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On Tuesday, August 18, the SEC announced a settlement with a large multinational financial services company over allegations that the company had violated the FCPA by giving internships to family members of government officials working at a Middle Eastern sovereign wealth fund in hopes of retaining or gaining more business from that fund. The order entered as part of the settlement quoted emails between company employees purportedly demonstrating that the company gave the internships in hopes of keeping and growing the business relationship with the fund. The SEC also alleged that the company gave the internships to the family members without requiring that they pass through the competitive screening process the company typically requires for interns. Finally, the SEC alleged that the company had inadequate controls to prevent the improper hiring of relatives of government officials. The company paid $14.8 million to settle the charges, with $8.3 million in disgorgement, $1.5 million in pre-judgment interest, and a $5 million penalty. The company previously disclosed in January 2015 that it had received a Wells Notice concerning possible FCPA violations in connection with the internships. The settlement follows earlier press reports of a broad SEC investigation into bank hiring practices in Asia, and appears to be the first settlement resulting from the investigation.
On May 20, BHP Billiton, an Australian-based metal resources company, paid $25 million to settle claims brought by the SEC alleging that the company violated the FCPA's internal controls and books and records provisions by sponsoring the attendance of foreign government officials at the 2008 Beijing Olympics. According to the SEC's cease-and-desist order, in which the company neither admitted nor denied the SEC's findings, BHP Billiton invited 176 government officials to attend the Olympics at BHP Billiton's expense, 98 of whom were representatives of state-owned enterprises that were BHP Billiton customers. The flight and hospitality packages the officials received were worth between $12,000 and $16,000 per package. Of note, the SEC did not allege any specific quid pro quo in exchange for the trips (and did not allege that BHP Billiton violated the anti-bribery provisions of the FCPA), but noted that the foreign officials came from African and Asian countries with well-known histories of corruption and were in a position to influence pending contract negotiations, efforts to obtain access right, and other regulatory and business dealings affecting BHP Billiton. The SEC settlement order found that BHP Billiton's Olympic hospitality applications did not accurately reflect pending negotiations or business dealings between BHP Billiton and government officials invited to the Olympics, and also found that the company failed "to design and maintain sufficient internal controls over the Olympic global hospitality program." Continuing recent efforts to highlight the nature of certain companies' cooperation efforts, the SEC called out BHP Billiton's "significant cooperation" with the government's investigation by, among other things, "voluntarily producing large volumes of business, financial, and accounting documents from around the world in response to the staff's requests, and by voluntarily producing translations of key documents." The SEC also noted the remedial efforts undertaken by the company to improve its compliance programs, including the creation of a compliance group within its legal department that reports directly to BHP Billiton's general counsel and audit committee. According to the order, BHP Billiton also enhanced its financial and auditing controls, including its policies for conducting business in high-risk markets, and conducted extensive employee training on anti-corruption issues. The settlement requires the company to report to the SEC on the operation of its FCPA and anti-corruption compliance program for a one-year period, although no independent monitor was required.
On April 8, the U.S. Securities and Exchange Commission (SEC) settled FCPA claims in an Administrative Proceeding against Oregon-based FLIR Systems Inc. (FLIR), which agreed to pay more than $9.5 million and report its FCPA compliance efforts to the SEC for the next two years to resolve the FCPA claims. The corporate settlement follows the SEC's settlement last year of charges with two FLIR employees. The SEC's settlement Order against FLIR — a developer of infrared technology for use in binoculars and other sensing products and systems — described violations of the FCPA's anti-bribery, books and records, and internal control provisions in connection with FLIR's activities in the Middle East, most notably unlawful travel, gifts, and entertainment to foreign officials in Saudi Arabia to obtain or retain business. This included expensive watches and personal travel, which was referred to as a "world tour" by FLIR employees. The "world tour" sent Saudi officials on a 20-night trip that included stops in Casablanca, Paris, Dubai, Beirut, and New York City. FLIR then allegedly falsely recorded the value of the gifts and the extent and nature of the travel in its books and records as legitimate business expenses and failed to catch the improper payments due to poor internal controls. According to the Order, FLIR cooperated with the SEC's investigation and self-reported the conduct. FLIR consented to the Order without admitting or denying the findings and agreed to pay disgorgement of $7,534,000, prejudgment interest of $970,584, and a penalty of $1 million for a total of $9,504,584.
On February 24, the SEC announced charges against a global manufacturer for alleged violations of the FCPA involving bribes paid by its African subsidiaries in order to make sales in Kenya and Angola. Over the course of a four-year period, the manufacturer allegedly failed to detect more than $3.2 million in bribes paid in cash to employees of private companies, government-owned entities, and other local authorities, including police or city council officials. According to the SEC Order, the manufacturer maintained "inadequate FCPA compliance controls," allowing improper payments to be recorded as legitimate business expenses, which violated the books, records, and internal control provisions of the Securities Exchange Act of 1934. Under the terms of the settlement, the manufacturer will pay over $16 million to settle the SEC's allegations and report its FCPA remediation efforts to the SEC for three years.
On October 27, the SEC settled administrative proceedings via a cease and desist order against Layne Christensen Co., a Texas-based water management company, related to FCPA violations from operations in Africa. The SEC's order cited over $800,000 in improper payments to officials in Mali, Guinea, the Democratic Republic of the Congo, Burkina Faso, and Tanzania, related to tax liabilities, customs clearance, expatriate work permits, and border entry. Some of those payments were as small as $4. The company agreed to pay over $4,750,000 in disgorgement and prejudgment interest, and a $375,000 penalty. The SEC cited the company's self-disclosure, remediation, and "significant cooperation" as reasons for a smaller penalty. In August, the company announced that the DOJ had declined to file charges related to the alleged FCPA violations. Of note, the company has in the past tied its discovery of the irregular payments to an update of its FCPA policy. Periodic evaluations and updates of FCPA policies are a necessary component of any compliance program, but also represent opportunities to evaluate past conduct and uncover issues.
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.
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