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Harry Cassin
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Editor Emeritus

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Contributing Editor

Julie DiMauro
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Thomas Fox
Contributing Editor

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Bill Waite
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Russell A. Stamets
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Richard Bistrong
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Eric Carlson
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The SEC Spreads The Love

Millipore’s announcement last week was unusual. The Massachusetts-based life science firm said in its 10-Q that the SEC won’t bring an enforcement action for potential Foreign Corrupt Practices Act violations the company self-reported in 2006. “By its letter on May 14, 2009,” Millipore said, “the Securities and Exchange Commission notified us that its investigation has been completed and it will not pursue any enforcement action on this matter.”

Not many companies hear that sort of good news, so why did Millipore?

The company said it decided in January 2006 to consolidate the results of its 40 percent-owned India joint venture. It learned then through its own internal controls “that certain payment and commission practices at the India JV [raised] issues of compliance.” There was an internal investigation, self-reporting to the SEC and DOJ, and “certain corrective actions.” That’s all we know.

But the key to the SEC’s no-enforcement decision is probably Millipore’s ownership of only 40 percent of the India JV. Under the FCPA’s internal controls provisions, an issuer holding 50 percent or less of the voting power in another firm is required to use its influence in good faith — to the extent reasonable under the circumstances — to cause the other firm to devise and maintain a system of acceptable accounting controls. (Section 13(b)(6) of the Securities Exchange Act of 1934) That provision, part of the FCPA’s 1988 Amendments, was meant “to recognize that it is unrealistic to expect a minority owner to exert a disproportionate degree of influence over the accounting practices of a subsidiary.” (H.Rept. 100-576, at 917)

Section 13(b)(6) also says that an “issuer which demonstrates good faith efforts to use such influence shall be conclusively presumed to have complied” with its internal controls obligations. Conclusively presumed to have complied. So the test is whether Millipore acted in good faith to cause the India JV to devise and maintain acceptable accounting controls. Not whether the JV did so or not.

Is it time to celebrate? Not quite. Although now cleared by the SEC on the internal controls side, what about antibribery aspects? Did any of Millipore’s employees know about or help the India joint venture make questionable payments? If so, the Justice Department could still come calling. But if no one at Millipore knew anything (which seems likely, given the SEC’s no-action), then the company couldn’t have acted “knowingly” to help the JV make corrupt payments to foreign officials in violation of the FCPA.

The DOJ rarely tells companies formally that they’re in the clear. For Millipore, the FCPA’s five-year statute of limitations will be up in 2011, assuming the company didn’t waive the time bar after it self-reported the India JV’s potential compliance problems.

Millipore Corp. trades on the New York Stock Exchange under the symbol MIL.

Millipore’s Form 10-Q filed August 12, 2009 for the period ending July 04, 2009 can be downloaded here.

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From U.S. v. Green. The AP reported here that the Los Angeles trial of Hollywood producers Gerald and Patricia Green has been delayed for at least a week. “A spokesman for the U.S. attorney’s office in Los Angeles, said Tuesday that the delay was due to the availability of a prosecution witness. Jury selection is slated to begin Aug. 25.” The Greens are charged with violating the FCPA and other laws by paying $1.8 million in bribes to Thai officials in exchange for $14 million in contracts. The movies they produced include Salvador, Rescue Dawn, and Diamonds.

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  1. Is this post suggesting that the SEC's letter only relates to the internal controls provisions? The SEC has brought actions under the anti-bribery provisions in a number of cases (e.g. Halliburton)–so doesn't it stand to reason that in this case the SEC was giving Millipore a pass on the anti-bribery provisions as well?

  2. The SEC might have been giving Millipore a pass on the antibribery as well. But in most cases it concentrates on the accounting and books and records provisions, while the DOJ enforces the antibribery provisions.

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