The Foreign Corrupt Practices Act 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 and these provisions are among the most generic legal provisions one can possibly find.
The latest example is this recent SEC enforcement action against shipping and logistics company Roadrunner Transportation Systems, Inc. for “engaging in a multi-year accounting fraud scheme.”
In summary fashion, this administrative order finds:
“From at least July 2013 through January 2017, Roadrunner engaged in a multi-year accounting fraud scheme by manipulating its financial reports to hit prior earnings guidance and analyst projections. Among other things, Roadrunner hid incurred expenses by improperly deferring them and spreading them over multiple quarters to minimize their impact on Roadrunner’s net earnings, avoided writing down assets that were worthless and receivables that were uncollectable, and manipulated earnout liabilities related to Roadrunner’s acquisitions which, in practical effect, created an income “cushion” that could be accessed in future quarters to offset expenses. Roadrunner also concealed its fraud from Roadrunner’s independent auditor. As a result of this conduct, Roadrunner materially misstated its financial results in its earnings releases, earnings calls, and quarterly and annual reports from at least the second quarter of 2013 through the third quarter of 2016.”
Based on the above conduct, the SEC found that Roadrunner violated (among other things) the FCPA’s books and records and internal controls provisions.
The SEC ordered Roadrunner to pay disgorgement of approximately $7.1 million and prejudgment interest of approximately $2.5 million. The entire $9.6 settlement amount was deemed satisfied by the company’s 2019 settlement of a private civil class action lawsuit alleging violations of securities laws based on the facts that gave rise to Roadrunner’s restatement.
This is interesting and I am scratching my head to think of another instance of an SEC FCPA enforcement action settlement amount being deemed satisfied by private (non-government) civil litigation.
