Nationality of Foreign Officials: China
Summary of Allegations:
In its Form 8-K files with the U.S. Securities and Exchange Commission ("SEC"), Herbalife Ltd. ("Herbalife") disclosed that the SEC has requested documents and other information relating to Herbalife's anti-corruption compliance in China.
According to the DOJ press release, between 2007 and 2017, Yanliang (“Jerry”) Li, the former head and managing director of the China subsidiary of Herbalife Ltd., and Hongwei (“Mary”) Yang, the former head of the external affairs department of the same subsidiary, among others, provided and approved illicit payments to public officials in China to secure operating licenses and influence government probes into the company’s compliance matters.
To execute the bribery scheme, Li and Yang generated bribery funds by obtaining reimbursement for fraudulent expenses. Li, with knowledge of the ongoing SEC investigation, made false sworn statements to the SEC and erased 200 files on his company-issued laptop.
Approximate Alleged Payments to Foreign Officials:
Business Advantage Allegedly Obtained: To secure business and influence government investigation outcome
Agencies: United States: Department of Justice, United States: Securities and Exchange Commission
Results: Cease-and-Desist Order, Deferred Prosecution Agreement, Prosecution of Individuals
Year Resolved: 2020
In its Form 8-K filed with the SEC on 20 January 2017, Herbalife disclosed that the SEC has requested documents and other information relating to Herbalife's anti-corruption compliance in China. Herbalife has also discussed the SEC's investigation with the U.S. Department of Justice ("DOJ"). The company is cooperating with the SEC's investigation and conducting its own review as well.
In April 2018, Herbalife changed its name to Herbalife Nutrition Ltd.
On 14 November 2019, the DOJ charged Li and Yang with one count of conspiracy to violate the FCPA for their roles in the bribery scheme in China. The SEC concurrently filed a civil complaint against Li in the Southern District of New York.
On 7 May 2020, Herbalife stated that it had reached understanding in principle with the DOJ and the SEC to resolve allegations of misconduct in China between 2006 and 2016.
On 28 August 2020, settlements were announced with the DOJ and the SEC. The SEC issued a Cease-and-Desist Order resolving the alleged violations of the books and records and internal controls provisions of the FCPA, while the DOJ entered into a three-year deferred prosecution agreement with the company addressing a charge of conspiracy to violate the FCPA's books and records provision. Herbalife agreed to pay a total of USD 123,056,590.50, comprising a criminal fine of USD 55,743,093, disgorgement of USD 58,669,993, and prejudgment interest of USD 8,643,504.50.