The SEC’s Recent Alter Ego Theories
The general rule is that legal liability does not ordinarily hop-skip-and-jump around a corporate organization because separate legal entities (including even those within the same corporate hierarchy) are not liable for the legal liability of other entities (whether that liability arises in tort, contract or the FCPA).
However, if one entity is merely the “alter ego” of another entity, the other entity may be exposed to legal liability based on the conduct of the “alter ego.” The above picture can demonstrate alter ego issues, namely that one entity will be the alter ego of another if the entities share the same heart, organs, nervous system, etc.
Against this backdrop, it is interesting to see how the SEC asserted alter ego theories in two recent FCPA enforcement actions in finding that a parent company violated the FCPA’s anti-bribery provisions because its “agent” (a foreign subsidiary) engaged in improper conduct.