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Issues To Consider From The Alexion Enforcement Action


This recent post went in-depth into the SEC’s recent $21.5 million Foreign Corrupt Practices Act enforcement action against Alexion Pharmaceuticals and this post highlights additional issues to consider.


Alexion became the subject of FCPA scrutiny in May 2015. Thus, from start to finish, its scrutiny lasted more than 4 years. I’ve said it many times, and will continue saying it until the cows come home, if the SEC wants its FCPA enforcement program to be viewed as credible and effective it must resolve instances of FCPA scrutiny much quicker.

This is particularly true in the Alexion matter given the following language in the SEC’s order:

“Alexion’s cooperation included providing regular briefings to Commission staff regarding the facts developed in its internal investigation in multiple countries and the forensic accounting review that Alexion undertook, and identifying and providing translations of key documents.”

Invoking A Standard That Does Not Even Exist

In the SEC’s press release the Assistant Director of SEC enforcement stated that “Alexion’s internal accounting controls failed to detect and prevent payments to foreign government officials by its subsidiaries.” You can read the FCPA statute until the cows come home but you will never find the words “prevent or detect” in the statute – quite simply because that is not the statutory standard.

Rather, the internal controls provision state that an issuer shall “devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that” certain financial objectives are met. The FCPA then defines  “reasonable assurances” to “mean such level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs.”

Is it asking too much for SEC enforcement officials to articular the proper statutory standard?

Strict Liability

The Alexion enforcement action is yet another example of the SEC advancing a strict liability theory of enforcement for subsidiary actions under the FCPA’s books and records and internal controls provisions. There are no factual allegations in the entire enforcement action against Alexion itself. Rather, the SEC asserts that certain subsidiary employees engaged in improper conduct, subsidiary books and records were consolidated into Alexion’s financial statements, and that therefore Alexion violated the FCPA books and records and internal controls provisions.

“No-Charged Bribery Disgorgement”

The Alexion enforcement action represents yet another so-called “no-charged bribery disgorgement action.”

In other words, the approximate $21.5 million SEC settlement amount consisted entirely of disgorgement (and associated prejudgment interest) even though the SEC only found violations of the FCPA’s books and records and internal controls provisions.

As highlighted in this previous post (and numerous prior posts thereafter), no-charged bribery disgorgement is troubling. Among others, Paul Berger (here) (a former Associate Director of the SEC Division of Enforcement) has stated that “settlements invoking disgorgement but charging no primary anti-bribery violations push the law’s boundaries, as disgorgement is predicated on the common-sense notion that an actual, jurisdictionally-cognizable bribe was paid to procure the revenue identified by the SEC in its complaint.” Berger noted that such “no-charged bribery disgorgement settlements appear designed to inflict punishment rather than achieve the goals of equity.”

No Liu Impact

On June 22nd, the Supreme Court’s held in Liu – as to the statutory scheme relevant to SEC federal court actions – that “a disgorgement award that does not exceed a wrongdoer’s net profits and is awarded for victims is equitable relief permissible” under the relevant statutory scheme. (See here for the prior post).

Despite commentary that Liu will make “a significant change to how corporate FCPA settlements will be reached” with the SEC, this prior post predicted that Liu will not have a meaningful impact on administrative actions brought by the SEC (as the Alexion and nearly all issuer enforcement actions are) and that the Supreme Court’s most FCPA relevant observations in Liu were merely dicta.

Liu did not seem to have an impact on the disgorgement amount in the Alexion enforcement action.

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