United States: Dun & Bradstreet Agrees To Pay $9 Million To SEC To Settle FCPA Charges, But DOJ Declines To Prosecute Under New Policy

On April 23, 2018, The Dun & Bradstreet Corporation ("Dun & Bradstreet") reached a $9 million resolution with the U.S. Securities and Exchange Commission ("SEC") and the U.S. Department of Justice ("DOJ") over allegations that Dun & Bradstreet violated the U.S. Foreign Corrupt Practices Act ("FCPA"). According to the U.S. government, two Dun & Bradstreet subsidiaries in China made improper payments to Chinese government officials. In its resolution with the SEC, Dun & Bradstreet agreed to pay over $9 million in disgorgement and a civil penalty. The DOJ, however, issued a declination letter to Dun & Bradstreet under the agency's new FCPA Corporate Enforcement Policy.

The SEC's order against Dun & Bradstreet alleges that two of the business information provider's indirect subsidiaries in China made unlawful payments to government officials between 2006 and 2012. A core component of Dun & Bradstreet's business model, including its credit reporting business, includes access to business data. Both Shanghai Huaxia Dun & Bradstreet Business Information Consulting Co., Limited ("HDBC") and Shanghai Roadway D&B Marketing Services Co., Ltd. ("Roadway") paid government officials—including employees of China's State Administration of Industry and Commerce ("AIC"), other agencies, and state-owned entities—to obtain proprietary data for Dun & Bradstreet's global commercial database.

In 2006, HDBC was created as a joint venture between Dun & Bradstreet and Huaxia International Credit Consulting Co. Limited ("Huaxia"). Dun & Bradstreet's due diligence on Huaxia found that the company used government connections to source financial statement information directly from provincial offices of the AIC and other agencies. The SEC determined that Dun & Bradstreet's due diligence procedures—a short FCPA training session to Huaxia executives and a request to complete an anti-bribery questionnaire and certification—failed to address this red flag. HDBC ultimately made payments to AIC officials, through both Huaxia and third parties, to improperly obtain non-public AIC business data.

In 2009, Dun & Bradstreet acquired 90% of the shares of Roadway, a leading provider of direct marketing services in China. During its pre-acquisition due diligence, Dun & Bradstreet learned that Chinese law imposed criminal sanctions for entities and individuals who illegally obtain citizens' personal information from Chinese government entities or organizations in certain fields. Dun & Bradstreet knew that Roadway obtained much of its data from third parties, so it would need to ensure Roadway legally obtained, and would continue to legally obtain, such data. In addition, prior to the acquisition, Roadway informed Dun & Bradstreet that it could not certify that no "rebates" were paid in connection with the data sales, because its sales commission structure might incentivize sales representatives to share their commissions with decision-makers to "drum up" business. The SEC alleges that Dun & Bradstreet did not conduct adequate due diligence as to the legality of Roadway-acquired data or sales representatives' potential improper kickbacks.

On March 15, 2012, a television news program featured a Roadway sales executive stating that Roadway created a database with information on over 150 million Chinese citizens, access to which Roadway sold for marketing purposes. The same day, local police raided the Roadway offices in Shanghai. Dun & Bradstreet suspended and then shut down Roadway's operations shortly after the raid. Roadway and five employees were subsequently convicted of illegally obtaining private information of Chinese citizens.

Dun & Bradstreet made an initial self-disclosure to the SEC in March 2012. On Monday, the SEC ordered Dun & Bradstreet to pay disgorgement of over $6 million, prejudgment interest of over $1.1 million, and a civil penalty of $2 million. Dun & Bradstreet did not admit or deny the allegations. According to its order, the SEC considered Dun & Bradstreet's self-disclosure, cooperation, and remedial efforts in reaching the agreement.

The same day, the DOJ issued a letter stating that it declined prosecution consistent with the FCPA Corporate Enforcement Policy. As factors for declination, the DOJ listed Dun & Bradstreet's identification of the misconduct, prompt voluntary self-disclosure, thorough investigation, full cooperation, compliance enhancements, full remediation, and disgorgement to the SEC. Specifically, Dun & Bradstreet cooperated by identifying all individual bad actors, providing all facts relating to the misconduct, making current and former employees available for interviews, and translating documents into English. 

In terms of remediation, Dun & Bradstreet terminated 11 individuals and disciplined other employees by reducing bonuses and salaries, lowering performance reviews, and formally reprimanding them. Notably, the declination letter does not specifically reflect that Dun & Bradstreet "prohibit[ed] employees from using software that generates but does not appropriately retain business records or communications," such as certain instant messaging and social network applications—an express requirement for remediation under the FCPA Corporate Enforcement Policy. Thus, it is unclear whether, and if so how, Dun & Bradstreet complied with this directive.

The resolution with Dun & Bradstreet represents the third public DOJ FCPA declination under the Trump administration and the first under the DOJ's new FCPA Corporate Enforcement Policy. One of the open questions for the new administration has been whether it would continue to follow the framework of the DOJ's FCPA Pilot Program. With the extension of the Pilot Program, the implementation of the FCPA Corporate Enforcement Policy, and the recent declinations involving Linde North America, CDM Smith, and Dun & Bradstreet, it appears likely that the DOJ under the new administration will continue to recognize companies' efforts at cooperation and self-disclosure. 

However, this case also illustrates that even where DOJ declines a matter and the company pays full disgorgement of any ill-gotten gains, the SEC may still impose a civil penalty. Based upon the resolution materials, key to the SEC's decision was the failure of Dun & Bradstreet to recognize and address red flags identified as part of pre-acquisition due diligence, as well as its failure to conduct adequate post-acquisition diligence and remediate the improper payments over the course of several years. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions