Massachusetts-based Imaging Company and Danish Subsidiary Settle FCPA Charges with the SEC and DOJ

On June 21, the SEC and DOJ announced a nearly $15 million settlement with a Massachusetts-based imaging company and its wholly-owned Danish subsidiary to resolve parallel civil and criminal actions involving FCPA violations. The SEC alleged that, from at least 2001 through early 2011, the subsidiary paid about $20 million to third parties in hundreds of sham transactions with distributors in Russia and shell companies in Belize, the British Virgin Islands, Cyprus, and Seychelles. The sham transactions involved fictitious inflated invoices to the distributors with the over-payments going to third parties identified by the distributors. The subsidiary did not have a relationship with the third parties and did not know if the payments had any business purpose for the distributors.

The settlement is consistent with the settlement offer that the imaging company disclosed last December, and it reflects the company’s agreement to pay $7.67 million in disgorgement and $3.8 million in prejudgment interest to resolve the SEC’s books and records and internal controls charges, and the subsidiary’s agreement to pay $3.4 million in criminal fines in a non-prosecution agreement with the DOJ. The subsidiary’s former CFO also settled with the SEC, agreeing to pay a $20,000 penalty to settle allegations that he knowingly circumvented internal controls and falsified the subsidiary’s books and records.

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SEC Reaches Non-Prosecution Agreements for Bribes of Chinese Officials; DOJ Declines to Pursue FCPA Enforcement Actions

On June 7, the SEC announced it had entered into non-prosecution agreements with two unrelated companies in connection with bribes paid to Chinese officials by foreign subsidiaries. First, a Massachusetts-based internet services provider agreed to pay $652,000 in disgorgement and $19,433 in interest. According to its agreement, the company’s foreign subsidiary had paid bribes to induce Chinese government-owned entities to purchase more services than they needed. Second, a Rhode Island-based residential and commercial building products manufacturer agreed to pay $291,000 in disgorgement and $30,000 in interest. According to that agreement, the company’s subsidiary made improper payments and gifts to Chinese officials in exchange for preferential treatment, relaxed regulatory oversight, and reduced customs duties, taxes, and fees. The agreements each stipulate that the companies are not charged with violations of the FCPA and will not pay any additional monetary penalties. Read more…

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SEC Charges Brokerage Firm with AML Failures

On June 1, the SEC announced that a Wall Street-based brokerage firm agreed to pay a $300,000 penalty to settle charges that it failed to sufficiently evaluate or monitor customers’ trading for suspicious activity and to file suspicious activity reports (SARs) in an alleged willful violation of Section 17(a) of the Exchange Act and Rule 17a-8. The broker-dealer was required to have written AML policies and procedures, which outlined specific examples of suspicious activities that, according to the SEC, “should have triggered internal reviews and, in a number of instances, [(SAR)] filings.” According to the SEC, the broker-dealer failed to file SARs on the following activity: (i) accounts that traded an aberrational percentage of a given stock in a particular day; (ii) accounts of entities that had executives charged with criminal securities fraud; (iii) customer trading that was the subject of grand jury subpoenas and regulatory inquiries; (iv) liquidation of securities followed immediately by large cash transfers; (v) transactions in securities that were subsequently subject to SEC trading suspensions; and (vi) rejections by other broker-dealers of attempts by the firm to transfer customers’ securities. Despite these red flags, the brokerage firm failed to file SARs for more than five years. The case represents the SEC’s first against a firm for solely failing to file SARs.

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SEC Names Christopher Hetner Senior Advisor to the Chair for Cybersecurity Policy

On June 2, the SEC named Christopher Hetner Senior Advisor to the Chair for Cybersecurity Policy. In this capacity, Hetner will serve as a senior advisor to Chair Mary Jo White on all policy matters relating to cybersecurity. Having joined the SEC in January 2015, Hetner currently serves as Cybersecurity Lead for the Technology Control Program within the SEC’s Office of Compliance Inspections and Examinations (OCIE), coordinating cybersecurity efforts across OCIE and lending advice on enforcement matters. As Senior Advisor, Hetner “will be responsible for coordinating efforts across the agency to address cybersecurity policy, engaging with external stakeholders, and further enhancing the SEC’s mechanisms for assessing broad-based market risk.”

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SEC Announces Stephen Cohen’s Departure

On June 3, the SEC announced that Stephen L. Cohen, Associate Director of the Enforcement Division, plans to leave the agency later this month. Cohen joined the SEC in 2004 as the Assistant Chief Litigation Counsel in the Enforcement Division, served as a senior advisor to former SEC Chairman Mary Schapiro from 2009 to 2011, and was appointed Associate Director of Enforcement in 2011. Under Cohen’s direction, the SEC brought enforcement actions addressing a variety of market participants’ alleged violations of federal securities laws.

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