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Criminal Internal Controls Charges Against Individuals

Criminal Law

Pardon me for being that guy, but in the Foreign Corrupt Practices Act space someone needs to put on the stripes every now and then and blow the whistle on certain commentary.

Another statement (see here for a similar prior post) from Michael Volkov’s Corruption, Crime & Compliance has left me scratching my head and thinking to myself “you gotta be kidding me.” In the post, Volkov writes: “If you follow my blog, you know that I have often predicted that DOJ will eventually prosecute criminally an individual for circumventing internal controls. The implications of such a prosecution will be significant.”

Newsflash.

As highlighted in this post, the DOJ has already criminally prosecuted several individuals for circumventing internal controls.

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Delaware Court Once Again Rejects “The Conclusory Allegation That Because Illegal Behavior Occurred, Internal Controls Must Have Been Deficient, And The Board Must Have Known So”

rejected

In my non-FCPA life, I teach a variety of courses such as corporations and securities regulation.

Because of this, I continue to scratch my head as to the seeming inability of certain FCPA commentators to grasp certain basic aspects of the legal framework regarding corporate law and governance.

For instance, this recent post is titled “When Will Shareholders Force Boards to Do Compliance” and the commentator asserts: “[with] any of the companies which were embroiled in Foreign Corrupt Practices Act (FCPA) matters which recently settled, where was the Board when the company was busy paying out millions in bribes, in some cases literally across the globe?”

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Further To The SEC’s Inconsistent Approach To Enforcing The FCPA’s Books And Records And Internal Controls Provisions

inconistent

As highlighted in previous posts on this subject (here and here), a basic rule of law principle is consistency.

In other words, the same legal violation ought to be sanctioned in the same way. When the same legal violation is sanctioned in materially different ways, trust and confidence in law enforcement is diminished.

However, there sure does seem to be a lack of consistency between how the SEC resolves Foreign Corrupt Practices Act books and records and internal controls violations.

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Issues To Consider From The SQM Enforcement Action

Issues

This previous post went in-depth into the $30.5 million Foreign Corrupt Practices Act enforcement action against Sociedad Quimica y Minera de Chile S.A. (SQM) announced on January 13th.  The action focused on the Chilean chemical and mining company’s conduct with Chilean officials.

As mentioned in the original post, there was no U.S. nexus alleged other than SQM having Series B shares, a form of American Depository Shares, listed on the New York Stock Exchange and thus being required to file periodic reports with the SEC.

This post highlights additional issues to consider.

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Issues To Consider From The Zimmer Biomet Enforcement Action

Issues

This previous post went in-depth into the $30.4 million Foreign Corrupt Practices Act enforcement action against Zimmer Biomet announced on January 12th.

This post highlights additional issues to consider.

Repeat Offender

Biomet is not the first company to be a repeat FCPA criminal offender, just the latest. Other criminal examples include Aibel Group / Vetco entities and Marubeni (and there several other examples involving SEC civil violations such as Orthofix Int’l recently becoming a repeat FCPA offender). To learn more about these examples, see the article “Measuring the Impact of NPAs and DPAs on FCPA Enforcement.”

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