In what may be the first case of its kind, a U.S. company that has no securities traded on an exchange but files periodic reports with the Securities and Exchange Commission has disclosed an internal investigation into possible Foreign Corrupt Practices Act violations.
In a December 30, 2009 SEC filing (here), Tampa-based PBSJ Corporation said it will miss the filing deadline for its Annual Report on Form 10-K for the year ended September 30, 2009 “due to an internal investigation being conducted by the Audit Committee of the Board of Directors.” The company said the purpose of the internal investigation “is to determine whether any laws have been violated, including the Foreign Corrupt Practices Act, in connection with certain projects undertaken by PBS&J International, Inc., one of the Company’s subsidiaries, in certain foreign countries.”
The FCPA’s antibribery provisions apply to “domestic concerns,” which include all U.S. companies; the books and records and internal controls provisions apply only to “issuers” — corporations that have issued securities that have been registered in the United States or who are required to file periodic reports with the SEC. See 15 U.S.C. §§ 78c(a)(8), 78dd-1(a) and our post here.
PBSJ Corporation is a “domestic concern” subject to the anti-bribery provisions. It has no publicly traded securities. But because it has so many shareholders — about 4,000 mainly current and former employees — it must file periodic reports with the SEC. That makes it an “issuer” subject to the books and records and internal controls provisions.
The Company said it self-reported to the SEC and Justice Department “the circumstances surrounding this internal investigation. Should the SEC or DOJ decide to conduct its own investigation, the Company will cooperate fully.”
PBSJ provides engineering and construction management for government agencies worldwide, usually for road-building projects. It has 80 offices and 3,900 employees.
The company has had other compliance problems and internal controls lapses. The Tampa Business Journal said in March 2005 PBSJ discovered “what eventually was determined to be a $36.6 million embezzlement scheme by the former CFO and two other workers. Discovery of the scheme triggered a series of events, including repayments to clients that had been overbilled in an effort to cover the missing funds and a restatement of financial information for several years.”
The company was also investigated by the Federal Election Commission. The FEC said for years PBSJ hid campaign contributions to political candidates. It also encouraged employees to contribute to campaigns, then secretly reimbursed them for their payments, which violates the law.
Why wouldn’t the company also possibly be an issuer subject to 30A? Doesn’t this analysis require a review of whether the company is an issuer "which has a class of securities registered pursuant to Section 12 [of the Exchange Act] or which is required to file reports under Section 15(d) [of the Exchange Act]"?
The Company’s 10K states that its securities are registered pursuant to Section 12(g) of the Exchange Act. Section 30A of the Exchange Act (the issuer-specific anti-bribery provisions) provides that it shall be unlawful for any issuer which has a class of securities registered pursuant to Section 12 of the Exchange Act or which is required to file reports under Section 15(d) of the Exchange Act to, essentially, make a corrupt payment of a bribe. Thus, the company fits within the definition of an "issuer" for purposes of 30A. Just because the company’s securities are not traded on a stock exchange in the US does not necessarily mean that it is not an "issuer" for purposes of 30A.
Am I missing something?
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