The SEC has had some notable struggles with the courts in recent years.
The SEC’s neither admit nor deny settlement policy has been questioned by several judges (most notably Judge Jed Rakoff) and is currently before the Second Circuit. In the Gabelli case, the SEC unanimously rejected the SEC’s statute of limitations position.
In recent Foreign Corrupt Practices Act enforcement actions:
Judge Leon expressed concerns regarding the Tyco and IBM enforcement actions and approved the settlements only after imposing additional reporting requirements on the company (for more see this recent Wall Street Journal Risk and Compliance Journal article).
Judge Shira Scheindlin dismissed the SEC’s case against former Siemens executive Herbert Steffen (see here for the prior post).
Judge Keith Ellison granted without prejudice Mark Jackson and James Ruehlen’s motion to dismiss the SEC’s claims that sought monetary damages (see here for the prior post).
The solution to these recent struggles?
With increasing frequency, the SEC is avoiding judicial scrutiny altogether in FCPA enforcement actions.
Thus far this year there have been four corporate SEC FCPA enforcement actions. Three of the four enforcement actions (75%) have bypassed the courts altogether.
As noted in this prior post, the SEC resolved the Total enforcement action via an administrative order.
As noted in this prior post, the SEC resolved the Ralph Lauren action via a non-prosecution agreement.
As noted in this prior post, the SEC resolved the Philips action via an administrative order.
[The SEC resolved the Parker Drilling action via a settled civil complaint – see here]
The above dynamic is the focus of the lead article in the always informative FCPA Update by Debevoise & Plimpton. The abstract of the article by Paul Berger, Sean Hecker, Erin Sheehy and Natalie Gray states:
“After discussing a likely major driver of the use of administrative proceedings, i.e., the uncertainty of federal court action on court-filed settlements requiring judicial approval, [the] article outlines the different resolutions available to the SEC in FCPA cases and highlights the key distinctions between a court-ordered injunction and an administrative cease-and-desist order. [The article] also point[s] out what companies should keep in mind about FCPA settlements achieved via administrative orders. Finally, [the article] examines recent trends in SEC FCPA settlements and explains why companies should expect … to see more FCPA cases settle through administrative proceedings.”
For additional reading on the use of SEC administrative proceedings in FCPA enforcement actions, see this prior guest post.
