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Friday Roundup


Scrutiny alert, coincidence or FCPA-related, ripple dismissed, and more shallow commentary, and ISO 37001 laughable.  It’s all here in the Friday roundup.

Scrutiny Alert

As highlighted in this previous post, in late 2013/early 2014 United Technologies Corp. (UTC) disclosed FCPA scrutiny concerning a non-employee sales representative retained in China. Recently, the company disclosed: “On March 7, 2018, the DOJ notified UTC that it had decided to close its investigation of this matter. Based on our ongoing discussions with the SEC staff to resolve this matter, UTC recorded a charge of approximately $11 million in the second quarter of 2018.”

Coincidence or FCPA-Related

This previous post highlighted a number of country exits after a company was under FCPA scrutiny or resolved an FCPA enforcement action.

Add another company to the list. As highlighted here, in June 2017 World Acceptance Corporation (a South Carolina based consumer finance company) operating in 15 U.S. states and Mexico disclosed FCPA scrutiny in Mexico.

Recently, the company disclosed that it “entered into an agreement to sell our Mexico operations and intend[s] to complete the sale by July 27th.” In connection with the transaction, the company recognized a $31.3 million loss and upon this disclose its stock price fell 7%.

Call this a ripple of FCPA scrutiny.

Ripple Dismissed

Speaking of ripples, the most frequent forms of civil litigation in the aftermath of FCPA scrutiny or enforcement are securities fraud class actions or derivative actions. A high percentage of these actions are dismissed at the motion to dismiss stage.

Another ripple of FCPA scrutiny or enforcement, while less frequent than the above actions, are civil claims under the Employee Retirement Income Security Act (ERISA) in which participants in a company’s investment program  allege breach of fiduciary duty and other duties such as prudence, loyalty, and monitoring against program managers.

In the aftermath of its FCPA enforcement (see here and here for the prior post), General Cable was hit with such a civil claim. In summary fashion:

“Plaintiff contends that defendants permitted the Plan to continue to offer General Cable stock as an investment option even after defendants knew or should have known that the stock was artificially inflated because the company had not disclosed that employees of its foreign subsidiaries had violated the [FCPA] by paying bribes to foreign government officials. Plaintiff alleges that the stock was thus an imprudent investment, and defendants breached their duties of prudence and loyalty in offering the stock to Plan participants.”

Recently, a federal court dismissed the action.

More Shallow Commentary

This recent highlighted shallow FCPA commentary – that is commentary that lacks an appreciation of context and perspective.

On this score, wow is this FCPA Blog guest post bad.

Regarding the points asserted in the post:

  • How did the DOJ “halt its prosecution of Credit Suisse HK” or “terminate” it? The company agreed to resolve its FCPA scrutiny via a non-prosecution agreement – a form of resolution that existed long before the Trump administration.
  • FCPA settlement amounts are not determined on the basis of whether a company is foreign or domestic. Settlement amounts are determined largely on the basis of the net financial benefit obtained through a bribery scheme as well as how the company acted in response to the conduct at issue (i.e. voluntary disclosure, cooperation, etc.) These factors help explain why many of the largest FCPA settlements have been against foreign companies. (See here for more).
  • Moreover, in many years (long before the Trump administration) much of the largeness of FCPA enforcement was because of enforcement actions against foreign companies. (See here for more).

Commenting on the FCPA Blog post, an individual on social media observed: “That is a horrendous article. Does FCPA Blog review the stuff they post?”

I agree. It would be nice if the FCPA Blog did exercise some editorial oversight over things published on its site.

ISO 37001 Laughable

I remain open-minded about the efficacy of ISO 37001 certification and am willing to be persuaded that it is a good idea. However, every time I read or listen to commentary by ISO 37001 cheerleaders (you know people marketing and selling their ISO 37001 services) I find myself not being persuaded (see here for a recent post).

This podcast is laughable for so many reasons not ISO 37001 specific. As to the ISO 37001 issues, I get that the person marketing and selling her ISO 37001 services is “excited” – a word used several times in the podcast – but I remain unpersuaded that ISO 37001 is a good idea for U.S. companies.

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