Posts earlier this week (here  and here ) highlighted various facts and figures from 2013 and historically concerning DOJ FCPA individual prosecutions. This post focuses on SEC FCPA individual actions in 2013 and historically.
Like the DOJ, the SEC frequently speaks in lofty rhetoric concerning its focus on holding individuals accountable under the FCPA. For instance, in connection with the 2012 Garth Peterson enforcement action, the SEC’s Director of Enforcement stated (here ) that the case “illustrates the SEC’s commitment to holding individuals accountable for FCPA violations.” Speaking generally, SEC Chairman Mary Jo White recently stated  that a “core principle of any strong enforcement program is to pursue responsible individuals wherever possible … [and that] is something our enforcement division has always done and will continue to do.”
Since 2000, the SEC has charged 59 individuals with FCPA civil offenses. The breakdown is as follows.
- 2000 – 0 individuals
- 2001 – 3 individuals
- 2002 – 3 individuals
- 2003 – 4 individuals
- 2004 – 0 individuals
- 2005 – 1 individual
- 2006 – 8 individuals
- 2007 – 7 individuals
- 2008 – 5 individuals
- 2009 – 5 individuals
- 2010 – 7 individuals
- 2011 – 12 individuals
- 2012 – 4 individuals
- 2013 – 0 individuals
Similar to the prior DOJ figures, most of the individuals charged – 33 (or 56%) were charged since 2008. Thus, on one level the SEC is correct when it states that individual prosecutions are a focus of its FCPA enforcement program at least as measured against the historical average given that between 1978 and 1999 the SEC charged 22 individuals with FCPA civil offenses.
Yet on another level, a more meaningful level given that there was much less overall enforcement of the FCPA between 1978 and 1999, the SEC’s statements (like the prior DOJ statements about its focus on individuals) represent hollow rhetoric as demonstrated by the below figures.
Of the 33 individuals charged with civil FCPA offenses by the SEC since 2008:
- 7 individuals were in the Siemens case;
- 4 individuals were in the Willbros Group case;
- 4 individuals were in the Alliance One case;
- 3 individuals were in the Maygar Telekom case; and
- 3 individuals were in the Noble Corp. case.
In other words, 64% of the individuals charged by the SEC with FCPA civil offenses since 2008 have been in just five cases.
Considering that there has been 65 corporate SEC FCPA enforcement actions since 2008, this is a rather remarkable statistic. Of the 65 corporate SEC FCPA enforcement actions, 53 (or 82%) have not (at least yet) resulted in any SEC charges against company employees. This figure is thus higher than the 73% figure highlighted earlier this week regarding the DOJ. This is notable given that the SEC, as a civil law enforcement agency, has a lower burden of proof in an enforcement action.
The last SEC FCPA enforcement action against a company employee related to a corporate FCPA enforcement action occurred approximately two years ago in connection with the Noble Corporation matter (see here  for the SEC’s enforcement action against Thomas O’Rourke, Mark Jackson and James Ruehlen – current or former employees of Noble Corporation). Of note from this enforcement action, it is the only individual FCPA enforcement action (DOJ or SEC) in connection with the 2010 enforcement actions against Panalpina and six oil and gas companies concerning alleged conduct in Nigeria.
Once again, like with the DOJ figures, one can ask the “but nobody was charged” question given the gap between corporate SEC FCPA enforcement and related individual enforcement actions.
Yet, like with the DOJ figures and as highlighted in yesterday’s post , there is an equally plausible reason why so few individuals have been charged in connection with many corporate SEC FCPA enforcement actions. The reason has to do with the quality and legitimacy of the corporate enforcement action in the first place.
With the SEC, the issue is not so much NPAs or DPAs (although the SEC has used such vehicles twice to resolve an FCPA enforcement action – a DPA with Tenaris in 2011 and a NPA with Ralph Lauren in 2013 – and there has been no individual enforcement actions related to these corporate enforcement action). Rather, the issue seems to be more the SEC’s neither admit nor deny settlement policy (notwithstanding its minor tweaks in 2013). For more on this policy and its impact of SEC enforcement actions, see pgs. 946-955 of my article “The Facade of FCPA Enforcement .” In the article, I discuss the affidavit of Professor Joseph Grundfest (Stanford Law School and a former SEC Commissioner) in SEC v. Bank of America and how SEC enforcement actions “typically omit mention of valid defenses and of countervailing facts or mitigating circumstances that, if proven at trial, could cause the Commission to lose it case.” In the article, I also discuss the SEC’s frank admission in the Bank of America case that a settled SEC enforcement action “does not necessarily reflect the triumph of one party’s position over the other.”
Individuals in an SEC FCPA enforcement, even if only a civil action, and even if frequently allowed to settle on similar neither admit nor deny terms, have their personal reputation at stake and are thus more likely than corporate entities to challenge the SEC and force it satisfy its burden of proof at trial as to all FCPA elements.
More recently, the SEC has been keen on resolving corporate FCPA enforcement actions in the absence of any judicial scrutiny. As highlighted in this  prior SEC Year in Review post, a notable statistic from 2013 is that 50% of SEC corporate enforcement actions were not subjected to one ounce of judicial scrutiny either because the action was resolved via a NPA or through an administrative order.
In other words, and like in the DOJ context, perhaps the more appropriate question is not “but nobody was charged,” in connection with SEC corporate FCPA enforcement actions, but rather – do SEC corporate FCPA settlements necessarily represent provable FCPA violations?
It is also interesting to analyze the 12 instances since 2008 where an SEC corporate FCPA enforcement action resulted in related charges against company employees. With the exception of Siemens, KBR/Halliburton and Magyar Telekom, the corporate SEC FCPA enforcement actions resulting in related charges against company employees occurred in what can only be described as relatively minor (at least from a settlement amount perspective) corporate enforcement actions. These actions are: Faro Technologies, Willbros Group, Nature’s Sunshine Products, United Industrial Corp., Pride Int’l., Noble Corp., Alliance One, Innospec, and Watts Water.
[Note – the above data was assembled using the “core” approach as well as the definition of an FCPA enforcement action described in this  prior post]