FCPA settlement math multiplies confusion

Last Thursday, Colombian conglomerate Grupo Aval and its subsidiary agreed to pay $80.8 million to settle FCPA offenses. In a Friday filing with the SEC, to clarify media reports, Grupo Aval said it will only be paying the U.S. either $60.6 million . . . or $24 million. What gives?

Here’s the excerpt from Grupo Aval’s August 11, 2023 6-K filing with the SEC:

In connection with the information circulating in the local Colombian media, Grupo Aval Acciones y Valores S.A. (“Grupo Aval”) and Corporación Financiera Colombiana S.A. (“Corficolombiana”), wish to clarify that the resolution with the U.S. Securities and Exchange Commission (“SEC”) establishes an amount to be paid to the SEC of USD40,269,289 and the resolution with the U.S. Department of Justice (“DOJ”) establishes a final amount to be paid to the DOJ, after credits, of USD20,300,000 for a total amount for these two agreements of USD60,569,289, amounts that will be paid by Corficolombiana and that will have an approximate impact of USD24,000,000 on Grupo Aval’s consolidated financial statements explained by its ownership stake in Corficolombiana.

When calculating FCPA-related settlement amounts, the FCPA Blog uses the following guidelines:

The total monetary value of the enforcement action is derived from the enforcement documents filed or otherwise produced by the DOJ or SEC or both. The settlement includes all criminal and civil penalties imposed on the highest-level entity and all related entities named in the enforcement action documents, as well as special assessments, forfeiture, disgorgement, and prejudgment interest, without regard to where the DOJ and / or SEC said the money would or could be paid.

In other words: DOJ Order + SEC Order = Total FCPA Settlement.

But the total FCPA settlement amount is not the same as the amount actually paid to the U.S. Treasury. Checks made out to the U.S. government may be considerably smaller.

Credits

Grupo Aval and its subsidiary will likely end up paying the U.S. government a total of $60.6 million, but the total amount ordered by the U.S. settlement is $80.8 million.

The DOJ said it would credit $20.3 million in payments made by the companies to the Colombian government to settle charges related to the same activity.

Here’s how the DOJ said it in its release concerning the settlement with Grupo Aval’s subsidiary, Corficolombiana:

The Department has agreed to credit up to half of that criminal penalty against money that the company and its subsidiary, Estudios y Proyectos del Sol S.A.S. (Episol), paid to Colombia’s Superintendencia de Industria y Comercio (SIC), for violations of Colombian laws related to the same conduct, so long as the company and Episol drop their appeals of the SIC resolution.

If Corficolombiana doesn’t comply with the DOJ stipulations to pay $20.3 million to the SIC and drop the appeals, it will need to pay the DOJ the remaining $20.3 million criminal penalty to satisfy the terms of the deferred prosecution agreement.

Ownership

There are some lingering questions about the total payout by Grupo Aval. From Thursday’s SEC administrative order:

Grupo Aval shall, within 10 days of the entry of this Order, pay disgorgement of $32,139,731 and prejudgment interest of $8,129,558 to the Securities and Exchange Commission for transfer to the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). 

According to the SEC, Grupo Aval must pay $40.2 million in disgorgement and interest. The company stated in the 6-K above that its hit would be $24 million.

Where’s the other $16.2 million going to come from? We’re not told. Perhaps it will be reimbursed by Grupo Aval’s subsidiary or other partners so the final economic impact on Grupo Aval is $24 million.

It’s complicated to figure out who pays what (and in what countries) in FCPA settlements, that’s why we stick to what is ordered in the DOJ and SEC documents.

Because of this, the total amount ordered in the U.S. settlement for Grupo Aval and its subsidiary is $80.8 million.

Finding the exact settlement amount of an FCPA corporate resolution is not always straightforward, and there are many different ways to do the math.

This is how the FCPA Blog calculates FCPA-related settlement amounts, and we aim to stay consistent with the methodology laid out above.