If you are confused by the above headline, this post serves as a useful reminder that the Foreign Corrupt Practices Act has always been a law much broader than its name suggests because of its books and records and internal controls provisions.
These provisions, among the most generic legal provisions one can find applicable to issuers, can be implicated in a variety of situations – situations that often have nothing to do with foreign bribery.
For instance, recently Baker Hughes disclosed:
“In December 2020, the Company received notice that the SEC is conducting a formal investigation that the Company understands is related to its books and records and internal controls regarding sales of its products and services in projects impacted by U.S. sanctions. The Company is cooperating with the SEC and providing requested information. The Company has also initiated an internal review with the assistance of external legal counsel regarding internal controls and compliance related to U.S. sanctions requirements. The SEC’s investigation and the Company’s internal review are ongoing, and the Company cannot anticipate the timing, outcome or possible impact of the investigation or review, financial or otherwise.”
This is not the first time the SEC has examined a company for sanctions issues using the FCPA’s books and records and internal controls provisions.
As highlighted in this prior post, in 2013 FCPA enforcement action against Weatherford (in which the company paid $153 million to resolve parallel DOJ and SEC enforcement actions) the SEC alleged, among other things:
“Weatherford and its subsidiaries engaged in commercial transactions with Cuba, Iran, Syria and Sudan (“sanctioned countries”) that violated U.S. sanction and export control laws. During the relevant time period, exporting or re-exporting goods or services from the United States or by a U.S. person to sanctioned countries was generally prohibited by U.S. law. Certain employees of Weatherford and its subsidiaries employed various schemes to conceal numerous commercial transactions with sanctioned countries that violated U.S. sanctions and export control laws, including creating false books and records. The company’s improper sales to sanctioned countries generated over $118 million in revenues and more than $30 million in profits.
Weatherford violated [the books and records provisions] when it created false books and records to [among other things] conceal transactions with sanctioned countries. Weatherford also violated [the internal controls provisions] by failing to have sufficient internal accounting controls in place to detect and prevent the authorization or payment of bribe payments and the improper sales to sanctioned countries.”
Should the recent disclosure of Baker Hughes lead to an enforcement action, it would be third time in which Baker Hughes resolves an FCPA enforcement.
As highlighted here, in 2001 the company resolved an enforcement action concerning conduct in Indonesia, India and Brazil.
As highlighted here and here, in 2007 the company resolved an enforcement action concerning conduct in Kazakhstan, Nigeria, Angola, Indonesia, Russia and Uzbekistan.
