This previous post  highlighted various facts and figures from 2018 SEC FCPA enforcement actions against issuers.
As highlighted in the prior post, of the 14 corporate SEC FCPA enforcement actions in 2018, 1 (7%) has involved, at present, related SEC FCPA charges or findings against company employees.
In 2018, the SEC charged or found that three individuals violated the FCPA: Joo Hyun Bahn  (associated with Colliers International Group); Patricio Contesse Gonazlez  (associated with SQM  which resolved an FCPA enforcement action in 2017); and Paul Margis  (associated with Panasonic Avionics). (Note: the SEC’s enforcement action against Takeshi Uonaga (Panasonic Avionics former CFO) is not included in FCPA enforcement statistics for the simple reason that this was a revenue recognition matter and thus a non-FCPA FCPA enforcement action).
In many respects, the biggest story in 2018 relevant to individual SEC FCPA enforcement actions was the July 2018 dismissal of FCPA charges against Michael Cohen and Vanja Baros (former Och-Ziff executives) when subjected to judicial scrutiny (see here ).
The remainder of this post focuses on SEC FCPA individual actions historically.
Like the DOJ, the SEC frequently speaks in lofty rhetoric concerning its focus on holding individuals accountable under the FCPA. As highlighted here , in September 2018 the SEC’s Co-Director of Enforcement stated:
“We have also continued to focus on individual accountability by pursuing charges against individuals for misconduct in the securities markets, including registered individuals, executives at all levels of the corporate hierarchy, including CEOs, CFOs and other high-ranking executives, and gatekeepers.”
As highlighted here , in November 2017 the SEC’s Co-Director of Enforcement stated:
“Of course, companies cannot engage in bribery without the actions of culpable individuals. The Enforcement Division is broadly committed to holding individuals accountable when the facts and the law support doing so. […] Individual accountability drives behavior more than corporate accountability, a point which is supported by both logic and experience. The Division of Enforcement considers individual liability in every case it investigates; it is a core principle of our enforcement program.”
Likewise, in November 2016 the SEC’s Director of Enforcement stated  that “pursuing individual accountability [in FCPA enforcement actions] is a critical part of deterrence.” Likewise, in November 2015 the SEC’s Director of Enforcement stated :
“Holding individuals accountable for their wrongdoing is critical to effective deterrence and, therefore, the Division considers individual liability in every case. […] The Commission is committed to holding individuals accountable and I expect you will continue to see more FCPA cases against individuals.”
Likewise, in November 2014 the SEC’s Director of Enforcement stated :
“I always have said that actions against individuals have the largest deterrent impact. Individual accountability is a powerful deterrent because people pay attention and alter their conduct when they personally face potential punishment. And so in the FCPA arena as well as all other areas of our enforcement efforts, we are very focused on attempting to bring cases against individuals. […] [I]ndividual accountability is critical to FCPA enforcement — and imposing personal consequences on bad actors, including through bars and monetary sanctions, will continue to be a high priority for us.”
Since 2000, the SEC has charged 77 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
- 2014 – 2 individuals
- 2015 – 2 individuals
- 2016 – 8 individuals
- 2017 – 3 individuals
- 2018 – 3 individuals
As highlighted by the above statistics, most of the individuals charged – 66 (or 85%) were charged since 2006. 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 1977 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 1977 and 1999, the SEC’s statements represent hollow rhetoric as demonstrated by the below figures.
Of the 66 individuals charged with civil FCPA offenses by the SEC since 2006:
- 7 individuals were in the Siemens case;
- 4 individuals were in the ABB case;
- 4 individuals were in the Willbros Group case;
- 4 individuals were in the Alliance One case;
- 4 individuals were in the Och-Ziff case;
- 3 individuals were in the Maygar Telekom case; and
- 3 individuals were in the Noble Corp. case.
In other words, approximately 45% of the individuals charged by the SEC with FCPA civil offenses since 2006 have been in just seven core actions.
Considering that there has been 142 corporate SEC FCPA enforcement actions since 2006, this is a rather remarkable statistic. Of the 142 corporate SEC FCPA enforcement actions, 114 (approximately 80%) have not (at least yet) resulted in any related SEC charges against company employees.
This is an interesting figure given that between 1977 and 2004 61% of SEC corporate FCPA enforcement actions did indeed result in related charges against company employees.
In other words, for most of the FCPA’s history the majority of corporate SEC FCPA enforcement resulted in related individual accountability, but in the SEC’s modern FCPA enforcement program, the vast majority of corporate SEC FCPA enforcement actions have not resulted in related individual accountability despite the SEC’s rhetoric.
It is also interesting to analyze the 28 instances since 2006 where an SEC corporate FCPA enforcement action resulted in related charges against company employees. With the exception of Baker Hughes, Siemens, KBR/Halliburton, Magyar Telekom, Och-Ziff, General Cable and Panasonic, 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: Schnitzer Steel, Immucor, Electronic Data Systems, Faro Technologies, Willbros Group, Nature’s Sunshine Products, United Industrial Corp., Pride Int’l., Noble Corp., Alliance One, Innospec, Watts Water, PBSJ and FLIR Systems, SAP, PTC, Nordion, Analogic, and LAN Airlines, Halliburton, and SQM.
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Set forth below is a complete list of SEC corporate FCPA enforcement actions since 2006 and whether the corporate enforcement action resulted in any related individual charges. Beginning in October 2014, I publicly invited the SEC to refute these numbers and support its individual accountability rhetoric after the SEC’s then FCPA Unit chief publicly stated that my numbers were false, wrong, deeply flawed, etc. (see here ). The SEC has not responded and the invitation still stands.
|2006||Oil States Int’l||No|
|2007||Electronic Data Systems||Yes|
|2007||Delta & Pine||No|
|2008||Westinghouse Air Brake||No|
|2009||Helmerich & Payne||No|
|2009||United Industrial Corp.||Yes|
|2010||Royal Dutch Shell||No|
|2011||Johnson & Johnson||No|
|2012||Smith & Nephew||No|
|2014||Smith & Wesson||No|
|2016||Las Vegas Sands||No|
|2018||Dun & Bradstreet||No|
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