As I have noted in prior posts (most recently here), allegations of bribery and improper payments often lead to follow-on securities class action lawsuits. Although historically claimants in these kinds of securities suits have had mixed results, some of these lawsuits have resulted in significant settlements (including most notably the $3 billion settlement in the Petrobras case). In the latest of these bribery follow-on lawsuits to result in a significant settlement, on December 11, 2020, the parties to the securities lawsuit pending against the Chilean company Chemical and Mining Company of Chile Inc. (a/k/a Sociedad Química y Minera de Chile S.A., or “SQM’) filed with the court their agreement to settle the lawsuit based on SQM’s agreement to pay $62.5 million. The parties’ December 11, 2020 stipulation of settlement can be found here. The lead plaintiff’s motion for preliminary approval of the settlement can be found here.
Continue Reading Chilean Company Pays $62.5 Million to Settle Bribery-Related Securities Suit
Company Hit With D&O Claims Over Improper Payments Investigation
There is no private right of action under the Foreign Corrupt Practices Act. However, FCPA-related matters frequently are the subject of D&O claims, as investors file follow-on civil actions in the wake of news of an FCPA-related investigation or enforcement action. The latest examples of this type of corrupt payment-related follow-on actions are the lawsuits recently filed against Raytheon Technologies Corporation and certain of its directors and offices in the wake of the company’s disclosures of governmental investigations of alleged improper payments. The new lawsuits are representative examples of the ways in which news of corruption investigations can lead to D&O claims against the target companies.
Continue Reading Company Hit With D&O Claims Over Improper Payments Investigation
A Closer Look at FCPA-Related Securities Suits
As I have previously noted, even though the Foreign Corrupt Practices Act (FCPA) does not contain a private right of action, plaintiffs’ attorneys have fashioned an FCPA-based claim of sorts in the form of a follow-on shareholder claim alleging either mismanagement or misrepresentation with respect to the alleged bribery or corrupt activity. A July 10, 2019 memo by attorneys from the DLA Piper law firm (here) takes a look at securities class action lawsuits filed based on FCPA allegations. As the authors note, the underlying FCPA allegations “do not necessarily make for a successful securities class action,” as most FCPA-related securities fraud claims “are dismissed.” As discussed below, a July 12, 2019 dismissal ruling in the FCPA-related Cemex securities class action illustrates both the kind of securities claims that can arise in the wake of FCPA-related allegations and also the hurdles that these kinds of claims face.
Continue Reading A Closer Look at FCPA-Related Securities Suits
Guest Post: Second Circuit Rejects FCPA Liability for Foreign Persons
In an August 24, 2018 opinion in United States v. Hoskins (here), the Second Circuit held that a foreign national cannot be held liable under the FCPA, rejecting the U.S. Department of Justice’s accomplice liability theories. In the following guest post, attorneys from the Paul Weiss law firm take a look at the opinion and review its implications. A version of this article previously was published as a Paul Weiss client memo. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
Continue Reading Guest Post: Second Circuit Rejects FCPA Liability for Foreign Persons
Frequently-Filed FCPA Follow-On Securities Suits Face Formidable Obstacles
As I have often noted (for example, here), a company’s announcement that it is the subject of an FCPA-related investigation frequently leads to the filing of a follow-on civil lawsuit in which investor claimants allege either that the company’s senior officials have violated their oversight duties or that the company’s public disclosure statements were insufficient in some way relating to the alleged misconduct. As I have also noted, these kinds of follow-on lawsuits, while frequently filed, often are unsuccessful.
Both of these aspects of the follow-on civil lawsuit track record are relevant in connection with the wave of litigation that has followed in the wake of the massive anti-bribery investigation in Brazil. Many of the companies caught up in the continuing anti-corruption investigation in Brazil have been hit with follow-on securities suits in the U.S. While there have been noteworthy exceptions, many of these cases have been unsuccessful. Most recently, the defendants’ motion to dismiss was granted in the anti-bribery investigation-related securities class action lawsuit that had been filed against the Brazilian airplane manufacturer Embraer. Southern District of New York Richard M. Berman’s March 30, 2018 opinion granting the motion to dismiss can be found here. The decision is interesting and it highlights many of the challenges claimants face in pursuing these kinds of claims.
Continue Reading Frequently-Filed FCPA Follow-On Securities Suits Face Formidable Obstacles
Is a Follow-On Lawsuit an End-Run Around the Absence of an FCPA Private Right of Action?
There is no private right of action under the Foreign Corrupt Practices Act (FCPA), but plaintiff shareholders nevertheless frequently file follow-on civil actions in the wake of FCPA allegations against a company. Are these follow-on civil actions just an end run around the FCPA’s lack of a private right of action? That is the question a district court addressed in ruling on a motion to dismiss in a securities class action lawsuit filed against VEON (formerly known as Vimpelcom). In a September 19, 2017 order (here), Southern District of New York Judge Andrew L. Carter, Jr. held that the alleged misrepresentations on which the plaintiff sought to rely were “sufficiently distinct to avoid any potential concern that Plaintiffs are seeking to enforce the FCPA by [their] securities fraud action.” A November 8, 2017 memo from the Shearman & Sterling law firm about the ruling can be found here.
Continue Reading Is a Follow-On Lawsuit an End-Run Around the Absence of an FCPA Private Right of Action?
FCPA Follow-On Civil Actions: Frequently Filed, Less Frequently Successful
There is no private right of action under the Foreign Corrupt Practices Act. However, a company’s announcement of an FCPA investigation or enforcement action frequently will draw a follow-on civil lawsuit in the form of a shareholders’ derivative lawsuit, in which a shareholder plaintiff alleges that the company’s board failed to prevent the company from committing these violations. But while these kinds of lawsuits arise frequently, they are less frequently successful, as illustrated most recently in a Delaware Chancery Court shareholders’ derivative lawsuit involving the telecommunications equipment company Qualcomm.
Continue Reading FCPA Follow-On Civil Actions: Frequently Filed, Less Frequently Successful
Field Notes on Recent Corporate Suit Filing Trends
As part of our beat here at The D&O Diary
, we regularly monitor new lawsuit filings and try to identify trends and patterns. Over the years, we have noted and commented on this blog about many of the trends and patterns we have identified. More than once we have noted the incidence of director and officer liability litigation arising out of environmental issues. We have also noted that D&O litigation often follows after the announcement of FCPA investigations. As discussed below, there has been a flurry of recent filings involving environmental issues. I have also noted below an interesting variant on the FCPA follow-on civil lawsuit pattern.
Continue Reading Field Notes on Recent Corporate Suit Filing Trends
Omissions Regarding Bribery Investigation Held Actionable
Regular readers of this blog know that the filing of a shareholder lawsuit following the disclosure of a bribery investigation is a well-established phenomenon (as discussed, for example, here). Readers will also recall that in March 2015 when the U.S. Supreme Court issued its Omnicare decision (about which refer here), there was significant discussion whether the Court’s ruling that omitted facts could make a statement of opinion misleading and support liability under the securities laws could prove helpful to plaintiffs and even lead to more securities lawsuits premised on alleged omissions.
The trend lines for both of these issues came together in a recent dismissal motion ruling in the Southern District of New York in the securities class action lawsuit involving Och-Ziff Capital Management Group. In a February 17, 2016 opinion (here), Southern District of New York Judge J. Paul Oetken ruled that the defendants’ alleged failure to disclosure alleged but uncharged violations of the FCPA and sanctions laws was not actionable. However, he also held that the defendants’ failure to disclose the existence of the DoJ and SEC investigations was actionable, in light of the statements the company did make about its exposure to regulatory investigations. As discussed below, the Court’s conclusion that these alleged omissions were actionable was made with express reference to and reliance on the Supreme Court’s Omnicare decision.
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Another U.S. Securities Suit Arising from Overseas Corruption Investigation
In an earlier post, I noted that a significant factor driving securities litigation filings so far this year has been the rising number of U.S. securities lawsuits involving non-U.S. companies. A number of different factors are contributing to the filing of these suits, but among the factors is the increasing numbers of U.S.-listed non-U.S. companies that have been caught up in corruption investigations in their home countries.
The highest profile company among the firms involved in corruption probes is the Brazilian petroleum company, Petrobras, which has been the target of growing Operação Lava Jato (Operation Car Wash) corruption investigation in Brazil. Petrobras, whose ADSs trade on the NYSE, was hit with a class action securities lawsuit in the U.S. in December 2014 (as discussed here).
The continuing Petrobras investigation has spread to a number of other Brazilian companies. Among other things, the investigation has led to the recent arrests of two high profile executives in the construction industry in Brazil, as discussed here. The leaders of the nation’s two largest engineering and construction companies, Marcelo Odebrecht, head of Odebrecht SA, and Otavio Marques Azevedo, head of Andrade Gutierrez, were taken into custody in raids linked to the Petrobras scandal.
The investigation has now led to yet another U.S. securities class action lawsuit against yet another Brazilian company. On July 1, 2015, a plaintiff shareholder filed a securities class action lawsuit in the Southern District of New York against Braskem, S.A. and certain of its directors and officers. Braskem, which is based in Brazil, is Latin America’s largest petrochemical company.
Continue Reading Another U.S. Securities Suit Arising from Overseas Corruption Investigation