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SEC annual report touts FCPA enforcement

The U.S. Securities and Exchange Commission (SEC) published its 2013 Agency Financial Report this week to detail its results for the President, Congress and public.

By the end of the 2013 fiscal year, the SEC had obtained total penalties and disgorgements of $3.4 billion, an increase from the $3.1 billion awarded the year before, it said in the report.

FCPA enforcement is important so that investors will “have faith that the economic performance of the public companies reflects the lawful considerations of markets, price and product, rather than a mirage from bribery and corruption,” the SEC said.

The agency released its 120-page joint FCPA guidance with the Department of Justice this year to help companies of all sizes understand issues related to the law.

The SEC also pursued enforcement actions and sited the following cases:

  • Allianz SE (December 2012): Facts — The SEC investigation uncovered 295 insurance contracts on large government projects that were obtained or retained through improper payments by Allianz’s subsidiary in Indonesia to employees of state-owned entities. An audit of accounting records showed managers were using special accounts to make illegal payments to government officials, and the misconduct continued in spite of the audit’s findings. Its external auditor found that the company failed to account properly for illegal payments disguised in invoices as commissions for government agents or that were disguised as as overpayments by government insurance contract holders. Compliance Problem — Allianz lacked the internal controls it needed to detect and prevent the wrongful payments and accounting practices. Penalty — Allianz agreed to pay more than $12.3 million to settle the SEC’s charges.
  • Eli Lilly and Company (December 2012): Facts — Improper payments were made by its subsidiary to foreign government officials to win millions of dollars in business in Russia, Brazil, China and Poland. The SEC alleged that the pharmaceutical company’s Russian subsidiary used offshore ‘marketing agreements’ to pay millions of dollars to third parties chosen by government customers or distributors that rarely provided any services and sometimes were used to funnel money to government officials to obtain business. Compliance Problem — When the company became aware of possible FCPA violations in Russia, Eli Lilly did not curtail the subsidiary’s use of the marketing agreements for more than five years. And its subsidiaries in other countries, such as Brazil, China and Poland, also made improper payments to third parties associated with government officials. Penalty — Eli Lilly agreed to pay more than $29 million to settle the SEC’s charges.
  • Siemens Aktiengesellschaft (April): Facts — A civil action was brought by the SEC against a former officer and board member of Siemens Aktiengesellschaft named Uriel Sharef for his role in paying more than $27 million of bribes to senior government officials in Argentina to secure a $1 billion contract with that government. The contract involved the furnishing of identity cards for Argentinian citizens, which Sharef and his associates would supply. Sharef was the most senior officer charged in the scheme, although six defendants — other Siemens executives — were charged. Compliance Problem — Sharef’s role involved coordinating with payment intermediaries in the United States to facilitate the bribes and enlisting subordinates to conceal the payments by circumventing Siemens’ internal accounting controls. Penalty — Sharef consented to the final judgment, which enjoined him from further violations of the FCPA and payment of $275,000 in civil fines. It is the second-highest penalty ever assessed against an individual in an FCPA case.
  • Ralph Lauren Corporation (April): Facts — Improper payments were made to secure the importation of Ralph Lauren products into Argentina without the necessary paperwork to avoid an inspection of prohibited products and to avoid general inspections by customs officials. The bribes made in money and gifts totaled more than $593,000 were discovered by Ralph Lauren Corp. during the implementation of an FCPA compliance training program in Argentina. Compliance Problem Solved — The SEC did not charge the company because it had promptly discovered and reported the violations on its own initiative  during an FCPA training program conducted in Argentina. The company also cooperated so thoroughly with the SEC’s investigation, saving the SEC a lot of time and resources. Penalty — The SEC used a non-prosecution agreement for the first time in a case involving FCPA misconduct.
  • Total S.A. (May): Facts — The France-based oil and pas company was charged with paying $60 million in bribes to intermediaries of an Iranian government official who then exercised his influence to help the company obtain valuable contracts with the National Iranian Oil Company. Total allegedly made more than $150 million in profits through the bribery scheme, and the company disguised the illegal payments by entering into sham consulting agreements with intermediaries of the Iranian official and mischaracterizing the bribes in its books and records as legitimate expenses related to the consulting agreements. Compliance Problem — Total had inadequate systems to review the consulting agreement properly, and it lacked sufficient internal controls to comply with the federal laws prohibiting bribery. Penalty — Total agreed to pay disgorgement of more than $153 million in illicit profits and retain an independent compliance consultant to review and consult on Total’s compliance with the FCPA.


Julie DiMauro is the executive editor of FCPA Blog and can be reached here.

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