Nu Skin Charitable Donation Violates FCPA

The most recent case goes back to 2013, when a provincial Administration of Industry and Commerce (AIC) in China launched an investigation into the China operations of Nu Skin, whose multilevel commission structure was illegal in China. Even the legal so-called direct selling was strictly regulated and Nu Skin had been the target of several crackdowns over the past decade. Companies operating under the direct selling model must obtain local licenses, and salespeople are permitted by law to promote the product through off-site meetings. But products must be sold at retail stores.

According to the SEC order, the AIC investigation was triggered by an unauthorized promotional meeting Nu Skin organized in a city where it didn't have a license to operate or a physical retail store. The AIC eventually informed Nu Skin that it would be fined Rmb2.8 million ($431,088). In response, Nu Skin let the AIC know that the company would prefer to make a donation rather than pay a fine, and meanwhile got in touch with a high-ranking local official who had the power to intervene.

In return for the official's influence in the case, Nu Skin said it would make a $154,000 donation to a charity of the official's choice. That particular charity wasn't even established in the province, and the official was responsible for its launch.

The official also had some more personal requests in mind: As an acquaintance of one of Nu Skin's China employees, he had, before the AIC investigation, asked the company's headquarters to help facilitate an influential U.S. person to write recommendation letters for his child to attend universities in the U.S. This request was later made a “top priority” by Nu Skin, which considered it vital to its China division, according to the SEC, which cited internal emails. Eventually, the letters were secured.

Still, Nu Skin's China division had to report the donation to headquarters and while it did so, it failed to disclose the connection between that and the AIC investigation. It also failed to reveal the relationship between the request for recommendation letters and the AIC investigation.

Nu Skin's U.S. headquarters nevertheless asked the China subsidiary to seek legal advice on the donation, noting that it could pose a potential FCPA risk. So Nu Skin China did, and was told by outside counsel to include language regarding the illegality of influencing government officials in the written agreement between Nu Skin's China unit and the charity. But that language, while included in draft versions of the agreement, was later removed from the final version without the knowledge of Nu Skin's U.S. headquarters.

Two days after a donation ceremony, Nu Skin China received notice from the AIC that the company would not be charged or fined.

The SEC found the U.S. company liable for not having a strong internal control system over the Chinese subsidiary that ensures accountability for assets, particularly illicit payments through the guise of charitable donations.

“Specifically, given the well-known corruption risks in China, Nu Skin U.S. did not ensure that adequate due diligence was conducted by Nu Skin China with respect to charitable donations to identify links to government or political party officials and to prevent payments intended to improperly influence such persons in violation of the company's anticorruption policy and the FCPA,” the SEC wrote in the order.

Nu Skin agreed to the settlement without admitting or denying the SEC's findings. The SEC said Nu Skin cooperated in the investigation and took remedial action.

The only other time an enforcement action has been made in an FCPA case based entirely on a charitable donation was in 2004, in a case that involved Schering-Plough. In that case, the SEC said the pharmaceutical company violated the FCPA when its subsidiary in Poland made improper payments of about $76,000 to a charitable organization called the Chudow Castle Foundation. The director of the foundation was a government official who could influence buying decisions for drugs. Schering-Plough settled the FCPA offenses by paying the SEC a civil penalty of $500,000.

(作者: 张超)

总部位于美国犹他州普洛佛的化妆品生产商 Nu Skin Enterprises Inc.已同意支付 765,688 美元来就美国证券交易委员会 (SEC) 的调查达成和解，该调查主张Nu Skin在中国进行的一笔可疑慈善捐款违反美国《反海外腐败法》。

在 9 月 19 日签发的命令中，SEC 认定Nu Skin违反了《反海外腐败法》，该公司日前为获取可影响中国监管机构对其的 2013 年调查的本地政府官员的帮助，而向一家新成立的慈善机构捐赠 100 万元人民币（约合 154,000 美元）。

在《反海外腐败法》颁发以来的 39 年历史中，这是第二次有公司仅基于旨在收买外国官员影响的慈善捐款而受到犯罪指控。

这起案例要追溯至 2013 年，当时，中国的省级工商行政管理局针对Nu Skin在中国的业务运营发起调查，因为其多层佣金结构在中国属于违法行为。而且这种法律上所称的直销模式受到严格监管，而Nu Skin在过去十年间已受到多次制裁。采用直销模式运营的公司必须获取本地执照，法律允许销售人员通过场外会面推销产品。但产品必须在零售店出售。

根据该 SEC 命令，此工商行政管理局调查的原因是Nu Skin在无运营执照或实体零售店铺的城市开展未经授权的会面推销。工商行政管理局最终宣布将向Nu Skin处以 280 万元人民币（约合 431,088 美元）的罚款。但Nu Skin向工商行政管理局表示愿意用捐款来代替罚金，同时还与有权干涉此调查的高级别本地官员联系。

作为对该官员影响案件调查的回报，Nu Skin表示会向其所选的慈善机构捐赠 154,000 美元。此特定慈善机构甚至并非在该省内成立，且由该官员负责启动。

该官员还提出了一些更私人的要求：作为一名Nu Skin中国员工的相识，该官员在此工商行政管理局调查前便向Nu Skin总部请求帮助促使具有影响力的美国人士来为其子女撰写推荐函，以便就读美国大学。SEC 表示，根据内部电子邮件，此要求之后被视为对其中国分部具有重要影响，而成为Nu Skin的“顶级优先事项”。最终促成了上述推荐函。

Nu Skin的中国分部按照要求向总部报告了此捐款，但并未披露这与该工商行政管理局调查之间的关联。而且也未说明推荐函请求与该工商行政管理局调查之间的关联。

不过，Nu Skin美国总部要求其中国分部寻求有关此捐款的法律建议，表示这可能产生潜在《反海外腐败法》风险。因此，Nu Skin中国向外部顾问寻求建议，获知应在与该慈善机构的书面协议中加入有关影响政府官员属于违法行为的表述。不过，此表述虽然最初加入了该协议的草稿版本，但之后在未通知Nu Skin美国总部的情况下，从正式版本中移除。

在举行捐款仪式的两天后，Nu Skin中国收到了工商行政管理局的通知不会受到指控或罚款。

SEC 认定，Nu Skin美国公司应就未对中国分部实施有效内部管控系统来确保资产经管责任而负责，尤其是对于伪装为慈善捐款的违法付费。

SEC 在签发的命令中表示,“具体而言，基于众所周知的中国市场腐败风险，Nu Skin美国未确保中国分部针对慈善捐款执行充足的尽职调查，来识别与政府或政党官员的关联，并避免旨在违反公司反腐败政策和《反海外腐败法》不当影响此类人士的付费。”

Nu Skin同意进行和解，没有对 SEC 的裁定予以承认或否认。SEC 表示 Nu Skin 配合调查，并已采取补救措施。

另一起仅基于慈善捐款采取执法行动的《反海外腐败法》案件发生于 2004 年，所涉企业为 Schering-Plough。在该案件中，SEC 表示，此制药公司因其波兰分公司向慈善机构 Chudow Castle Foundation 不当支付约合 76,000 美元而违反《反海外腐败法》。该基金的一名董事为可影响药物采购决策的政府官员。Schering-Plough 向 SEC 支付了 500,000 美元民事罚金，来就该《反海外腐败法》违法指控达成和解。

By Anna Zhang, The Asian Lawyer

Provo, Utah-based cosmetic maker Nu Skin Enterprises Inc. has agreed to pay $765,688 to settle a U.S. Securities and Exchange Commission (SEC) investigation into a questionable charity donation the company made in China in violation of the Foreign Corrupt Practices Act (FCPA).

In an order issued on September 19, the SEC ruled that Nu Skin has violated the FCPA by making a Rmb1 million ($154,000) donation to a newly formed charity in order to obtain the favor of a local government official who could influence a 2013 probe into the company by a Chinese regulator.

It was just the second time in the FCPA's 39-year history that a company was charged with offenses based solely on a charitable contribution that was intended to buy the influence of a foreign official.

The most recent case goes back to 2013, when a provincial Administration of Industry and Commerce (AIC) in China launched an investigation into the China operations of Nu Skin, whose multilevel commission structure was illegal in China. Even the legal so-called direct selling was strictly regulated and Nu Skin had been the target of several crackdowns over the past decade. Companies operating under the direct selling model must obtain local licenses, and salespeople are permitted by law to promote the product through off-site meetings. But products must be sold at retail stores.

According to the SEC order, the AIC investigation was triggered by an unauthorized promotional meeting Nu Skin organized in a city where it didn't have a license to operate or a physical retail store. The AIC eventually informed Nu Skin that it would be fined Rmb2.8 million ($431,088). In response, Nu Skin let the AIC know that the company would prefer to make a donation rather than pay a fine, and meanwhile got in touch with a high-ranking local official who had the power to intervene.

In return for the official's influence in the case, Nu Skin said it would make a $154,000 donation to a charity of the official's choice. That particular charity wasn't even established in the province, and the official was responsible for its launch.

The official also had some more personal requests in mind: As an acquaintance of one of Nu Skin's China employees, he had, before the AIC investigation, asked the company's headquarters to help facilitate an influential U.S. person to write recommendation letters for his child to attend universities in the U.S. This request was later made a “top priority” by Nu Skin, which considered it vital to its China division, according to the SEC, which cited internal emails. Eventually, the letters were secured.

Still, Nu Skin's China division had to report the donation to headquarters and while it did so, it failed to disclose the connection between that and the AIC investigation. It also failed to reveal the relationship between the request for recommendation letters and the AIC investigation.

Nu Skin's U.S. headquarters nevertheless asked the China subsidiary to seek legal advice on the donation, noting that it could pose a potential FCPA risk. So Nu Skin China did, and was told by outside counsel to include language regarding the illegality of influencing government officials in the written agreement between Nu Skin's China unit and the charity. But that language, while included in draft versions of the agreement, was later removed from the final version without the knowledge of Nu Skin's U.S. headquarters.

Two days after a donation ceremony, Nu Skin China received notice from the AIC that the company would not be charged or fined.

The SEC found the U.S. company liable for not having a strong internal control system over the Chinese subsidiary that ensures accountability for assets, particularly illicit payments through the guise of charitable donations.

“Specifically, given the well-known corruption risks in China, Nu Skin U.S. did not ensure that adequate due diligence was conducted by Nu Skin China with respect to charitable donations to identify links to government or political party officials and to prevent payments intended to improperly influence such persons in violation of the company's anticorruption policy and the FCPA,” the SEC wrote in the order.

Nu Skin agreed to the settlement without admitting or denying the SEC's findings. The SEC said Nu Skin cooperated in the investigation and took remedial action.

The only other time an enforcement action has been made in an FCPA case based entirely on a charitable donation was in 2004, in a case that involved Schering-Plough. In that case, the SEC said the pharmaceutical company violated the FCPA when its subsidiary in Poland made improper payments of about $76,000 to a charitable organization called the Chudow Castle Foundation. The director of the foundation was a government official who could influence buying decisions for drugs. Schering-Plough settled the FCPA offenses by paying the SEC a civil penalty of $500,000.

(作者: 张超)

总部位于美国犹他州普洛佛的化妆品生产商 Nu Skin Enterprises Inc.已同意支付 765,688 美元来就美国证券交易委员会 (SEC) 的调查达成和解，该调查主张Nu Skin在中国进行的一笔可疑慈善捐款违反美国《反海外腐败法》。

在 9 月 19 日签发的命令中，SEC 认定Nu Skin违反了《反海外腐败法》，该公司日前为获取可影响中国监管机构对其的 2013 年调查的本地政府官员的帮助，而向一家新成立的慈善机构捐赠 100 万元人民币（约合 154,000 美元）。

在《反海外腐败法》颁发以来的 39 年历史中，这是第二次有公司仅基于旨在收买外国官员影响的慈善捐款而受到犯罪指控。

这起案例要追溯至 2013 年，当时，中国的省级工商行政管理局针对Nu Skin在中国的业务运营发起调查，因为其多层佣金结构在中国属于违法行为。而且这种法律上所称的直销模式受到严格监管，而Nu Skin在过去十年间已受到多次制裁。采用直销模式运营的公司必须获取本地执照，法律允许销售人员通过场外会面推销产品。但产品必须在零售店出售。

根据该 SEC 命令，此工商行政管理局调查的原因是Nu Skin在无运营执照或实体零售店铺的城市开展未经授权的会面推销。工商行政管理局最终宣布将向Nu Skin处以 280 万元人民币（约合 431,088 美元）的罚款。但Nu Skin向工商行政管理局表示愿意用捐款来代替罚金，同时还与有权干涉此调查的高级别本地官员联系。

作为对该官员影响案件调查的回报，Nu Skin表示会向其所选的慈善机构捐赠 154,000 美元。此特定慈善机构甚至并非在该省内成立，且由该官员负责启动。

该官员还提出了一些更私人的要求：作为一名Nu Skin中国员工的相识，该官员在此工商行政管理局调查前便向Nu Skin总部请求帮助促使具有影响力的美国人士来为其子女撰写推荐函，以便就读美国大学。SEC 表示，根据内部电子邮件，此要求之后被视为对其中国分部具有重要影响，而成为Nu Skin的“顶级优先事项”。最终促成了上述推荐函。

Nu Skin的中国分部按照要求向总部报告了此捐款，但并未披露这与该工商行政管理局调查之间的关联。而且也未说明推荐函请求与该工商行政管理局调查之间的关联。

不过，Nu Skin美国总部要求其中国分部寻求有关此捐款的法律建议，表示这可能产生潜在《反海外腐败法》风险。因此，Nu Skin中国向外部顾问寻求建议，获知应在与该慈善机构的书面协议中加入有关影响政府官员属于违法行为的表述。不过，此表述虽然最初加入了该协议的草稿版本，但之后在未通知Nu Skin美国总部的情况下，从正式版本中移除。

在举行捐款仪式的两天后，Nu Skin中国收到了工商行政管理局的通知不会受到指控或罚款。

SEC 认定，Nu Skin美国公司应就未对中国分部实施有效内部管控系统来确保资产经管责任而负责，尤其是对于伪装为慈善捐款的违法付费。

SEC 在签发的命令中表示,“具体而言，基于众所周知的中国市场腐败风险，Nu Skin美国未确保中国分部针对慈善捐款执行充足的尽职调查，来识别与政府或政党官员的关联，并避免旨在违反公司反腐败政策和《反海外腐败法》不当影响此类人士的付费。”

Nu Skin同意进行和解，没有对 SEC 的裁定予以承认或否认。SEC 表示 Nu Skin 配合调查，并已采取补救措施。

另一起仅基于慈善捐款采取执法行动的《反海外腐败法》案件发生于 2004 年，所涉企业为 Schering-Plough。在该案件中，SEC 表示，此制药公司因其波兰分公司向慈善机构 Chudow Castle Foundation 不当支付约合 76,000 美元而违反《反海外腐败法》。该基金的一名董事为可影响药物采购决策的政府官员。Schering-Plough 向 SEC 支付了 500,000 美元民事罚金，来就该《反海外腐败法》违法指控达成和解。