November 9th, 2015

By George Horn

The 114th Congress has now taken up the policy recently announced by the Department of Justice (DOJ) through the Yates Memo. The Hide No Harm Act (S.2140) would impose criminal penalties upon corporate officers who fail to advise an appropriate federal agency of “serious danger associated with a product, service or business practice.” Corporate officers who fail to notify an appropriate agency of the federal government regarding any serious danger associated with a covered product, service or business practice within twenty-four hours of the individual receiving notice of such dangers could be punished by a fine and imprisonment for up to five (5) years. A fine imposed upon an individual for violating the Act “may not be paid, directly or indirectly, out of the assets of any business entity…”

Introduced on Oct. 6, 2015, by U.S. Senators Richard Blumenthal (D-Connecticut) and Robert Casey (D-Pennsylvania), this legislation, if enacted, would severely ratchet up the stakes for high level executives. The proposed legislation is in keeping with DOJ’s recently announced new guidance related to the prosecution of corporate wrongdoers.

Under the proposed Act, “corporate officer” is defined as an “employer, director, or officer of a business entity” who “has a responsibility and authority, by reason of his or her position in the business entity and in accordance with the rules or practice of the business entity, to acquire knowledge of any serious danger associated with a covered product.” The terms “business practice,” “covered product” and “covered service” are broadly defined. In practice, the Act would cover a wide swath of business practices from research and design through distribution of a product, whether manufactured domestically or imported into the United States, so long as it enters interstate commerce. Any “service conducted or provided by a business entity that enters interstate commerce” would also come under the proposed Act’s umbrella.

The broad sweeping language contained in the Act, if passed, stands to significantly expand the scope of potential criminal liability in both the service and product manufacturing industries.

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June 29th, 2015

By Kathleen L. Matsoukas

On Monday, June 15, 2015, the criminal trial of Joseph Sigelman, a former co-chief executive of PetroTiger Ltd. came to an abrupt end when he pleaded guilty to a single count of conspiracy and, the following day, received a sentence of probation. Mr. Sigelman had faced a potential 20-year sentence for charges including alleged violations of the Foreign Corrupt Practices Act (FCPA). All charges except the guilty plea to a single count of conspiracy to violate the FCPA were dropped as a result of the plea. While the sudden conclusion to the Sigelman trial appears to have been brought on by a witness’s surprise change in testimony, it certainly appears to be the latest in a series of setbacks for the DOJ in its efforts to enforce the FCPA against individual defendants in the courtroom.

Joseph Sigelman, a former Goldman Sachs banker, was the co-CEO of PetroTiger Ltd., a company he founded in Colombia to provide oil producers with outsourced services. Mr. Sigelman had previously founded Office Tiger, a successful company based in India that provided outsourced administrative and document services. In Mr. Sigelman’s indictment, the government alleged that he had been involved in a scheme to take kickbacks and pay bribes to secure approval of a $45 million oil services contract in Colombia, and that he used a bank account in the Phillipines (where he had a home) to help conceal the payments. Mr. Sigelman maintained throughout that his understanding had been that PetroTiger was making legitimate payments to a consultant—not paying bribes to government officials. However, Gregory Weisman and Kurt Hammarskjöld, two former colleagues at PetroTiger, had pleaded guilty prior to Mr. Sigelman’s trial and, in exchange for more lenient sentences, had agreed to testify against him.

The Sigelman trial was a high-profile federal criminal trial for a number of reasons. Few FCPA cases ever make it to the filing of criminal charges against individuals, much less a trial. Indeed, including the Sigelman case, there have been only four (4) times since September 2011 in which the DOJ has been put to its burden of proof; all have resulted in dismissals of or acquittals on substantive FCPA charges. The case is also significant because it involves a prosecution of an individual that occurred after a company voluntarily disclosed a potential FCPA violation. Indeed, the government’s press release announcing the indictment stated that the case had come to the DOJ through a voluntary disclosure by PetroTiger.

The government’s trial team in Sigelman was led by Patrick Stokes, the Chief of the DOJ’s FCPA unit, who has repeatedly reiterated that the DOJ is making it a priority to pursue individual defendants. The Government’s primary evidence against Mr. Sigelman was the testimony of the two former colleagues, Weisman and Hammarskjöld, who had previously pleaded guilty.  The indictment charged Mr. Sigelman with six counts, including substantive violations of the FCPA, and conspiracy to violate the FCPA and commit money laundering.

The trial opened with the Government arguing that Mr. Sigelman was motivated by greed. Mr. Stokes said in his opening statement that Mr. Sigelman had been caught on video trying to get Mr. Weisman to change his story, and that Mr. Sigelman had even asked Mr. Weisman to lift up his shirt to see if he was wearing a wire, “something an innocent man does not do.” Mr. Sigelman’s attorneys asserted that the charges stemmed from retaliation and Mr. Sigelman was not only unaware of any bribes (or that consultants were “public officials” under the FCPA) but was staunchly anti-corruption.

After two weeks of trial, the government’s case fell apart when, under cross-examination, Mr. Weisman admitted that he had given false testimony about the terms of his cooperation agreement. This, coupled with testimony from an FBI agent that a key player in the investigation had been allowed to leave the United States for Colombia without arrest, led to a mid-trial plea agreement on June 15. After these testimonial reversals in the government’s case, Mr. Sigelman pleaded guilty to one count of conspiracy to violate the FCPA. On June 16, he was sentenced to probation, restitution and a fine totaling approximately $333,000. In his sentencing opinion, Judge Joseph Irenas chastised the Government for taking the position that anything other than a one-year prison sentence would be inappropriate. The government also announced that it would not be bringing an enforcement action against PetroTiger.

In its release, the DOJ has attempted to spin the Sigelman plea as a victory. But it seems impossible to characterize a $333,000 individual fine and probation as a “victory” when the Government sought a conviction on violations that could have amounted to a 20-year sentence. In fact, coverage of the Sigelman case has been exceedingly critical. Bloomberg noted that “the trial result reflects a troubling setback for the Justice Department’s stepped up enforcement of the FCPA,” and noted the stark difference between the Government’s negotiation of major corporate FCPA settlements and its unsuccessful efforts at trial. Mr. Weisman and Mr. Hammarskjöld have yet to be sentenced—but one imagines they are second-guessing their decisions to plead guilty in the first place.

Will the DOJ continue to aggressively pursue FCPA charges against individuals in the wake of Sigelman and its less-than-stellar trial track record? The DOJ’s position on charging individuals is predicated, at least in part, on the deterrent effect of individual prosecutions – an assumption that appears belied by recent experience. Additionally, as evidenced by the Stein case, “leaning on” corporations to serve up their employees as sacrificial lambs is a problematic and potentially dangerous undertaking – not to mention one that seems contrary to public policy. One might wonder if the interests of the DOJ (and taxpayers) in bringing charges under the FCPA would be better served through a continued focus on corporate settlements rather than individual prosecutions, given the monetary windfalls (and compliance improvements) that result from those settlements.

This Barnes & Thornburg LLP publication should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.

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April 24th, 2015

By George Horn

With ever increasing pressure on its government to stamp out corruption, Brazil presents a “Perfect Storm” for Foreign Corrupt Practices Act (FCPA) / Anti-Corruption enforcement approaching the 2016 Olympics. Having the Olympic Games centered in Rio de Janeiro presents the perfect opportunity for Dilma Rousseff’s government to show that it takes enforcement of anti-corruption laws seriously. As such, companies should ensure their compliance initiatives are being vigorously updated and monitored. This is especially the case with regard to third-party relationships.

While passage of the Clean Companies Act (CCA) brought Brazil in line with an ever growing international consensus against corruption, the CCA has been sparingly enforced. Though the CCA penalizes both corporations and individuals for corrupt conduct, implementing regulations called for by its passage have yet to be enacted.

The CCA applies a strict liability standard against companies, administratively and civilly, for those acts of corruption performed for their benefit. This standard distinguishes the CCA from the FCPA and UK Bribery Act, allowing Brazilian authorities to impose sanctions without a finding of corrupt intent against the offending company or its employees.

While Brazil has an excellent enforcement mechanism in place to address foreign bribery, it has done little to actually utilize this tool against outside interests who engage in corrupt activities in Brazil. In October 2014, an Organisation for Economic Cooperation and Development (OECD) report confirmed that even though the CCA’s foreign bribery offense covers bribery cases through a third party, Brazilian authorities have failed to give full effect to this enforcement mechanism. In its findings, the OECD noted its concern regarding the “still low level of enforcement of foreign bribery in Brazil.” Indeed, Brazilian authorities have not initiated a single action against a foreign company under the CCA.

The OECD report identified follow-up initiatives needed to bring Brazil’s anti-corruption enforcement into full effect. Some of those suggested initiatives include:

  • The drafting and enactment of regulations required to implement the CCA;
  • Being more proactive in the investigation and prosecution of foreign bribery; and
  • Continued support of companies, encouraging the adoption of adequate internal controls and compliance systems to both prevent and detect corruption activities.

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February 26th, 2015

By George Horn

The anti-corruption regulatory environment in Brazil has become more risky and complex during the CCA era. Do enforcement trends foreshadow eventual robust application of the CCA? The number of recent high profile cases brought against individuals in Brazil strongly suggests a climate with little tolerance for bribery. What was historically commonplace within Brazilian economic and political spheres may no longer be the norm. Indeed, in taking the oath of office for her second term as President on Jan. 1, 2015, Dilma Rousseff promised to embark on an anti-corruption crusade in response to the corruption scandal engulfing Petrobras. She went further in pledging to forward the Brazilian legislature an anti-corruption bill during the first half of 2015 and to lead the Brazilian political system in a “national pact against corruption.”

While January 2015 marked the first anniversary of the Clean Companies Act, long awaited regulations in support of the CCA have yet to be adopted. Adoption of those regulations will give more teeth to the CCA and more guidance to those companies and individuals who operate within its target areas.

Given recent activity, and especially the promise by President Rousseff to forward new anti-corruption legislation to the Brazilian congress during the first half of 2015, it is clear that Brazil is intent on increasing its enforcement efforts against corrupt behavior. As a result, companies doing business in Brazil should strongly consider the following actions:

  • Implementing and/or updating compliance programs and training to address anti-corruption efforts in Brazil.
  • Performing an in-depth self-risk assessment to help ensure success of any Brazilian based compliance program.
  • Identifying the degrees and frequency of interaction with Brazilian public officials.
  • Identifying the need to have third party agents involved in Brazilian business dealings.
  • Be mindful of the need for due diligence related to any M&A transactions in Brazil given the risk of successor liability under the CCA.
  • Business partnerships in Brazil should be carefully scrutinized due to the risk of joint and several liability.

Read Part I – Corruption Enforcement in Brazil: What Does it Look Like?

September 23rd, 2014

By Kathleen L. Matsoukas

Traditionally, Australia has not vigorously enforced its anti-corruption laws.  In fact, an OECD report released in October 2012 found that, as of that date, enforcement of Australia’s Bribery of Foreign Officials Act was “extremely low,” considering the number of Australian companies exposed to bribery risk. It notes that as of 2012, only 1 of 28 referred allegations resulted in a prosecution. That may be changing with Monday’s report in the Australian Financial Review that Leighton Holdings, an international contracting company based in Australia and active in mining and oil and gas, has internal emails and other documents that show that it have paid substantial bribes in Iraq to secure oil and gas contracts. According to that article, among other things, certain leaked emails which are part of an investigation by the Australian Federal Police “warn a $24 million ‘facilitation payment’ linked to a 2010 Iraq contract would ‘attract attention’ from auditors.” The AFP is reportedly finalizing a case to present to prosecutors based on these and other documents.

The Australian Financial Review previously reported on an internal memorandum between two top executives that stated that oil pipeline contracts in Iraq were won by Leighton Holdings’ payment of multi-million-dollar bribes and that more kickbacks were needed. Other leaked documents reportedly reflect that payments were made to a Monaco company named Unaoil, after Unaoil promised that they could “facilitate” matters with the Iraqi government-owned Southern Oil Company in exchange for $24 million. Others also apparently reflect that in 2011, Leighton Offshore (a subsidiary of Leighton Holdings) made large payments – recorded as payments “for friend” – to three separate companies owned by a middleman who had told the company that he had connections with Iraqi officials.

The Leighton Holdings matter highlights the confusion that inevitably results when a country’s anti-corruption law permits facilitation payments. The Australian government’s information page on the Bribery of Foreign Officials Act explains that while the facilitation payment defense is available under the law, it is limited to circumstances involving “routine government action,” and “does not include any decision to award or continue business, or any decision related to the terms of new or existing business.”  It also notes that “[i]f a payment is to qualify as a legitimate facilitation payment, detailed records must be kept including the value of the benefit concerned, the identity of the foreign official and the person receiving the benefit, and particulars of the routine government action sought.”  Finally, it recommends that “individuals and companies make every effort to resist making facilitation payments” as “[a] growing body of research and the experiences of a growing number of major companies demonstrate that businesses can achieve net gains by refusing to make payments.”

While this guidance is helpful, the 2012 OECD Report (which would have covered the period in which the Leighton Holdings bribes were allegedly made) identified problems with  the facilitation payments defense under Australia’s law, identifying the confusion that can result with such an exception and noting that:

Australia has made efforts to raise awareness of the facilitation payment defence, including through its proactive consultation process.  Nevertheless, there continues to be substantial confusion over the scope of the facilitation payment defence. The lead examiners therefore recommend that Australia continue to raise awareness of the distinction between bribes and facilitation payments, and encourage companies to prohibit or discourage the use of small facilitation payments in internal company controls, ethics and compliance programmes or measures, recognising that such payments must in all cases be accurately accounted for in such companies’ books and financial records.

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September 15th, 2014

By Brian Casey

The past few months have been busy for courts and the SEC dealing with securities whistleblowers. The Supreme Court’s potentially landmark decision in Lawson v. FMR LLC back in March already seems like almost ancient history.  In that decision, the Supreme Court concluded that Sarbanes-Oxley’s whistleblower protection provision (18 U.S.C. §1514A) protected not simply employees of public companies but also employees of private contractors and subcontractors, like law firms, accounting firms, and the like, who worked for public companies. (And according to Justice Sotomayor’s dissent, it might even extend to housekeepers and gardeners of employees of public companies).

Since then, a lot has happened in the world of whistleblowers. Much of the activity has focused on Dodd-Frank’s whistleblower-protection provisions, rather than Sarbanes-Oxley. This may be because Dodd-Frank has greater financial incentives for plaintiffs, or because some courts have concluded that it does not require an employee to report first to an enforcement agency. The following are some interesting developments:

What is a “whistleblower” under Dodd-Frank?

This seemingly straightforward question has generated a number of opinions from courts and the SEC. The Dodd-Frank Act’s whistleblower-protection provision, enacted in 2010, focuses on a potentially different “whistleblower” population than Sarbanes-Oxley does. Sarbanes-Oxley’s provision focuses particularly on whistleblower disclosures regarding certain enumerated activities (securities fraud, bank fraud, mail or wire fraud, or any violation of an SEC rule or regulation), and it protects those who disclose to a person with supervisory authority over the employee, or to the SEC, or to Congress.

On the other hand, Dodd-Frank’s provision (15 U.S.C. §78u-6 or Section 21F) defines a “whistleblower” as “any individual who provides . . . information relating to a violation of the securities laws to the Commission.”  15 U.S.C. §78u-6(a)(6).  It then prohibits, and provides a private cause of action for, adverse employment actions against a whistleblower for acts done by him or her in “provid[ing] information to the Commission,” “initiat[ing], testif[ing] in, or assist[ing] in” any investigation or action of the Commission, or in making disclosures required or protected under Sarbanes-Oxley, the Exchange Act or the Commission’s rules.  15 U.S.C. §78u-6(h)(1). A textual reading of these provisions suggests that a “whistleblower” has to provide information relating to a violation of the securities laws to the SEC.  If the whistleblower does so, an employer cannot discriminate against the whistleblower for engaging in those protected actions.

However, after the passage of Dodd-Frank, the SEC promulgated rules explicating its interpretation of Section 21F. Some of these rules might require providing information to the SEC, but others could be construed more broadly to encompass those who simply report internally or report to some other entity.  Compare Rule 21F-2(a)(1), (b)(1), and (c)(3), 17 C.F.R. §240.21F-2(a)(1), (b)(1), and (c)(3). The SEC’s comments to these rules also said that they apply to “individuals who report to persons or governmental authorities other than the Commission.”

Therefore, one issue beginning to percolate up to the appellate courts is whether Dodd-Frank’s anti-retaliation provisions consider someone who reports alleged misconduct to their employers or other entities, but not the SEC, to be a “whistleblower.” The only circuit court to have squarely addressed the issue (the Fifth Circuit in Asadi v. G.E. Energy (USA) LLC) concluded that Dodd-Frank’s provision only applies to those who actually provide information to the SEC.

In doing so, the Fifth Circuit relied heavily on the “plain language and structure” of the statutory text, concluding that it unambiguously required the employee to provide information to the SEC.  Several district courts, including in Colorado, Florida and the Northern District of California, have concurred with this analysis.

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September 11th, 2014

By Trace Schmeltz

Anti-bribery laws, including the United States’ own Foreign Corrupt Practices Act, seem to be becoming the stuff of Aesop’s Fables, with many asking whether the resounding alarm over bribery-exposure is akin to the cries of “wolf” by the shepherd boy. The alarm is real enough, however. The Securities and Exchange Commission and the Department of Justice have brought an average of 30 cases per year since 2005. These laws impact small and medium-sized companies and their executives, as well. In July 2014, Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA Unit explained that “small and medium-size businesses that want to enter into high-risk markets and expand their international sales” must be compliant with the FCPA.

So, if the wolf is really amongst the flock—or, at least, potentially in the neighborhood—what is one to do? Pull back from China, India, Brazil and Russia? Spend millions of dollars in legal fees with a major New York law firm? Respectfully, no. We recommend five simple steps to ensuring—as best as possible—that you can keep the wolf at bay, at a reasonable cost to your enterprise.

Be Aware of Your Risks. When it comes to corruption risks, there is no one-size fits all approach. Each business must be aware of its own risks. Corruption risks are directly tied to (i) the contacts a business has with the government of any particular country and (ii) the corruption perception of the government of such countries. In a highly-regulated country, in which licenses and permits are required at every turn, the corruption risk may be higher than that in either a less-regulated country or a similarly regulated country that is not perceived to be as corrupt. One of our clients, for example, requires licenses and permits for all of its work—its current project in Turkmenistan (which ranks 168 out of 177 on the Corruption Perception Index), poses risk on both fronts. In such situations, each of the steps below require more emphasis and care. On projects in countries with less regulation or lower corruption-perception levels, on the other hand, some of these steps may be less important.

Have a Compliance Policy. The vigilant shepherd must have a plan before the wolf is amongst the flock. Similarly, companies doing business overseas ought to have an anti-corruption policy in place before learning of a potential problem. According to “A Resource Guide to the U.S. Foreign Corrupt Practices Act,” published by the Department of Justice and the Securities and Exchange Commission (available here at p. 56), an effective compliance program “may influence whether or not charges should be resolved through a deferred prosecution agreement (DPA) or a non-prosecution agreement (NPA) … [and] will often affect the penalty amount and the need for a monitor or self-reporting.” An effective compliance program, “tailored to the company’s specific business and to the risks associated with that business,” can help set the ethical tone in a company, as well as spot and root out potential corruption through strong internal controls, audit practices and documentation policies. With the proliferation of anti-corruption prosecutions, law firms across the country—not just the large coastal firms—have the expertise to cost-effectively draft and tailor such policies.

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August 25th, 2014

By Kathleen L. Matsoukas

The recent convictions of Peter Humphrey and his wife and business partner Yu Yingzeng demonstrate the risks corporate investigation firms face in China when they obtain or pass on information on Chinese citizens. But perhaps even more alarming for U.S. companies is the effect of such prosecutions on their efforts to comply with the Foreign Corrupt Practices Act and other anti-corruption laws, as these types of convictions stand to have a chilling effect on both companies’ due diligence efforts and their internal investigations into allegations of bribery and fraud in China.

Mr. Humphrey, a British citizen, and Ms. Yu, a Chinese citizen, were convicted of trafficking in personal information of Chinese citizens between 2009 and 2013 through their company ChinaWhys. ChinaWhys, which still operates an up-to-date website, markets itself as “an international business risk advisory firm with eyes in China.” It offers services from “due diligence and the discreet gathering of timely business intelligence, to the vetting of partners and the screening of employees.” It specifically references corruption investigations on its website.  Mr. Humphrey, himself a Certified Fraud Examiner, has written extensively on the issues facing companies in China, including under the anti-corruption laws, and the ways forensic firms can assist companies to comply with their legal obligations. ChinaWhys is one of many firms in China that seeks to assist companies in conducting background checks and other due diligence, which can be more difficult in China than in other jurisdictions.

Chinese officials claimed that Mr. Humphrey and Ms. Yu had, through ChinaWhys, illegally obtained the “personal household registrations” of Chinese citizens, or “hukous,” as well as other personal information, for a price of $130 to $163 for each item, which they packaged into reports they sold at great profit. While it was not discussed at trial, ChinaWhys boasted many large multinational corporations as clients and may have been assisting those clients in Foreign Corrupt Practices Act compliance or investigations work. Mr. Humphrey was sentenced to two and one half years in prison (including one year served while awaiting trial) and a fine of £20,000, while Ms. Yu was sentenced to two years in prison and a £15,000 fine.

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July 24th, 2014

By Jason Barclay

There has been much attention paid to the Supreme Court’s recent decision in Riley v. California, Nos. 13-132 and 13-212 (June 25, 2022), and justifiably so. It was notable because it was a 9-0 decision in a criminal case – a rare occurrence in the Supreme Court’s history, especially for this deeply-divided Court. But it was also an important, landmark ruling for the Fourth Amendment and its protections against unreasonable searches and seizures.

In its narrowest interpretation, the Supreme Court’s decision in Riley rejected the argument made by law enforcement that cell phones could be searched without a valid warrant if they were seized at the time of arrest. The Supreme Court has repeatedly recognized that there are appropriate exceptions to the Fourth Amendment’s warrant requirement, perhaps the most prominent of which is the exception that allows an officer to search a person’s body at the time of their arrest. Law enforcement unsuccessfully argued that a cell phone, found on an arrestee’s person, could likewise be seized and its contents searched at the time of the arrest under this well-established Fourth Amendment exception.

Corporations cannot be arrested and do not have “bodies” to be searched. Chief Justice Roberts’ opinion in Rileymakes no mention of the application of the Fourth Amendment to corporations or more broadly, to white collar criminal cases in general. Therefore, few have suggested that Riley will alter the way corporations are investigated for white collar crimes in any material way.

And perhaps they are right, but Riley is important for more than its holding. The Supreme Court has long held that “[t]he Warrant Clause of the Fourth Amendment protects commercial buildings as well as private homes.” See Marshall v. Barlow’s Inc., 436 U.S. 307 (1978). Businesses, like individuals, have certain privacy expectations, and businessmen, like the occupants of a residence, have “constitutional right[s] to go about [their] business[es] free from unreasonable official entries upon [their] private commercial property.”  Id..

The Supreme Court made clear that its decision to place clear limits on the seizure of cell phones in Riley was not because they are “phones,” but rather because “these devices are in fact minicomputers that also happen to have the capacity to be used as a telephone.” That conclusion, and more importantly, the Court’s nuanced articulation of what these “minicomputers” are capable of performing is what is so striking and important.

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July 17th, 2014

By Austin Burke

The SEC suffered another high-profile loss this month, accepting a settlement with two executives accused of bribing foreign officials without obtaining any monetary penalties.  Such “no penalty” settlements may become increasingly common for the SEC as it continues to realize the effects of the Supreme Court’s holding in last year’s Gabelli v. SEC.

The widely-publicized Noble case involved alleged violations of the Foreign Corrupt Practices Act.  The SEC accused Noble, an oil services company, of paying hundreds of thousands of dollars in bribes to Nigerian officials between 2003 and 2007 in order to obtain certain rig permits and project extensions.  The SEC further alleged that company executives Mark Jackson and James Ruehlen contributed to this bribery scheme.  Under the Noble settlement, however, Jackson and Ruehlen admitted no wrongdoing and avoided financial penalties.  The final judgments reflecting these terms came down on July 3, less than a week before the case was scheduled to go to trial.

The surprising outcome in Noble likely resulted, at least in part, from the Supreme Court’s decision in Gabelli.  In that case, the Court unanimously held that the general five-year statute of limitations for civil penalty actions runs from the time a fraudulent act occurs, not when the SEC discovers the fraud.  In practice, this means the SEC must work diligently to timely uncover fraudulent conduct because regulators cannot bring actions to impose civil penalties once five years have passed.  In Noble, the statute of limitations for the civil penalty actions against Jackson and Ruehlen had already run for most of the alleged violations by the time the SEC brought charges in 2012.  Indeed, Gabelli effectively took the alleged violations occurring from 2003 to 2006 off the table.

Gabelli, however, did not resolve all of the questions surrounding the application of the civil penalty statute of limitations to the SEC.  For example, the case did not allow the Court to address whether the same limitations period applies if the SEC seeks injunctive relief, declaratory relief, disgorgement, or similar remedies.  Some lower courts have held that such remedies, which mostly serve to prevent future violations or compensate victims, are not punitive and therefore fall outside the scope of the limitations period for civil penalties.  Others, to determine if the period applies, have asked whether the requested relief is intended to punish the defendant or protect the public from harm.

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