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SEC Enforcement Of The FCPA – Year In Review

SEC

Foreign Corrupt Practices Act enforcement, it is not just about the DOJ.  Granted, as a civil enforcement agency its sticks are less sharp than the DOJ’s, but the SEC also claims a significant piece of the FCPA enforcement pie (query whether it should – but that is a subject for another day – for instance as discussed in “The Story of the Foreign Corrupt Practices Act” the SEC wanted no part in enforcing the FCPA’s anti-bribery provisions).

Today’s post is a year in review of SEC FCPA Enforcement.  (See here for a similar post for 2013; here for a similar post for 2012; here for a similar post for 2011; and here for a similar post for 2010).

Stay tuned for a similar post on DOJ FCPA enforcement in 2014.

Settlement Amounts and Specifics

In 2014, the SEC collected approximately $327 million in 7 corporate FCPA enforcement actions.

By comparison, in 2013 the SEC collected approximately $300 million in 8 corporate enforcement actions; in 2012 the SEC collected approximately $118 million in 8 corporate FCPA enforcement actions; in 2011 the SEC collected approximately $148 million in 13 corporate FCPA enforcement actions; and in 2010, the SEC collected approximately $530 million in 19 corporate FCPA enforcement actions.

The range of SEC FCPA enforcement actions in 2014 was, on the high end, $175 million (Alcoa), and on the low end, $2 million (Smith & Wesson). Of the $327 million the SEC collected in 2014 corporate FCPA enforcement actions, approximately 54% was in just one enforcement action (Alcoa) and two enforcement actions (Alcoa and Avon) comprised approximately 75% of the amount.

Three corporate FCPA enforcement actions from 2014 were SEC only (Bruker, Layne Christensen and Smith & Wesson).

Of the 7 corporate enforcement actions from 2014, 6 enforcement actions (all but the Avon action) were administrative actions.  In other words, there was no judicial scrutiny of 86% of SEC FCPA enforcement actions from 2014.  The settlement amounts in these actions comprised approximately 80% of the SEC’s $326 million collected in 2014 corporate FCPA enforcement actions.  By comparison, in 2013 there was no judicial scrutiny of 50% of SEC FCPA enforcement actions and settlement amounts in these actions comprised approximately 57% of the SEC’s $300 million collected.

In 2014, the SEC collected approximately $104 million in disgorgement and prejudgment interest in enforcement actions that did not charge anti-bribery violations. This is noteworthy because many question, and rightfully so, whether disgorgement is an appropriate remedy in cases that do not charge FCPA anti-bribery violations.  See here for a prior post on so-called “no-charged bribery disgorgement” cases. In 2013, the SEC collected approximately $208 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases; in 2012, the SEC collected approximately $57.4 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases; and in 2011 the SEC collected approximately $51 million in disgorgement and prejudgment interest in n0-charged bribery disgorgement cases.

The $327 million the SEC collected in 2014 FCPA enforcement actions breaks down as follows:

$2.7 million in a civil penalties (Bruker, Layne Christensen and Smith & Wesson); and

$324.3 million in disgorgement and prejudgment interest.

Thus, 99% of SEC FCPA settlement amounts in 2014 consisted of disgorgement and prejudgment interest.  By way of comparison, in 2013 98% of SEC FCPA settlement amounts consisted of disgorgement and prejudgment interest; in 2012 86% of SEC FCPA settlement amounts consisted of disgorgement and prejudgment interest; in 2011, disgorgement and prejudgment interest comprised 94% of SEC FCPA enforcement settlement amounts; and in 2010, disgorgement and prejudgment interest comprised 96% of SEC FCPA enforcement settlement amounts.

If one tries to analyze why some SEC FCPA enforcement actions in 2014 included a civil penalty, disgorgement and prejudgment interest (Bruker, Layne Christensen, and Smith & Wesson), whereas other enforcement actions included only disgorgement and prejudgment interest (Avon, Bio-Rad and HP), whereas other enforcement actions included only disgorgement (Alcoa), good luck and please enlighten us all with your insight.

Corporate vs. Individual Actions

Of the 7 corporate SEC FCPA enforcement actions from 2014, 0 (0%) have involved, at present, related SEC charges against company employees.  By way of comparison, of the 8 SEC corporate FCPA enforcement actions from 2013, 0 (0%) have involved, at present, related SEC charges against company employees; in 2012, 0 of the 8 corporate (0%) FCPA actions involved related SEC charges against company employees; in 2011, 2 of the 13 (15%) corporate SEC FCPA enforcement actions involved related SEC charges against company employees; in 2010, 3 of the 19 (15%) corporate SEC FCPA enforcement actions involved related SEC charges against company employees.

Voluntary Disclosures

Of the 7 corporate SEC FCPA enforcement actions from 2014, 4 enforcement actions (57%) (Avon, Bruker, Bio-Rad and Layne Christensen) were the result of corporate voluntary disclosures. 1 enforcement action (Smith & Wesson) originated from the manufactured Africa Sting enforcement action, 1 enforcement action (HP) was the result of a previous foreign law enforcement action and 1 enforcement action (Alcoa) was the result of a previous civil lawsuit. By way of comparison, of the 8 corporate SEC FCPA enforcement actions in 2013, 3 enforcement actions (38%) were the result of corporate voluntary disclosures; in 2012 of the 8 corporate SEC FCPA enforcement actions 4 (50%) were the result of corporate voluntary disclosures; and in 2011 of the 13 corporate SEC FCPA enforcement actions 11 (85%) were the result of corporate voluntary disclosures.

This remainder of this post provides an overview of SEC FCPA enforcement in 2014.

Avon (December 17th)

See here and here for prior posts

Charges:   Violation of the FCPA’s books and records and internal controls provisions

Settlement:  Approximately $67.4 million ($52,850,000 in disgorgement plus prejudgment interest of $14,515,013.13)

Disclosure:   Voluntary Disclosure

Individuals Charged:  No

Related DOJ Enforcement Action:  Yes

Bruker Corp. (December 15th)

See here for the prior post.

Charges: None.  Administrative cease and desist order finding violations of the FCPA’s books and records and internal control provisions.

Settlement:  Approximately $2.4 million ($1,714,852 in disgorgement, $310,117 in prejudgment interest, and a $375,000 penalty)

Disclosure:   Voluntary Disclosure

Individuals Charged:  No

Related DOJ Enforcement Action:  No

Bio-Rad (November 3rd)

See here and here for prior posts

Charges: None.  Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions and books and records and internal control provisions.

Settlement:  Approximately $40.7 million in disgorgement

Disclosure:   Voluntary Disclosure

Individuals Charged:  No

Related DOJ Enforcement Action:  Yes

Layne Christensen (November 3rd)

See here and here for prior posts

Charges: None.  Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions and books and records and internal control provisions.

Settlement:  Approximately $5.1 million ($3,893,472.42 in disgorgement plus $858,720 in prejudgment interest as well as a $375,000 penalty amount)

Disclosure:   Voluntary Disclosure

Individuals Charged:  No

Related DOJ Enforcement Action:  No

Smith & Wesson (July 28th)

See here and here for prior posts.

Charges:   None.  Administrative cease and desist order finding violations of the FCPA’s anti-bribery, books and records and internal control provisions.

Settlement:  Approximately $2 million ($107,852 in disgorgement, $21,040 in prejudgment interest, and a civil monetary penalty of $1,906,000

Disclosure:   The enforcement action originated after a Smith & Wesson employee was criminally charged in the DOJ’s manufactured Africa Sting enforcement action.

Individuals Charged:  No (as to the conduct alleged in the corporate enforcement action).

Related DOJ Enforcement Action:  No.

HP (April 9th)

See here for the prior post.

Charges:   None.  Administrative cease and desist order finding violations of the FCPA’s books and records and internal control provisions.

Settlement:  $34 million in disgorgement and prejudgment interest (approximately $2.5 million of the disgorgement amount was satisfied by payment of $2.5 million in connection with the HP Mexico DOJ action).

Disclosure:   The enforcement action appears to have been the result of a previous German and Russian law enforcement investigation (see here for the prior post).

Individuals Charged:  No

Related DOJ Enforcement Action:  Yes

Alcoa (January 9th)

See here for the prior post.

Charges:   None.  Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions and books and records and internal control provisions.

Settlement:  $175 million in disgorgement (of which $14 million will be satisfied by the payment of the forfeiture in the criminal action).

Disclosure:   A 2008 civil lawsuit between Alba and Alcoa.

Individuals Charged:  No

Related DOJ Enforcement Action:  Yes

SEC Enforcement (Individual)

For the first time since April 2012, the SEC brought an FCPA enforcement action against an individual.  This enforcement action is summarized below.

Stephen Timms and Yasser Ramahi (November 17th)

See here for the prior post

Charges: None.  Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions, causing violations of the FCPA’s books and records provisions

Settlement:  Timms and Ramahi consented to the entry of the order and agreed to pay financial penalties of $50,000 and $20,000 respectively.

Employer Charged:  The individuals were associated with FLIR System, Inc. but at present the company has not been charged

Related DOJ Enforcement Action:  No

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