This previous post went in-depth into the recent SEC Foreign Corrupt Practices Act enforcement action against Kinross Gold Corp.
Set forth below are additional issues to consider.
Just the Second
The 2016 enforcement action against Nordion was believed to be the first ever FCPA enforcement action against a Canadian company (see here and here for prior posts). The Kinross enforcement action is believed to be just the second.
As stated in Kinross’s recent release:
“[The FCPA scrutiny] related to allegations of improper payments made to government officials and certain internal control deficiencies at the Company’s West African mining operations, which Kinross first became aware of in August 2013. The Company immediately commenced an internal investigation into the allegations in accordance with its Whistleblower Policy. In March 2014, the SEC commenced an investigation seeking information and documents relating to these allegations, and in December 2014, the DOJ commenced a similar investigation. On October 2, 2015, the Company publicly disclosed the SEC and DOJ investigations.”
See also this previous post.
Thus from start to finish Kinross’s FCPA scrutiny lasted approximately four years.
I’ve said it once, I’ve said it twice, and I will continue to say it. If the SEC wants the public to have confidence in its FCPA enforcement program, it must resolve instances of FCPA scrutiny much quicker.
Does the FCPA’s internal controls provisions explicitly require issuers, as it relates to indirect subsidiaries, to:
- have policies relevant to low-level employees contracting with vendors and making payments with petty cash; and
- have policies relevant to vendor selection and disbursements of goods and services?
One can talk about best practices until the cows come home, but the FCPA’s internal controls provisions provide that issuers shall:
“devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that– (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary (I) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (II) to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.”
“Reasonable assurances” and “reasonable detail” means such level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs.
So what makes the above alleged deficiencies a violation of the internal controls provisions in the Kinross enforcement action?
Ipse dixit (Latin for He himself said it – an unsupported statement that rests solely on the authority of the individual who makes it) – in other words because the SEC says so. (See here, here, here, here, here, here and here for previous ipse dixit posts).
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