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      Proskauer on International Litigation and Arbitration:
       Managing, Resolving, and Avoiding Cross-Border Business or Regulatory Disputes
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C. Explosion in Monetary Penalties

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  1. The size of the penalties imposed following successful enforcement actions had been growing in recent years, but exploded last month when the Siemens matter was resolved.

  2. Prior to 2007, the largest total fine paid to the DOJ and the SEC was $28.5 million (in the Titan case, resolved in 2005). 10

  3. In April 2007, a subsidiary of Baker Hughes Inc., a major oilfield services company, pled guilty to violating the anti-bribery provisions of the FCPA, conspiracy to violate the FCPA, and aiding and abetting the falsification of its parent company's books and records.11   The subsidiary agreed to pay $44 million in combined fines and penalties as part of a plea agreement with the DOJ and a civil settlement with the SEC.

  4. Also in 2007, the DOJ obtained what was then the largest criminal fine for FCPA violations, $26 million,.12  and the SEC obtained what was its largest FCPA settlement, $33 million.13

  5. All these records, however, were shattered by the recent Siemens resolution. 

(a) In December 2008, Siemens agreed to pay more than $1.3 billion in additional fines and penalties, beyond the $274 million it previously paid to German authorities, after it and some of its subsidiaries were accused of paying anywhere from $800 million to $1.4 billion in bribes.  14 

(i) As part of this resolution, Siemens pled guilty to one count of failure to maintain internal controls and one count of failure to maintain adequate books and records.  In addition, three of its subsidiaries pled guilty to conspiring to violate the FCPA.15  

(ii) In terms of the $1.3 billion, Siemens agreed to pay a criminal fine of $450 million.  It also agreed to disgorge $350 million to resolve the civil action brought by the SEC.  Finally, Siemens agreed to pay an additional $540 million to German authorities. 16 

(b) Incredibly, the authorities have made clear that they would not have been so lenient had it not been for Siemens' "exceptional"cooperation, "significant remediation,"and its massive, "thorough"internal investigation.17   For example, US authorities could have sought to ban Siemens from competing for government contracts, but did not do so. 18

10  Cohen et al., supra note 2.

11  Press Release, Department of Justice, Baker Hughes Subsidiary Pleads Guilty to Bribing Kazakh Official and Agrees to Pay $11 million Criminal Fines as Part of Largest Combined Sanction Ever Imposed in FCPA Case,

12  Press Release, Department of Justice, Three Vetco International Ltd. Subsidiaries Plead Guilty to Foreign Bribery and Agree to Pay $ 26 million in Criminal Fines,?; Cohen et al., supra note 2.

13  Siemens Press Conf., supra note 1. 

14  Jack Ewing, Siemens Settlement: Relief, But Is It Over? BusinessWeek, Dec. 15, 2008; Siemens Press Conf., supra note 1.

15  Siemens Press Conf., supra note 1.

16  Id.

17  Id.  It has been estimated that Siemens spent billions of dollars on its internal investigation; Ewing, supra note 13; and its lawyers billed an estimated 1.5 million hours; Siemens Press Conf., supra note 1.

18  Ewing, supra note 13.

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