Foreign Corrupt Practices Act enforcement, it is not just about the DOJ. Granted, as a civil enforcement agency its 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).
Today’s post is a year in review of SEC FCPA Enforcement. (See here for a similar post for 2011 and here for a similar post for 2010). Stay tuned for a similar post on DOJ FCPA enforcement in 2012.
Settlement Amounts
In 2012, the SEC collected approximately $118 million in 8 corporate FCPA enforcement actions. By comparison, in 2011 the SEC collected approximately $148 million in 13 corporate FCPA enforcement actions. In 2010, the SEC collected approximately $530 million in 19 corporate FCPA enforcement actions.
The range of SEC FCPA enforcement actions in 2012 was, on the high end, $45.1 million in the Pfizer enforcement action, and on the low end, $2 million in the Oracle enforcement action.
Three corporate FCPA enforcement actions from 2012 were SEC only (Oracle, Allianz, and Eli Lilly).
Of the 8 corporate enforcement actions from 2012, only 4 (Smith & Nephew, Biomet, Tyco, and Eli Lilly) included FCPA anti-bribery charges. In other words, 4 SEC FCPA enforcement actions charged FCPA books and records and internal controls violations only, yet in those enforcement actions, the SEC collected approximately $57.4 million in disgorgement and prejudgment interest. 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 “non-bribery disgorgement” cases. In 2011, 8 of the 13 SEC FCPA corporate enforcement actions charged FCPA books and records and internal controls violations only and the SEC collected approximately $51 million in disgorgement and prejudgment interest in those non-bribery disgorgement cases.
Of the $118 million the SEC collected in 2012 corporate FCPA enforcement actions, approximately $75 million (64%) were in two enforcement actions (Pfizer and Eli Lilly). Of the $118 million, approximately $104 million (88%) were in enforcement actions against pharmaceutical or other health care related companies. All of these enforcement actions were based, in whole or in part, on the enforcement theory that employees of various foreign health care systems (such as physicians, nurses, mid-wives, lab personnel, etc.) are “foreign officials” under the FCPA. See this prior post which traced the origins and prominence of this enforcement theory.
The $118 million the SEC collected in 2012 FCPA enforcement actions breaks down as follows: $16 million in civil penalties and $102 million in disgorgement and prejudgment interest. Thus, 86% of SEC FCPA settlement amounts in 2012 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 2012 included a civil penalty, disgorgement and prejudgment interest (Allianz and Eli Lilly), whereas other enforcement actions included only disgorgement and prejudgment interest (Smith & Nephew, Biomet, Orthofix, Pfizer, and Tyco), whereas other enforcement actions included only a civil penalty (Oracle), good luck and please enlighten us all with your insight.
Corporate vs. Individual Actions
Of the 8 SEC corporate FCPA enforcement actions from 2012, 0 (0%) have involved, at present, related SEC charges against company employees. In 2011, just 2 of the 13 (15%) corporate SEC FCPA enforcement actions involved related SEC charges against company employees and in 2010, just 3 of the 19 (15%) corporate SEC FCPA enforcement actions involved related SEC charges against company employees.
In 2012, the SEC did charge 3 individuals (Thomas O’Rourke, Mark Jackson, and David Ruehlen) in connection with the 2010 Noble Corporation enforcement action. Without admitting or denying the SEC’s allegations, O’Rourke agreed to resolve the matter by paying a $35,000 civil penalty. The SEC’s case against Jackson and Ruehlen remains pending. (See here for the most recent post). In addition, as noted in this prior post, the SEC also charged Subramanian Krishnan (former CFO of Digi International) with aiding and abetting violations of the FCPA’s books and records provisions and substantive FCPA internal controls violations. However, as noted in the prior post, it was unclear as to the nature of the SEC’s allegations. This action appears to have been a “non-FCPA, FCPA enforcement action” as the action is not listed on the SEC’s FCPA website.
Voluntary Disclosures
Of the 8 corporate SEC FCPA enforcement actions in 2011, 4 enforcement actions (50%) (Orthofix, Pfizer, Tyco, and Oracle) were the result of corporate voluntary disclosures. 3 enforcement actions (38%) (Smith & Nephew, Biomet and Eli Lilly) appear to have been based on corporate disclosures following an industry sweep (a sweep that may have been prompted by Johnson & Johnson’s voluntary disclosure – see here for the prior post). 1 enforcement action (Allianz) was based on the SEC opening an investigation after receiving an anonymous complaint of possible FCPA violations
This remainder of this post provides an overview of corporate SEC FCPA enforcement in 2012.
Eli Lilly (December 20th)
See here for the prior post.
Charges: Settled civil complaint charging violations of the FCPA’s anti-bribery provisions, and books and records and internal controls provisions.
Settlement: Approximately $29.4 million (approximately $14 million in disgorgement, approximately $6.7 million in prejudgment interest, and an $8.7 million civil penalty)
Disclosure: According to the company’s disclosures, it was first notified of an investigation in August 2003.
Individuals Charged: No.
Related DOJ Enforcement Action: No.
Allianz (December 17th)
See here for the prior post.
Charges: None. Administrative cease and desist order finding violations of the FCPA’s books and records and internal control provisions.
Settlement: Approximately $12.4 million (approximately $5.3 million in disgorgement, approximately $1.8 million in prejudgment interest, and a civil penalty of approximately $5.3 million).
Disclosure: According to the SEC – “In response to the March 2009 Whistleblower complaint, Allianz convened a Whistleblower Committee to do an internal investigation and retained counsel to conduct an internal investigation of Utama’s payment practices in Indonesia. Allianz did not report the conduct to the Commission staff. In April 2010, the staff opened an investigation after receiving an anonymous complaint of possible FCPA violations.”
Individuals Charged: No.
Related DOJ Enforcement Action: No.
Tyco International (September 24th)
See here for the prior post.
Charges: Settled civil complaint charging violations of the FCPA’s anti-bribery provisions, and books and records and internal controls provisions.
Settlement: Approximately $13.1 million ($10.5 million in disgorgement and approximately $2.6 million in prejudgment interest).
Disclosure: Voluntary disclosure.
Individuals Charged: No.
Related DOJ Enforcement Action: Yes.
Oracle (August 16th)
See here for the prior post.
Charges: Settled civil complaint charging violations of the FCPA’s books and records and internal controls provisions.
Settlement: $2 million civil penalty.
Disclosure: Voluntary disclosure.
Individuals Charged: No.
Related DOJ Enforcement Action: No.
Pfizer (August 7th)
See here for the prior post.
Charges: Settled civil complaint against Pfizer charging violations of the FCPA’s books and records and internal controls provisions. Settled civil complaint against Wyeth charging violations of the FCPA’s books and records and internal controls provisions.
Settlement: As to Pfizer, approximately $26.3 million ($16 million in disgorgement and $10.3 in prejudgment interest). As to Wyeth, approximately $18.8 million ($17.2 million in disgorgement and $1.6 million in prejudgment interest).
Disclosure: Voluntary disclosure.
Individuals Charged: No.
Related DOJ Enforcement Action: Yes as to Pfizer, no as to Wyeth.
Orthofix International (July 10th)
See here for the prior post.
Charges: Settled civil complaint charging violations of the FCPA’s books and records and internal controls provisions.
Settlement: $5.2 million (approximately $5 million in disgorgement and approximately $240,000 in prejudgment interest).
Disclosure: Voluntary disclosure.
Individuals Charged: No.
Related DOJ Enforcement Action: Yes.
Biomet (March 26th)
See here for the prior post.
Charges: Settled civil complaint charging violations of the FCPA’s anti-bribery provisions, and books and records and internal controls provisions.
Settlement: $5.5 million ($4.4 million in disgorgement and $1.1 million in prejudgment interest).
Disclosure: Industry sweep inquiry followed by disclosure of misconduct at issue, including a portion of which that was voluntarily disclosed.
Individuals Charged: No.
Related DOJ Enforcement Action: Yes.
Smith & Nephew (Feb. 6th)
See here for the prior post.
Charges: Settled civil complaint charging violations of the FCPA’s anti-bribery provisions, and books and records and internal controls provisions.
Settlement: $5.4 million ($4,028,000 in disgorgement and $1,398,799 in prejudgment interest).
Disclosure: Industry sweep inquiry followed by disclosure of misconduct at issue.
Individuals Charged: No.
Related DOJ Enforcement Action: Yes.
