As highlighted in this previous post, on June 5, 2017 in Kokesh v. SEC the Supreme Court unanimously rejected the SEC’s position and held that disgorgement “in the securities-enforcement context is a ‘penalty’ within the meaning of [28 U.S.C.] 2462 and so disgorgement actions must be commenced within five years of the date the claim accrues.”
Although Kokesh was not a Foreign Corrupt Practices Act enforcement action, it most certainly was FCPA relevant because ever since the SEC first sought a disgorgement remedy in an FCPA enforcement action in 2004, disgorgement has become the dominant remedy sought by the SEC in corporate FCPA enforcement actions.
There was much commentary about the impact Kokesh might have on FCPA enforcement. This prior post observed that Kokesh should indeed impact FCPA enforcement, but further observed that the unanimous Supreme Court decision would be meaningless if issuers (as often happens in the FCPA context) roll over and play dead when under FCPA scrutiny by waiving statute of limitations defenses or agreeing to toll the statute of limitations.
Since Kokesh was decided, the SEC has brought six corporate FCPA enforcement and in all of the enforcement actions in which the SEC has sought disgorgement, the issuer has paid disgorgement amounts for conduct, either in whole or in part, beyond any conceivable statute of limitations period. Granted in all of these enforcement actions the issuers were under scrutiny long before June 5, 2017 and because FCPA scrutiny lasts on average over 4 years perhaps the true impact of Kokesh on FCPA enforcement may not be know for several more years.
Nevertheless, the below information highlights how – one year later – Kokesh’s impact on actual FCPA enforcement actions seems to be minimal to non-existent.
Halliburton
See here and here for prior posts.
The enforcement action concerned alleged conduct in Angola that took place between 2009 – 2011. In other words, 6-8 years prior to the enforcement action. Yet, Halliburton agreed to pay $14 million in disgorgement (plus $1.2 million in prejudgment interest) as well as a $14 million penalty.
Alere
See here and here for prior posts.
The FCPA portion of the enforcement action concerned alleged improper payments “from 2007 through at least 2012” in Colombia and in early 2012 in India. In other words, 5-10 years prior to the enforcement action. Yet, Alere agreed to pay $$3.8 million ($3.3 million in disgorgement and $.5 million in prejudgment interest) for this conduct.
Elbit Imaging
See here for the prior post.
The enforcement action consisted of a $500,000 civil penalty (in other words no disgorgement). Nevertheless, the alleged improper conduct occurred between 2007 and 2012. In other words, 6 – 11 years prior to the enforcement action.
Kinross Gold
See here and here for the prior posts.
The enforcement action consisted of a $950,000 civil penalty (in other words no disgorgement). Nevertheless, the improper conduct largely occurred between 2010 to 2012. In other words, 6 – 8 years prior to the enforcement action.
Dun & Bradstreet
See here, here, and here for prior posts.
The enforcement action concerned alleged conduct that took place between 2006 and 2012. In other words, 6-12 years prior to the enforcement action. Yet, D&B agreed to pay approximately $9.2 million (disgorgement of $6,077,820, prejudgment interest of $1,143,664, and a civil money penalty in the amount of $2 million).
Panasonic
See here and here for prior posts.
As stated by the SEC “the anti-bribery violation is the result of a 2007 bribery scheme.” In other words, conduct that occurred 11 years prior to the enforcement action. Other alleged improper conduct also took place beyond any conceivable statute of limitations period. Yet, Panasonic agreed to pay approximately $143.2 million ($126.0 million in disgorgement and $16.3 million in prejudgment interest).
As highlighted in this prior guest post by Kevin Muhlendorf (Wiley Rein and a former SEC Enforcement Division attorney and DOJ Fraud Section prosecutor):
“At bottom, acceding to an SEC request for a tolling agreement is often a one-way bargain – the SEC can continue its investigation at a languid pace, and the individual or entity is not given any real benefit, except the continued specter of living under a lengthy investigation, the timing of which is solely in the hands of the government. Often lost on the enforcers is the personal or operational toll that living under the uncertainty of a lengthy government investigation causes – a toll that statutes of limitations were partly designed to alleviate. While the assumed benefit to a tolling agreement is that the SEC will not preemptively charge in order to avoid forfeiting its ability to later do so, that suggests that absent agreeing to a tolling agreement, the SEC would prematurely charge a half-baked case. That seems a bluff worthy of calling.
Corporations, more so than individuals, traditionally shy away from truly challenging SEC enforcement actions, especially FCPA actions. In the forty years of FCPA enforcement, no corporation has ever fully litigated the FCPA and taken the Commission to trial. Although every inquiry is fact dependent, there is an established pattern of corporations proving their cooperation to reach a settlement, and that often involves one or more tolling agreements. However, Kokesh and Gabelli [see here for a prior post] should at least alter the calculus that goes into making that decision. Those with a valid statute of limitations defense to some or all of the potential claims against them should zealously guard that defense and press the SEC as to how it will prevail on violations occurring outside the five-year window.”
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