On July 11, a Wisconsin-based global technology company agreed, pursuant to an administrative cease and desist order and without admitting or denying the SEC’s findings, to pay $14.3 million to settle the SEC’s allegations that it violated the books and records and internal controls provisions of the FCPA. The charges related to actions taken by managers and employees of the company’s wholly-owned Chinese subsidiary, between 2007 and 2013, to make payments to sham vendors to effect bribes and improper payments to employees of Chinese government owned shipyards, ship-owners, and others, as well as to obtain and retain business and personally enrich the subsidiary’s employees. The company’s settlement includes a disgorgement of $11,800,000, prejudgment interest of $1,382,561, as well as a civil penalty of $1,180,000. The company also agreed to a one-year period of self-reporting to the SEC on the status of its FCPA and anti-corruption related remediation and compliance enhancements. 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.
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.
On June 7, House Financial Services Committee Chairman Jeb Hensarling (R-TX) released details of the Financial CHOICE (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) Act, a Republican proposal to dismantle the Dodd-Frank Act. According to Chairman Hensarling’s remarks delivered to the Economic Club of New York, “Dodd-Frank has failed.” The goals of the proposed plan are: (i) to promote economic growth through competitive, transparent, and innovative capital markets; (ii) to provide the opportunity for every American to achieve financial independence; (iii) to protect consumers from fraud and deception as well as the loss of economic freedom; (iv) to end taxpayer bailouts of financial institutions and too big to fail institutions; (v) to manage systemic risk; (vi) to simplify in order to prevent powerful entities from taking advantage of complexity in the law; and (vii) to hold Wall Street and Washington accountable. Importantly, Section Three (“Empower Americans to achieve financial independence by fundamentally reforming the CFPB and protecting investors”) proposes, among other things, to replace the current single director structure of the CFPB with a five-member, bipartisan commission subject to congressional oversight and appropriations. Section Three further proposes to repeal indirect auto lending guidance. As part of its goal to end “too big to fail” institutions and bank bailouts, Section Two of the Act proposes to retroactively repeal FSOC’s authority to designate firms as systematically important financial institutions. Finally, in an effort to “unleash opportunities for small businesses, innovators, and job creators by facilitating capital formation,” Section Six of the Act proposes to repeal the Volcker Rule, along with other sections and titles of Dodd-Frank that limit capital formation.
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…