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A Focus On SEC Individual Actions

SEC

After a wild week or so in 2017 Foreign Corrupt Practices Act enforcement, back to some 2016 FCPA enforcement statistics.

This previous post highlighted various facts and figures from 2016 SEC FCPA enforcement actions against issuers.

As highlighted in the prior post, of the 24 corporate SEC FCPA enforcement actions from 2016, 7 (29%) have involved, at present, related SEC charges or findings against company employees.

In 2016, the SEC charged or found that 8 individuals violated the FCPA.

  • Ignacio Cueto Plaza (associated with LAN Airlines)
  • Yu Kai Yuan (associated with PTC)
  • Mikhail Gourevitch (associated with Nordion)
  • Lars Frost (associated with BK Medical (Analogic)
  • Jun Ping Zhang (associated with CareFx China / Harris Corp).
  • Daniel Och and Joel Frank (associated with Och-Ziff)
  • Karl Zimmer (associated with General Cable)

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.

For instance, 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.”

Similarly, 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 71 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

As highlighted by the above statistics, most of the individuals charged – 60 (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 60 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;
  • 3 individuals were in the Maygar Telekom case; and
  • 3 individuals were in the Noble Corp. case.

In other words, 42% of the individuals charged by the SEC with FCPA civil offenses since 2006 have been in just six core actions.

Considering that there has been 122 corporate SEC FCPA enforcement actions since 2006, this is a rather remarkable statistic.  Of the 122 corporate SEC FCPA enforcement actions, 97 (or 80%) have not (at least yet) resulted in any SEC charges against company employees.

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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 25 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, and General Cable 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,

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 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 Schnitzer Steel Yes
2006 Statoil No
2006 Oil States Int’l No
2006 Tyco No
2007 Lucent Tech. No
2007 Akzo Nobel No
2007 Chevron No
2007 Ingersoll-Rand No
2007 York No
2007 Immucor Yes
2007 Bristow Group No
2007 Electronic Data Systems Yes
2007 Textron No
2007 Delta & Pine No
2007 Baker Hughes Yes
2007 Dow Chemical No
2007 El Paso No
2008 Fiat No
2008 Siemens Yes
2008 Con-Way No
2008 Faro Yes
2008 Willbros Yes
2008 AB Volvo No
2008 Flowserve No
2008 Westinghouse Air Brake No
2009 UTStarcom No
2009 AGCO No
2009 Nature’s Sunshine Yes
2009 Helmerich & Payne No
2009 Avery Dennison No
2009 United Industrial Corp. Yes
2009 Novo Nordisk No
2009 ITT Corp. No
2009 KBR/Halliburton Yes
2010 Alcate-Lucent No
2010 RAE Systems No
2010 Panalpina No
2010 Pride Int’l Yes
2010 Tidewater No
2010 Transocean No
2010 GlobalSantaFe No
2010 Noble Corp. Yes
2010 Royal Dutch Shell No
2010 ABB No
2010 Alliance One Yes
2010 Universal No
2010 GE/Ionics No
2010 Eni/Snamprogetti No
2010 Veraz Networks No
2010 Technip No
2010 Daimler No
2010 Innospec Yes
2010 Natco No
2011 Magyar Telekom Yes
2011 Aon No
2011 Watts Water Yes
2011 Diageo No
2011 Armor Holdings No
2011 Tenaris No
2011 Rockwell No
2011 Johnson & Johnson No
2011 Comverse No
2011 Ball Corp. No
2011 IBM No
2011 Tyson No
2011 Maxwell Tech. No
2012 Eli Lilly No
2012 Allianz No
2012 Tyco No
2012 Oracle No
2012 Pfizer No
2012 Orthofix No
2012 Biomet No
2012 Smith & Nephew No
2013 Philips No
2013 Parker Drilling No
2013 Ralph Lauren No
2013 Total No
2013 Diebold No
2013 Stryker No
2013 Weatherford Int’l No
2013 ADM No
2014 Alcoa No
2014 HP No
2014 Smith & Wesson No
2014 Layne Christensen No
2014 Bio-Rad No
2014 Bruker No
2014 Avon No
2015 PBSJ Yes
2015 Goodyear No
2015 FLIR Sytems Yes
2015 BHP Billiton No
2015 Mead Johnson No
2015 BNY Mellon No
2015 Hitachi No
2015 Hyperdynamics No
2015 Bristol-Myers Squibb No
2016 SAP Yes
2016 SciClone No
2016 PTC Yes
2016 VimpelCom No
2016 Qualcomm No
2016 Nordion Yes
2016 Novartis No
2016 Las Vegas Sands No
2016 Nortek No
2016 Akamai Technologies No
2016 Analogic Yes
2016 LAN Airlines Yes
2016 Johnson Controls No
2016 AstraZeneca No
2016 Key Energy No
2016 Nu Skin No
2016 AbInBev No
2016 Och-Ziff Yes
2016 GlaxoSmithKline No
2016 Embraer No
2016 JPMorgan No
2016 Braskem No
2016 Teva Pharma No
2016 General Cable Yes

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