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Issues To Consider From The Recent BHP Billiton Enforcement Action

This [1] recent post highlighted the SEC FCPA enforcement action against BHP Billiton.

This post continues the analysis by highlighting various issues to consider from the enforcement action.

Record-Setting SEC Civil Penalty

At $25 million, the BHP Billiton enforcement action clearly did not set any records in terms of overall settlement amount. (See here [2] for the current top ten FCPA enforcement actions in terms of overall settlement amount).

In most SEC FCPA enforcement actions, the settlement amount comprises (in any given year 95%+) of disgorgement and prejudgment interest.

However, the BHP Billiton comprised solely a $25 million civil penalty.

This is believed to be, by a large margin, the largest-ever SEC civil penalty in an FCPA enforcement action.  Number 2 on this list is believed to be against ABB in 2010 [3] (settlement amount included a $16.5 million civil penalty).

Moreover, the BHP Billiton enforcement action is the second-largest SEC only FCPA enforcement action of all-time behind the $29 million SEC only FCPA enforcement action against Eli Lilly in 2012 (see here [4] for the prior post). (Note: an SEC only FCPA enforcement action means an enforcement action that involved only an SEC component, not an SEC settlement amount in an enforcement action that also involved a DOJ component).

That the BHP Billiton enforcement action – a travel and entertainment action – represents the largest SEC FCPA penalty ever and the second largest SEC only FCPA enforcement action of all-time is nothing short of remarkable and further to the point that FCPA settlement amounts (and components thereof) seem to be getting bigger each year … just because.  (See here [5] for the prior post).

The Absurdity of Just Don’t Bribe

In the minds of some [6], the FCPA is simple.  Just don’t bribe.

More sophisticated observers recognize the absurdity of such an absolutist position.

In short, a company can do things with customer or prospective customer x and it is generally just fine.  But when the same company does the same thing with customer or prospective customer y, the U.S. government just might call it bribery.

The BHP Billiton enforcement action highlights this dynamic.

To recap, BHP Billiton was an official sponsor of the 2008 Summer Olympics in Beijing, China.  As such, the company received priority access to tickets, hospitality suites, and accommodations for the games.  Not surprisingly, the company invited 650 people (customers, suppliers, etc.) to attend the Olympic Games with three to four day hospitality packages.

According to the SEC’s findings, approximately 75% of these invitees were not alleged “foreign officials.”  Thus no problem.

But lo and behold, approximately 25% of these people invited were alleged “foreign officials” primarily from Africa and Asia and an even smaller percentage of these invited “foreign officials” actually attended the Olympic Games.

The end result, according to the SEC, bribery.

Sure, BHP Billiton was not charged with FCPA anti-bribery violations, but does anyone seriously question whether this enforcement action was regarding anything but the alleged “foreign officials.”?

Avoiding the “D” Word

BHP Billiton was not the subject of a DOJ enforcement action.

To those who overuse the “D” word, this is yet another example of a DOJ “declination.”

However, consider this.

As a foreign issuer, the only way BHP Billiton could have been found to be in violation of the FCPA’s anti-bribery provisions is to the extent “[U.S.] mails or any means or instrumentality of interstate commerce” was used in furtherance of the alleged travel and entertainment expenditures.  The SEC’s enforcement action contained no such findings.

Sure, the DOJ also can bring criminal enforcement actions – including against foreign issuers – for willful violations of the FCPA’s books and records and internal controls provisions, but the SEC’s findings surely did not warrant such treatment.

Time-Line

Like most FCPA inquiries by the DOJ/SEC, BHP Billiton’s FCPA scrutiny followed a glacial pace.

As the company previously disclosed, it received requests for information in August 2009 from the SEC.

Thus, from start to finish it took approximately six years.