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Large Firm Will Pay Over $280 Million to Settle FCPA Charges

A large retailer agreed to pay more than $282 Million to settle charges brought by the Department of Justice and the SEC that it failed to implement anti-corruption procedures required by the Foreign Corrupt Practices Act. The prosecutors assert that the company knew about FCPA violations including unlawful payments routed through intermediaries as far back as 2000 but failed to take any meaningful action until 2011. Alleged failures included neglecting to follow up on obvious red flags raised by the internal audit function, revising internal recommendations, delegating compliance to in-country business units, and failing to implement sufficient training. An SEC enforcement official maintains that the company “valued international growth and cost-cutting over compliance.”

The Foreign Corrupt Practices Act requires registrants to implement rigorous compliance and internal controls to prevent unlawful payments to foreign government officials. Violations can result in substantial civil and criminal penalties.

IT Firm Pays Over $25 Million for Bribing Foreign Officials; Execs Charged

An IT outsourcing firm agreed to pay over $25 Million in disgorgement, interest and penalties for violating the Foreign Corrupt Practices Act by paying bribes to Indian government officials to build facilities there.  The SEC and the Department of Justice have also charged the firm’s President and Chief Legal Officer with approving and facilitating the transactions.  According to the SEC, Indian officials demanded bribes to grant construction permits, and the firm approved and arranged such payments through a third-party contractor.   The SEC alleges that the firm hid the bribes by falsifying construction change orders.  The SEC charged the company on the legal theory of respondeat superior whereby the company is responsible for the actions of its senior executives.

Firms doing business outside the United States must create compliance infrastructure to prevent employees at any level from paying bribes.  Violations of the FCPA carry severe civil and criminal penalties. 

Asset Manager Pays $64 Million for Bribing Foreign Officials

 The SEC ordered a large asset manager to pay over $34 Million in disgorgement and interest to settle charges that it bribed foreign officials to obtain investment mandates.  The firm also agreed to pay a $32 Million criminal fine and execute a non-prosecution agreement with the Department of Justice.  The SEC alleges that employees at the asset manager knew that payments made by a foreign subsidiary to a solicitor were used to bribe foreign officials with power to direct investments by sovereign wealth funds.  The SEC accuses the firm for violating the internal control provisions of the Foreign Corrupt Practices Act and for having insufficient internal accounting controls.

OUR TAKE: Compli-pros must implement enhanced procedures when their firms seek to attract foreign government clients.  Procedures should include vetting of solicitors and due diligence into payments.

SEC Sues Former State Pension Official for Accepting Kickbacks to Steer Commission Business


The SEC commenced enforcement proceedings against a public plan’s former Fixed Income Director and two brokers for a kickback scheme whereby the public official steered brokerage business in exchange for personal gifts.  The U.S. Attorney’s Office also announced parallel criminal charges.  The SEC alleges the brokers bribed the public official with combined gifts totaling more than $180,000 over a 2-year period, which gifts included jewelry, tickets, trips, restaurants, cocaine, and prostitutes.  The SEC also asserts that the 3 respondents conspired to hide the gifts from reporting and disclosure.  The SEC charges that the public official breached his fiduciary duty to the public plan and thereby violated the securities laws.  The SEC’s Enforcement Director expressed the SEC’s position on public corruption: “This action demonstrates that the SEC will not tolerate public officials who abuse public pension funds to satisfy their own greedy and wanton desires.”

OUR TAKE: The SEC is expanding its regulatory jurisdiction by pursuing public corruption cases.  Although the public official’s alleged conduct certainly violated the plan’s policies and state (and federal) laws, the SEC employs a broad application of the fiduciary duty to assert that the conduct amounted to fraud in the purchase or sale of a security.  The SEC may use this same legal theory to enforce the DoL’s fiduciary rule.


Foreign Official Hiring Program Results in $264 Million in Fines and Penalties


A large investment bank agreed to pay over $264 Million including $130 Million to the SEC, $72 Million to the Justice Department, and nearly $70 Million to the Federal Reserve Board, for violating the Foreign Corrupt Practices Act by giving jobs in return for investment banking business.  The SEC charges that the respondent bypassed normal procedures to hire friends and relatives of senior officials at government entities in order to secure investment banking assignments.  The SEC asserts that those responsible for the program knew its illegality and intentionally misled internal audit and compliance reviews.  According to the SEC, the referral program resulted in the hiring of 200 employees over a 7-year period and generated in more than $100 Million in revenue.

OUR TAKE:  This is the second major FCPA case in the last several weeks (see https://cipperman.com/2016/10/04/large-hedge-fund-manager-ceo-pay-413-million-settle-bribery-charges/).   The SEC intends to review FCPA compliance and bring enforcement actions with firms seeking business with foreign government entities.