The National Law Forum

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Goodyear Pays for Sins of Subsidiaries in $16 Million Settlement

Proskauer Rose LLP, Law Firm

Following recent trends, the U.S. Securities and Exchange Commission brought an administrative proceeding against a U.S. issuer for the corrupt activities of its foreign subsidiaries. Earlier this week, Goodyear Tire & Rubber Company agreed to pay the SEC over $16 million to settle charges that it violated the accounting provisions of theForeign Corrupt Practices Act by failing to prevent or detect over $3 million in bribes paid by its Angolan and Kenyan subsidiaries. Goodyear also must report its compliance remediation efforts to the SEC annually for the next three years.

The SEC’s Charges

According to the SEC’s cease and desist order, between 2007 and 2011, Goodyear’s downstream subsidiaries in Kenya andAngola bribed employees of both private and government-owned companies to obtain business. The subsidiaries also bribed police, tax authorities and other local officials, though the SEC’s order did not allege the purposes of those payments. The bribes “were falsely recorded as legitimate business expenses in the books and records of the subsidiaries, which were consolidated into Goodyear’s books and records.”

The SEC found that “Goodyear did not prevent or detect these improper payments because it failed to implement adequate FCPA compliance controls at its subsidiaries” and, for the Kenyan subsidiary, “because it failed to conduct adequate [pre-acquisition] due diligence.” Goodyear was not alleged to have any involvement with or knowledge of its subsidiaries’ illicit conduct. Nonetheless, comments by Scott Friestad, Associate Director of the SEC’s Enforcement Division, displayed the SEC’s willingness to hold parent companies responsible for failing to adequately supervise their subsidiaries: “Public companies must keep accurate accounting records, and Goodyear’s lax compliance controls enabled a routine of corrupt payments by African subsidiaries that were hidden in their books.”

Lessons Learned

  1. Benefits of self-disclosure, cooperation, and remediation: Although Goodyear had to disgorge over $14 million in profits from its Kenyan and Angolan operations, and over $2 million in prejudgment interest, it avoided a civil penalty. This relatively favorable outcome likely is due to Goodyear’s timely self-disclosure to the SEC after receiving information about the bribes (through internal whistleblower mechanisms), its substantial cooperation with the SEC during the course of the investigation, and its extensive remediation efforts. Those efforts included divesting one subsidiary and preparing to divest the other, disciplining employees, and enhancing its anti-corruption compliance program. The settlement bolsters repeated assertions by law enforcement and regulatory officials that companies who self-disclose and cooperate will be rewarded with leniency.

  2. Buyers (and parents) beware: Parent companies may be on the hook for their subsidiaries’ misconduct, even when the parent company does not participate in or know about the illicit activities. Indeed, the SEC was careful to note that the Kenyan subsidiary’s corrupt activities may have begun prior to Goodyear’s acquisition, and could have been identified through adequate pre-acquisition due diligence. Pre- and even post-acquisition anti-corruption due diligence has become mandatory for companies that seek to acquire entities in high-risk foreign jurisdictions. And after the transaction is consummated, parents who are subject to the FCPA’s accounting provisions must ensure that their subsidiaries maintain robust internal controls and accurate books and records, regardless of whether they too are issuers.

  3. FCPA charges may include commercial bribery: According to the SEC’s order, both of Goodyear’s subsidiaries paid bribes not only to employees of government-owned entities, but also to employees of private companies. This settlement should serve as a reminder that although the FCPA’s anti-bribery provisions only extend to the bribery of foreign government officials, the accounting provisions may be used to prosecute commercial bribery.

  4. Expect more FCPA enforcement actions in administrative proceedings: Companies facing a civil FCPA enforcement action by the SEC must remain cognizant of the likelihood that the proceedings will play out on the administrative stage. Defendants in administrative forums face truncated deadlines, an absence of judicial scrutiny and limited appellate rights, and cannot avail themselves of the protections in the Federal Rules of Evidence and Civil Procedure. The SEC likely will continue to seek home-court advantage, whenever possible.

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Three Reasons You Need Email Marketing

RW Lynch Company, Inc.

Email marketing. You may have heard that it is old fashioned, ineffective and ultimately a waste of time and effort. Despite what the naysayers preach, this is simply untrue. We live in the internet age. It is crucial for law firms to get their name out there. Email marketing is a thriving, affordable and effective way to build and market your firm, increase conversions and remind clients who you are. We believe that email marketing is one of the best business practices for lead cultivation and management. Why?

It’s inexpensive

Perhaps the best feature of email marketing is that it is economical. Email marketing is a great way to spend less and receive a greater return on your investment. It cuts out high costs that other marketing channels, like direct mail, add on. You can communicate with contacts more frequently because an email takes less time and money to create. All you need is an effective email marketing program. Many legal marketing companies, like RW Lynch, provide an email marketing service that will take care of everything from templates to content, and more.

It’s convenient

Emails are easy to send, and they are easy to receive. A postal mailing, for example, takes significantly more time and effort. Designing, printing, folding, stuffing, stamping and mailing does not leave much time for taking care of clients. Typing a quick email and clicking send is a lot more cost effective, and saves a lot more of your valuable time. Email marketing is even convenient for you clients. Imagine the likelihood of a client carrying around a physical mail piece to share with their loved ones. Now imagine the likelihood of that same client forwarding an informative email, or sharing it on social media. Email marketing is simply an easier way to communicate with leads.

It keeps you on their mind

The best feature of email marketing might be that it is economical, but the most important aspect of email marketing is that it keeps you in touch with current and former clients. Remind your contacts that you are there when they need you, without becoming overbearing. Remind your clients that you care by sending personalized messages, holiday greetings and birthday wishes. Your clients are far more likely to refer you to their friends and family if they remember that you worked hard for them. The easiest way to remind them is through consistent email marketing.

There are a lot of options when it comes to marketing yourself and your law firm. Many options are exceedingly expensive and offer little to no return on effort and investment. Email marketing is a simple practice that will make a big impact. If you think that you are too busy for email marketing, don’t forget that there are many email marketing programs available and waiting to help you succeed.

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