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Harry Cassin
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Thomas Fox
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Bill Waite
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Eric Carlson
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Ericsson’s FCPA disgorgement is second biggest. But is it legal?

Last week’s $1.06 billion blockbuster resolution by Sweden’s Ericsson included disgorgement to the SEC of $540 million. By our count that’s the second biggest disgorgement ever ordered in an FCPA enforcement action.

With the addition of Ericsson, mobile phone companies now fill three of the top five spots on the FCPA disgorgement list.

Seven companies on the list are based outside the United States, and three inside (Och-Ziff, KBR, and Alcoa).

What’s the legal basis for disgorgement?

The SEC is authorized to use it as an equitable remedy under the Securities Exchange Act of 1934, which says at 15 U.S.C. § 78u-2,

In any proceeding in which the Commission or the appropriate regulatory agency may impose a penalty under this section, the Commission or the appropriate regulatory agency may enter an order requiring accounting and disgorgement, including reasonable interest. The Commission is authorized to adopt rules, regulations, and orders concerning payments to investors, rates of interest, periods of accrual, and such other matters as it deems appropriate to implement this subsection.

(Our emphasis)

In 2017 the U.S. Supreme Court ruled in Kokesh v. SEC that the SEC uses disgorgement essentially as a penalty. Therefore, the court said, disgorgement should be subject to the same five-year statute of limitations as penalties.

Based on the “penalty” reasoning in Kokesh, two defendants in another securities fraud case have asked the Supreme Court to consider whether the SEC can seek disgorgement at all. In November the Supreme Court agreed to hear the case.

Disgorgement first appeared in an FCPA enforcement action in 2004 when ABB Ltd disgorged $5.9 million to resolve books and records and internal controls offenses. Since then the SEC has used disgorgement in most of its FCPA-related enforcement actions.

Disgorgement doesn’t appear in all big FCPA cases. When Russian telecom MTS paid $850 million earlier this year to resolve FCPA violations in Uzbekistan, it paid the SEC a civil penalty of $100 million but no disgorgement. The DOJ imposed a separate fine and $40 million in criminal forfeiture but also no disgorgement.

*     *     *

Here are the current top ten FCPA-related corporate disgorgements (including pre-judgment interest):

1. Petrobras $933.5 million in 2018*

2. Ericsson $540 million in 2019

3. Telia $457 million in 2017

4. VimpelCom $375 million in 2016

5.  Siemens $350 million in 2008

6.  Teva $236 million in 2016

7.  Och-Ziff $199 million in 2016

8.  KBR $177 million in 2009

9.  Alcoa $161 million in 2014

10.  Total S.A. $153 million in 2013

Fresenius falls off the top ten disgorgement list with its $147 million payment to the SEC in 2019.

Other big FCPA disgorgements include Panasonic Corporation and its aviation unit, which disgorged $143 million to the SEC in 2018. In 2017 JPMorgan Chase disgorged $130.5 million to resolve FCPA offenses, and in 2010 Snamprogetti disgorged $125 million.

An individual, Jeffrey Tesler of the UK, agreed to an FCPA-related forfeiture of $149 million in 2011 in connection with the TSKJ Nigeria enforcement actions. Forfeiture resembles disgorgement but is a different remedy, so we haven’t included Tesler on our disgorgement top ten list.

For comparison, here’s our current list of the top ten FCPA enforcement actions.


* The SEC allowed Petrobras to credit against the disgorgement the money it had already paid into a settlement fund for U.S. shareholder litigation. If for some reason Petrobras hadn’t disgorged that amount within a year through payments to the U.S. class action fund or otherwise, then it was obligated to pay the money directly to the SEC.

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