Is It Only A Matter Of Time?
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.
Further To The SEC’s Inconsistent Approach To Enforcing The FCPA’s Books And Records And Internal Controls Provisions
Other than this website (see here, here, here, here, here, here, here 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.
The Kraft Heinz Company Resolves, Among Other Things, A Books and Records And Internal Controls Matter
There has been only two “traditional” (that is involving foreign bribery) corporate Foreign Corrupt Practices Act enforcement actions thus far in 2021.
However, there have been several other FCPA enforcement actions.
Confused?
Don’t be, just realize that the FCPA has always been a law much broader than its name suggests and the FCPA’s books and records and internal controls provisions (among the most generic legal provisions one can possibility find) can be implicated in a variety of circumstances that have nothing to do with foreign bribery.
The latest example to demonstrate this point is last week’s announcement by the SEC of a $62 million enforcement action against The Kraft Heinz Company for “a long-running expense management scheme that resulted in the restatement of several years of financial reporting.”
Further To The SEC’s Inconsistent Approach To Enforcing The FCPA’s Books And Records And Internal Controls Provisions
Other than this website (see here, here, here, here, here, here, here 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.
The Latest Reminder That The FCPA Has Always Been A Law Much Broader Than Its Name Suggests
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 to demonstrate this point is yesterday’s announcement by the SEC that Healthcare Services Group, Inc. has agreed to pay $6 million to settle charges that the company engaged in accounting and disclosure violations that enabled the company to report inflated quarterly earnings per share (EPS) that met research analysts’ consensus estimates for multiple quarters.