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This Week On FCPA Professor

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FCPA Professor has been described as “the Wall Street Journal concerning all things FCPA-related,” and “the most authoritative source for those seeking to understand and apply the FCPA.”

Set forth below are the topics discussed this week on FCPA Professor.

In the minds of some, companies that have resolved Foreign Corrupt Practices Act enforcement actions are bad or unethical companies. It is a tempting position to take. After all, the FCPA is about bribery and corruption. However, it is a wrong position to take in many (but certainly not all) instances as many companies that resolve FCPA enforcement actions otherwise win awards of being the most ethical, most admired, or otherwise produce products or services that change the world. For instance, as highlighted in this post the U.S. government has partnered with several FCPA violators to help combat COVID-19.

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World Acceptance Corp. Resolves $21.7 Million Enforcement Action Based On The Conduct Of A Former Wholly-Owned Mexico Subsidiary

world accept

As highlighted in this prior post, in June 2017 World Acceptance Corporation (a South Carolina based consumer finance company) disclosed that it was “conducting an internal investigation of its operations in Mexico, focusing on the legality under the U.S. Foreign Corrupt Practices Act and certain local laws of certain payments related to loans, the maintenance of the Company’s books and records associated with such payments, and the treatment of compensation matters for certain employees.”

As highlighted in this prior post, in May 2020 the company disclosed that “discussions with the SEC have progressed to a point that the Company can now reasonably estimate a probable loss and has recorded an aggregate accrual of $21.7 million with respect to the SEC matters.”

Yesterday, the SEC announced that World Acceptance Corp. agreed to resolve a $21.7 million FCPA enforcement action based on the actions of a former wholly-owned Mexican subsidiary it sold in July 2018.

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Apparently Anything Involving China Is Part Of The DOJ’s China Initiative

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As highlighted in this prior post, in November 2018 the Department of Justice announced a China Initiative. Among the goals of the China Initiative was to ‘identify Foreign Corrupt Practices Act (FCPA) cases involving Chinese companies that compete with American businesses.”

Recently, the DOJ updated its China Initiative page and provided approximately 60 “China-Related Case Examples.”

Two FCPA enforcement actions were included. As stated by the DOJ:

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Courts Dismisses Bribery Related Securities Fraud Action Against Glencore And Various Executives

Dismissed

In mid-2018 Glencore (a commodities company incorporated in the United Kingdom and headquartered in Switzerland with common stock that trades on the New York based over-the-counter market) disclosed that it was under scrutiny by the U.K. Serious Fraud Office and DOJ. (See here for the prior post).

Soon thereafter, the company’s share price fell and sure as the sun rises in the east and dogs bark, attorneys representing shareholders filed securities fraud claims against the company and certain executives.

One such action was filed in the U.S. District Court in New Jersey alleging that Glencore and certain executives made false and /or misleading statements and/or failed to disclose facts relating to bribery schemes Glencore allegedly engaged in in the Democratic Republic of Congo, Venezuela and Nigeria.

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The FCPA Has Always Been A Law Much Broader Than Its Name Suggests

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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 books and records and internal controls provisions are among the most generic legal provisions one can possible find. The provisions generally require issuers to: (i) maintain books and records which, in reasonable detail, accurately and fairly reflect issuer transactions and disposition of assets (the books and records provisions); and (ii) devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are properly authorized, recorded, and accounted for (the internal controls provisions).

Because of these provisions, 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.

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