Really No Big Deal
Lockheed’s request (which the SEC does not oppose) to be relieved of an SEC permanent injunction stemming from a 1976 (pre-FCPA) enforcement action has been receiving some recent ink (see here and here ”Lockheed Wants Out of 40-Year Old Disclosure Demand”).
I don’t really see this as a big deal given that Lockheed’s reporting obligation is not disappearing, it’s just now subject to a more specific law.
As stated in the unopposed motion:
“On April 13, 1976, the Commission filed a Complaint against Lockheed Martin for violations of Sections 10(b), 13(a), and 14(a) of the Securities Exchange Act of 1934 (and the Commission’s Rules promulgated thereunder) arising out of alleged payments to foreign government officials in the early 1970s. Simultaneous with the filing of the Commission’s Complaint, Lockheed Martin consented to the entry of a final judgment of permanent injunction (the “Final Judgment”) without admitting or denying the Commission’s non jurisdictional allegations.
The Final Judgment was entered by the Court that same day. The Final Judgment incorporated by reference a “Consent and Undertaking” entered into and filed by Lockheed Martin (the “Consent”), pursuant to which Lockheed Martin agreed to undertake several remedial actions. [...] Those actions included (a) the creation of an independent Special Committee to conduct an investigation into the matters alleged in the Commission’s Complaint; (b) the preparation and submission of a full report of the Special Committee’s investigation to the Court, the Commission, and Lockheed Martin’s Board of Directors; and (c) the adoption of a “Statement of Policies and Procedures” regarding “unlawful payments to government officials” (hereinafter “Anti-Corruption Policies and Procedures”). In addition, Lockheed Martin agreed that it would file a Form 8-K with the Commission at least 10 days in advance of any future changes to its Anti-Corruption Policies and Procedures. This prospective requirement—which Lockheed Martin has now complied with for nearly four decades—is the only aspect of the Final Judgment at issue in this motion.
In 2003, the Commission issued a final rule implementing Section 406 of the SarbanesOxley Act of 2002 (the “Sarbanes-Oxley Act”), which directed the Commission to devise and promulgate requirements for the disclosure of “codes of ethics” by public companies. The final rule defines a “code of ethics” as “written standards that are reasonably designed to deter wrongdoing and to promote,” among other things, “[c]ompliance with applicable governmental laws, rules and regulations.” The Commission’s final rule requires public companies to disclose their codes of ethics to the public by either (i) filing them as an exhibit to an annual report (on Form 10-K), or (ii) posting them on the company’s website. The final rule also requires that certain types of changes to a company’s code of ethics must be disclosed within four business days of the change where the company elects to disclose its code of ethics on its website.
In light of the Commission’s final rule, Lockheed Martin—like many other public companies—has elected to make its code of ethics (as well as certain other corporate policies) available to the public by posting them on its corporate website. Among other things, Lockheed Martin’s “Code of Ethics and Business Conduct”—which applies to anyone “conducting business on behalf of Lockheed Martin” (including, but not limited to, its employees), and is made available in 16 different languages—requires strict compliance with all applicable anticorruption laws, including the U.S. Foreign Corrupt Practices Act (“FCPA”). Lockheed Martin also makes its more detailed policy on “Compliance with the Anti-Corruption Laws” available on its website. By virtue of the Final Judgment, however, Lockheed Martin must continue to file a Form 8-K before making any change to its Anti-Corruption Policies and Procedures, notwithstanding its compliance with the Commission’s final rule.”
The bribery and corruption news from Brazil continues to flow. First it was Petrobras-related bribery, then it was various corporate interactions with tax authorities, and now it is advertising industry.
Advertising Age reports
“A former executive at Lowe & Partners’ Brazilian agency, Borghi/Lowe, was detained by police last Friday and a federal judge authorized the agency’s financial and other records to be searched … Ricardo Hoffman, Borghi/Lowe’s former VP and head of the agency’s office in the nation’s capital Brasilia, is said by Federal judge Sergio Moro [...] to have instructed third parties to make payments to then-Congressman Andre Vargas in connection with two government accounts handled by Borghi/Lowe.”
Lowe & Partners is a unit of The Interpublic Group of Companies, Inc., a New York based company.
See here for a 1989 FCPA enforcement action against an advertising agency and various executives.
Voice of America highlights allegations of bribery and corruption in the Democratic Republic of Congo (DRC) by London-based SOCO (a company with ADRs registered with the SEC).
According to the article:
“A member of DRC’s Parliament allegedly admitted to taking monthly payments from SOCO to lobby for the oil company and a high-level SOCO official and a company contractor allegedly admitted that the company paid rebels.
SOCO has “categorically denied” corruption allegations.
“The company operates in accordance with the [British] Bribery Act of 2010, and any allegation to the contrary is categorically denied,” SOCO said in a statement [...]. “Payments to rebel groups have never been, or will ever be, sanctioned by SOCO.”
Across the Pond
thebriberyact.com highlights the 5th birthday of the U.K. Bribery Act (from the date passed, not the date the law went live – July 1, 2011) and asks – “the Bribery Act has moved from crawling to walking. Anyone for cake?” The post notes:
“The Bribery Act was born amid a huge public fanfare, plenty of hype and lots press coverage. Prosecutions would be imminent and UK PLC would be seriously disadvantaged on the global stage as a result of the ‘red tape’ of the Bribery Act. In 2015 it is hard to square the reality of what happened with what the naysayers forecast. A handful of individual prosecutions under the Act but none of them are ‘Bribery Act’ cases in the true sense of the word. Put another way, the hype around the Bribery Act focussed on the potential enforcement of new UK anti-corruption laws against corporates UK and foreign who fell under the long arm jurisdiction of the Act. To date, there has been no corporate prosecution launched and no Deferred Prosecution Agreement disposing of a Bribery Act case. Five years on the UK economy is the strongest in Europe and predictions of the the demise of UK PLC turn out to have been premature. So. What was all the fuss about?”
Precisely. Here was my two cents on the date the Bribery Act went live in 2011.
“As with any new law, there is likely to be a learning phase for both the enforcement agencies and those subject to the law. That was certainly the case in the U.S. in the years following passage of the FCPA in 1977. Thus, it very well may be the case that there are no enforcement actions for some time (recognizing that it often takes a few years from beginning of an inquiry to resolution of an action). Thus the greatest immediate impact of the Bribery Act is sure to be the compliance ethic it inspires. I expect that the enforcement actions that may develop over time to focus on egregious instances of corporate conduct on which no reasonable minds would disagree. I do not get the sense, based on public comments of the Ministry of Justice and the Serious Fraud Office, that the envelope will be pushed too far in the early years of the Bribery Act.”
In this recent Q&A on the FCPA Compliance and Ethics Blog, James Koukios, a lawyer who recently left the DOJ’s FCPA Unit for private practice, states:
“Because the Fraud Section has the exclusive mandate for FCPA prosecutions, we were able to formulate—and execute—policy decisions in a manner that, I believe, had a significant impact on corporate compliance programs and the global anti-corruption movement.”
As I have long argued, special enforcement policies require special rules. As to DOJ and SEC FCPA enforcement attorneys who have supervisory and discretionary positions and articulate government FCPA policies, it is in the public interest that such individuals be prohibited, upon leaving government service, from providing FCPA defense or compliance services in the private sector for a five-year period.
For Your Viewing Pleasure
Calling all Judge Jed Rakoff fans. In this video of a recent speech, Judge Rakoff talks about corporate criminal liability and judicial review of NPAs and DPAs.
A good weekend to all.