Canada-Based Kinross Gold Corp. Resolves Approximate $1 Million SEC Action Because Its Acquired Indirect African Subsidiaries Had Deficient Internal Controls
Silly you for believing certain commentator hype that the Trump SEC would stop enforcing the Foreign Corrupt Practices Act or for thinking that the general lull in SEC corporate enforcement during the fourth quarter of 2017 meant anything.
In the second SEC corporate FCPA enforcement action in the last 2.5 weeks (see here for the prior Elbit Imaging action), the SEC announced yesterday that Canada-based Kinross Gold Corporation (a company with shares traded on the New York Stock Exchange) resolved an enforcement action “arising from the company’s repeated failure to implement adequate accounting controls of two African subsidiaries.” Without admitting or denying the SEC’s finding in this administrative order, Kinross agreed to, among other things, pay a $950,000 civil penalty.
First Corporate Enforcement Action Of 2018 Is Against Israel-Based Elbit Imaging Ltd.
Last Friday, the SEC released this administrative order finding that Israel-based Elbit Imaging Ltd. (a real estate company with shares traded on NASDAQ) violated the books and records and internal controls provisions of the Foreign Corrupt Practices Act based on payments made to certain third parties “when some or all of the funds may have been used to make corrupt payments to Romanian government officials or were embezzled.”
The enforcement action concerned conduct between 2006 and 2012 (beyond any conceivable statute of limitations) and without admitting or denying the SEC’s findings Elbit agreed to pay $500,000 (an amount reflective of the fact that Elbit is currently winding down its operations).
The Elbit Imaging enforcement action is the first corporate FCPA enforcement action of 2018 and breaks a nearly six month dry spell in SEC corporate FCPA enforcement actions.
Dubious As It Was, The Schering-Plough Enforcement Action Was Notable
[This post is part of a periodic series regarding “old” FCPA enforcement actions]
This recent post discussed how from a compliance take-away standpoint the large, egregious, no reasonable minds could differ there was bribery, enforcement actions are the least important and least instructive.
Rather, the most instructive and thus important enforcement actions tend to be those that take the Foreign Corrupt Practices Act in a new direction, involve unique interpretations of law (not subjected to any judicial scrutiny of course) and thus pose new compliance challenges for business organizations. The SEC’s 2004 enforcement action against Schering-Plough, based on a bona-fide charitable contribution, certainly fits this mold.
Customs Issues In Argentina Result In FCPA Enforcement Action Against BJ Services
[This post is part of a periodic series regarding “old” FCPA enforcement actions]
In 2004, the SEC brought this administrative cease and desist order against BJ Services (a Houston-based oil field services, products, and equipment company). The conduct at issue focused on the company’s Argentina subsidiary and its relationships with customs officials. As stated in the SEC’s order, there was no indication that anyone employed by BJ Services approved many of the alleged improper payments and the SEC further acknowledged that the improper payments were made in violation of BJ Services’ existing policies prohibiting payments of the kind made to the customs official.
Other interesting aspects of the enforcement include the following: (i) certain of the improper payments were facilitated by the Argentina subsidiary issuing checks “in the name of a lower’level” employee who then “cashed the checks and provided the proceeds to the customs official”; (ii) the SEC seemed to acknowledge that certain of the payments were facilitation payments under the FCPA, but nevertheless improperly booked, and thus still actionable.
BellSouth Gets Hung Up In Latin America
[This post is part of a periodic series regarding “old” FCPA enforcement actions]
In 2002, the SEC announced the filing of a settled civil complaint against BellSouth Corporation charging the telecommunications company with violations of the FCPA’s books and records and internal controls provisions.
The conduct at issue focused on an indirect subsidiary in Venezuela (and BellSouth’s inability to “reconstruct the circumstances of purpose” of certain payments) and an indirect subsidiary in Nicaragua (which retained the wife of the chairman of a Nicaraguan legislative committee with oversight of telecommunications).
As frequently highlighted on these pages, the root cause of many FCPA enforcement actions are foreign trade barriers and restrictions and in this regard, as the complaint notes, Nicaraguan law prohibited foreign companies from acquiring a majority interest in Nicaraguan telecommunications companies.”