In December 2011, in connection with the Foreign Corrupt Practices Act enforcement action against Magyar Telekom, the SEC also charged former Magyar Telekom executives Elek Straub (former Chairman and CEO); Andras Balogh (former Director of Central Strategic Organization); and Tamas Morvai (former Director of Business Development and Acquisitions) with various FCPA and related offenses. (See here for the prior post).
The complaint alleged, in connection with a bribery scheme in Macedonia and Montenegro, that the individuals violated or aided and abetted violations of the FCPA’s anti-bribery, books and records, and internal controls provisions; knowingly circumvented internal controls and falsified books and records; and made false statements to the company’s auditor.
Unlike most FCPA individual defendants (criminal or civil), the individuals mounted a defense (see here) and the SEC was put in the rare position of having to prove an FCPA case. A motion to dismiss was filed (largely on jurisdictional and statue of limitations issues) and in February 2013 the court denied the motion to dismiss. (See here for the prior post).
Put in a position to prove its case, the SEC ultimately dropped its claims that the individuals bribed Montenegro officials. (See here).
The case proceeded through discovery and competing motions for summary judgment were filed. In late August 2016 oral argument on the motions were heard as to the following issues:
- statute of limitations issues;
- the jurisdictional element of the FCPA’s anti-bribery provisions including whether a key document in the SEC’s complaint was indeed in furtherance of a bribery scheme or merely a legitimate business document;
- general personal jurisdiction issues; and
- two of the SEC’s claims that do not necessarily involve bribery, but rather falsification of books and records and false statements to auditors.
As highlighted in posts here and here, in September 2016 the court denied the motions for summary judgment and in doing so rejected the SEC’s position that it may pursue FCPA violations that occurred out of the limitations period on the basis that those violations were similar in character to and part of the same alleged “scheme” as violations that occurred within the limitations.
Trial was scheduled to begin in May 2017.
Last week, without admitting or denying the SEC’s allegations, Morvai agreed to resolve the action by agreeing to pay a $60,000 civil penalty and other remedial relief.
Score this one as you like.
But when a civil action settles over 5 years after it was filed, after the SEC dropped certain of its claims, after the SEC’s summary judgment motion was denied, and when the individual defendant settles without admitting or denying the SEC’s allegations and agrees to pay (a relatively) modest civil penalty, I’ve got my answer.
The SEC’s claims as to Straub and Balogh remain pending and the following fact bears repeating.
In FCPA history, the SEC is believed to have never prevailed in an FCPA enforcement action when put to its ultimate burden of proof.
Stay Informed About FCPA Current Events
This approximate two hour engaging video tutorial provides a summary of all 2016 corporate FCPA enforcement actions and enforcement agency policy developments; various issues to consider; and compliance take-away points.