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Enforcing FCPA violations, the SEC flexes its muscle

October 11, 2016

This year, the SEC has brought a record number of enforcement actions under the Foreign Corrupt Practices Act of 1977 against corporations or their executives for bribery of foreign officials. Below are summaries of three such recent high-profile actions.

GlaxoSmithKline plc

GlaxoSmithKline plc agreed to pay the SEC a $20 million civil penalty to settle charges that it violated the FCPA requirement to maintain accurate books and records when its China-based subsidiaries participated in pay-to-prescribe schemes in an effort to increase sales. In an administrative proceeding announced on September 30th, the SEC contended that sales and marketing managers within the company’s China-based subsidiaries took part in schemes involving the transfer of money and gifts to healthcare professionals in order to improperly influence them. This brought millions of dollars in increased sales of GlaxoSmithKline’s pharmaceutical products to China’s state health institustrong-armtions. The SEC alleged that the company failed to adopt an effective anti-corruption compliance program to identify and avoid these types of schemes. Since there was no such program, the improper payments were inaccurately reflected in GlaxoSmithKline’s books and records as legitimate travel and entertainment expenses, marketing expenses, speaker payments, medical associations payments, and promotion expenses. The SEC concluded that the company was in violation of the FCPA’s internal controls and books-and-records provisions. Without admitting or denying the allegations, GlaxoSmithKline settled the charges by consenting to the entry of a cease-and-desist order, agreeing to pay the $20 million civil penalty, and agreeing to report to the SEC for two years on the status of its remediation and compliance measures. The company has reportedly publicly apologized for its role in the scandal, put an end to doctor speaking fees, and completely ended quotas for its sales reps. It is also being reported that GlaxoSmithKline’s China subsidiary has tripled an in-house compliance team, which now checks every submitted receipt.

Och-Ziff Capital Management Group

On September 29th, the SEC announced that hedge fund Och-Ziff Capital Management Group agreed to settle civil charges of FCPA violations by paying the agency $199 million. In addition, Och-Ziff’s founder and CEO agreed to pay approximately $2.2 million to settle SEC charges that he caused certain violations along with the hedge fund’s CFO, who also agreed to settle the charges. After examining the way in which financial services firms were gaining investments from sovereign wealth funds overseas, the SEC determined that Och-Ziff used intermediaries, agents, and business partners to bribe high-level government officials in Africa. According to the SEC’s order, the illicit payments encouraged the Libyan Investment Authority sovereign wealth fund to invest in the hedge fund’s managed funds. Other bribes were paid to secure mining rights and improperly influence government officials in Libya, Chad, Niger, Guinea, and the Democratic Republic of the Congo. The SEC found that Och-Ziff failed to maintain proper internal controls to detect the bribes. The SEC also found that the hedge fund’s executives ignored red flags and corruption risks and allowed illegal transactions to proceed. In addition to the civil penalty, Och-Ziff will enter into a deferred prosecution agreement with the Justice Department in a parallel criminal proceeding and will pay a criminal penalty of $213 million. Och-Ziff also agreed to retain an independent compliance monitor for three years to guarantee that it stays within the law. The firm also promised to reinforce its internal controls to guard against future violations. Andrew J. Ceresney, head of the SEC’s enforcement division, noted that the hedge fund “engaged in complicated, far-reaching schemes to get special access and secure significant deals and profits through corruption.” According to DealBook, the SEC and the Justice Department are continuing the investigation of other individuals involved in the bribery. The Wall Street Journal added that Och-Ziff now also faces restrictions on how it conducts its fundraising. While the company will still be able to raise money from wealthy investors and institutions, it might first have to endure a lengthy and costly process of seeking approval from state regulators in jurisdictions where it solicits investors. This comes Och-Ziff did not seek an SEC waiver from additional penalties, which are otherwise imposed as soon as courts approve civil law enforcement sanctions or criminal charges.

Anheuser-Busch InBev

On September 28th, the SEC announced beverage and brewing company Anheuser-Busch InBev will pay $6 million to settle charges that it violated the FCPA and whistleblower protection laws in utilizing third-party sales promoters to pay off Indian government officials in order to increase sales and production, and then in attempting to silence an employee who reported the wrongdoing. As the company did not have adequate internal accounting controls to seek out and prevent such improper payments, it failed to ensure that transactions involving the promoters were properly recorded in its books and records. Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, remarked that Anheuser-Busch “recorded improper payments by its sales promoters in India as legitimate expenses in its financial accounting, and then exacerbated the problem by including language in a separation agreement that chilled an employee from communicating with the SEC.” Without admitting or denying the allegations, Anheuser-Busch settled the charges by consenting to the entry of a cease-and-desist order and agreeing to report its FCPA compliance efforts to the SEC in addition to the monetary sanctions. The company also agreed to notify certain former employees that the company does not prohibit employees from contacting the SEC about possible law violations. According to the Wall Street Journal, the SEC has been making it a priority to end corporate efforts to silence prospective whistleblowers with restrictive separation agreements, and this is the fourth company recently penalized by the SEC for allegedly restricting the rights of departing employees.

New document display frame on Securities Mosaic SEC Filings page

September 19, 2016

Last week, we release a redesigned and enhanced version of our document display frame for SEC Filings. It’s only the first stage – a kind of sneak peek — of an ongoing complete redesign and enhancement of our SEC Filings search page, the bulk of which will be released later this fall. (More information on that forthcoming.)

The new document display optimizes presentation of the document text, re-establishing it prominently in the reader’s visual hierarchy and ensuring there is “breathing room” between text and the edge of the frame. The redesign also boasts two new feature enhancements:

Advanced text search capability added to document level.  Harness the power of Boolean connectors and nested search terms when you need to locate words or phrases within a document.  While we’ve long offered advanced text search capability on initial searching — and offer highlighted text hits from that initial search at the document view — we haven’t offered the ability to perform a new advanced text query within a particular document.  Your browser’s Ctrl-F command lets you find specific words, but it lacks the power and flexibility offered by advanced text search, where proximity, wildcard, and “OR” connectors are at your command.  On Securities Mosaic, you now have that capability.

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Navigation feature added to Reference Retriever.  Last year, we dramatically upgraded our Reference Retriever tool by adding, to the document text itself, hyperlinks to references made to other filings or exhibits.  Now, we’ve added a navigation component to the tool, allowing you to quickly locate those hyperlinked references. Just click the search icon, and all references within the document will be highlighted in green.  You can then arrow from one to the next; or click the hyperlink within the document to locate the referenced document.

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For some companies, Brexit hurts so good

August 15, 2016

Now that the initial shock of the Brexit vote has subsided, companies potentially affected by Britain’s anticipated break from the EU are beginning to play out the various scenarios for shareholders.  You can find corporate disclosure on the topic by looking at SEC, SEDAR and UK Filings made since the June 23 referendum.

If there is one word that epitomizes the tone of such disclosure, it is “uncertainty.”  While companies have a bit of a handle on the short-term impact of Brexibrexit-1477615_960_720t – most immediately and palpably, the overnight devaluation of the British Pound Sterling against the Euro and the US Dollar – things get fuzzier when it comes to the long-term horizon.  The biggest questions surround what market access will look like for UK companies doing business in Europe.  That risk, summarized in filings of various companies, is that the UK “could lose the benefits of global trade agreements negotiated by the European Union on behalf of its members, which may result in increased trade barriers which could make our doing business in Europe more difficult.”

With uncertainty comes anxiety.  But that’s not necessarily a bad thing for all companies.  Indeed, some corporations see in Brexit a business opportunity—an opportunity rooted precisely in that feeling of anxious uncertainty.  For example, there is a general belief that the post-Brexit hangover will compel regulators to keep interest rates low, which could foster growth in the financial services sector.  “Brexit will likely benefit us,” explains commercial lender Walker & Dunlop in its recent 10-Q, “as borrowers take advantage of low mortgage interest rates and as a ‘flight to safety’ results in an increase of global capital investments in U.S. markets, including commercial real estate, resulting in higher loan origination and investment sales activity.”

Similarly, the price of gold and other precious metals surged following the vote, with investors presumably seeking a “safe haven” from the volatility of the market.  Those positioned to profit from that circumstance have been quick to pounce on the opportunity. “A continued destabilization of the Europe may occur in the wake of last night’s historic vote in the UK to leave the EU,” intoned the CEO of Lomiko Metals Inc., a British Columbia-based mining company. A grim warning, to be sure, but one with a silver lining: “There is good potential for a renewed interest in junior mining stocks seeking commodities with good demand outlooks such as gold, silver, lithium and graphite.”

Finally, Brexit may emerge as a boon for the legal services industry. That, at least, is the conclusion of Burford Capital Ltd., a UK-based litigation finance firm. Burford provides capital to businesses and law firms to allow them to pursue litigation and other legal services.  Such services are likely to be in higher demand as a result of the UK’s referendum, the company explains in a recent Interim Results report:

Substantively, Brexit will give rise to significant uncertainty for businesses, and demand for legal services tends to flourish during periods of uncertainty, boosting our business collaterally.There is likely to be more litigation as a result of Brexit, and there is no catalyst for any reduction in the volume of litigation.

Once again, it is the “uncertainty” of the situation that creates the climate for business success. As the Burford report continues, “while we regret the macroeconomic disruption and upheaval that Brexit has already caused and doubtless will continue to cause, Brexit is not bad for Burford.”  For companies engaged in certain types of business, Brexit is good precisely because it is bad.


U.K. Filings are here, just in time for AALL

July 13, 2016

Our brand new U.K. Filings search page is now live! To access it, go to Securities Mosaic, click on the “International Filings” tab on the navigation bar, and select U.K. Filings.

The release is just in time for the annual meeting and conference of the American Association of Law Libraries, being held now in Chicago. If you’re attending AALL, please swing by the Lexis Securities Mosaic booth (#603) to say hello and to hear more about what we’AALLve done and where we’re headed.  I’ll be personally present at the booth during much of the show.

In addition, I’ll be hosting a special Exhibitor Showcase on Sunday, July 17 at 1:30 p.m. Get a sneak peek of our soon-to-be-released enhanced search environment for SEC EDGAR filings.  The new Securities Mosaic SEC Filings page features post-search filters, a library of predefined searches, expanded redline comparison tools, section searching on registration statements (S-1, S-3, F-1), instant document download, and links to associated Comment Letter correspondence.  I look forward to hearing your feedback.

U.K. Filings coming soon to Securities Mosaic

June 27, 2016

union-jack-1027898_960_720How will the U.K.’s “Brexit” vote – its historic decision to break from the European Union — impact business in the U.K.?  There’s no better window into companies than their required disclosure in compliance with securities regulations.  And while Lexis Securities Mosaic has long offered the ability to see SEC EDGAR filings made by British companies that are traded on U.S. exchanges, it hasn’t offered access to filings made with U.K. regulators for companies traded on U.K. exchanges.

Until now.

We at Lexis Securities Mosaic are excited to announce the debut of our U.K. Filings search page, coming the week of July 11.  We’ll offer a complete collection, updated daily, of filings available through the National Storage Mechanism of the UK Listing Authority, under the oversight of the U.K.’s Financial Conduct Authority.

Our collection includes all filings by companies that have issued equity securities via the U.K. trading markets, notably the London Stock Exchange and Irish Stock Exchange, going back to the late 1990s.  Find documents related to new listings of securities (prospectuses, listing particulars), periodic reporting and financials (annual reports, current reports, quarterly reports), ownership (including insider activities), and shareholder communication by way of annual general meetings.   There are about 75,000 records in all.

Users can search by document category, document type, filer, date, and advanced text search (supporting both Boolean syntax and natural language constructions).  Custom alerts, available via email or RSS, can be created based on queries.  Search results can also emailed to colleagues or exported into Excel format.

The U.K. Filings search page is included as part of your current Securities Mosaic subscription, and will be found under the “International Filings” search tab, next to SEDAR (Canadian) filings.


Securities Mosaic: Looking forward, looking back

June 21, 2016

In the second half of 2016, Lexis Securities Mosaic will be unveiling some major product enhancements, kicking off in early July with the addition of U.K. Filings from the National Storage Mechanism.  Check this blog next week for more detail on that content addition. And for those who will be attending the 109th annual AALL conference in Chicago next month, I’ll be hosting a special session dedicated toCategory cloud Securities Mosaic, offering a sneak preview of another major feature release coming in September.

As a general rule, though, Blogmosaic is your best source for news and information on Securities Mosaic, including what’s new and what’s on the horizon.  Indeed, a search on the blog’s archive proves the point.  If you click on the the “product enhancements” link in the blog’s “category cloud,” you’ll see a long (and impressive) list of noteworthy enhancements and content additions over the last several years. What have we done for you lately, you ask?  Now you know.  And the best is yet to come!

The Lexis Securities Mosaic Corporate Counsel Report is here!

May 25, 2016

We are proud to announce the inaugural issue of the bi-weekly Lexis Securities Mosaic Corporate Counsel Report.  This newest addition to our venerable suite of news emails is aimed at lawyers who represent the interests of corporations, offering a resource to help them keep on top of the fast-paced, multi-faceted, and rapidly changing world they inhabit.

If you’re a Securities Mosaic subscriber, you can check out today’s issue, hot off the press, here.  Or you can sign up to have the Corporate Counsel Report delivered to your email inbox every other Wednesday.Manage News  Just click on your name in the upper right hand corner of the Securities Mosaic website, select Manage News Emails, and opt in. (You can also go there to opt out – but why would you?)  A personal account is required to receive the Corporate Counsel Report directly; contact your librarian or account administrator if you have questions. Going forward, subscribers will also be able to retrieve or search across past issues of Corporate Counsel Report going back six months by navigating to our News & Blogwatch archive.

If you’re not a Securities Mosaic subscriber, click here to learn more about the Corporate Counsel Report and request a free trial.