TRACE International recently published the “Global Enforcement Report 2012,” which you can se on the TRACE website (registration required to view report). While the report notes that U.S. and global anti-bribery efforts declined last year, the first five months of 2013 indicate renewed regulatory interest in anti-bribery enforcement.
On May 29th, the SEC and U.S. Justice Department filed Foreign Corrupt Practices Act (“FCPA”) charges against France-based oil and gas company Total S.A. The regulators allege that Total paid $60 million in bribes to intermediaries of an Iranian government official to help the company obtain oil and gas field development contracts. The SEC’s order requires Total to pay disgorgement of $153 million profits and retain an independent compliance consultant to review and report on Total’s compliance with the FCPA. In the parallel criminal proceedings, Total agreed to pay a $245.2 million penalty as part of a deferred prosecution agreement. Charges also were recommended by the prosecutor of Paris (François Molins, Procureur de la République) of the Tribunal de Grande Instance de Paris for violations of French laws. See in the Matter of Total S.A., SEC Release No. 34-69654.
In April, the SEC instituted settled administrative proceedings against Koninklijke Philips Electronics for the actions of its Polish subsidiary. Despite the fact that Philips self-reported the violations, cooperated with the investigation and undertook numerous remedial measures, the SEC still required Philips to pay disgorgement and prejudgment interest of $4,515,178.00 to settle the case. See in the Matter of Koninklijke Philips Electronics N.V., SEC Release No. 34-69327.
The SEC took a different tack, however, in its case against the Ralph Lauren Corporation. Instead of charging Ralph Lauren Corporation with violations of the FCPA, the Commission entered into a first-of-its-kind non-prosecution agreement (“NPA”) with the clothing firm. The Commission explained that the company’s prompt reporting of the violations on its own initiative, the completeness of the information it provided, and its extensive, thorough, and real-time cooperation with the SEC’s investigation led the SEC to enter into the NPA.
Of additional note is the fact that Ralph Lauren Corporation did not have an FCPA compliance program in place at the time of the violations. The violations were uncovered when the company instituted the FCPA program. Nevertheless, the company has not been required to hire an FCPA monitor and the settlement payments it must make, slightly more than $700,000 to the SEC and $882,000 to the Department of Justice, are relatively modest.
More recently, the SEC filed one of the few FCPA cases to be brought against a financial services firm. It alleges that bond traders at Direct Access Partners, a broker-dealer, paid bribes to a high-ranking Venezuelan finance official to secure the bond trading business of a state-owned Venezuelan bank. The Justice Department has filed related criminal charges. Read the SEC Press Release here. The alleged violations were uncovered during a routine SEC examination of the firm and, according to Traders Magazine, have led to Direct Access Partners’ effective closure.
Two recent federal court cases provide additional insight into FCPA enforcement. In SEC v. Straub, the potential cross-border and long-lasting reach of the FCPA was made plain. The SEC filed charges against executives at Deutsche Telekom’s subsidiary, Magyar. The U.S. District Court for the Southern District of New York held that it had personal jurisdiction over the executives, even though they were not U.S. residents, because (1) they allegedly engaged in conduct designed to violate U.S. law, (2) Magyar and Deutsche Telekom list securities on the NYSE, and (3) both companies file with the SEC. The statute of limitations did not run because defendants were not present in the U.S. Moreover, the defendants’ use of email provided the predicate for interstate commerce. Although the emails originated and terminated outside the U.S., they were routed through the U.S. The fact that defendants may not have known that was immaterial.
The limit of the SEC’s FCPA reach, however, was outlined by a different Southern District of New York judge. In SEC v. Sharef, the SEC brought FCPA charges against foreign former executives who allegedly participated in a scheme to bribe Argentine government officials. One defendant, Herbert Steffen, sought dismissal for lack of personal jurisdiction. Granting the motion, the Court held that Steffen’s actions were too attenuated to establish minimum contacts. Steffen may have urged the payment of bribes but the bribery did not occur until a co-defendant received authority from superiors. And Steffen did not participate in the cover-up. Jurisdiction over foreign defendants based on SEC filings has its limits, concluded the Court.