When It Comes to Compliance, Not Knowing Isn't a Defense
On August 29, 2019, Technology Firm Juniper Networks agreed to pay the US Government $11.7 million to settle FCPA and accounting offenses related to sales practices in Russia and China. See In the Matter of Juniper Networks, SEC Release No. 86812, 8/29/2919. Specifically, Juniper’s foreign subsidiaries “falsified trip and meeting agendas for customer events that understated the true amount of entertainment involved on the trips” and used “off-book funds” to increase sales discounts without actually passing the discounts to customers. See id.
WHY IT MATTERS: The sales representatives (mid-level and junior employees) lied to Juniper’s legal department to gain approval. Therefore, even though Juniper: (a) Did not know about these illegal activities; (b) Had clear travel policies in place prohibiting such actions; and (c) “fully cooperated” with the SEC by disclosing the misconduct in a timely manner – including through “voluntarily produced and translated documents” – the SEC nevertheless demanded a civil monetary penalty based on its finding that the company’s overall internal accounting/compliance controls were insufficient. See id. Juniper additionally agreed to update its compliance protocol, conduct new employee trainings and will soon be creating an independent “expert investigations function” (bringing in an outside law firm) to prevent future violations. See id.
KEY LESSONS: (1) Lack of knowledge by senior management offers little (if any) shelter from US financial laws governing cross-border activity; (2) Incomplete compliance practices are better than nothing but will not prevent serious legal consequences; and (3) The SEC stressed that Juniper’s most egregious violations were: (a) Failure to require express management authorization for transactions in countries subject to heightened FCPA scrutiny; and (b) Failure to conduct appropriate training both for employees AND foreign counter-parties. See id. In other words: Be like the new Juniper – not the old Juniper.
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