A Focus On SEC Individual Actions

Like the DOJ, the SEC frequently speaks in lofty rhetoric concerning its focus on holding individuals accountable under the FCPA. As highlighted here, in September 2018 the SEC’s Co-Director of Enforcement stated:

“We have also continued to focus on individual accountability by pursuing charges against individuals for misconduct in the securities markets, including registered individuals, executives at all levels of the corporate hierarchy, including CEOs, CFOs and other high-ranking executives, and gatekeepers.”

As highlighted here, in November 2017 the SEC’s Co-Director of Enforcement stated:

“Of course, companies cannot engage in bribery without the actions of culpable individuals. The Enforcement Division is broadly committed to holding individuals accountable when the facts and the law support doing so. […] Individual accountability drives behavior more than corporate accountability, a point which is supported by both logic and experience. The Division of Enforcement considers individual liability in every case it investigates; it is a core principle of our enforcement program.”

Likewise, in November 2016 the SEC’s Director of Enforcement stated that “pursuing individual accountability [in FCPA enforcement actions] is a critical part of deterrence.” Likewise, in November 2015 the SEC’s Director of Enforcement stated:

“Holding individuals accountable for their wrongdoing is critical to effective deterrence and, therefore, the Division considers individual liability in every case. […] The Commission is committed to holding individuals accountable and I expect you will continue to see more FCPA cases against individuals.”

Likewise, in November 2014 the SEC’s Director of Enforcement stated:

“I always have said that actions against individuals have the largest deterrent impact. Individual accountability is a powerful deterrent because people pay attention and alter their conduct when they personally face potential punishment. And so in the FCPA arena as well as all other areas of our enforcement efforts, we are very focused on attempting to bring cases against individuals.  […] [I]ndividual accountability is critical to FCPA enforcement — and imposing personal consequences on bad actors, including through bars and monetary sanctions, will continue to be a high priority for us.”

Since 2000, the SEC has charged 77 individuals with FCPA civil offenses.  The breakdown is as follows.

• 2000 – 0 individuals
• 2001 – 3 individuals
• 2002 – 3 individuals
• 2003 – 4 individuals
• 2004 – 0 individuals
• 2005 – 1 individual
• 2006 – 8 individuals
• 2007 – 7 individuals
• 2008 – 5 individuals
• 2009 – 5 individuals
• 2010 – 7 individuals
• 2011 – 12 individuals
• 2012 – 4 individuals
• 2013 – 0 individuals
• 2014 – 2 individuals
• 2015 –  2 individuals
• 2016 – 8 individuals
• 2017 – 3 individuals
• 2018 – 3 individuals

As highlighted by the above statistics, most of the individuals charged – 66 (or  85%) were charged since 2006.  Thus, on one level the SEC is correct when it states that individual prosecutions are a focus of its FCPA enforcement program at least as measured against the historical average given that between 1977 and 1999 the SEC charged 22 individuals with FCPA civil offenses.

Yet on another level, a more meaningful level given that there was much less overall enforcement of the FCPA between 1977 and 1999, the SEC’s statements represent hollow rhetoric as demonstrated by the below figures.

Of the 66 individuals charged with civil FCPA offenses by the SEC since 2006:

• 7 individuals were in the Siemens case;
• 4 individuals were in the ABB case;
• 4 individuals were in the Willbros Group case;
• 4 individuals were in the Alliance One case;
• 4 individuals were in the Och-Ziff case;
• 3 individuals were in the Maygar Telekom case; and
• 3 individuals were in the Noble Corp. case.

In other words, approximately 45% of the individuals charged by the SEC with FCPA civil offenses since 2006 have been in just seven core actions.

Considering that there has been 142 corporate SEC FCPA enforcement actions since 2006, this is a rather remarkable statistic.  Of the 142 corporate SEC FCPA enforcement actions, 114 (approximately 80%) have not (at least yet) resulted in any related SEC charges against company employees.

This is an interesting figure given that between 1977 and 2004 61% of SEC corporate FCPA enforcement actions did indeed result in related charges against company employees.

In other words, for most of the FCPA’s history the majority of corporate SEC FCPA enforcement resulted in related individual accountability, but in the SEC’s modern FCPA enforcement program, the vast majority of corporate SEC FCPA enforcement actions have not resulted in related individual accountability despite the SEC’s rhetoric.

It is also interesting to analyze the 28 instances since 2006 where an SEC corporate FCPA enforcement action resulted in related charges against company employees.   With the exception of Baker Hughes, Siemens, KBR/Halliburton, Magyar Telekom, Och-Ziff, General Cable and Panasonic, the corporate SEC FCPA enforcement actions resulting in related charges against company employees occurred in what can only be described as relatively minor (at least from a settlement amount perspective) corporate enforcement actions.  These actions are:  Schnitzer Steel, Immucor, Electronic Data Systems, Faro Technologies, Willbros Group, Nature’s Sunshine Products, United Industrial Corp., Pride Int’l., Noble Corp., Alliance One, Innospec, Watts Water, PBSJ and FLIR Systems, SAP, PTC, Nordion, Analogic, and LAN Airlines, Halliburton, and SQM.

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Set forth below is a complete list of SEC corporate FCPA enforcement actions since 2006 and whether the corporate enforcement action resulted in any related individual charges. Beginning in October 2014, I publicly invited the SEC to refute these numbers and support its individual accountability rhetoric after the SEC’s then FCPA Unit chief publicly stated that my numbers were false, wrong, deeply flawed, etc. (see here). The SEC has not responded and the invitation still stands.

2006	Schnitzer Steel	Yes
2006	Statoil	No
2006	Oil States Int’l	No
2006	Tyco	No
2007	Lucent Tech.	No
2007	Akzo Nobel	No
2007	Chevron	No
2007	Ingersoll-Rand	No
2007	York	No
2007	Immucor	Yes
2007	Bristow Group	No
2007	Electronic Data Systems	Yes
2007	Textron	No
2007	Delta & Pine	No
2007	Baker Hughes	Yes
2007	Dow Chemical	No
2007	El Paso	No
2008	Fiat	No
2008	Siemens	Yes
2008	Con-Way	No
2008	Faro	Yes
2008	Willbros	Yes
2008	AB Volvo	No
2008	Flowserve	No
2008	Westinghouse Air Brake	No
2009	UTStarcom	No
2009	AGCO	No
2009	Nature’s Sunshine	Yes
2009	Helmerich & Payne	No
2009	Avery Dennison	No
2009	United Industrial Corp.	Yes
2009	Novo Nordisk	No
2009	ITT Corp.	No
2009	KBR/Halliburton	Yes
2010	Alcate-Lucent	No
2010	RAE Systems	No
2010	Panalpina	No
2010	Pride Int’l	Yes
2010	Tidewater	No
2010	Transocean	No
2010	GlobalSantaFe	No
2010	Noble Corp.	Yes
2010	Royal Dutch Shell	No
2010	ABB	No
2010	Alliance One	Yes
2010	Universal	No
2010	GE/Ionics	No
2010	Eni/Snamprogetti	No
2010	Veraz Networks	No
2010	Technip	No
2010	Daimler	No
2010	Innospec	Yes
2010	Natco	No
2011	Magyar Telekom	Yes
2011	Aon	No
2011	Watts Water	Yes
2011	Diageo	No
2011	Armor Holdings	No
2011	Tenaris	No
2011	Rockwell	No
2011	Johnson & Johnson	No
2011	Comverse	No
2011	Ball Corp.	No
2011	IBM	No
2011	Tyson	No
2011	Maxwell Tech.	No
2012	Eli Lilly	No
2012	Allianz	No
2012	Tyco	No
2012	Oracle	No
2012	Pfizer	No
2012	Orthofix	No
2012	Biomet	No
2012	Smith & Nephew	No
2013	Philips	No
2013	Parker Drilling	No
2013	Ralph Lauren	No
2013	Total	No
2013	Diebold	No
2013	Stryker	No
2013	Weatherford Int’l	No
2013	ADM	No
2014	Alcoa	No
2014	HP	No
2014	Smith & Wesson	No
2014	Layne Christensen	No
2014	Bio-Rad	No
2014	Bruker	No
2014	Avon	No
2015	PBSJ	Yes
2015	Goodyear	No
2015	FLIR Sytems	Yes
2015	BHP Billiton	No
2015	Mead Johnson	No
2015	BNY Mellon	No
2015	Hitachi	No
2015	Hyperdynamics	No
2015	Bristol-Myers Squibb	No
2016	SAP	Yes
2016	SciClone	No
2016	PTC	Yes
2016	VimpelCom	No
2016	Qualcomm	No
2016	Nordion	Yes
2016	Novartis	No
2016	Las Vegas Sands	No
2016	Nortek	No
2016	Akamai Technologies	No
2016	Analogic	Yes
2016	LAN Airlines	Yes
2016	Johnson Controls	No
2016	AstraZeneca	No
2016	Key Energy	No
2016	Nu Skin	No
2016	AbInBev	No
2016	Och-Ziff	Yes
2016	GlaxoSmithKline	No
2016	Embraer	No
2016	JPMorgan	No
2016	Braskem	No
2016	Teva Pharma	No
2016	General Cable	Yes
2017	Mondelez Int’l	No
2017	Zimmer Biomet	No
2017	SQM	Yes
2017	Orthofix Int’l	No
2017	Halliburton	Yes
2017	Telia	No
2017	Alere	No
2018	Elbit Imaging	No
2018	Kinross Gold	No
2018	Dun & Bradstreet	No
2018	Panasonic	Yes
2018	Legg Mason	No
2018	Beam	No
2018	Credit Suisse	No
2018	Sanofi	No
2018	United Technologies	No
2018	Petrobras	No
2018	Stryker	No
2018	Vantage Drilling	No
2018	Eletrobras	No
2018	Polycom	No

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