The Foreign Corrupt Practices Act has always been a law much broader than its name suggests.
Sure, the FCPA contains anti-bribery provisions which concern foreign bribery.
Sure, the FCPA’s books and records and internal controls provisions can be implicated in foreign bribery schemes.
However, the fact remains that most FCPA enforcement actions (that is enforcement actions that charge or find violations of the FCPA’s books and records and internal controls provisions) have nothing to do with foreign bribery. For lack of a better term, these enforcement actions have longed been called non-FCPA, FCPA enforcement actions by this site.
The latest example concerns an SEC enforcement action against Archer-Daniels Midland Company and two former executives.
In summary fashion, this administrative order finds:
“This matter concerns accounting and disclosure fraud at Archer-Daniels-Midland Company that materially inflated the performance of a key business segment, “Nutrition,” which the company touted to investors as an important driver of the company’s overall growth.
Vikram Luthar, former CFO of Nutrition and subsequently ADM, along with Vince Macciocchi, Nutrition’s former President, led a series of transactions that inflated Nutrition’s operating profit at the expense of ADM’s other segments. ADM’s former CFO Ray Young acted negligently in overseeing and approving certain transactions. Each officer played a role in certain improper adjustments to sales between ADM’s business segments that boosted Nutrition’s operating profit in 2019, 2021, and 2022 (the “relevant period”). As a result, ADM’s periodic reports filed with the Commission contained materially false and misleading statements concerning Nutrition’s financial condition and results of operations.
On January 21, 2024, ADM announced an internal investigation regarding certain accounting practices and procedures in connection with the Nutrition segment, and that it had withdrawn Nutrition’s forward-looking outlook due to the ongoing investigation and placed Luthar on administrative leave. The next trading day, ADM’s stock price fell by 24 percent. In March 2024 ADM corrected prior period errors, and in November restated its previously issued 2023 Form 10-K and Forms 10-Q for the first and second quarters of 2024, in each instance to address errors in its historical segment reporting.”
The SEC found that ADM violated, among other things, the FCPA’s books and records and internal controls provisions and that the former executives caused violations of those provisions.
ADM agreed to pay a $40 million civil penalty. The former executives agreed to pay: a $125,000 civil money penalty, $330,000 in disgorgement and $74,343 in prejudgment interest; and a $75,000 civil penalty, $450,000 in disgorgement, and $126,610 in prejudgment interest.
As a condition of settlement, ADM (as well as the former executives) agreed to cease and desist from committing future violations of, among other things, the FCPA’s books and records and internal controls provisions.
As highlighted in this post, in 2013 ADM resolved a $54 million FCPA enforcement action based on the conduct of an indirect subsidiary in Ukraine and a joint venture partner in Venezuela. As a condition of settlement, ADM consented to the entry of a final judgment permanently enjoining it from future violations of the FCPA books and records and internal control provisions.
