Over the past year, both the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) have continued to aggressively bring cases against companies and individuals for Foreign Corrupt Practices Act (FCPA) violations. 2010 alone saw eight of the 10 largest monetary settlements for FCPA violations in a year, where the combined fines and penalties to the SEC and the DOJ exceeded $1.8 billion.1 Because the heightened focus and aggressive stance in pursuing FCPA violations show no signs of abating, companies with potential FCPA exposure should understand recent enforcement trends and become familiar with measures they can take to ensure compliance with the FCPA. Recent trends from enforcement actions, which are described below, include: investigations of individuals, industry wide sweeps, an increase in penalties and use of tools such as deferred prosecution agreements by the SEC.
Recent Enforcement Trends
Investigation of Individuals
Both the SEC and the DOJ continue to seek enforcement actions against individuals who include corporate executives and decision makers. Commenting on the FCPA enforcement action against Paul Jennings, former CEO of Innospec, for allegedly approving bribes to obtain and maintain business, Cheryl J. Scarboro, chief of the SEC's Foreign Corrupt Practices Act Unit, noted, "We will vigorously hold accountable those individuals who approve such bribery and who sign false SOX [Sarbanes-Oxley Act] certifications and other documents to cover up wrongdoing."2
The SEC also has pursued books and records violations where it was determined that individuals had ultimate responsibility for the improper conduct of employees within an organization. In the Nature's Sunshine Products case, although the SEC's complaint did not allege that the CEO and former CFO had knowledge of any improper payments, the SEC claimed that the company violated the books and records and internal controls provisions of the FCPA in its capacities as "control persons."
The penalties for FCPA violations to which individuals are subject can include prison sentences, substantial fines and related legal fees that their employers likely will be prevented from paying. As a result, individuals with potential FCPA exposure, even in the control person context, need to obtain a thorough understanding of the Foreign Corrupt Practices Act and take preventative measures to minimize violations.
Industry wide Sweeps
The Panalpina case, which saw...