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SEC Enforcement Of The FCPA – Year In Review

This is the first of several posts regarding FCPA 2015 enforcement statistics and issues to be published on FCPA Professor this month.

Yearly FCPA enforcement statistics are interesting, particularly when compared to prior years, but any yearly statistic contains an arbitrary cutoff date and is thus of marginal value.

Moreover, statistics are calculated against the universe of enforcement activity in any given year and in 2015 there were 9 corporate SEC enforcement actions and just 2 corporate DOJ enforcement actions. With such low denominators, yearly enforcement statistics are of further marginal value.

With such limitations in mind, let the 2015 FCPA enforcement statistics begin.

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Foreign Corrupt Practices Act enforcement, it is 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 [1]” 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 [2] for a similar post for 2014; here [3] for a similar post for 2013; here [4] for a similar post for 2012; here [5] for a similar post for 2011; and here [6] for a similar post for 2010).

Stay tuned for a similar post on DOJ FCPA enforcement in 2015.

As highlighted below, four statistics stand out from corporate SEC FCPA enforcement in 2015:

(i) unlike in prior years where several SEC corporate enforcement actions also had a DOJ component, each SEC corporate enforcement action in 2015 was a “stand-alone” action;

(ii) compared to prior years, civil penalties comprised a much larger percentage of SEC settlement amounts;

(iii) consistent with prior years, SEC enforcement was largely corporate only as only 2 of the 9 corporate enforcement actions also resulted in related enforcement actions against company employees; and

(iv) compared to prior years, a lower percentage of corporate enforcement actions were the result of voluntary disclosures, but rather originated from pro-active FCPA investigations.

Settlement Amounts and Specifics

In 2015, the SEC collected approximately $114.8 million in 9 corporate FCPA enforcement actions.

By comparison, 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 2015 was, on the high end, $25 million (BHP Billiton), and on the low end, $75,000 (Hyperdynamics). The median settlement amount was approximately $14.7 million.

All SEC corporate FCPA enforcement actions in 2015 were SEC only – a noticeable difference from prior years in which many SEC corporate FCPA enforcement actions also involved a DOJ component.

Of the 9 corporate enforcement actions from 2015, 7 enforcement actions (78%) were administrative actions, 1 enforcement action (PBSJ) was a deferred prosecution agreement and 1 enforcement action (Hitachi) was a settled civil complaint filed in federal court.

In other words, there was no judicial scrutiny of 89% of SEC FCPA enforcement actions from 2015. By comparison, 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 2015, the SEC collected approximately $45.2 million in disgorgement and prejudgment interest in enforcement actions that did not charge 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 [7] for a prior post on so-called “no-charged bribery disgorgement” cases.

By way of comparison, 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 $114.8 million the SEC collected in 2015 FCPA enforcement actions breaks down as follows:

$56.2 million in a civil penalties (Bristol-Myers, Hyperdynamics, Hitachi, BNY Mellon, Mead Johnson, BHP Billiton, FLIR Systems, and PBSJ); and

$58.6 million in disgorgement and prejudgment interest.

This division (only 51% of SEC FCPA settlement amounts in 2015 consisted of disgorgement and prejudgment interest) is noteworthy because 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 2015 included a civil penalty, disgorgement and prejudgment interest (PBSJ, FLIR Systems, BNY Mellon, Mead Johnson and Bristol-Myers), whereas other enforcement actions included only disgorgement and prejudgment interest (Goodyear), whereas other enforcement actions included only a civil penalty (BHP Billiton, Hyperdynamics, and Hitachi) good luck and please enlighten us all with your insight.

Corporate vs. Individual Actions

Of the 9 corporate SEC FCPA enforcement actions from 2015, 2 (22%) (PBSJ and FLIR Systems) have involved, at present, related SEC charges against company employees.

By way of comparison, in 2014 of the 7 corporate SEC FCPA enforcement actions from 2014, 0 (0%) have involved, at present, related SEC charges against company employees; in 2013 of the 8 SEC corporate FCPA enforcement actions 0 (0%) have involved, at present, 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 9 corporate SEC FCPA enforcement actions from 2015, 3 enforcement actions (33%) (PBSJ, Goodyear, and FLIR Systems) were the result of corporate voluntary disclosures. 5 enforcement actions (BHP Billiton, Hyperdynamics, BNY Mellon, Mead Johnson and Bristol-Myers) would appear to be the result of pro-active SEC investigations (i.e. issuance of subpoenas, industry sweeps). The origin of 1 enforcement action (Hitachi) is not specified in the resolution documents.

In  terms of voluntary disclosure, by way of comparison 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 2015.

Bristol-Myers Squibb (October 5th)

See here [8] and here [9] for prior posts

Charges:   None. Administrative cease and desist order finding violations of the FCPA’s books and records and internal controls provisions

Settlement:  $14.7 million ($11.4 million in disgorgement, prejudgment interest of $500,000, and a civil penalty of $2.75 million)

Disclosure: According to the company’s disclosures, its FCPA scrutiny began in 2006 when the SEC informed the company that it had begun a formal inquiry into the activities of certain of the company’s subsidiaries and its employees and agents. In March 2012, the company received a subpoena from the SEC issued in connection with its investigation under the FCPA, primarily relating to sales and marketing practices in various countries.

Individuals Charged:  No

Related DOJ Enforcement Action:  No.

Hyperdynamics (Sept. 29th)

See here [10] for the prior post

Charges:   None. Administrative cease and desist order finding violations of the FCPA’s books and records and internal controls provisions

Settlement:  $75,000 civil penalty.

Disclosure: According to the company’s disclosure –  ”the SEC had issued a subpoena to Hyperdynamics concerning possible violations of the FCPA”

Individuals Charged:  No

Related DOJ Enforcement Action:  No.

Hitachi  (Sept. 28th)

See here [11] and here [12] for prior posts

Charges:   Settled civil complaint charging FCPA books and records and internal controls violations.

Settlement:  $19 million civil penalty.

Disclosure:   Not specified in the resolution documents.

Individuals Charged:  No

Related DOJ Enforcement Action:  No.

BNY Mellon (August 18th)

See here [13] and here [14] for prior posts.

Charges:   None.  Administrative cease and desist order finding violations of the FCPA’s anti-bribery and internal control provisions.

Settlement:  $14.8 million ($8.3 million in disgorgement, $1.5 million in prejudgment interest, and a $5 million penalty).

Disclosure:   Unclear from the resolution documents (perhaps the industry sweep of the financial services industry)

Individuals Charged:  No.

Related DOJ Enforcement Action:  No.

Mead Johnson (July 28th)

See here [15] and here [16] for prior posts.

Charges:   None.  Administrative cease and desist order finding violations of the FCPA’s books and records and internal controls provisions.

Settlement:  Approximately $12 million ($7.77 million in disgorgement, $1.26 million in prejudgment interest, and a $3 million penalty).

Disclosure:  The resolution documents state: “In 2011, Mead Johnson received an allegation of possible violations of the FCPA in connection with the Distributor Allowance in China. In response, Mead Johnson conducted an internal investigation, but failed to find evidence that Distributor Allowance funds were being used to make improper payments to HCPs. Thereafter, Mead Johnson China discontinued Distributor Allowance funding to reduce the likelihood of improper payments to HCPs, and discontinued all practices related to compensating HCPs by 2013. Mead Johnson did not initially self-report the 2011 allegation of potential FCPA violations and did not thereafter promptly disclose the existence of this allegation in response to the Commission’s inquiry into this matter.

Individuals Charged:  No.

Related DOJ Enforcement Action:  No.

BHP Billiton (May 20)

See here [17]here [18] and here [19] for prior posts.

Charges:   None.  Administrative cease and desist order finding violations of the FCPA’s books and records and internal control provisions.

Settlement:  $25 million civil penalty.

Disclosure:   The company disclosed that it received information requests from the SEC in August 2009.

Individuals Charged:  No

Related DOJ Enforcement Action:  No.

FLIR Systems (April 8th)

See here [20] and here [21] for prior posts.

Charges:   None.  Administrative cease and desist order finding violations of the FCPA’s anti-bribery, books and records and internal control provisions.

Settlement:  Approximately $9.5 million (disgorgement of $7,534,000, prejudgment interest of $970,584 and a penalty of $1 million).

Disclosure:   Voluntary disclosure.

Individuals Charged:  Yes in November 2014 (see here [22] for the prior post).

Related DOJ Enforcement Action:  No.

Goodyear (Feb. 24th)

See here [23]here [24] and here [25] for prior posts.

Charges:  None.  Administrative cease and desist order finding violations of FCPA’s books and records and internal controls provisions.

Settlement:  $16,228,065 (disgorgement of $14,122,525 and prejudgment interest of $2,105,540).

Disclosure: Voluntary disclosure.

Individuals Charged:  No

Related DOJ Enforcement Action: No

PBSJ (Jan. 22nd)

See here [26] for a prior post.

Charges: Violations of the FCPA’s anti-bribery, books and records, and internal controls provisions.

Settlement:  The charges were resolved via a deferred prosecution agreement in which the company agreed to pay approximately $3.4 million (disgorgement and interest of $3,032,875 and a penalty of $375,000).

Disclosure: Voluntary Disclosure

Individuals Charged:  Yes (see below).

Related DOJ Enforcement Action:  No.

SEC Enforcement (Individual)

The SEC brought two FCPA enforcement actions against individuals in 2015.  The enforcement actions are summarized below.

Vicente Garcia (August 12th)

See here [27] for the prior post

Charges: None.  Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions and internal controls provisions.

Settlement:  Garcia consented to the entry of the cease-and-desist order and agreed to pay disgorgement of $85,965, which is the total amount of kickbacks he received, plus prejudgment interest of $6,430 for a total of $92,395.

Employer Charged:  Garcia was the former head of Latin America sales for SAP, but at present the company has not been charged

Related DOJ Enforcement Action:  Yes

Walid Hatoum (January 22nd)

See here [26] for the prior post

Charges: None.  Administrative cease and desist order finding violations of the FCPA’s anti-bribery, internal controls, and books and records provisions.

Settlement:  Hatoum consented to the entry of the cease-and-desist order and agreed to pay a $50,000 civil penalty.

Employer Charged:  Yes, Hatoum was a former President of PBSJ lnt’l and PBSJ also resolved an FCPA enforcement action on the same day.

Related DOJ Enforcement Action:  No.