Payment to Third Parties
According to a media report, (i) Nissan had an advisor contract (with no substance) with Mr. Ghosn’s sister, based on which Nissan paid a total of $755,000 for 14 years, and (ii) Nissan made a total of $1million contribution to St Joseph University in Lebanon during 2011 - 2015 without going through Nissan's official process for contribution. (only in Japanese http://news.livedoor.com/article/detail/15876948/)
There has been no media report, as far as I am aware of, covering any fact that may indicate these payments are for bribery. However, as a company under the jurisdiction of FCPA, Nissan was supposed to have internal rules requiring risk-based due diligence of third parties and charitable contributions, as such third parties are often used for bribery. As far as we know from media coverage, however, Nissan’s process seems to be not so effective.
Amount of Fine
FCPA violation may result in huge amount of fine. The amount is not proportioned to the amount of bribe. Let us take a look at previous cases from “sanction to bribe ratio”. In the Ralph Lauren case, the amount of bribe was 580,000, and the amount of fine was 882,000 - the ratio is 152%. This figure is among the lowest. What factors were considered? According to DOJ:
“The agreement acknowledges RLC’s extensive, thorough, and timely cooperation, including self-disclosure of the misconduct, voluntarily making employees available for interviews, making voluntary document disclosures, conducting a worldwide risk assessment, and making multiple presentations to the Department on the status and findings of the internal investigation and the risk assessment. In addition, RLC has engaged in early and extensive remediation, including conducting extensive FCPA training for employees worldwide, enhancing the company’s existing FCPA policy, implementing an enhanced gift policy and other enhanced compliance, control and anti-corruption policies and procedures, enhancing its due diligence protocol for third-party agents, terminating culpable employees and a third-party agent, instituting a whistleblower hotline, and hiring a designated corporate compliance attorney.” (see https://www.justice.gov/opa/pr/ralph-lauren-corporation-resolves-foreign-corrupt-practices-act-investigation-and-agrees-pay)
In some other cases, this ratio can be more than ten times of Ralph Lauren case, i.e., more than 1500%.
“Nine factors are considered in conducting an investigation, determining whether to charge a corporation and negotiating a plea or other agreements.” A Resource Guide to the U.S. Foreign Corrupt Practices Act p53. One is “the existence and effectiveness of the corporation’s pre-existing compliance program. Another one is “the corporation’s remedial actions, including any efforts to implement an effective corporate compliance program or improve an existing one, replace responsible management, discipline or terminate wrongdoers, pay restitution, and cooperate with the relevant government agencies.”
Effective Compliance Program
What is “effective compliance program”? A Resource Guide to the U.S. Foreign Corrupt Practices Act (p56 - p65) describes in detail, and Evaluation of Corporate Compliance Programs summarizes very well. One of the 11 items in this document is Third Party Management. From what we can know from media coverage, it appears Nissan’s due diligence in challenging countries such as Brazil (CPI: 37), Saudi Arabia (CPI: 49), Lebanon (CPI: 28) seem to be either non-existence or very weak (CPI: Corruption Perceptions Index). Whether this is the general status of Nissan in these countries, or if it was exceptional cases only related to Mr. Carlos Gohsn, is not clear from media reports.
In any event, I would not be surprised if U.S. DOJ / SEC was carefully following media reports regarding Mr. Carlos Ghosn.