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

Orkin

This type of post has been published several times before (see here and here among other posts), and once again today, to highlight an important (yet often overlooked) aspect of the Foreign Corrupt Practices Act: the FCPA 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 fact remains that 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. For lack of a better term, let’s call these numerous enforcement actions non-FCPA, FCPA enforcement actions.

The latest example is this recent SEC enforcement action against Rollins Inc. (an Atlanta based company that provides termite and other pest control services to residential and commercial customers including through such brands as Orkin) and Paul Northern (the company’s for CFO) for engaging “in improper accounting practices in order to boost its publicly-reported quarterly earnings per share (EPS) to meet research analysts’ consensus estimates.”

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

reminder

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 fact remains that 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 and these provisions are among the most generic legal provisions one can possibly find.

The latest example is this recent SEC enforcement action against Baxter International (and two former executives) “for engaging in improper intra-company foreign exchange transactions that resulted in the misstatement of the company’s net income.”

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

reminder

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 fact remains that 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 and these provisions are among the most generic legal provisions one can possibly find.

Case in point is this recent SEC enforcement action against Medallion Financial Corp., a Delaware company headquartered in New York, NY, and its President and Chief Operating Officer, Andrew Murstein of New York, NY, with illegally engaging in two schemes in an effort to reverse the company’s plummeting stock price.

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Is It Only A Matter Of Time?

question marks2

Recently, the SEC announced that J.P. Morgan Securities LLC (JPMS), a broker-dealer subsidiary of JPMorgan Chase & Co., agreed to pay a $125 million civil penalty pursuant to an administrative order finding “widespread recordkeeping failures.”

The enforcement action against JPMS was based on its status as a broker-dealer and not JPMorgan’s status as an issuer subject to the FCPA’s books and records provisions.

Nevertheless, as discussed below, the SEC has already going off the rails in terms of enforcing the books and records provisions and perhaps it is only a matter of time before the SEC uses the general type of findings in the JPMS enforcement action in a books and records enforcement action against an issuer.

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Further To The SEC’s Inconsistent Approach To Enforcing The FCPA’s Books And Records And Internal Controls Provisions

inconistent

Other than this website (see herehere, hereherehereherehere and here), there seems to be little focus on the SEC’s inconsistent approach to enforcing the FCPA’s books and records and internal controls provisions.

Which is too bad because consistency is a basic rule of law principle. In other words, the same legal violation ought to be sanctioned in the same way. When the same legal violation is sanctioned in materially different ways, trust and confidence in law enforcement is diminished.

As highlighted in the numerous prior posts as well as the latest example described below, there sure does seem to be a lack of consistency between how the SEC resolves Foreign Corrupt Practices Act books and records and internal controls violations.

As most readers no doubt know, the FCPA has always been a law much broader than its name suggests.   The anti-bribery provisions are just one prong of the FCPA.

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