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 example concerns CPI Aerostructures, Inc. (CPI Aero – a manufacturer of structural assemblies, integrated systems, and kitted components for the domestic and international aerospace and defense markets).
In summary fashion, this administrative order finds:
“This matter involves financial reporting, accounting, internal accounting controls, and disclosure controls and procedures failures by CPI Aero, an aerospace structural products manufacturer. These failures led to multiple restatements of CPI Aero’s financial statements for fiscal periods between January 1, 2018 and December 31, 2022 concerning, among other things, reported revenue, inventory, loss reserves, and deferred tax asset and liability balances contained in the Income Taxes footnote. In addition, CPI Aero reported multiple material weaknesses in its internal control over financial reporting (“ICFR”) and failed to maintain effective disclosure controls and procedures (“DCP”) for the six consecutive annual reporting periods from 2018 through 2023.”
Based on the above, the SEC found that CPI Aero violated, among other things, the FCPA’s books and records and internal controls provisions.
Without admitting or denying the SEC’s findings, CPI Aero consented to a cease-and-desist order and to undertakings to, among other things, fully remediate the company’s material weakness in ICFR and have effective ICFR and DCP by December 31, 2024. As set out in the SEC’s Order, if CPI Aero fails to satisfy all of the undertakings, the company shall pay a civil penalty of $400,000. (See here for the SEC release).
