[This post is part of a periodic series regarding "old" FCPA enforcement actions]
The FCPA enforcement action against Sam Wallace Company Inc. (“Wallace”) was a first in several regards. It was the first FCPA enforcement action involving both a DOJ and SEC component (all prior enforcement actions were either SEC only or DOJ only) and it was the first FCPA enforcement action involving criminal FCPA books and records charges.
In 1981, the SEC filed a complaint against Wallace (a Texas based construction company), Robert Buckner (Chairman of the Board of Wallace, CEO of Wallace, and a Director of Wallace) and Alfonso Rodriguez (Executive Vice President of Wallace, Regional Manager of various Wallace subsidiaries, and a Director of Wallace). The conduct at issue focused on “payments from Wallace bank accounts totaling at least $1.391 million to a certain foreign official to aid Wallace in procuring and maintaining certain contracts and billings with a certain foreign government.” According to the SEC complaint, the defendants “disguised and concealed such payments on Wallace’s books and records by utilizing, or causing to be utilized, certain false accounting entries which did not reflect the true nature and purpose of, and falsely described the expenditures used in the making of these payments to a certain foreign official.” The SEC complaint for permanent injunction and certain ancillary relief charged FCPA anti-bribery violations as well as a variety of other securities law violations such as Section 10b-5 and filing false reports and proxy statements with the SEC. Without admitting or denying the SEC’s allegations, Wallace agreed to establish a Special Committee of its Board to investigate the matters alleged in the SEC’s complaint and to file the report with the Court and the SEC.
In 1983, the DOJ filed a criminal information against Wallace containing more detail than the SEC’s complaint. According to the DOJ, the recipient of the bribe payments was “John H. O’Halloran, then chairman of the Trinidad and Tobago Racing authority” and the payments were made “in order to obtain and retain a contract to construct the grandstand and receiving building portion of the Caroni Racetrack Project in Trinidad.” The information charges that Wallace, aided and abetted by certain of its officers and employees, caused the Sam P. Wallace & Co. of P.R. Inc. (a wholly owned subsidiary of Wallace whose earnings were consolidated with the financial reports of Wallace) to “create fictitious purchase orders to purported suppliers for the purpose of concealing the withdrawal of corporate funds in order” to pay bribes to O’Halloran. Among other charges, the information charges violations of the FCPA’s books and records provisions. Wallace pleaded guilty and was ordered to pay a criminal fine of $530,000.
In 1983, the DOJ also filed a criminal information against Rodriguez. In the information, the DOJ alleged that the “Trinidad and Tobago Racing Authority was an agency of the government of the Republic of Trinidad and Tobago and was an instrumentality of the Trinidad and Tobago government.” The information charged FCPA anti-bribery violations and Rodriguez pleaded guilty. His sentence was suspended and he was placed on probation for two years and ordered to pay a $10,000 fine.
See here for original source documents from the SEC’s and DOJ’s enforcement action.