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.
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…
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.
On July 25, a Chile-based airline company agreed to settle parallel criminal and civil FCPA matters relating to alleged bribery of Argentine labor union officials through a sham consulting contract with a third party in exchange for the union accepting lower wages and other concessions. The airline company agreed to pay a total of more than $22 million, including a $12.75 million penalty as part of a three-year Deferred Prosecution Agreement (DPA) with DOJ.
As part of the DPA, the company agreed to continue cooperating with DOJ’s investigation, to make improvements to its compliance program, and to retain a compliance monitor for a period of more than two years. In the DPA and in its press release regarding the settlement, DOJ noted that it took into account certain factors that weighed against the company, including that it did not voluntarily disclose the alleged misconduct (which came to light through Argentinian press reports) or discipline the responsible employees. However, DOJ did note that the company cooperated with DOJ’s investigation once the press reports became public, and “provided all relevant facts known to it, including about individuals involved in the misconduct.” Read more…
On July 20, the SEC named Kurt Gottschall Associate Regional Director of Enforcement in its Denver office. Gottschall began his SEC career in 2000 as a staff attorney and has since served as Branch Chief and Assistant Regional Director. Throughout his career, Gottschall has investigated or supervised numerous enforcement matters related to various securities law violations. The announcement notes several of Gottschall’s career highlights, which include pursuing fraud charges and an emergency asset freeze against promoters of a $30 million Ponzi scheme and a financial fraud case against six executives of an insurance agency franchisor and lender.