This previous post asked whether the SEC would be put to its burden of proof in the Mark Jackson and James Ruehlen FCPA enforcement action. The answer was yes as the defendants filed a motion to dismiss the SEC’s complaint as highlighted in this previous post. The SEC filed an opposition brief that is highlighted in this previous post. Last Friday, Jackson & Ruehlen filed separate reply briefs (see here and here).
In summary, Jackson’s counsel (lead by David Krakoff, BuckleySandler – here) argues as follows (internal citations omitted).
“Plaintiff Securities and Exchange Commission’s [opposition brief] side-steps the issues presented as well as Supreme Court precedent. Rather than address the deficiencies in its Complaint … the SEC ignores them and assumes it is not required to plead actual facts. Rather than properly plead the elements of a Foreign Corrupt Practices Act (“FCPA”) violation, the SEC claims it would simply be too difficult to identify, in any way, the other necessary party in an alleged bribery scheme—the foreign official who received or was to receive alleged bribes, or what acts that specific foreign official took.
But viewed under proper pleading standards, the SEC’s Complaint remains deficient and must be dismissed. The Complaint is nothing more than a series of conclusions about what Jackson “knew” or “believed,” without the necessary foundation of facts suggesting that Jackson did “know” or “believe” what the SEC asserts. Such conclusions are not “well-pleaded” facts which must be accepted by the Court as true for the purpose of a motion to dismiss. The few well-pleaded facts do not rise to the level of a plausible entitlement to relief, and indeed are equally consistent with a legally permissible explanation of Jackson’s conduct, which requires the Complaint to be dismissed. And many of the claims are barred by the statute of limitations.
The SEC has had years to investigate this case, using the full force of its investigatory power. It is not too much to ask, now that it has filed suit, for the SEC to plead actual facts.”
In summary, Ruehlen’s counsel (lead by Joseph Warin, Gibson Dunn – here) argues as follows (internal citations omitted)
“Despite investigating this case for many years, the SEC concedes in its Opposition that the Complaint does not allege the basic facts of an FCPA claim:
• It does not identify any Nigerian official—by name or even by position—to whom bribes were paid, authorized, or intended.
• It does not identify any duty that was breached or any law that was violated by the unknown Nigerian official recipient(s).
• It does not state what the unknown Nigerian officials did in exchange for the bribes or how those actions were intended to assist Noble in obtaining or retaining business.
These structural flaws cannot be cured through discovery.
First, without alleging the identity of the officials, facts describing their duties and obligations under Nigerian law, and facts showing how Mr. Ruehlen allegedly intended to corrupt them, the SEC’s conclusory claims only raise the “sheer possibility that the defendant has acted unlawfully,” which is insufficient to state a claim.
Second, because the plain language of the FCPA permits payments to foreign officials in order to secure routine governmental actions, the Complaint only alleges conduct that is “not only compatible with, but indeed [is] more likely explained by, lawful . . . behavior.”
Third, the Complaint does not meet the standards of notice pleading under Federal Rule of Civil Procedure 8. Mr. Ruehlen is left to guess who was allegedly bribed, the scope of that person’s authority, and whether that person violated any Nigerian law. He must also guess which Noble record he allegedly falsified and which control he allegedly evaded. Accordingly, the Complaint does not provide Mr. Ruehlen the requisite “fair notice of what the . . . claim is and the grounds upon which it rests,” rendering it impossible for him to answer the Complaint, seek discovery, or prepare his defense.
The briefing is complete and the lines have been drawn.
The Jackson & Ruehlen challenge is a significant event in terms of the SEC’s FCPA enforcement program. Rarely is the SEC put to its burden of proof in FCPA enforcement actions. As noted in this prior post, the last time the SEC was put to its burden, in a similar case concerning conduct outside the context of foreign government procurement, the SEC lost. In addition, as noted in prior posts (here and here) the government (DOJ and SEC) have an overall losing record when put to its burden of proof in cases concerning conduct outside the context of foreign government procurement.