As highlighted here, in 2010 tobacco company Alliance One International resolved an approximate $19.5 million Foreign Corrupt Practices Act enforcement action concerning conduct in Kyrgyzstan, Thailand, China, Greece, and Indonesia. In resolving the SEC matter Alliance One consented to the entry of final judgment permanently enjoining it from violating the FCPA including the books and records and internal controls provisions.
Last week, Alliance One (now known as Pyxus International, Inc.) became a repeat offender of the FCPA’s books and records and internal controls provisions in a so-called non-FCPA FCPA enforcement action (i.e. the books and records and internal controls violations did not involve foreign bribery).
This SEC order states in summary fashion:
“This matter concerns violations of the reporting, books and records, and internal accounting control provisions of the Exchange Act by Alliance One, a tobacco processing company, from at least 2011 to 2015. Throughout the period, the processes and control activities designed to support the amounts of inventory, deferred crop costs, and the revenue transactions at Alliance One’s subsidiary in Kenya, Alliance One Tobacco (Kenya) Ltd. (“Alliance One Kenya”), were not sufficient at a local or regional level. Additionally, Alliance One Kenya’s management overrode existing controls and failed to report accounting errors to Alliance One. As a result, Alliance One filed with the Commission materially misstated financial statements in annual and quarterly reports from at least 2011 through the second quarter of 2015.
In May 2016, Alliance One filed restated financial statements to correct the accounting errors of Alliance One Kenya, determined that its internal control over financial reporting had not been designed or operating effectively, and reported the existence of material weaknesses in its internal control over financial reporting, which had been remediated. The correction of these errors decreased the reported amount of inventory by approximately $32 million, decreased accounts receivable by approximately $7 million, and decreased retained earnings by approximately $39 million.”
Based on the above, the SEC found that Alliance One violated, among other things, the FCPA’s books and records and internal controls provisions.
The consequence for becoming a repeat offender of these provisions and restating financial statements to the tune of millions of dollars?
There was no monetary component to the settlement. However Alliance One, once again, was ordered to cease and desist from committing future violations of the FCPA’s books and records and internal controls provisions.
Perhaps yet another example of the SEC enforcing the same legal provisions (the FCPA’s books and records and internal controls provisions) in materially different ways. (See prior posts here, here and here).
Strategies For Minimizing Risk Under The FCPA
A compliance guide with issue-spotting scenarios, skills exercises and model answers. "This book is a prime example of why corporate compliance professionals and practitioners alike continue to listen to Professor Koehler."