The Foreign Corrupt Practices Act 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, these enforcement actions have longed been called non-FCPA, FCPA enforcement actions by this site.
The latest examples concerns TAL Education Group (TAL) (a company incorporated in the Cayman Islands and having its principal place of business in China with American Depository Shares traded on the New York Stock Exchange).
In summary fashion, this administrative order finds:
“This matter concerns violations of the periodic reporting, books and records, and internal accounting controls provisions of the federal securities laws by TAL, a foreign private issuer headquartered in the People’s Republic of China (“PRC”), during the first three quarters of its 2020 fiscal year.
These violations stemmed from deceptive conduct by persons then working at the TAL subsidiary operating TAL’s “Light Class” Business Line, who, at the direction of a then mid-level manager, forged numerous “chops,” or seals, and created phony contracts with third parties, all for the purpose of artificially inflating the Light Class Business Line’s revenue.
Due in part to TAL’s internal accounting controls with respect to its Light Class Business Line having been deficient during the period of the aforementioned conduct, that conduct resulted in TAL’s consolidated reported net revenues and net income being misstated, during the first three quarters of its 2020 fiscal year, in the aggregate, by $86.1 million and $26.6 million, respectively. This, in turn, necessitated the filing of a restatement by TAL.”
Based on the above, the order finds that TAL violated, among other things, the FCPA’s books and records and internal controls provisions.
Without admitting or denying the SEC’s findings, TAL agreed to pay a $1.25 million civil penalty.