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.
Thoughts On The JPMorgan Whistleblower Complaint
This recent post highlighted the whistleblower complaint filed by a former employee of JPMorgan (Shaquala Williams) in connection with the 2016 Foreign Corrupt Practices Act enforcement action against the company.
As described in the prior post, the JPMorgan enforcement action was based on alleged improper hiring and internship practices that the U.S. government labeled bribery and corruption. The DOJ portion was resolved through a three year non-prosecution agreement involving JPMorgan Securities (Asia Pacific) Limited (“JPMorgan-APAC), a wholly subsidiary of JP Morgan, which involved a variety of requirements and undertakings imposed upon the company – as is typical in resolving FCPA enforcement actions.
Issues To Consider From The WPP Enforcement Action
This previous post highlighted the recent $19.2 million SEC Foreign Corrupt Practices Act enforcement action against London-based advertising agency WPP (a company with depositary shares traded on the New York Stock Exchange).
This post continues the analysis by highlighting additional issues to consider.
No Disclosure
Most issuers under FCPA scrutiny tend to disclose the scrutiny in SEC filings and thereafter disclose scrutiny developments in subsequent filings.
However, WPP appears to be a relatively rare example of an issuer not disclosing FCPA scrutiny.
Ng’s Motion To Dismiss Denied – Judge States That Internal Controls Provisions Can Be Implicated Even In Transactions In Which An Issuer Does Not Use Its Own Assets To Pay An Alleged Bribe
As highlighted in this prior post, in November 2018 the DOJ criminally charged former Goldman Sachs executives Tim Leissner and Ng Chong Hwa (Roger Ng) (along with Low Taek Jho – Jho Low) with Foreign Corrupt Practices Act offenses for paying bribes to various Malaysian and Abu Dhabi officials in connection with 1Malaysia Development Berhad (1MDB), Malaysia’s state-owned and state-controlled investment development company.
Leissner pleaded guilty and in October 2020 Goldman Sachs resolved a net $1.66 billion FCPA enforcement action based on the same conduct. (See additional posts here and here).
Previous posts here, here and here highlighted Ng’s motion to dismiss in which he argues that the DOJ’s case against him suffers from several factual errors and legal deficiencies. Ng also suggested that the DOJ scripted Leissner’s guilty plea and that Goldman’s DPA was entered into for reasons of risk aversion and otherwise compromises his ability to defend himself.
As to FCPA specific issues, Ng argued as follows:
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.”