This type of post has been published several times before (see here and here among other posts), and once again today, to highlight an important (yet often overlooked) aspect of the Foreign Corrupt Practices Act: the FCPA has always been a law much broader than its name suggests.
Sure, the FCPA contains anti-bribery provisions which concern foreign bribery. Sure, the FCPA’s books and records and internal controls provisions can be implicated in foreign bribery schemes.
However, the fact remains that most FCPA enforcement actions (that is enforcement actions that charge or find violations of the FCPA’s books and records and internal controls provisions) have nothing to do with foreign bribery. For lack of a better term, let’s call these numerous enforcement actions non-FCPA, FCPA enforcement actions.
The latest example is this recent SEC enforcement action against Surgalign Holdings, Inc (formerly known as RTI Surgical Holdings, Inc., and RTI Surgical, Inc. (“RTI”) and Robert Jordheim (RTI’s CFO from 2010 to 2017). RTI manufactured and sold surgical implants, such as orthopedic and spinal implants.
In summary fashion, this administrative order finds:
“From 2015 through 2019, RTI shipped orders weeks or months before its customers had originally requested delivery, thereby pulling sales forward from future quarters, to address projected quarterly revenue shortfalls. In some instances, RTI did so after requesting and obtaining customer permission; in other instances, RTI shipped orders early without customer approval and then prematurely recognized revenue for the sales. In multiple quarters, RTI would not have met its revenue guidance without these undisclosed pull-forwards. RTI and its former senior management, including its CFO until September 2017, Robert Jordheim, did not disclose to investors that RTI’s apparent success at achieving its revenue guidance resulted from its reliance on pull-forwards, and they did not disclose the known uncertainty that this practice created for RTI’s future revenue streams. In 2020, RTI issued a restatement to correct, among other things, its premature recognition of revenue, in violation of generally accepted accounting principles (GAAP), for orders shipped early to customers without their approval.”
Based on the above, the SEC found that Surgalign violated, among other things, the FCPA’s books and records and internal controls provisions. The SEC further found that Jordheim, among other things, was a cause of Surgalign’s books and records and internal controls violations.
Without admitting or denying the SEC’s findings, Surgalign agreed to pay a $2 million civil monetary penalty and Jordheim agreed to pay a $75,000 civil monetary penalty.
