FCPA Compliance and Ethics Blog

March 30, 2011

SEC Sweeps Sovereign Wealth?

Ed. Note-today we host a Guest Blog from our Colleague Mary Shaddock Jones, Assistant General Counsel and Director Of Compliance at Global Industries, Ltd.

I recently read an article by Cadwalader, Wickersham & Taft, LLP regarding the Security and Exchange Commission’s (“SEC”) delivery of letters of inquiry to at least 10 hedge funds, banks and private equity funds requesting information about the firms’ interactions with sovereign wealth funds.  From all accounts, the SEC may be looking into whether or not the financial institutions interaction with the sovereign wealth funds was conducted in accordance with the Foreign Corrupt Practices Act (“FCPA”).

By now, no one paying attention to the FCPA should be surprised by yet another industry wide investigation.  Beginning in 2007 we saw industry wide investigations in the oil and gas industry with both the U.N. Oil for Food Program in Iraq and the use of an international freight forwarding company in West Africa.  In addition, the Medical Device and Pharmaceutical industries have both been part of an industry wide sweep.  Every industry, every company, every individual and every board member that operates internationally must WAKE UP!

Since the Sarbanes-Oxley (“SOX”) Act became law on July 30, 2002, U.S. reporting companies have to investigate and self report any potential violations of U.S. law, including the FCPA.  On top of all of this the Dodd-Frank legislation has broad application across industries based on the authority granted to the Securities and Exchange Commission (SEC) and applies to all SEC registrants as well as entities regulated by the Commodities Futures Trading Commission (CFTC). The Dodd-Frank Act permits whistleblower awards of 10-30 percent of the amount of monetary sanctions in cases where they exceed $1 million. To receive the monetary award, the information provided must be “original,” essentially meaning that it must be obtained from the whistleblower’s independent knowledge or analysis only and not known to the Commission from any other source.  The information can apply to any type of securities law violation including insider trading, fraudulent financial reporting, and Foreign Corrupt Practices Act (FCPA) violations. It is well published that in the last several years FCPA fines and penalties have as large as hundreds of millions of dollars for an individual case.  10-30 percent of hundreds of millions is a lot of money!

What does all of this mean to every industry, every company and every individual and every board member of a public company that operates internationally?  Don’t wait for the SEC and/or DOJ to come knocking at your door with their broom.  Start at the top: review your risks, review your compliance program, and review your internal controls.  Do you have a clean house?   If not, spring cleaning should be on the top of your to-do list!

There was an excellent article written on February 8, 2011 by Elizabeth Ising and Amy Goodman from the law firm of Gibson Dunn & Crutcher, LLP in Boardmember.com reflecting the top 11 Legal and Regulatory Tips for Board of Directors in 2011.  Not surprising, the top three tips were: (1) Understand the company’s business and industry and be active in strategic planning; (2) Engage in regular risk oversight; and (3) Encourage robust compliance programs that have adequate resources.

During hard economic times, companies are looking to be as efficient in their operations as possible.  There is nothing wrong with this strategy- in fact it is admirable.  However, don’t lose sight of the fact that an FCPA investigation, much less any fine or penalty, will cost your company millions of dollars. I work in the energy industry and I have experienced what happens to companies during these sweeps. If you do not have a robust compliance policy and procedure in place and/or can not document it, you may be in for a long and costly ride. So put your money to good use and invest upfront in a solid compliance program before the dust storm enters your house.

Mary Shaddock Jones is Assistant General Counsel and Dir. Of Compliance at Global Industries, Ltd. Mary can be reached at maryj@globalind.com. The views and opinions expressed here are her own and not necessarily those of her employer.


Leave a Comment »

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Blog at WordPress.com.

%d bloggers like this: