It seems with each passing year we see record-setting regulatory fines. Of course, some are more memorable than others. Most of us still recall the widespread media attention, beginning in late 2008, that was focused on Siemens when it was charged with violating the Foreign Corrupt Practices Act (FCPA) and agreed to pay a record $1bn in fines and disgorgement to resolve the charges with the US Department of Justice, US Securities and Exchange Commission, European Commission and Office of the Prosecutor General in Munich. At that time, the $450m criminal fine levied by the US was many times greater than the previous record fine in FCPA enforcement, which was $44.1m paid by Baker Hughes, Inc. in April 2007. In addition to the $1.6bn in fines and disgorgement paid by Siemens, it also incurred over $850m in costs related to an independent investigation conducted by 100 attorneys and 130 forensic accountants. The investigative work took place in 34 countries, included more than 1750 interviews and 800 informational meetings and involved the collection and preservation of over 100 million documents. As a result, Siemens’ direct, ‘out of pocket’ costs related to its FCPA violations totalled nearly $2.5bn. No doubt, it’s always difficult to unscramble an egg once it has been broken.

More recently, we learned that various regulators have entered into a number of significant settlements related to the alleged manipulation of the London Interbank Offered Rate (LIBOR). Last December, UBS Securities Japan Co. Ltd, a wholly-owned subsidiary of UBS AG (UBS), agreed to plead guilty to felony wire fraud and admit its role in manipulating LIBOR.

Oct-Dec 2013 Issue

Berkeley Research Group