In context

Settlements in brief – recently settled cases in regulatory and criminal enforcement

February 10, 2014
In context

Regulatory and criminal enforcement cases are settled fairly regularly, and we often consider settlements as setting precedents. We provide a brief overview of the most important settlements every month. This month, we briefly discuss recent settlements reached with JPMorgan and Alcoa in the US, and with KPMG in the Netherlands.

JP Morgan settlement – message to your compliance programme

JP Morgan agreed to pay USD 2.6 billion to various US federal authorities and plaintiffs in civil cases. It admitted it had violated the Bank Secrecy Act by failing to report suspicious transactions and by not using sufficient compliance systems.


The settlement encompasses USD 1.7 billion to the government, USD 350 million in a related case to the Treasury Department and USD 543 million to various plaintiffs. Allegedly, JPMorgan ignored a number of signs about faulty investments related to the Madoff investment scheme. Madoff is responsible for the biggest Ponzi scheme in history.


This USD 1.7 billion is the largest forfeiture to date by a US bank and is the largest U.S. Department of Justice (DOJ) penalty for a Bank Secrecy Act violation.


According to US Attorney for the Southern District of New York Preet Bharara, this settlement is a critical message to banks about compliance with reporting requirements.


Alcoa settles for FCPA violation 

The Securities & Exchange Commission (SEC) and the DOJ investigated Alcoa Inc. (Alcoa) for violation of the Foreign Corrupt Practices Act (FCPA) by allegedly paying more than USD 110 million in payments to Bahraini officials to influence contract negotiations between Alcoa and a major government-operated aluminum plant. Alcoa agreed to settle with the SEC and the DOJ by paying a total fine of USD 384 million


According to the SEC, Alcoa lacked sufficient internal controls to prevent and detect the bribes, which were improperly recorded in Alcoa’s books and records as legitimate commissions or sales to a distributor. As part of the plea agreement, Alcoa agreed to maintain and implement an enhanced global anti-corruption compliance program, including the development and implementation of policies and procedures and the conducting of comprehensive anti-corruption training throughout the company.


The FCPA prohibits payments to foreign officials, but not necessarily to foreign governments (see also FCPA Guidance). The Guidance includes the advice that companies considering making contributions to foreign governments should take steps to ensure that those contributions are not used for corrupt purposes, such as for the personal benefit of individual foreign officials. As part of an effective compliance program, companies should have clear and easily accessible guidelines and processes in place for gift-giving by the company’s directors, officers, employees and agents.


 KPMG reaches settlement with Dutch Public Prosecutor

The Dutch Public Prosecution Service investigated KPMG and three former KPMG accountants (partners) for fiscal years 2000-2003. The investigation focused on the accountants’ involvement in concealing payments made by Ballast Nedam to foreign agents.


KPMG reached a settlement of EUR 7 million for its role in the audits for fiscal years 2000-2003.


The investigation into three suspects, former accountants, will continue. The case against Ballast Nedam concluded with a transaction in December 2012. The investigation into several former managers of Ballast Nedam suspected of having personally gained from the payment of foreign agents has not been concluded yet.

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