FCPA Settlement in SEC Case Against Former and Current Noble Executives Avoids Bribery Claims

Jackson Settlement Noble Corp.

On July 2, the SEC agreed to resolve its claims against Buckley Sandler client, Mark A. Jackson, former CEO of Noble Corp., and co-defendant James J. Ruehlen, a current Noble executive.  Back in February 2012, the SEC had filed suit in the Southern District of Texas alleging that Jackson and Ruehlen violated the FCPA by approving bribes to Nigerian government officials in connection with temporary import permits for its rigs, falsifying Noble's internal accounting records, and circumventing its internal controls, but on the eve of trial, the SEC agreed to final resolutions that did not include any bribery violations.  The trial, set for July 9 in the Southern District of Texas, before Judge Keith Ellison, would have been the first FCPA civil enforcement action by the SEC in 30 years to proceed to the trial stage of litigation. Noble Corp., a leading oil and gas drilling company, was one of the companies that voluntarily disclosed its internal investigation and subsequently settled with the government during the SEC and DOJ's investigation of the industry arising out of the Panalpina settlement.  In Jackson's settlement, Jackson consented, without admitting or denying any allegations, to the entry of judgment solely with regard to the claim that he was a "control person" of Noble's books and records violations, and an injunction on that basis.  The settlement did not include payment of money by Jackson or any restriction on his future employment opportunities.  Likewise, Ruehlen consented, without admitting or denying any allegations, to the entry of judgment solely with regard to the claim that he aided and abetted Noble's books and records violations, and an injunction on that basis.  Ruehlen's settlement also did not include payment of money by Ruehlen or any restriction on his future employment opportunities.  The settlements were approved by Judge Ellison on July 3. The SEC's ultimate recovery had it proceeded to trial may have been limited by a number of factors, including the Judge's prior rulings on issues such as the definition of "corruptly" under the FCPA, and the facilitating payments exception to the FCPA.  Judge Ellison's decision on the Defendants' motions to dismiss is now some of the only case law regarding the definition of "corruptly" in the FCPA context and the "facilitating payments" exception, and is a must-read for any FCPA practitioner.  In that decision, Judge Ellison interpreted the FCPA's legislative history and limited existing FCPA case law to define the term "corruptly" under the FCPA as "an act done with an evil motive or wrongful purpose of influencing a foreign official to misuse his position."  Judge Ellison also held that the SEC was required to affirmatively negate the idea that the payments at issue were facilitating payments, as part of its burden of alleging corrupt intent. Interpreting "corruptly" was at issue again shortly prior to the settlement, when Judge Ellison heard argument from the parties on Jackson and Ruehlen's motions for summary judgment, as well as the SEC's motion for partial summary judgment on the facilitating payments exception.  In their motions, Jackson and Ruehlen argued that the undisputed evidence demonstrated that they reasonably believed that Noble was entitled to the temporary import permits it sought, and therefore, they could not have acted with the requisite corrupt intent in approving the payments at issue.  The SEC responded with a new definition of "corruptly," arguing that "corruptly" meant only an intent to "influence any act or decision made by an official in his official capacity " regardless of any "entitlement" to that act or decision."  Jackson and Ruehlen responded that the SEC's novel interpretation effectively read "corruptly" out of the FCPA, was inconsistent with the FCPA's legislative history and the SEC's own prior FCPA guidance, and was not supported by case law.  Judge Ellison declined to further address the proper interpretation of "corruptly" beyond his motion to dismiss opinion, denying both sides — motions from the bench at oral argument. The 2013 Supreme Court decision in Gabelli v. SEC, 568 U.S. __, 133 S. Ct. 1216 (2013) also potentially limited the SEC's ability to seek penalties had the case gone to trial.  In Gabelli, the Supreme Court held that, when seeking civil penalties in fraud cases, the government faced a five year state of limitations from the time the conduct occurred, rather than from the time it was discovered.  On the heels of the Gabelli decision, and after the SEC had already once amended its complaint, the SEC agreed in March 2013 to limit its complaint to seek monetary penalties only for alleged conduct after May 2006.  Any potential recovery would also have been reduced by the SEC's voluntary dismissal, just days before the summary judgment deadline, of claims regarding the adequacy of Noble's internal controls. Press coverage about the settlements has noted the favorable settlement terms for Jackson and Ruehlen and has viewed the settlements as victories for the individuals.