SEC Stepping Up FCPA Enforcement

The SEC & FCPA Enforcement

The Securities and Exchange Commission (SEC) continues to ramp up its enforcement of the Federal Corrupt Practices Act (FCPA). In 2010, the SEC’s Enforcement Division created a specialized unit dedicated to enforcement of the FCPA, which prohibits U.S. companies from bribing foreign officials for government contracts and other business. To date, the agency has brought and settled nine separate enforcement actions in 2015.

Bristol-Myers Squibb Co. (BMS) is the most recent company to resolve FCPA charges. The company will pay nearly $14.7 million to settle allegations that its joint venture in China bribed health care providers at state-controlled hospitals in an effort to boost drug sales.

“Certain sales representatives of the joint venture improperly generated funds that were used to provide corrupt inducements [to health care providers] in the form of cash payments, gifts, meals, travel, entertainment, and sponsorships for conferences and meetings in order to secure new sales and increase existing sales,” the SEC stated. “BMS falsely recorded the relevant transactions as legitimate business expenses in its books and records.”

Additional enforcement actions

More enforcement actions are expected in the coming months. In addition to resolved cases, at least 78 companies reported that they are subject to an ongoing FCPA investigation in SEC filing as of September 30, according to Corporate Counsel.

In several cases, the FCPA violations did not involve outright bribes, suggesting that the SEC is making good on its “broken windows” policy in the FCPA arena. As we have previously mentioned on this blog, under the leadership of SEC Chair Mary Jo White, the agency’s enforcement policy is to “pursue even the smallest infractions” as a means of deterring more serious violations.

In its case against Hyperdynamics Corporation, the SEC alleged that the energy company committed books and records and internal controls offenses. Notably, the Department of Justice concluded its FCPA investigation without bringing charges. According to the SEC, Hyperdynamics failed to accurately record certain payments made by its subsidiary based in the Republic of Guinea and also failed to determine whether the company’s subsidiary paid related parties. Last month, Hyperdynamics resolved the FCPA charges by agreeing to pay the SEC $75,000.

In light of the SEC’s increased attention on the FCPA, corporations should focus on strengthening their internal controls and compliance efforts. As the latest enforcement actions highlight, even small violations can lead to costly legal headaches.