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Sarbanes-Oxley Certifications As A Basis For Books And Records Violations

Certification

As highlighted in this prior post, the DOJ recently announced criminal charges against Abraham Cigarroa Cervantes (a Mexican citizen described as a former finance director of the Latin America division of Stericycle).

The alleged conduct was in connection with the same bribery schemes at issue in Stericycle’s 2022 FCPA enforcement action as well as the related 2024 FCPA enforcement action against Mauricio Gomez Baez (a Mexican citizen who was the former Senior Vice President of Stericycle’s Latin American).

As stated in the DOJ release announcing the Cigarroa enforcement action:

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Courts Upholds FCPA Convictions Of Former ComEd Executives And Associates

Judicial Decision

As discussed in this prior post, in May 2023 a federal jury in Chicago found four former Commonwealth Edison (“ComEd”) executives and associates guilty on all counts charged, including conspiring to influence and reward the former Speaker of the Illinois House of Representatives in order to assist with the passage of legislation favorable to the electric utility company, in addition to multiple bribery and record falsification charges. (See here for the DOJ release).

Bribery of a state politician is not ordinarily the type of conduct that results in Foreign Corrupt Practices Act issues.

However, ComEd (a majority-owned indirect subsidiary of Exelon Corp) was an issuer (as was Exelon) and the FCPA has always been a law much broader than its name suggests because of the FCPA’s books and records and internal controls provisions.

Indeed, the most serious (from a sentencing and fine perspective) criminal charges the four individuals were found guilty of were record falsification in violation of the FCPA.

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That Was Then, This Is Now

shrug

To best understand (and place in context) current SEC FCPA enforcement positions and policies, it is useful to understand past SEC FCPA enforcement positions and policies.

The year was 1981, the event was the American Institute of Certified Public Accountants, and the speaker was Harold Williams, the Chairman of the SEC. The speech did not contain the standard disclaimer (i.e. I am just an individual and not speaking on behalf of the SEC), rather Williams specifically stated that his remarks “constitute a statement of the Commission’s policy.”

Williams focused his remarks (here) “solely to one major auditing development of recent years: the accounting provisions of the Foreign Corrupt Practices Act of 1977″ and stated that “the anxieties created by the Foreign Corrupt Practices Act – among men and women of utmost good faith – have been, in my experience without equal.”

Williams tried to damper these anxieties and spoke about the scope of the provisions including when an enforcement action would be warranted.

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Duped By Certain China Subsidiary Employees, 3M Resolves A $6.5 Million Enforcement Action

3m

The SEC announced today that 3M resolved a $6.5 million Foreign Corrupt Practices Act enforcement.

The basics are as follows.

Approximately 6-10 years ago, a former Marketing Manager of a 3M China-based subsidiary “secretly” provided “tourism activities” for Chinese health care officials.

The Marketing Manager “would create a travel itinerary that included various legitimate business, training and marketing activities for submission to 3M-China’s compliance personnel for approval,” however there were “alternate itineraries” that “consisted of various tourism activities at or near the location of the educational events.”

There is no suggestion that anyone at 3M headquarters knew of or approved of the conduct. Indeed, subsidiary employees, among other things, “falsified internal compliance documents that affirmatively denied and/or omitted mention of the Tourism Activities that were planned as part of the overseas trip.”

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That Was Then

THATWASTHEN

To best understand (and place in context) current SEC FCPA enforcement positions and policies, it is useful to understand past SEC FCPA enforcement positions and policies.

The year was 1981, the event was the American Institute of Certified Public Accountants, and the speaker was Harold Williams, the Chairman of the SEC.

Williams focused his remarks (here) “solely to one major auditing development of recent years: the accounting provisions of the Foreign Corrupt Practices Act of 1977.”

Williams began has remarks as follows.

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