A Blemish – Nu Skin Enterprises Resolves SEC FCPA Enforcement Action Based On Its Chinese Subsidiary’s “Charitable Donation”
A common theme in 2016 SEC Foreign Corrupt Practices Act enforcement actions has been foreign subsidiaries (often in China) engaging in conduct without the knowledge of the parent company, the subsidiary taking steps to conceal the conduct from the parent company, yet in what amounts to strict liability, the SEC holding the parent company liable for books and records and internal control violations.
The SEC returned to this theme yesterday in this administrative action against Nu Skin Enterprises Inc., a Utah based company in the business of manufacturing and marketing cosmetic and nutritional products primarily through direct selling, or multi-level marketing, channels.
SEC Brings FCPA Enforcement Action Against Former Executive Of Harris Corp’s Dissolved Chinese Subsidiary
As highlighted in this prior post, in April 2011 Harris Corporation completed an acquisition of Carefx and in the process acquired its subsidiaries including Carefx China. In connection with its integration activities and the subsequent audit of the financials of the Carefx China operations, Harris Corp. became aware that certain entertainment, travel and other expenses in connection with the Carefx China operations may have been incurred or recorded improperly. In response, Harris Corp. voluntarily disclosed to the DOJ and SEC.
As highlighted in this prior post, a few months ago Harris Corp. disclosed that “during the second quarter of fiscal 2016, the DOJ advised us that they have determined not to take any action against us related to this matter.” The same disclosure stated that the company is “continuing to cooperate with the SEC regarding its investigation.”
In the meantime, earlier this week the SEC announced this administrative action finding that Jun Ping Zhang (pictured – a U.S. citizen and former Chairman and CEO of CareFx China who was terminated in mid-2012) violated the Foreign Corrupt Practices Act. Zhang is currently Senior Vice President, Product Innovation and Chief Technology Officer at MedeAnalytics. (See also here).
Issues To Consider From The AstraZeneca Enforcement Action
This post summarized the recent SEC Foreign Corrupt Practices Act enforcement action against AstraZeneca in which the company, without admitting or denying the SEC’s findings, agreed to cough up $5.5 million.
This post continues the analysis by highlighting additional issues to consider.
Timeline
In an August 9, 2010 filing, AstraZeneca first disclosed:
“AstraZeneca PLC has received inquiries from the US Department of Justice and the Securities and Exchange Commission in connection with an investigation into Foreign Corrupt Practices Act issues in the pharmaceutical industry. AstraZeneca is cooperating with their inquiries.”
Thus from start to finish, AstraZeneca’s FCPA scrutiny lasted over six years.
It is absolutely inexcusable on any level for FCPA scrutiny to last over six years. If the SEC wants the public to view its FCPA enforcement program as legitimate, credible, and effective, it must resolve instances of FCPA scrutiny much faster.
Deceived By Its Indirect Chinese Subsidiary, Johnson Controls Agrees To Pay $14.4 Million To Resolve SEC FCPA Enforcement Action, DOJ Markets Another “Declination”
According to the SEC, “several members” of Johnson Controls indirect Chinese subsidiary “colluded with each other and circumvented and manipulated JCI’s internal and financial controls …”.
The end result was this SEC administrative order released yesterday in which the SEC found that Johnson Controls (JCI) violated the books and records and internal controls provisions of the Foreign Corrupt Practices Act. Without admitting or denying the SEC’s findings, JCI agreed to pay approximately $14.4 million.
Also yesterday, the DOJ released this June 21st letter to JCI’s counsel stating that it has closed its inquiry “concerning possible violation of the FCPA … despite the bribery by employees of JCI’s subsidiary in China.” The DOJ’s letter is the focus of a separate post today.
Two For Tuesday In FCPA Enforcement Land – Akamai Technologies
Just when you think you’ve seen all possible combinations of Foreign Corrupt Practices Act enforcement, along comes yesterday’s “two for Tuesday” in which the SEC announced in the same press release two non-prosecution agreements against two separate companies and the DOJ simultaneously released two so-called “declination” letters against the same two companies.
This post highlights the enforcement action against Akamai Technologies and today’s first post highlights the enforcement action against Nortek Inc.. From there future posts will highlight issues to consider from the enforcement actions (and there are many including the question of just what charges – based on the SEC’s statement of facts – did the DOJ actually decline?”).