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CDM Smith probe ends in declination with disgorgement

Jaclyn Jaeger | July 2, 2017

The Fraud Section of the Justice Department’s Criminal Division last month issued its seventh declination under the FCPA Pilot Program, and the second under the Trump Administration. It was also the fourth declination with disgorgement.

In its latest letter agreement, dated June 21, to Nathaniel Edmonds of law firm Paul Hastings, who represented CDM Smith, the Fraud Section of the Justice Department’s Criminal Division said, “consistent with the FCPA Pilot Program,” that it was closing its investigation into CDM Smith, a privately held engineering and construction firm, concerning alleged violations of the Foreign Corrupt Practices Act. The Department said it would not be bringing any enforcement action, but did require the company to disgorge the illegal profits.

The letter agreement stated that, from approximately 2011 until approximately 2015, employees of CDM Smith’s division responsible for India operations and CDM India illegally paid bribes to officials in the National Highways Authority of India (NHAI), India’s state-owned highway management agency and an “instrumentality” under the FCPA to receive contracts from NHAI. The bribes generally were 2-4% of the contract price and paid through fraudulent subcontractors, who provided no actual services and understood that payments were meant to solely benefit the officials.

In addition, the letter stated, CDM Smith’s division responsible for India and CDM India paid $25,000 to local officials in the Indian state of Goa in relation to a water project contract. All senior management at CDM India (who also acted as employees and agents of CDM Smith and signed contracts on behalf of CDM Smith, including CDM India’s country manager) were aware of the bribes for CDM Smith and CDM India contracts, and approved or participated in the misconduct. Under the agreement, CDM must disgorge $4 million in ill-gotten gains.

In the letter agreement, the Fraud Section said it closed the case based on numerous factors, including:

  • Timely, voluntary self-disclosure of the matter;
  • Thorough and comprehensive investigation;
  • Full cooperation;
  • CDM’s agreement to disgorge the profits received from the improper conduct;
  • Enhancements the company made to its compliance program and internal controls; and
  • Full remediation, including terminating or taking disciplinary action against employees involved in the misconduct.

Look for full coverage on recent trends in the FCPA’s Pilot Program in the July 5 edition of Compliance Week.