SEC Charges Live Ventures And Its Current CEO And CFO With, Among Other Things, FCPA Books And Records And Internal Controls Violations
The SEC frequently resolves administrative actions against issuers and occasionally, in connection with the same core conduct, resolves administrative actions with current executive officers.
But the SEC charging an issuer and its current executive officers in federal court? This is a rare instance indeed.
Yet that is exactly what the SEC did last week in this complaint charging Live Ventures (a Nevada based online marketing services company) and its current CEO John Isaac and CFO Virland Johnson.
There are no allegations of foreign bribery, but the enforcement action once again demonstrates that the FCPA has always been a law much broader than its name suggests as Live Ventures, Isaac, and Johnson were charged with, among other things, FCPA books and records and internal controls violations.
Baker Hughes Under FCPA Scrutiny For Sanctions Issues
If you are confused by the above headline, this post serves as a useful reminder that the Foreign Corrupt Practices Act has always been a law much broader than its name suggests because of its books and records and internal controls provisions.
These provisions, among the most generic legal provisions one can find applicable to issuers, can be implicated in a variety of situations – situations that often have nothing to do with foreign bribery.
For instance, recently Baker Hughes disclosed:
A Further 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.
Case in point is this recent SEC enforcement action against Gulfport Energy Corporation.
Was It Smart For The DOJ To Cite E-Smart?
As highlighted in yesterday’s post, the DOJ recently filed a brief in response to Ng Chong Hwa (Roger Ng’s) motion to dismiss a criminal indictment against him in connection with his alleged involvement in bribery schemes involving various Malaysian and Abu Dhabi officials in connection with 1Malaysia Development Berhad (1MDB).
In the brief, the DOJ sets forth its views on the FCPA’s internal controls provisions (believed to be the first instance in the FCPA’s 40+ years in which the DOJ has set forth its internal controls views in a contested matter).
The FCPA space has long know about SEC v. Worldwide Coin (a rare instance in which a court was tasked with substantively construing the books and records and internal controls provisions – see here for the prior post). In addition to citing this case in its brief, the DOJ also cited SEC v. E-Smart Technologies, 82 F.Supp.3d 97 (D.D.C. 2015).
SEC Commissioners Peirce And Roisman Hit Internal Controls Home Run
For years, these pages have highlighted off-the-rails enforcement of the Foreign Corrupt Practices Act’s books and records and internal controls provisions (see here, here, here, here, here, here, here and here among other posts).
Among other things, the prior posts have discussed FCPA legislative history, the FCPA’s statutory text, SEC v. World-Wide Coin Investments (believed to be the only judicial decision to directly address the substance of the books and records and internal controls provisions) and prior FCPA enforcement agency guidance – all in an effort to highlight the difficulty of reconciling existing legal authority and even enforcement agency guidance with certain FCPA books and records and internal controls enforcement theories in recent years.
Last week, SEC Commissioners Hester Peirce and Elad Roisman issued this statement to explain why they voted against the SEC’s recent settled action against Andeavor LLC (see here in which the company agreed to pay $20 million). As highlighted below, Commissioners Peirce and Roisman discussed the same concepts and cited the same authority which have been highlighted on these pages for years and in the process hit an internal controls home run.