Further To The SEC’s Inconsistent Approach To Enforcing The FCPA’s Books And Records And Internal Controls Provisions
As highlighted in previous posts on this subject (here, here and here), a basic rule of law principle is consistency.
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.
However, 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.
Vantage Drilling Resolves Rather Unusual $5 Million FCPA Enforcement Action
Yesterday, the SEC announced this rather unusual Foreign Corrupt Practices Act enforcement action against Vantage Drilling.
What made it rather unusual is that the administrative action only found violations of the FCPA’s internal controls provisions concerning its unique relationship with a former outside director and shareholder that “created a risk that [the company] was providing or reimbursing funds that [the Director] intended to use to make improper payments to officials at Petrobras” in connection with obtaining a drilling services contract.
Alliance One Becomes A Repeat Offender Of The Books And Records And Internal Controls Provisions
As highlighted here, in 2010 tobacco company Alliance One International resolved an approximate $19.5 million Foreign Corrupt Practices Act enforcement action concerning conduct in Kyrgyzstan, Thailand, China, Greece, and Indonesia. In resolving the SEC matter Alliance One consented to the entry of final judgment permanently enjoining it from violating the FCPA including the books and records and internal controls provisions.
Last week, Alliance One (now known as Pyxus International, Inc.) became a repeat offender of the FCPA’s books and records and internal controls provisions in a so-called non-FCPA FCPA enforcement action (i.e. the books and records and internal controls violations did not involve foreign bribery).
FCPA Flash Podcast – A Conversation With Thomas Gorman Regarding The SEC’s Recent Internal Controls Report Of Investigation
The FCPA Flash podcast provides in an audio format the same fresh, candid, and informed commentary about the Foreign Corrupt Practices Act and related topics as readers have come to expect from written posts on FCPA Professor.
This FCPA Flash episode is a conversation with Thomas Gorman (Dorsey & Whitney, former Senior Counsel in the SEC’s Division of Enforcement, and founder and editor of the informative SEC Actions blog). In the episode, Gorman discusses the SEC’s recent report of investigation relevant to the FCPA’s internal controls provisions, whether certain emerging FCPA issues should have been addressed through a report of investigation as opposed to an enforcement action, and common SEC internal controls enforcement theories including the “prevent and detect” standard not even found in the FCPA.
Obvious Parallels To Certain FCPA Enforcement Actions In The SEC’s Recent Report Of Investigation
I’ve long believed that in certain instances, the SEC should use its Section 21(a) report of investigation powers to address emerging Foreign Corrupt Practices Act issues rather than bring an actual enforcement action.
Recently the SEC did just that in this report “regarding certain cyber-related frauds perpetrated against public companies and related internal accounting controls requirements.”
As highlighted below, in the report the SEC cites FCPA legislative history, prior SEC FCPA guidance, and otherwise takes positions in the report that seemingly undermine its internal controls enforcement theories in many traditional FCPA enforcement actions involving alleged foreign bribery.