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Issues To Consider From The Stericycle Enforcement Action

Issues

This previous post highlighted the recent net $59 million Foreign Corrupt Practices Act enforcement action against Stericycle (an Illinois based medical waste disposal company) for conduct in Brazil, Mexico, and Argentina.

Portions of the alleged conduct were egregious in that an executive of the company’s Latin America division orchestrated the bribery schemes and others associated with the company used “spreadsheets to track the bribe payments.”

Nevertheless, there are several legal and policy issues to consider from the enforcement action.

Timeline

As highlighted in this post, Stericycle disclosed its FCPA scrutiny in mid-2017.

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A Further Reminder That The FCPA Has Always Been A Law Much Broader Than Its Name Suggests

Orkin

This type of post has been published several times before (see here and here among other posts), and once again today, to highlight an important (yet often overlooked) aspect of the Foreign Corrupt Practices Act: the FCPA has always been a law much broader than its name suggests.

Sure, the FCPA contains anti-bribery provisions which concern foreign bribery. Sure, the FCPA’s books and records and internal controls provisions can be implicated in foreign bribery schemes.

However, the fact remains that most FCPA enforcement actions (that is enforcement actions that charge or find violations of the FCPA’s books and records and internal controls provisions) have nothing to do with foreign bribery. For lack of a better term, let’s call these numerous enforcement actions non-FCPA, FCPA enforcement actions.

The latest example is this recent SEC enforcement action against Rollins Inc. (an Atlanta based company that provides termite and other pest control services to residential and commercial customers including through such brands as Orkin) and Paul Northern (the company’s for CFO) for engaging “in improper accounting practices in order to boost its publicly-reported quarterly earnings per share (EPS) to meet research analysts’ consensus estimates.”

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A Closer Look At The Ng Jury Instructions

Closer Look

Foreign Corrupt Practices Act jury trials are rare.

Therefore, FCPA jury instructions are also rare.

Highlighted below are certain portions of the jury instructions from the recent trial of Roger Ng (a former managing director at Goldman Sachs) was who convicted by a jury of FCPA and related 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.

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Judge Broadly Interprets FCPA’s Internal Controls Provision – Concludes That “Circumvention” Does Not Depend On The Falsification Of A Book Or Record

JudgeBrodie

As highlighted here, Roger Ng (a former managing director at Goldman Sachs) was recently convicted by a jury of Foreign Corrupt Practices Act and related 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.

As discussed here, in September 2021 Judge Margo Brodie (E.D.N.Y) denied Ng’s pre-trial motion to dismiss. Among the arguments Ng made in the motion to dismiss was that a count in the indictment should be dismissed because the DOJ failed to that Ng conspired to circumvent a set of internal accounting controls cognizable under the FCPA. As to this issue, Judge Brodie concluded that the FCPA’s internal controls provisions can be implicated even in transactions in which an issuer does not use its own assets to pay an alleged bribe.

During the trial, at the conclusion of the government’s case, Ng moved for a judgment of acquittal of the charge and Judge Brodie denied the motion on the record on March 28, 2022. Recently, Judge Brodie issued this Memorandum and Order explaining her decision.

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If The SEC Were An Issuer …

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1960s MAN THINKING HAND PENCIL ON CHIN WEARING EYEGLASSES SERIOUS EXPRESSION

The FCPA’s books and records and internal control provisions require issuers (generally FCPA speak for publicly-traded companies) to: (i) “make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer;” and (ii) devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that (among other things) transactions are executed in accordance with management’s general or specific authorization, transactions are recorded as necessary to maintain accountability of assets, and access to assets is permitted only in accordance with management’s general or specific authorization.

The SEC enforces these provisions against issuers – often in expansive ways.

The SEC, of course, is not an issuer, but every so often it is interesting to spend a few moments in “hypothetical land.” (See this prior post). What if the SEC were an issuer?

Relevant to this question, last week the SEC announced – using the bland headline “Commission Statement Relating to Certain Administrative Adjudications” – in pertinent part as follows:

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