Issues To Consider From The Lifecore Enforcement Action
This previous post concerned the FCPA enforcement action against Lifecore Biomedical, Inc. (f/k/a Landec Corporation) in connection with alleged Foreign Corrupt Practices Act violations involving wastewater issues in Mexico.
This post highlights additional issues to consider.
Timeline
As highlighted in this prior post, in January 2020 Landec disclosed:
Lifecore Resolves FCPA Enforcement Action Regarding Wastewater Issues In Mexico
Yesterday, the DOJ released this so-called “declination with disgorgement” letter regarding Lifecore Biomedical, Inc. (f/k/a Landec Corporation) in connection with alleged Foreign Corrupt Practices Act violations involving wastewater issues in Mexico.
Pursuant to the letter agreement, Lifecore agreed to “disgorge” $406,505 in “costs avoided” (which of course is an interesting spin on disgorgement which is traditionally understood to mean relinquishment of unjust gains).
The letter agreement states in full:
Top 20 SEC Disgorgement Amounts In FCPA Enforcement Actions
The Foreign Corrupt Practices Act contains specific penalty provisions for both violations of the anti-bribery and books and records and internal control provisions. However, in the FCPA’s modern era there has been a dramatic shift by the SEC away from the FCPA’s statutory penalties in most corporate enforcement action towards disgorgement.
The 2004 FCPA enforcement action against ABB is believed to be the first FCPA enforcement in which the SEC sought a disgorgement remedy.
Since then, the SEC has secured approximately $5.4 billion in disgorgement (and associated pre-judgment interest) in approximately 160 corporate enforcement actions. Set forth below is the current top 20 list of SEC disgorgement (and associated pre-judgment interest) amounts.
Top 20 SEC Disgorgement Amounts
The Foreign Corrupt Practices Act contains specific penalty provisions for both violations of the anti-bribery and books and records and internal control provisions. However, in the FCPA’s modern era there has been a dramatic shift by the SEC away from the FCPA’s statutory penalties in most corporate enforcement action towards disgorgement.
The 2004 FCPA enforcement action against ABB is believed to be the first FCPA enforcement in which the SEC sought a disgorgement remedy.
Since then, the SEC has secured approximately $5.1 billion in disgorgement (and associated pre-judgment interest) in approximately 150 corporate enforcement actions. Set forth below is the current top 20 list of SEC disgorgement amounts.
5th Circuit Interprets “Awarded For Victims” Language From Supreme Court’s Liu Decision
As highlighted in this prior post, in June 2020 the Supreme Court concluded in Liu v. SEC that “a disgorgement award that does not exceed a wrongdoer’s net profits and is awarded for victims is equitable relief permissible” under 78u(d)(5) (a statutory provision which states in pertinent part that “in any action or proceeding brought or instituted by the [SEC] under any provision of the securities laws … any Federal court may grant .. any equitable relief that may be appropriate or necessary for the benefit of investors.”
As often happens, the Supreme Court provided a general framework for lower courts to analyze an issue without specifically defining what the key terms of the framework actually means.
Recently the Fifth Circuit addressed what the term “awarded for victims” means – becoming the first court of appeals to do so since Liu was decided.