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Issues To Consider From The KT Corp. Enforcement Action


This recent post highlighted the $6.3 million Foreign Corrupt Practices Act enforcement action against KT Corp. – a South Korea based telecommunications company with American Depositary Shares registered with the SEC and traded on the New York Stock Exchange.

This post highlights additional issues to consider.


In the FCPA’s modern era, much of the largeness of enforcement activity is from enforcement actions against foreign companies from peer OECD Convention countries.

The first corporate FCPA enforcement action of 2022 is another example.

Like the U.S., South Korea is a party to the OECD Convention (meaning – generally speaking – that South Korea has laws and law enforcement capable of capturing the conduct at issue ).

The question should thus be asked whether the KT enforcement action represents a proper use of the FCPA – at least from a policy standpoint.

In other words, what legitimate U.S. law enforcement interests are implicated when employees of a South Korea company interact with South Korea officials or officials in Vietnam?

After all, as noted by the SEC: “In November 2021, Korean authorities indicted KT and fourteen high-level executives for criminal violations” in connection with certain of the conduct at issue in the FCPA enforcement action.

Indeed, Article 4 of the OECD Convention states that “when more than one Party has jurisdiction over an alleged offence described in this Convention, the Parties involved shall, at the request of one of them, consult with a view to determining the most appropriate jurisdiction for prosecution.

Can it truly be said that the U.S. was “the most appropriate jurisdiction” to prosecute a South Korean company for alleged interactions with non-U.S. officials?

As highlighted in this prior post, in 2017 DOJ officials stated that they “are working harder than ever to coordinate with global partners and avoid what some have termed “piling on” in attendant global resolutions.” As stated by the Principal Deputy Chief of the DOJ Fraud Section:

“Coordination with foreign countries will continue, and that number of coordinated resolutions will grow, including with new countries.  This is important for several reasons.  First and foremost, it is fair to companies.  It encourages companies to cooperate across the board, because we understand that, at the end of a case, money paid out is derived from one pie.  A resolving company should not have piled upon it duplicative fines via separate resolutions that do not credit one another.  Although the “piling on” problem is not entirely solved by doing this (other countries may certainly try to reach additional resolutions), our efforts do mitigate this problem, and we are trying to do better in this regard.”

As highlighted in this prior post, in 2018 the DOJ announced a “non-piling” policy stating:

“The Department should … endeavor, as appropriate, to coordinate with and consider the amount of fines, penalties, and/or forfeiture paid to other federal, state, local, or foreign enforcement authorities that are seeking to resolve a case with a company for the same misconduct.”

Call it what you want, but when the U.S. brings an FCPA enforcement action against a company from an OECD Convention country that has also been prosecuted in its home county, it is “piling on.”

From a historical perspective, it is worth noting that part of the FCPA reform discussion in the 1980’s were bills – introduced by Democrats – seeking to waive the FCPA’s provisions “in the case of any country which the Attorney General has certified to have (1) effective bribery or corruption statutes; and (2) an established record of aggressive enforcement of such statutes.” (See S. 1797, Competitive America Trade Reform Act of 1985, introduced on October 29, 1985 by Senator Gary Hart (D-CO) and H.R. 3813, Competitive America Trade Reform Act of 1985, introduced on November 21, 1985 by Representative Vic Fazio (D-CA)).

While waiving the FCPA’s provisions – as those bills sought to do – does not seem like a good idea, perhaps the time has come with the maturity of the OECD Convention – for U.S. enforcement agencies to adopt a policy of not bringing FCPA enforcement actions against foreign companies from peer OECD Convention countries.

The Flip Side

As highlighted in this prior post, for the FCPA’s first 39 years there was never (it is believed) an enforcement action against a foreign company based on interactions with its own alleged government officials.

The first such enforcement action occurred in 2016 against Odebrecht/Braskem (Brazil), quickly followed by a 2017 enforcement action against SQM (Chile) and then followed by a 2018 enforcement action against Petrobras (Brazil).

The KT Corp. enforcement action appears to be the 4th enforcement action in the FCPA’s approximate 45 years to fit this mold.

From a policy standpoint, is the U.S. prepared for the flip side?

In other words, a foreign law enforcement agency bringing a bribery and corruption enforcement action against a U.S. company (based on the company’s mere listing of shares on its exchanges) based on the U.S. company’s alleged interactions with U.S. officials including alleged illegal political contributions?

“No-Charged Bribery Disgorgement”

The KT Corp. enforcement action represents yet another so-called “no-charged bribery disgorgement action.” No doubt due to jurisdictional issues, KT Corp. was not found to be in violation of the FCPA’s anti-bribery provisions.

Even so, the SEC still sought approximately $2.8 million in disgorgement and associated pre-judgment interest.

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.”

Pot of Money

Policy issues aside, a bribery scheme generally requires a pot of money that is often “created” within a company.

As to a portion of the misconduct at issue in the KT Corp. enforcement action, the SEC found:

“From at least 2009 through 2017, high-level executives of KT maintained slush funds, comprised of both off-the-books accounts and physical stashes of cash, in order to provide items of value to government officials, among others. These included gifts, entertainment and, ultimately, illegal political contributions to members of the Korean National Assembly serving on committees relevant to KT’s business.

From 2009 to 2013, a KT then-Executive Officer and another KT senior executive orchestrated a scheme through which the Executive Officer approved inflated bonuses to company officers and executives, which was then returned to the Executive Officer in cash and used to generate a slush fund of approximately $1 million. Some of the funds were held in a KT executive’s personal bank account, while the cash was stored in a safe on the sixteenth floor of KT’s offices in Bundang. The Executive Officer used the cash as a slush fund for gifts to, among others, government officials with the ability to influence KT’s business. No one at KT maintained records of the recipients of the gifts, although other KT executives knew about the conduct. KT booked the slush fund amounts as executive bonuses, even though the money was used for gifts and for payments to government officials.”

Charitable Donations

A portion of the conduct at issue in the KT Corp enforcement action concerned charitable foundations. As stated by the SEC:

“Between 2015 and 2016, KT made payments of over $1.6 million to three organizations at the request of high-level government officials. KT paid $972,616 to Foundation A, described as a foundation for the promotion of Korean culture, and $603,791 to Foundation B, described as a foundation for the promotion of sports. A close associate of a senior Korean government official set up both foundations, and the payments were made at the behest of the Blue House, Korea’s presidential residence and office. The third payment, of $88,420 to another organization, Association C concerning e-Sports, was solicited by a member of Korea’s National Assembly who served on legislative committees important to KT’s business. All of these payments were booked incorrectly, either as charitable donations or as a sponsorship.

Despite the circumstances – direct requests for payment coming from or on behalf of high government officials – KT took no steps to determine if the payments were legitimate donations, rather than illicit payments made at the behest of government officials. Further, neither Foundation A nor B was established when the donation request was made or when KT managers agreed to make the payments.”

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