enforcement climate, the risks the industry faces and strategies for compliance.  The interview covered, among other things: the relationship between investment control and FCPA risk; contract provisions to limit the FCPA risk raised by third parties; issues presented by deal finders and sovereign wealth funds; hiring risks and best practices; facilitation payments; and successor liability.  Shur will expand on these ideas at a complimentary event (invitation here) at 5 p.m. on June 3 at the CORE: Club in Manhattan.  The event is sponsored by Molo Lamken, The FCPA Report and our affiliated publication, The Hedge Fund Law Report.  In addition to Shur, the event will feature his partner Andrew DeVooght, panelists from Indus Capital, Seward & Kissel, Global Environment Fund and the SEC.  Please RSVP to rsvp@fcpareport.com.  A cocktail reception will follow.

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  • From Vol. 3 No.10 (May 14, 2014)

    The FCPA Report, MoloLamken and The Hedge Fund Law Report to Present Panel Discussion of FCPA Risks for Hedge Funds and Private Equity Firms on June 3

    Hedge funds and private equity firms have found themselves increasingly in the government’s FCPA crosshairs.  The FCPA Report, along with The Hedge Fund Law Report and MoloLamken, will sponsor a complimentary panel discussion on Tuesday, June 3, 2014, to discuss risks and strategies regarding recent governmental actions targeting the financial services industry.  MoloLamken partner Andrew DeVooght will give a legal update and his fellow partner Justin Shur will moderate a panel featuring Seward & Kissell partner Rita Glavin; Brian Guzman, General Counsel at Indus Capital; Stuart Barkoff, General Counsel at Global Environment Fund; and Barry O’Connell, of the SEC’s New York Enforcement Division, who recently worked on the Total case. The discussion will begin at 5:00 p.m. and will be followed by a cocktail reception at 6:30 p.m. at the CORE: Club, 66 East 55th Street in Manhattan.  Space is limited.  To register for the event, please e-mail your contact information to Rsvp@fcpareport.com.   A copy of the invitation is here.

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  • From Vol. 2 No.25 (Dec. 18, 2013)

    What Private Fund Managers Must Know About FCPA Enforcement

    “Hedge funds are under the FCPA microscope now,” Lauren Resnick, a partner at Baker Hostetler LLP, warned at a recent panel discussing the corruption risks that private fund managers, including hedge fund managers, face.  She and her colleague Marc Kornfeld, along with James “Bucky” Canales, Chief Operating Officer of StoneWater Capital, detailed how the FCPA affects the private funds industry and what hedge fund managers and others should be doing to minimize the risk of an FCPA violation, or the violation of other global anti-bribery laws.  See also “Buyer Beware: Understanding and Mitigating Parent Company FCPA Liability in the Context of Private Equity Acquisitions,” The FCPA Report, Vol. 2, No. 15 (Jul. 24, 2013).

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  • From Vol. 2 No.16 (Aug. 7, 2013)

    How Can Financial Services Firms and Employees Avoid FCPA Liability?

    The financial services industry has come under increasing scrutiny by the government in various areas, including anti-corruption.  See “Buyer Beware: Understanding and Mitigating Parent Company FCPA Liability in the Context of Private Equity Acquisitions,” The FCPA Report, Vol. 2, No. 15 (Jul. 24, 2013).  In May, for example, the DOJ and SEC brought charges against individuals at a broker-dealer alleging that the individuals paid bribes in connection with sales of financial services.  See “FCPA Charges against Broker-Dealer Stemming From Routine SEC Examination Is ‘Wake-Up Call’ to the Financial Services Industry,” The FCPA Report, Vol. 2, No. 10 (May 15, 2013).  Given this increased attention from the government, how can principals and employees of private equity firms, hedge fund managers, broker-dealers and other financial services firms – as well as their principals and employees – protect themselves?  What are the chief risk factors and the most effective precautions?  During a recent program hosted by Strafford Publications, Inc., Lara Covington, special counsel at Schulte Roth & Zabel LLP, addressed these and other questions.

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  • From Vol. 2 No.15 (Jul. 24, 2013)

    Buyer Beware: Understanding and Mitigating Parent Company FCPA Liability in the Context of Private Equity Acquisitions

    The DOJ and SEC’s recent actions against financial services entities such as Direct Access Partners may be a harbinger of more scrutiny to come.  The increased focus on the financial services industry, along with the government’s aggressive expansion of its theories of parental liability for actions taken by subsidiaries and other business units (as revealed in the recent Ralph Lauren enforcement action), has special relevance both to standalone private equity firms and to investment banks and similar entities with private equity arms or subsidiaries.  Parent companies may be facing greater exposure than ever before for the misconduct of their subsidiaries, and thus face a greater risk of being the subject of the next enforcement action.  In a guest article, Seth C. Farber and Riche T. McKnight, partners at Winston & Strawn LLP, and Ryan D. Fahey, an associate at Winston & Strawn LLP, review relevant enforcement actions under the FCPA’s anti-bribery, books and records and internal control provisions, and outline critical steps that private equity firms and investment banks with private equity arms can take to reduce their overall FCPA exposure.  See also “FCPA Charges against Broker-Dealer Stemming From Routine SEC Examination Is ‘Wake-Up Call’ to the Financial Services Industry,” The FCPA Report, Vol. 2, No. 10 (May 15, 2013); “SEC’s NPA with Ralph Lauren, the Agency’s First Ever, Modifies the M&A Due Diligence Requirements Traditionally Included in DOJ DPAs, and Outlines Specific Actions That Constitute Effective Self-Reporting,” The FCPA Report, Vol. 2, No. 9 (May 1, 2013).

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  • From Vol. 2 No.5 (Mar. 6, 2013)

    How to Perform Effective FCPA Due Diligence in Private Equity Transactions and Strategic Mergers and Acquisitions

    Corporations conducting mergers and acquisition, organizations that provide financing and even companies that are simply acquiring assets risk violating the FCPA and other anti-corruption laws if they fail to perform adequate due diligence.  A panel of experts at the New York City Bar, including both litigators and transactional attorneys, recently shared their insights on how to structure and conduct various types of deals in a manner that protects the acquirer from FCPA liability.  The panelists offered advice on, among other things, the different forms of M&A transactions; addressing the challenges of performing due diligence for anti-corruption purposes; determining how much due diligence is necessary; negotiating for the right to perform sufficient due diligence; performing post-acquisition due diligence; protecting the acquirer through language in the deal documents; and FCPA liability for private equity investors.

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  • From Vol. 2 No.1 (Jan. 9, 2013)

    How Private Fund Managers Can Manage FCPA Risks When Investing in Emerging Markets

    Anti-corruption enforcement efforts have dramatically increased over the last few years.  Every day it seems there is a new headline about an investigation involving alleged violations of the FCPA.  Federal authorities have indicated that their FCPA enforcement efforts are increasingly focused on the financial services industry and, in particular, private fund managers that invest in emerging markets.  Given this heightened level of government scrutiny, it is important that private equity firms, hedge fund managers and other investors that conduct business in foreign markets understand the associated FCPA risks.  Such risks can arise in the context of raising funds overseas, working with joint venture partners and third party agents, and investing in companies that operate in countries known for corruption.  A potential misstep in these areas can result in a fund manager and its employees facing significant civil penalties and possible criminal prosecution or, at a minimum, having to respond to government subpoenas or requests for information in connection with an investigation by federal authorities, thus resulting in the unnecessary expenditure of time and money and the attraction of unwanted attention.  In a guest article, Justin V. Shur and Joel M. Melendez, partner and associate, respectively, at Molo Lamken LLP, consider some of the important and recurring FCPA risks that arise for investors in emerging markets, and offer practical guidance to help private fund managers and their employees avoid or minimize liability in this area.

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