Foreign Corrupt Practices Act enforcement, it’s not just about the DOJ.
Granted, as a civil enforcement agency the SEC’s sticks are less sharp than the DOJ’s, but the SEC also claims a significant piece of the FCPA enforcement pie (query whether it should – but that is a subject for another day – for instance as discussed in “The Story of the Foreign Corrupt Practices Act” the SEC wanted no part in enforcing the FCPA’s anti-bribery provisions).
This previous post was a 2016 year in review of DOJ FCPA enforcement.
Today’s post is a 2016 year in review of SEC FCPA Enforcement. (See here for a similar post for 2015; here for a similar post for 2014; here for a similar post for 2013; here for a similar post for 2012; here for a similar post for 2011; and here for a similar post for 2010).
Settlement Amounts and Specifics
In 2016, the SEC brought 24 corporate enforcement actions (an all-time high) and collected approximately $1.07 billion in those enforcement actions (also an all-time high). (Note this $1.07 billion figure is a net amount after accounting for various credits and deductions in a few enforcement actions involving foreign issuers).
By way of comparison, in 2015 the SEC collected approximately $114.8 million in 9 corporate FCPA enforcement actions; in 2014 the SEC collected approximately $327 million in 7 corporate FCPA enforcement actions; in 2013 the SEC collected approximately $300 million in 8 corporate enforcement actions; in 2012 the SEC collected approximately $118 million in 8 corporate FCPA enforcement actions; in 2011 the SEC collected approximately $148 million in 13 corporate FCPA enforcement actions; and in 2010, the SEC collected approximately $530 million in 19 corporate FCPA enforcement actions.
The range of SEC FCPA enforcement actions in 2016 was, on the high end, $236 million (Teva), and on the low end, $322,000 (Nortek).
Of the 24 corporate enforcement actions brought by the SEC in 2016, 14 (58%) were SEC only.
Of the 24 corporate enforcement actions: 18 enforcement actions (75%) were administrative actions; 4 enforcement actions (Teva, Braskem, Embraer and Vimpelcom) (17%) were resolved via civil complaints; and 2 enforcement actions (Akamai Technologies and Nortek) (8%) were resolved via NPAs.
In other words, there was no judicial scrutiny of 83% of SEC FCPA enforcement actions in 2016. By comparison, in 2015 there was no judicial scrutiny of 89% of SEC FCPA enforcement actions; in 2014 there was no judicial scrutiny of 86% of SEC FCPA enforcement actions; and in 2013 there was no judicial scrutiny of 50% of SEC FCPA enforcement actions.
In 2016, the SEC collected approximately $73 million in disgorgement and prejudgment interest in enforcement actions that did not charge or find anti-bribery violations. This is noteworthy because many question, and rightfully so, whether disgorgement is an appropriate remedy in cases that do not charge FCPA anti-bribery violations. See here for a prior post on so-called “no-charged bribery disgorgement” cases.
By way of comparison, in 2015 the SEC collected approximately $45 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases; in 2014 the SEC collected approximately $104 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases; in 2013, the SEC collected approximately $208 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases; in 2012, the SEC collected approximately $57.4 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases; and in 2011 the SEC collected approximately $51 million in disgorgement and prejudgment interest in n0-charged bribery disgorgement cases.
The $1.07 billion the SEC collected in 2016 FCPA enforcement actions breaks down as follows:
- $46.3 million in civil penalties; and
- $1.03 billion in disgorgement and prejudgment interest.
In other words, 96% of SEC FCPA settlements in 2016 consisted of disgorgement and prejudgment interest. By comparison, in 2015 51% of SEC FCPA settlements consisted of disgorgement and prejudgment interest; in 2014 99% of SEC FCPA settlement amounts in 2014 consisted of disgorgement and prejudgment interest; in 2013 98% of SEC FCPA settlement amounts consisted of disgorgement and prejudgment interest; in 2012 86% of SEC FCPA settlement amounts consisted of disgorgement and prejudgment interest; in 2011, disgorgement and prejudgment interest comprised 94% of SEC FCPA enforcement settlement amounts; and in 2010, disgorgement and prejudgment interest comprised 96% of SEC FCPA enforcement settlement amounts.
If one tries to analyze why some SEC FCPA enforcement actions in 2016 included a civil penalty, disgorgement and prejudgment interest (ABInBev, Nu Skin, AstraZeneca, Johnson Controls, Novartis and SciClone), whereas other enforcement actions included only disgorgement and prejudgment interest (General Cable, Teva, Braskem, JPMorgan, Embraer, Och-Ziff, Key Energy, LAN Airlines, Analogic, Akamai Technologies, Nortek, VimpelCom and PTC), whereas other enforcement actions included only a civil penalty (GlaxoSmithKline, Las Vegas Sands, Nordion and Qualcomm) good luck and please enlighten us all with your insight.
Corporate vs. Individual Actions
Of the 24 corporate SEC FCPA enforcement actions from 2016, 7 (29%) have involved, at present, related SEC charges or findings against company employees.
Strategies For Minimizing Risk Under The FCPA
A compliance guide with issue-spotting scenarios, skills exercises and model answers. "This book is a prime example of why corporate compliance professionals and practitioners alike continue to listen to Professor Koehler."
Order Your CopyBy way of comparison, in 2015 of the 9 corporate SEC FCPA enforcement actions 2 (22%) have involved related SEC charges against company employees; in 2014 of the 7 corporate SEC FCPA enforcement actions, 0 (0%) involved related SEC charges against company employees; in 2013 of the 8 SEC corporate FCPA enforcement actions 0 (0%) involved related SEC charges against company employees; in 2012, 0 of the 8 corporate (0%) FCPA actions involved related SEC charges against company employees; in 2011, 2 of the 13 (15%) corporate SEC FCPA enforcement actions involved related SEC charges against company employees; in 2010, 3 of the 19 (15%) corporate SEC FCPA enforcement actions involved related SEC charges against company employees.
Voluntary Disclosures
Of the 24 corporate SEC FCPA enforcement actions from 2016, 8 enforcement actions (33%) (General Cable, Nu Skin, Johnson Controls, Akamai Technologies, Nortek, Nordion, Analogic, and PTC) were the result of corporate voluntary disclosures.
By way of comparison, of the 9 corporate SEC FCPA enforcement actions from 2015, 3 enforcement actions (33%) were the result of corporate voluntary disclosures; of the 7 corporate SEC FCPA enforcement actions from 2014, 4 enforcement actions (57%) were the result of corporate voluntary disclosures; of the 8 corporate SEC FCPA enforcement actions in 2013, 3 enforcement actions (38%) were the result of corporate voluntary disclosures; in 2012 of the 8 corporate SEC FCPA enforcement actions 4 (50%) were the result of corporate voluntary disclosures; and in 2011 of the 13 corporate SEC FCPA enforcement actions 11 (85%) were the result of corporate voluntary disclosures.
This remainder of this post provides an overview of SEC FCPA enforcement in 2016.
General Cable Corp. (Dec. 29th)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of FCPA’s anti-bribery, books and records, and internal controls provisions.
Settlement: $55.3 million (disgorgement of approximately $51.2 million and prejudgment interest of approximately $4.1 million)
Origin: Voluntary disclosure
Individuals Charged: Yes
Related DOJ Enforcement Action: Yes
Teva Pharmaceutical (Dec. 22nd)
See here and here for prior posts
Charges: Settled civil complaint charging violations of the FCPA’s anti-bribery provisions, books and records provisions and internal controls provisions
Settlement: $236 million in disgorgement and prejudgment interest
Origin: The resolution documents state: “Teva did not timely voluntarily self-disclose the FCPA violations,” yet also state that Teva disclosed “conduct in Russia and Ukraine of which the [DOJ] was previously unaware.”
Individuals Charged: No
Related DOJ Enforcement Action: Yes
Braskem (Dec. 21st)
See here, here and here for prior posts
Charges: Settled civil complaint charging violations of the FCPA’s anti-bribery, books and records, and internal controls provisions.
Settlement: $65 million in disgorgement
Origin: Foreign law enforcement investigation
Individuals Charged: No
Related DOJ Enforcement Action: Yes
JPMorgan (Nov. 17th)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery, books and records and internal controls provisions
Settlement: $130.6 million in disgorgement and prejudgment interest
Origin: SEC information request
Individuals Charged: No
Related DOJ Enforcement Action: Yes
Embraer (Oct. 24th)
See here and here for prior posts
Charges: Settled civil complaint charging violations of the FCPA’s anti-bribery, books and records and internal controls provisions.
Settlement: $83.8 million in disgorgement and $14.4 million in prejudgment interest. The SEC agreed to credit a disgorgement amount that Embraer agreed to pay to Brazilian authorities (believed to be approximately $18.6 million). Net amount thus equals $79.6 million.
Origin: SEC subpoena
Individuals Charged: No
Related DOJ Enforcement Action: Yes
GlaxoSmithKline (Sept. 30th)
See here for the prior post
Charges: None. Administrative cease and desist order finding violations of FCPA’s books and records and internal controls provisions.
Settlement: $20 million civil penalty
Origin: The company previously disclosed: “The US Securities and Exchange Commission (SEC) and the US Department of Justice (DOJ) initiated an industry-wide enquiry in 2010 into whether pharmaceutical companies may have engaged in violations of the US Foreign Corrupt Practices Act (FCPA) relating to the sale of pharmaceuticals, including in Argentina, Brazil, Canada, China, Germany, Italy, Poland, Russia and Saudi Arabia. The Group is one of the companies that has been asked to respond to this enquiry and is cooperating with the SEC and DOJ. The Group has informed the DOJ and SEC about the investigation of its China operations by the Chinese government that was initiated in 2013 and the outcome of that investigation. The Group also has briefed the DOJ and SEC regarding other countries and issues.”
Individuals Charged: No
Related DOJ Enforcement Action: No
Och-Ziff (Sept. 29th)
See here and here for prior posts.
Charges: None. Administrative cease and desist order finding violations of FCPA’s anti-bribery, books and records and internal controls provisions.
Settlement: Approximately $199 million in disgorgement and prejudgment interest.
Origin: “Beginning in 2011, and from time to time thereafter, we have received subpoenas from the SEC and requests for information from the U.S. Department of Justice (the “DOJ”) in connection with an investigation involving the FCPA and related laws.
Individuals Charged: Yes.
Related DOJ Enforcement Action: Yes
AB InBev (Sept. 28th)
See here for the prior post.
Charges: None. Administrative cease and desist order finding violations of FCPA’s anti-bribery, books and records and internal controls provisions. The SEC also found that AB InBev entered into a separation agreement with a former employee that violated an SEC Rule implementing Dodd-Frank’s whistleblower provisions.
Settlement: $6 million ($2.7 million in disgorgement plus interest of $292,381 and a penalty of $3 million).
Origin: The SEC’s order states: “AB InBev did not report the 2009 and 2011 complaints to the Commission staff before the Commission first contacted AB InBev in October 2011.”
Individuals Charged: No.
Related DOJ Enforcement Action: No.
Nu Skin (Sept. 20th)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of FCPA’s books and records and internal controls provisions.
Settlement: $765,688 ($431,088 in disgorgement, prejudgment interest of $34,600, and a $300,000 civil money penalty).
Origin: Voluntary disclosure
Individuals Charged: No
Related DOJ Enforcement Action: No
AstraZeneca (Aug. 30th)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of FCPA’s books and records and internal controls provisions.
Settlement: $5.5 million (disgorgement of $4,325,000, prejudgment interest of $822,000, and a civil money penalty of $375,000)
Origin: In an August 2010 filing, the company disclosed: “AstraZeneca PLC has received inquiries from the US Department of Justice and the Securities and Exchange Commission in connection with an investigation into Foreign Corrupt Practices Act issues in the pharmaceutical industry. AstraZeneca is cooperating with their inquiries.”
Individuals Charged: No
Related DOJ Enforcement Action: No
Key Energy (Aug. 11th)
See here, here, and here for prior posts
Charges: None. Administrative cease and desist order finding violations of FCPA’s books and records and internal controls provisions.
Settlement: $5 million in disgorgement
Origin: The SEC’s order states: “In or around January 2014, the staff of the Commission contacted Key Energy with respect to potential FCPA violations by Key Energy. In April 2014, Key Mexico employees reported to Key Energy information they had received suggesting the recently resigned country manager had promised bribes to one or more Pemex employees during his employment with Key Mexico. Upon learning of these allegations, Key Energy reported the allegations to the staff of the Commission.”
Individuals Charged: No
Related DOJ Enforcement Action: No
Johnson Controls (July 11th)
See here, here, here, and here for prior posts
Charges: None. Administrative cease and desist order finding violations of FCPA’s books and records and internal controls provisions.
Settlement: $$14.4 million (disgorgement of $11.8 million, prejudgment interest of $1,382,561 and a $1.18 million civil penalty)
Origin: Voluntary disclosure
Individuals Charged: No
Related DOJ Enforcement Action: No
LAN Airlines (July 25th)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of FCPA’s books and records and internal controls provisions.
Settlement: $9.4 million in disgorgement and prejudgment interest
Origin: Argentine media reports
Individuals Charged: Yes – In February 2016 the SEC charged Ignacio Cueto Plaza, the current CEO of LAN Airlines (see here)
Related DOJ Enforcement Action: Yes
Analogic (June 21st)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of FCPA’s books and records and internal controls provisions.
Settlement: Approximately $11.5 million in disgorgement and prejudgment interest
Origin: Voluntary disclosure
Individuals Charged: Yes. Based on the same conduct the SEC also announced that “Lars Frost, BK Medical’s former Chief Financial Officer, agreed to pay a $20,000 civil penalty to settle charges that he knowingly circumvented the internal controls in place at BK Medical and falsified its books and records.”
Related DOJ Enforcement Action: Yes
Akamai Technologies (June 7th)
See here and here for prior posts
Charges: None. NPA references ““possible violations of the books and records and internal accounting controls provisions of the FCPA.”
Settlement: Approximately $672,000 in disgorgement and prejudgment interest
Origin: Voluntary disclosure
Individuals Charged: No.
Related DOJ Enforcement Action: No. The DOJ released a so-called “declination letter” involving the company. See here for the post titled “Nortek / Akamai – Don’t Believe the Hype, Rather Ask What Viable Criminal Charges Did the DOJ Actually Decline?”
Nortek (June 7th)
See here and here for prior posts
Charges: None. NPA references ““possible violations of the books and records and internal accounting controls provisions of the FCPA.”
Settlement: Approximately $322,000 in disgorgement and prejudgment interest
Origin: Voluntary disclosure.
Individuals Charged: No
Related DOJ Enforcement Action: No. The DOJ released a so-called “declination letter” involving the company. See here for the post titled “Nortek / Akamai – Don’t Believe the Hype, Rather Ask What Viable Criminal Charges Did the DOJ Actually Decline?”
Las Vegas Sands (April 7th)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of FCPA’s books and records and internal controls provisions.
Settlement: $9 million civil penalty
Origin: The SEC’s order states “In connection with the investigation by the Staff, the LVSC Audit Committee retained outside counsel to conduct an internal investigation.”
Individuals Charged: No
Related DOJ Enforcement Action: No
Novartis (March 23)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of FCPA’s books and records and internal controls provisions.
Settlement: $25 million ($23 million in disgorgement and prejudgment interest and a $2 million penalty)
Origin: The resolution documents state: “n connection with the SEC Staff s investigation and in response to media reports concerning a competitor in August 2013, Novartis instituted an expansive review of its relationships in China with travel and event planning vendors”
Individuals Charged: No
Related DOJ Enforcement Action: No
Nordion (March 3)
See here and herefor prior posts
Charges: None. Administrative cease and desist order finding violations of the FCPA’s books and records and internal controls provisions
Settlement: $375,000 civil penalty
Origin: Voluntary disclosure
Individuals Charged: Yes
Related DOJ Enforcement Action: No
Qualcomm (March 1)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery, books and records and internal controls provisions
Settlement: $7.5 million civil penalty
Origin: Qualcomm’s FCPA scrutiny was, at least partially, related to September 2010 formal order of private investigation from the SEC that arose from a “whistleblower’s” allegations made in December 2009 to the audit committee of the Company’s Board of Directors and to the SEC. As Qualcomm previously disclosed, “the audit committee completed an internal review of the allegations with the assistance of independent counsel and independent forensic accountants. This internal review into the whistleblower’s allegations and related accounting practices did not identify any errors in the Company’s financial statements.” More directly related to the FCPA scrutiny, according to Qualcomm’s previous disclosure: “On January 27, 2012, the Company learned that the U.S. Attorney’s Office for the Southern District of California/DOJ has begun a preliminary investigation regarding the Company’s compliance with the Foreign Corrupt Practices Act (FCPA), a topic about which the SEC is also inquiring.”
Individuals Charged: No
Related DOJ Enforcement Action: No
VimpelCom (February 18th)
See here, here, and here for prior posts
Charges: Settled civil complaint charging violations of the FCPA’s anti-bribery provisions, books and records provisions, and internal controls provisions
Settlement: $167.5 million in disgorgement (after accounting for various credits and deductions)
Origin: Unclear from the resolution documents
Individuals Charged: No
Related DOJ Enforcement Action: Yes
PTC (February 16th)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of FCPA’s anti-bribery provisions, books and records and internal controls provisions
Settlement: $13.7 million ($11.9 million in disgorgement and $1.8 in prejudgment interest)
Origin: The SEC’s order states: “PTC only discovered the improper payments to or for the benefit of Chinese government officials in 2011, while investigating complaints concerning a senior PTC-China salesperson. Upon learning this information, PTC, with the oversight of the Audit Committee of the Board of Directors, engaged independent counsel and an independent forensic consulting firm to undertake an investigation. PTC voluntarily self-reported the results of its internal investigation to the Commission and responded to information requests from the Commission staff. PTC did not, however, uncover or disclose the full scope and extent of PTC-China’s FCPA issues until 2014.”
Individuals Charged: Yes
Related DOJ Enforcement Action: Yes
SciClone Pharmaceuticals (February 4th)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of FCPA’s anti-bribery provisions, books and records and internal controls provisions.
Settlement: $12.8 million ($9,426,000 in disgorgement, prejudgment interest of $900,000 as well as a $2.5 million civil penalty)
Origin: SEC subpoena
Individuals Charged: No
Related DOJ Enforcement Action: No
SAP (February 1st)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of FCPA’s books and records and internal controls provisions.
Settlement: Approximately $3.9 million (disgorgement of $3.7 million and prejudgment interest of $188,896)
Origin: The SEC’s order states “when SAP learned of the conduct as a result of the SEC’s inquiry, SAP conducted a thorough internal investigation and extensively cooperated with the SEC’s investigation …”
Individuals Charged: Yes – in August 2015 Vicente Garcia (a former head of Latin American sales for SAP) resolved a parallel DOJ / SEC FCPA enforcement action based on the same conduct (see here for the prior post).
Related DOJ Enforcement Action: No
