Westport Fuel Systems Resolves $4 Million FCPA Enforcement Action Based On Transfer Of Shares To A Private Equity Fund In Which A Chinese Official Held An Interest – Former CEO Also Resolves Action
In the third corporate Foreign Corrupt Practices Act is less than 24 hours, the SEC announced this afternoon that Westport Fuel Systems (a Canadian company with shares traded on NASDAQ) agreed to pay approximately $4 million for “paying bribes to a foreign government official in China.”
In addition, in connection with the same core conduct, Nancy Gougarty (a U.S. citizen who previously served as Chief Operating Officer and from mid-2016 until early 2019 as the CEO and member of the board of directors) agreed to pay a $120,000 civil penalty.
Issues To Consider From The Deutsche Bank Enforcement Action
This prior post highlighted the SEC’s $16.2 million Foreign Corrupt Practices Act enforcement action against Deutsche Bank – the latest FCPA enforcement action focused on alleged improper internship and hiring practices primarily involving the financial services industry.
This post continues the analysis by highlighting additional issues to consider.
Timeline
The company’s FCPA scrutiny reportedly began in mid-2013. Thus, from start to finish, Deutsche Bank’s FCPA scrutiny lasted an unconscionable six years.
Next Up – Deutsche Bank Hands Over $16.2 Million To Uncle Sam
First, it was BNY Mellon Corp. in August 2015 for $14.8 million (see here and here for prior posts). Then, it was Qualcomm in March 2016 for $7.5 million (see here and here for prior posts). Then, it was JPMorgan in November 2016 for $202.6 million (see here, here, and here for prior posts). Then, it was Credit Suisse in July 2018 for $77 million (see here and here for prior posts).
Next up in Foreign Corrupt Practices Act enforcement actions (mostly targeting the financial services industry) focusing, in whole or in part, on internship and hiring practices being a form of bribery is Deutsche Bank as the SEC announced yesterday that the German bank with shares traded on the NYSE will pay approximately $16.2 million “to settle changes that it violated the FCPA by hiring relatives of foreign government officials [in both the Asia Pacific Region and Russia] in order to improperly influence them in connection with investment banking business).
A Brazilian Telecom Company Hosted Brazilian Government Officials For Soccer Tournaments In Brazil – Five Years Later, U.S. Collects $4.1 Million In FCPA Enforcement Action
It is only fitting that one day after publishing this post regarding the SEC’s inconsistent enforcement of the Foreign Corrupt Practices Act (and how the SEC resolved an FCPA books and records and internal controls case for $0 against a U.S. company for engaging in accounting misconduct including the CEO of the company making misrepresentations to the market concerning $307 million) that the SEC brings this $4.1 million administrative action against Telefonica Brasil (a company with ADRs traded on the NYSE).
The conduct at issue?
You better sit down for this … the company “failed to devise and maintain sufficient internal accounting controls over a hospitality program that the company hosted in connection with the 2014 World Cup and 2013 Confederations Cup” both held in Brazil.
Delisting Of U.S. Securities As A Potential Negative Collateral Consequence Of Expansive FCPA Enforcement Against Foreign Issuers
Foreign issuers (that is companies with shares traded on a U.S. exchange) are certainly subject to the Foreign Corrupt Practices Act.
The mere listing and trading is all that is required under the FCPA’s books and records and internal controls provisions for jurisdiction.
In contrast the anti-bribery provisions, as applicable to foreign issuers, have the following jurisdictional requirement: “use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance” of a bribery scheme. Thus, as frequently highlighted on these pages, it is a myth that the FCPA’s anti-bribery provisions are extraterritorial as to foreign issuers. Nevertheless, it is true that the FCPA enforcement agencies take a very broad view (in certain instances in apparent conflict with Supreme Court decisions) of its jurisdiction over foreign issuers.