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Business Crimes Hotline

By ljnstaff | Law Journal Newsletters |
October 02, 2017

WASHINGTON, DC

Uber Facing FCPA Investigation

The Wall Street Journal has reported that the Department of Justice (DOJ) has taken “preliminary steps” to determine whether Uber, the popular ride-sharing service, has violated the Foreign Corrupt Practices Act (FCPA). Though the Justice Department typically declines to comment on the existence of investigations, Uber confirmed to the Wall Street Journal that the company is cooperating with the investigation.

Uber currently operates in over 70 countries, and it is not yet known which country or countries are the focus of this preliminary investigation. The FCPA forbids individuals and companies from bribing officials of foreign governments in order to receive business benefits. In addition, the FCPA also requires that companies that are publicly listed in the U.S. follow certain accounting standards, which opens up companies to liability if they attempt to hide fraudulent payments in their books and records. Uber is not yet a publicly traded company.

This is not the only brush with the law that the company has recently faced. In August, Uber settled with the Federal Trade Commission (FTC) over claims that it failed to sufficiently protect customer data. The FTC alleged that employees were able to access customer trip history, and that customer information was not securely stored in the company's data cloud. In settling the case, the company agreed to be subject to 20 years of privacy audits. Maureen K. Ohlhausen, Acting Chairman of the FTC, said in a statement, “This case shows that, even if you're a fast growing company, you can't leave consumers behind: you must honor your privacy and security promises.”

This settlement comes after another FTC settlement that occurred at the beginning of 2017 in which Uber agreed to pay $20 million to settle claims that it tried to recruit drivers with overstated claims of potential earnings.

Uber is also under criminal investigation for its use of “Greyball,” a software program that it used to evade law enforcement officials in cities where authorities had challenged or banned Uber. This program would block individuals identified as city or state officials from accessing the real Uber app, and would instead replace their Uber app with a fake version so that these officials could not see where Uber drivers were located.

The founder of Uber, Travis Kalanick, stepped down from his role as CEO at the end of June following a string of negative news stories about the company's culture and business practices. This was prior to the news that the company was also under preliminary investigation for potential FCPA violations. Kalanick's replacement, Dara Khosrowshahi, the former CEO of Expedia, took over at the company in the beginning of September.

MICHIGAN

VW Engineer Sentenced to 40 Months for Emissions Scandal

James Liang, a former engineer with Volkswagen, was sentenced to 40 months in prison for his role in the company's plot to evade U.S. vehicle emissions standards by creating technology to trick emissions tests into thinking that Volkswagen's vehicles were in compliance with regulatory standards when they were not. Liang's sentence was handed down by Judge Sean Cox of the Eastern District of Michigan.

Liang is the first Volkswagen employee sent to prison over charges related to the emissions testing scheme. He pleaded guilty in September 2016 to one count each of conspiracy to defraud the U.S., to commit wire fraud, and to violate the Clean Air Act. Seven other Volkswagen employees, including six executives and an employee of the company's Audi brand, have also been indicted. One executive, Oliver Schmidt, has been held without bail since he was arrested in January, and recently reached a plea deal with prosecutors.

Volkswagen is already paying $22 billion in penalties, settlements, and fines over its plot to evade emissions tests through the creation of technology that would “cheat” the tests. The conspiracy began in 2006, when several Volkswagen employees decided to engineer new technology that would enable its cars to trick emissions tests into thinking the vehicle produced less emissions than it actually did. Instead of accurately reporting the emissions of the vehicle during emissions testing, the company had engineered its vehicles to recognize when they were undergoing emissions testing, which would trigger a lower-emissions mode of operation than that typically employed on the road. The company continued to update and improve this technology from model year 2009 to 2016.

In addition to utilizing this technology, Liang and other Volkswagen employees also lied to the Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) by certifying that Volkswagen vehicles met emissions standards when in fact they did not.

Liang's 40-month sentence was longer than the three-year sentence suggested by federal prosecutors. Liang was also ordered to pay a $200,000 fine, 10 times more than the amount prosecutors recommended. Liang received this sentence despite the fact that he had cooperated with investigators.

Judge Cox explained that “the economy can't function” if there is no “trust in corporate America.”

Kate Monks, Mayer Brown, Washington, DC

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