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The SEC Wants You to Self-Report

At a conference in November, the SEC’s Director of Enforcement, Andrew Ceresney, announced that, from now on, you must self-report violations of the Foreign Corrupt Practices Act if you want the Enforcement Division to recommend a non-prosecution or deferred-prosecution agreement. Even then, Mr. Ceresney warned, you may not get an NPA or DPA, but the Division won’t even consider it if you fail to self-report. To self-report, in other words, is now a necessary, threshold condition to negotiating an NPA or DPA.

On the heels of that announcement, last month, one company that had self-reported its FCPA violations was able to resolve civil and criminal charges on relatively favorable terms.

First, the company settled the civil SEC investigation that commenced after it reported that two of its subsidiaries were making improper payments to foreign officials to win business. The improper payments included non-business-related travel, gifts, and entertainment that totaled $1.5 million over five years. To settle the case, the company agreed to cease and desist from further violations and to surrender $14 million in profits.

Next, the company settled the parallel, criminal investigation by entering into an NPA with the Justice Department. The three-year NPA requires the company to pay $15 million in fines, improve its compliance program, and report on its progress to the government.

Finally, one of the company’s employees earned a three-year DPA of his own based on his substantial cooperation during the SEC investigation. It was the Commission’s first DPA with an individual in an FCPA case.

To be clear, self-reporting has long been a factor in the Commission’s framework for evaluating cooperation by people or businesses. Generally, the SEC will credit your cooperation based on how much you helped, how important the case was, how culpable you were personally, and how much of a threat you continue to pose.

But going forward, self-reporting appears to carry significantly more weight with the agency, at least in FCPA cases.

 

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