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 involves Evoqua Water Technologies Corp. and Imran Parekh (a former division-level finance director at the company).
In summary fashion, this complaint alleges:
“Beginning in 2016 and continuing at least until December 2018, Evoqua improperly counted (or “recognized”) revenue in violation of Generally Accepted Accounting Principles (“GAAP”), which is a common set of accounting principles, standards, and procedures that public companies must follow when they compile their financial statements, and is the accounting standard adopted by the Commission that must be followed by public companies in the United States. Evoqua’s improper revenue recognition caused the company to materially misstate the financial statements it incorporated into its November 2017 initial public offering (“IPO”) of stock and reported in its subsequent annual and quarterly financial statements filed with the Commission. Parekh was primarily responsible for the fraudulently inflated revenues at Evoqua.
[…]
Evoqua’s violations of the securities laws were the result of intentional or reckless conduct by Parekh, and negligent conduct at Evoqua’s corporate level in managing the financial reporting and accounting controls processes. The misconduct continued through Evoqua’s first year as a public company, resulting in inaccurate books and records and material misstatements of Evoqua’s financial condition reported in its registration statement and IPO Prospectus, as well as its Forms 10-K, 10-Q, and 8-K filed with the Commission between the end of 2017 and until December 2018.”
Evoqua was charged with, among other things, violations of the FCPA’s books and records and internal controls provisions. Parekh was charged with, among other things, aiding and abetting Evoqua’s violations of the books and records and internal controls provisions.
Evoqua consented to the entry of a final judgment that permanently enjoins it from violating, among other things, the books and records and internal controls provisions. As stated in the SEC release, “the final judgment would also order Evoqua to comply with certain undertakings, including an agreement to implement recommended improvements to its system of internal accounting controls, and to pay a civil penalty of $8.5 million.”
Parekh also consented to the entry of a judgment that permanently enjoins him from violating, among other things, the books and records and internal controls provisions. The SEC release states: “the judgment also orders that Parekh will be ordered to pay disgorgement, prejudgment interest, and a civil penalty, the amounts of which will be determined by the court, and that the court will determine whether Parekh should be barred from serving as an officer or director of a public company and if so the duration of such a bar.”
