This previous post highlighted various facts and figures from 2020 SEC FCPA enforcement actions against issuers.
This post focuses on SEC FCPA individual actions – both in 2020 and historically.
Like the DOJ, the SEC frequently speaks in lofty rhetoric concerning its focus on holding individuals accountable under the FCPA. As highlighted here, in 2020 the SEC’s Co-Director of Enforcement stated: “[A] critical part of our program continues to be seeking to deter wrongdoing by holding individuals accountable
As highlighted here, in 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 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 2016 the SEC’s Director of Enforcement stated that “pursuing individual accountability [in FCPA enforcement actions] is a critical part of deterrence.” Likewise, in 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 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.”
SEC rhetoric aside, what do the numbers actually show?
In 2020, the SEC brought two core actions against three individuals.
As highlighted in this post, in April 2020 the DOJ charged Asante Berko (a former Executive Director of Goldman Sachs International) with FCPA violations and other charges for “orchestrating a bribery scheme to help a client [a Turkish energy company] win a government contract to build and operate an electrical power plant” in Ghana. This case remains pending.
As highlighted in this post, in October 2020, in connection with the J&F Investimentos S.A. enforcement action, the SEC found that Joesley Batista and Wesley Batista caused violations of the FCPA’s books and records and internal controls provisions and that the individuals: (i) knowingly circumvented or knowingly failed to implement a system of internal accounting controls and knowingly falsified books and records; and (ii) made materially false or misleading statements or omissions to an accountant or auditor. To resolve the matter, the Batistas agreed to each pay a civil penalty of $550,000.
Since 2000, the SEC has charged or found that 86 individuals violated the FCPA. 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
- 2019 – 6 individuals
- 2020 – 3 individuals
As highlighted by the above statistics, most of the individuals charged – 75 (or 87%) 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 75 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.
- 3 individuals were in the Cognizant Technologies case.
In other words, approximately 45% of the individuals charged by the SEC with FCPA civil offenses since 2006 have been in just 8 core actions.
Considering that there has been 164 corporate SEC FCPA enforcement actions since 2006, this is a rather remarkable statistic. Of the 164 corporate SEC FCPA enforcement actions, 131 (approximately 80%) have not 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 33 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, Panasonic, Goldman and Herbalife 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, SQM, Cognizant and Westport Fuel.
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||Oil States Int’l||No|
|2007||Electronic Data Systems||Yes|
|2007||Delta & Pine||No|
|2008||Westinghouse Air Brake||No|
|2009||Helmerich & Payne||No|
|2009||United Industrial Corp.||Yes|
|2010||Royal Dutch Shell||No|
|2011||Johnson & Johnson||No|
|2012||Smith & Nephew||No|
|2014||Smith & Wesson||No|
|2016||Las Vegas Sands||No|
|2018||Dun & Bradstreet||No|
|2019||Westport Fuel Systems||Yes|
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