Houston-Based Company Disgorges $5 Million to Settle SEC Enforcement Action

In an SEC cease and desist order filed on August 11, Key Energy Services, Inc., a Houston-based provider of rig-based oil well services, agreed to disgorge $5 million to settle charges that the company violated the books and records and internal control provisions of the FCPA. According to the order, from August 2010 through at least April 2013, Key Energy’s Mexican subsidiary paid bribes of at least $229,000 to a contract employee at Petroleos Mexicanos (Pemex), the Mexican state-owned oil and gas company. In exchange, the subsidiary received Pemex non-public information, advice and assistance on contracts with Pemex, and lucrative amplifications or amendments to those contracts. The funds were allegedly funneled through an entity purporting to provide consulting services, but for which there was no evidence of appropriate authorization of the relationship, and no supporting documentation regarding the purported consulting work performed. According to the SEC, the subsidiary improperly recorded the transfers to the consulting firm as legitimate business expenses, which were consolidated into Key Energy’s books and records. Key Energy allegedly failed to implement and maintain sufficient internal controls, including within the subsidiary relating to interactions with Pemex officials, and failed to respond to indications that the subsidiary was improperly using consultants. Read more…


DOJ Files Suit Against Military Housing Provider for Alleged SCRA Violations

On August 10, the DOJ announced that a private military housing provider agreed to pay $200,000 to settle allegations that it violated the SCRA by obtaining default judgments against active-duty servicemembers and their families and subsequently evicting them. According to the DOJ, the company violated the SCRA when it requested default judgments against active-duty servicemembers without filing the appropriate affidavits “to alert the court of the tenants’ military status.” Under the terms of the proposed consent order, the company must (i) pay each servicemember affected by its actions $35,000 and vacate the judgment; (ii) forgive deficiency balances and request that the credit bureau remove evictions from effected credit reports; and (iii) pay a civil penalty of $60,000 to the United States. The consent order is pending approval by the U.S. District Court for the Southern District of California. The DOJ noted that this is the first case it has filed alleging illicit eviction of servicemembers from their homes.

California AG Harris filed a parallel suit against the defendants, arguing that the evictions violated the California Military and Veterans Code, the SCRA, state debt collection laws, and state privacy laws.


Medical Device Manufacturer Sets Aside Reserves for DPA Breaches

On August 8, a medical device manufacturer announced in an SEC filing that it is “probable” that the company will incur additional liabilities in connection with the company’s 2012 deferred prosecution agreement (DPA) related to FCPA violations in Mexico and Brazil. The company stated that it had set aside funds for this purpose, but did not specify the amount. The company’s SEC filing stated that the company “expects to continue discussions with the SEC and DOJ but the terms of a potential resolution were not certain.” Two months ago, DOJ stated in a court filing that the company had breached the DPA by failing to implement and maintain a compliance program.


Two Companies Reserve Hundreds of Millions of Dollars for Potential FCPA Settlements

Second quarter SEC filings revealed substantial financial reserves set aside by two companies, each under investigation for alleged FCPA violations for over half a decade. If they end up reflecting the size of the ultimate settlements reached, the reserves, totaling hundreds of millions of dollars, would represent some of the largest FCPA enforcement settlements ever reached by the Justice Department.

According to its July 29 Form 6-K/A filing with the SEC, a Brazilian aircraft manufacturer has recognized a $200 million loss contingency in connection with its discussions to settle the DOJ’s investigation into allegations that the manufacturer’s sales executives bribed various Dominican individuals who, in exchange, influenced legislators in the Dominican Republic to approve a $92 million contract and financing agreement for aircraft. The manufacturer also disclosed that a final settlement is likely to include a deferred prosecution agreement and the imposition of an independent monitor to oversee the manufacturer’s compliance with the terms of an agreement. The related criminal case by the Brazilian government against eight of the manufacturer’s sales executives is still ongoing.

On August 2, a publicly-traded hedge fund revealed in its Form 10-Q filing with the SEC that it has raised its FCPA investigation reserve to over $414 million from the $200 million accrued in the prior quarter. The hedge fund disclosed that it was raising the reserve based on ongoing discussions to resolve the matter with the SEC and DOJ.

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Former President of Guatemala Soccer Federation Pleads Guilty in FIFA Investigation

On July 29, the DOJ announced that the former president of the Guatemala soccer federation pleaded guilty to racketeering conspiracy and wire fraud conspiracy charges. The individual was the president of the Guatemala soccer federation from 2009 to 2015. The former president’s guilty plea came in response to allegations that he received bribes in exchange for awarding media and marketing rights to a Florida company for the Guatemalan national soccer team’s World Cup qualifying games. The bribes, totaling hundreds of thousands of dollars, were transmitted from U.S. bank accounts. As part of the plea, the former president agreed to forfeit $350,000 and could be sentenced to a maximum of 20 years for each count.

The guilty plea came as part of the U.S. government’s investigation into corruption in international soccer. 42 individuals and entities have been charged thus far in the investigation, which has been ongoing since May 2015, and the former president is the sixteenth person to plead guilty.

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POSTED IN: Federal Issues, International