This 2010 article titled “The Facade of FCPA Enforcement” discusses how the facade of FCPA enforcement is evident not only in connection with the FCPA’s substantive provisions, but also in the remedies the enforcement agencies typically pursue in an FCPA enforcement action.
The Foreign Corrupt Practices Act contains specific penalty provisions for both violations of the anti-bribery and books and records and internal control provisions. However, in the FCPA’s modern era there has been a dramatic shift by the SEC away from the FCPA’s statutory penalties in most corporate enforcement action towards disgorgement.
The 2004 FCPA enforcement action against ABB is believed to be the first FCPA enforcement in which the SEC sought a disgorgement remedy and since then the SEC has secured approximately $4.6 billion in disgorgement (and associated pre-judgment interest) in approximately 130 corporate enforcement actions. Set forth below is the current top 20 list of SEC disgorgement amounts.
|1. Ericsson||2019||$540 million|
|2. Siemens||2008||$350 million|
|3. Teva Pharma||2016||$236 million|
|4. Telia||2017||$208.5 million|
|5. Och-Ziff||2016||$199 million|
|6. KBR / Halliburton||2009||$177 million|
|7. Vimpelcom||2016||$167.5 million|
|8. Alcoa||2014||$161 million|
|9. Total||2013||$153 million|
|10. Fresenius Healthcare||2019||$147 million|
|11. Walmart||2019||$144 million|
|12. Panasonic||2018||$143 million|
|13. JPMorgan||2016||$131 million|
|14. ENI / Snamprogetti||2010||$125 million|
|15. Technip||2010||$98 million|
|16. Daimler||2010||$91 million|
|17. Embraer||2016||$79 million|
|18. Avon||2014||$67 million|
|19. Braskem||2016||$65 million|
|20. Weatherford||2013||$64 million|
* Disgorgment and associated prejudgment interest amount actually secured by the SEC subject, in certain cases, to offsets or credits for parallel DOJ and/or foreign law enforcement actions.
As has been highlighted several times on these pages, the SEC’s use of the disgorgement remedy has not been limited to cases involving anti-bribery charges. Rather, the SEC also routinely seeks a disgorgement remedy when only charging violations of the FCPA’s books and records and internal control provisions – a practice referred to as no-charged bribery disgorgement.
Specifically, the SEC has secured approximately $775 million in approximately 60 corporate no-charged bribery disgorgement actions. One of the most vocal critics of the SEC’s non-charged bribery disgorgement practice is a former SEC Associate Director of Enforcement who has noted:
“Settlements invoking disgorgement but charging no primary anti-bribery violations push the law’s boundaries, as disgorgement is predicated on the common-sense notion that an actual, jurisdictionally-cognizable bribe was paid to procure the revenue identified by the SEC in its complaint. […] No-charged bribery disgorgement settlements appear designed to inflict punishment rather than achieve the goals of equity. […] Given the bedrock principle that a court’s equitable power to order such disgorgement goes only as far as the scope of the violation, it is difficult to determine how a court could lawfully allow disgorgement of profits for uncharged violations without the remedy crossing the line into ‘punishment’ for the violations actually charged. Although settling companies that willingly accept disgorgement as a remedy in such cases may have important strategic interests at stake – e.g., avoiding primary anti-bribery charges – even these companies (as well as the SEC) must consider that the federal courts may at some point step in and forbid such settlements as beyond ‘the bounds of fairness, reasonableness, and adequacy.’ […] At some point […] Congress may well determine that the practice of seeking ‘disgorgements’ in cases in which there is no jurisdictionally-cognizable bribery charged by the SEC is an inappropriate use of the agency’s authority. In light of these serious legal issues, the Commission itself may wish to re-examine its settlement practices in this arena.”
In 2017 in Kokesh v. SEC, the Supreme Court unanimously rejected the SEC’s position and held that disgorgement “in the securities-enforcement context is a ‘penalty’ within the meaning of [28 U.S.C.] 2462 and so disgorgement actions must be commenced within five years of the date the claim accrues.” (See here for the prior post).
Although Kokesh was not a Foreign Corrupt Practices Act enforcement action, given the above statistics regarding the prominence of disgorgement in SEC FCPA enforcement actions, it most certainly was FCPA relevant. However, not even a unanimous Supreme Court opinion matters much when corporate defendants – to curry favor with the SEC – routinely waive or agree to toll statute of limitations defenses in FCPA matters. (See here).
As highlighted in this prior post, the Supreme Court recently heard oral argument in Liu v. SEC in which the question presented is “whether the Securities and Exchange Commission may seek and obtain disgorgement from a court as ‘equitable relief’ for a securities law violation even though this Court has determined that such disgorgement is a penalty.”
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