On November 4, 2010, the Securities and Exchange Commission ("SEC") and U.S. Department of Justice ("DOJ") announced much-anticipated resolutions of Foreign Corrupt Practices Act ("FCPA") charges in what the SEC described as the "first sweep of a particular industrial sector in order to crack down on public companies and third parties who are paying bribes abroad." The charges were brought against six companies in the oil services industry, as well as global freight forwarding company Panalpina, Inc., a non-U.S. issuer. The SEC's press release indicates that "[t]he FCPA Unit will continue to focus on industry-wide sweeps, and no industry is immune from investigation."
The charges are notable not only for this reason, but also because, according to FCPA Unit Chief Cheryl J. Scarboro, this is the first time the SEC has charged a non-U.S. issuer with violations of the FCPA. Neither Panalpina, Inc. nor its parent, Swiss freight forwarding company Panalpina World Transport, is a U.S. issuer, but the SEC asserted jurisdiction on the basis that Panalpina acted as the "agent" of its U.S.-issuer customers when it bribed foreign officials, and/or aided and abetted its U.S.-issuer customers' FCPA violations.
The alleged facts underlying the charges are that defendants paid millions of dollars in bribes to foreign officials in Nigeria and various other countries during much of the last decade, primarily to circumvent local laws governing the import of goods and materials. In resolving the charges, defendants agreed to pay a total of $156.6 million in criminal penalties and $80 million in civil penalties, disgorgement and prejudgment interest. In addition, the plea agreements and deferred prosecution agreements impose extensive self-monitoring and reporting requirements on defendants over the next three years.
The increasing willingness of enforcement authorities in the U.S. to charge non-U.S. issuers with FCPA violations, as well as their increased focus on industry-wide sweeps, highlights the importance of robust FCPA compliance programs even for non-U.S. issuers whose businesses have some nexus to the U.S.
Click here for a copy of the SEC's press release.
Click here for a copy of the DOJ's press release.