Monday, August 31, 2009

Baker Hughes - BJ Services Merger

The press (see here among other places) is reporting that Baker Hughes has agreed to buy BJ Services in a $5.5 billion cash and stock deal.

Both companies should be familiar to FCPA followers and there are many FCPA issues present in this announced merger.

For starters, a bit of background.

In 2007, Baker Hughes settled parallel DOJ and SEC FCPA enforcement actions concerning business conduct in Kazakhstan, Nigeria, Angola, Indonesia, Russia, and Uzbekistan. (See here for the DOJ release and related materials, see here for the SEC release and related materials). Combined fines and penalties were a then FCPA-record $44 million.

In 2004, BJ Services consented to entry of an SEC cease-and-desist order finding that it violated the FCPA's anti-bribery, books and records, and internal control provisions in connection with the business conduct of its wholly-owned Argentinean subsidiary. (See here for the SEC order).

In addition, in its 2008 Annual Report (filed in November 2008 see here) BJ Services indicated (at pgs. 69-70) that it voluntarily disclosed to the DOJ/SEC the results of an internal investigation concerning problematic business conduct in the Asia-Pacific region that could implicate the FCPA. To my knowledge, no enforcement action has yet resulted from this disclosure.

At a minimum, the following FCPA issues are present in the Baker Hughes / BJ Services announced merger.

Baker Hughes settled the 2007 FCPA enforcement action by agreeing to a deferred prosecution agreement (see here). Pursuant to Paragraph 8 of the DPA, Baker Hughes agreed to engage an independent monitor to review the company's compliance with the FCPA for a period of three years. Thus, per the DPA, Baker Hughes is still under an FCPA monitor - an individual who no doubt has been busy or soon will be busy in ensuring that Baker Hughes properly integrates BJ Services into Baker Hughes' existing FCPA compliance policies and procedures.

What about the issue of Baker Hughes purchasing a company with disclosed, yet apparently unresolved, FCPA issues? This is one area where the DOJ has offered up substantive guidance to acquiring companies and the following DOJ Opinion Procedure Releases are relevant (in whole or in part): 08-02 (see here), 08-01 (see here), 04-02 (see here), and 03-01 (see here). For additional reading (see here).

I like to tell my students that the business law issues we cover in class are not merely historical, but rather are issues that companies deal with on a daily basis. For all you FCPA students out there, the Baker Hughes - BJ Services merger announcement provides a good real-world "issue-spotting" exam.

Friday, August 28, 2009

Authorizing Improper Payments ... You Can't Do That Either!

The FCPA's anti-bribery provisions prohibit one from offering to pay, paying, or promising to pay "anything of value" to a "foreign official" to "obtain or retain business."

As highlighted by the SEC's recent settled enforcement action against Oscar Meza (the former Director of Asia-Pacific Sales for Faro Technologies, Inc.), the anti-bribery provisions also prohibit one from "authorizing" such payments or offer of payments as well.

According to an SEC complaint (see here), this is exactly what Meza did when the company's new China Country Manager requested permission to "do business the Chinese way," a term, the SEC alleges, Meza understood to mean that the Country Manager was requesting permission to pay kickbacks and other things of value to potential Chinese customers in order to obtain sales contracts.

The SEC's complaint alleges that Meza's authorizations resulted in Faro-China's payment of approximately $450,000 in improper payments to ... you guessed it ..."employees of Chinese state-owned companies." (see para. 12). According to the complaint, not only did Meza authorize these payments, but he also instructed Faro-China's staff to alter account entries to conceal the true nature of the payments. (see paras 15-16). Further, in language sure to make any defense lawyer cringe, Meza allegedly sent an e-mail to the Country Manager lamenting that "someone will notice [the payments] one day and we may all be in trouble." (para 14).

Based on the above conduct, the SEC charged Meza with violating the FCPA's anti-bribery provisions and books and records and internal control provisions, and aiding and abetting Faro's violations of these same provisions.

Without admitting or denying the SEC's allegations, Meza consented to entry of a final judgment enjoining him from violating the FCPA and aiding and abetting such violations. According to the SEC release (see here) Meza was ordered to pay a $30,000 civil penalty as well as approximately $27,000 in disgorgement and pre-judgment interest (a figure no doubt attributed to the fact that Meza received, in addition to a base salary, a sales commission based on the value of sales contracts awarded to Faro-China - including contracts with Chinese government-owned companies).

This is not the first time FCPA followers have heard about Faro Technologies or the above factual scenario. In June 2008, the company (based on the same core set of facts as above) (i) agreed to a DOJ non-prosecution agreement and paid a $1.1 criminal penalty (see here); and (ii) consented to the entry of an SEC cease and desist order and agreed to pay $1.85 million in disgorgement and pre-judgment interest (see here).

What Will September Bring?

September is a great month. Evenings are crisp and cool, the leaves begin to change, college football returns to campus, and in-season honey crisp apples are widely available!

September is also the end of the government's fiscal year and, because of this, it tends to be an active FCPA enforcement month. Although September 2008 was a bit slow, September 2007 saw the following enforcement actions: Immucor, Inc., Bristow Group, Inc., Electronic Data Systems Corp., and Paradigm B.V.

The Paradigm action (see here) is one of my favorite for FCPA training purposes in that the action covers a wide range of conduct (use of companies and agents without adequate due diligence, things of value such as sightseeing trips and cash payments for shopping, etc.) in several different countries (Kazakhstan, China, Mexico, Nigeria, and Indonesia).

So while you are cheering on your favorite team this September and enjoying Fall's harvest, don't forget about the FCPA as September could be a big month given reports of the numerous cases on enforcement officials' desks.

Tuesday, August 25, 2009

More On Control Person (And Similar Theories of Liability) / The National Law Journal (see here) recently ran an interesting Q&A with the former Assistant Chief of the DOJ Fraud Section regarding the recent Nature's Sunshine Products Inc. ("NSP") enforcement action (see here for my prior post). While the NSP enforcement action may well be the first FCPA enforcement action in which the SEC charged a corporate executive with an FCPA violation under a Section 20(a) "control person" theory of liability, the SEC has previously charged corporate executives under other indirect theories including aiding and abetting a company's FCPA violations by invoking Section 20(e).

For instance, in 2007, the SEC charged Monty Fu (the founder and, at various times, the Chief Executive Officer and Chairman of the Board of Syncor International Corporation) with aiding and abetting Syncor's FCPA books and records and internal control violations.

The evidence against Fu?

As alleged in the SEC complaint (see here), "...Fu had the authority to maintain compliance with existing internal controls, and to implement additional internal controls designed to comply with the FCPA's books and records and internal controls provisions, YET FAILED TO DO SO." (see para. 2, emphasis added).

In charging Fu both with direct violations of the FCPA's books and records and internal control provisions (albeit by alleging in the alternative that Fu knew or was reckless in not knowing that the problematic payments were improperly recorded on the company's books and records) and with aiding and abetting Syncor's violations, the SEC alleged that Fu "knowingly failed to implement a system of internal accounting controls sufficient to provide reasonable assurance that transactions were recorded in Syncor's books and records" in accordance with the FCPA (see para 22). As a result, the SEC charged that Fu "knowingly provided substantial assistance to Syncor" in connection with its violations (see para's 28 and 33).

Whether the SEC invokes section 20(a) or 20(e), the FCPA enforcement trend is clearly greater scrutiny of corporate executives and a greater SEC expectation that corporate executives play a meaningful role in ensuring enterprise-wide FCPA compliance.

In other words, if you are an executive of an issuer and you don't know what the acronym FCPA stands for, you better get educated.

Saturday, August 8, 2009

FCPA Enforcement ... It's More Than Just Suitcases Full of Cash to Government Officials

When conducting FCPA training, one of the first things I like to do is immediately dispel the notion that the FCPA only applies to suitcase full of cash to a government official types of situations. While the FCPA does indeed apply to such egregious situations, the FCPA (and certainly DOJ/SEC's interpretation of the statute) applies to a wide range of other - seemingly less culpable - conduct as well.

My future FCPA training slides will certainly include the recent Control Components Inc. ("CCI") FCPA enforcement action as it clearly demonstrates the broadness of FCPA enforcement.

First, the big picture.

As described in a recent DOJ release (see here), CCI pleaded guilty to a three-count criminal information charging two counts of violating the FCPA and one count of violating the Travel Act in connection with a "decade-long scheme to secure contracts in approximately 36 countries by paying bribes to officials and employees of various foreign state-owned companies as well as foreign and domestic private companies."

Pursuant to the plea agreement, CCI agreed to pay a criminal fine of $18.2 million, serve a three-year term of organizational probation and adopt a host of other measures common in FCPA settlements such as create, implement and maintain an anti-bribery compliance program and retain an independent compliance monitor.

The CCI enforcement action demonstrates the broadness of FCPA enforcement in at least two respects: (i) the "foreign official" element; and (ii) the "anything of value" element.

"Foreign Official"

As to the "foreign official" element, para 5 of the Indictment is the key paragraph. It states as follows:

"Defendant CCI's state-owned customers included, but were not limited to, Jiangsu Nuclear Power Corporation (China), Guohua Electric Power (China), China Petroleum Materials and Equipment Corporation, PetroChina, Dongfang Electric Corporation (China), China National Offshore Oil Company, Korea Hydro and Nuclear Power, Petronas (Malaysia), and National Petroleum Construction Company (United Arab Emirates). Each of these state-owned entities was a department, agency, or instrumentality of a foreign government, within the meaning of the FCPA, Title 15, United States Code, Section 78dd-2(h)(2)(A). The officers and employees of these entities, including but not limited to the Vice-Presidents, Engineering Managers, General Managers, Procurement Managers, and Purchasing Officers, were "foreign officials" within the meaning of the FCPA, Title 15, United States Code, Section 78dd-2(h)(2)(A).

As I've stated before in this forum (see here) and likely will in the future until this legal issue is decided by a court, DOJ's position that employees of state-owned companies, regardless of position, are "foreign officials" under the FCPA is an unchallenged and untested legal theory - and one I believe is ripe for challenge.

Even if DOJ's position were to be upheld by a court, those subject to the FCPA could certainly benefit from some clarity as to what DOJ considers to be a state-owned entity. Instead, in the CCI Information (and countless others) all that is there is a mere conclusory statement that each of the relevant companies are "state-owned entities" (see para 5).

What attributes of, for instance, Guohua Electric Power, make it a state-owned entity? I've long been curious as to what extent of investigation or discovery DOJ undertakes before it concludes that a company is a state-owned entity? If anyone has insight into this issue, please do share.

Also interesting to note is that even though para 6 of the Information states that CCI, through its former officers and employees, made corrupt payments to officers and employees of "numerous state-owned" customers around the world for the purpose of assisting in obtaining or retaining business for CCI, the Information charges only two FCPA violations.

Count two concerns payments to secure a contract with China National Offshore Oil Company and Count three concerns payments to secure a contract with Korean Hydro and Nuclear Power.

Presumably DOJ did not have sufficient evidence to support other FCPA counts as to CCI's alleged payments to the other "numerous state-owned" customers, including the others specifically listed in para. 5 of the Information.

So why would a company such as CCI plead guilty to violating the FCPA when the "foreign officials" it allegedly bribed are "foreign officials" only under DOJ's untested and unchallenged legal theory?

That is a good question, but I suspect it has to do with the fact that companies are in the business of making money and not in the business of setting legal precedent. With a settlement comes certainty, whereas with litigation comes uncertainty.

"Anything of Value"

As to the "anything of value" element, the Information lists the following "things of value" given by CCI, directly or indirectly to "foreign officials" - "overseas holidays to places such as Disneyland and Las Vegas" (para 19); "extravagant vacations" with the following expenses "first-class airfare to destinations such as Hawaii, five-star hotel accommodations, charter boat trips, and similar luxuries" (para 20); "college tuition" [for] the children of at least two executives" at CCI's state-owned customers (para 20); "lavish sales events" including CCI payment of "hotel costs, meals, green fees for golf, and travel expenses" (para 21); and "expensive gifts" (para 21).

What do all these things have in common? They are not "suitcases full of cash" yet still "things of value" under the FCPA.

This is not the first time FCPA followers have heard of CCI and it is likely not the last time either. As described in the DOJ release, two former CCI executives (Mario Covino and Richard Morlok) have already pleaded guilty to conspiracy to violate the FCPA (see here and here). In addition, six former CCI executives (Stuart Carson, Hong (Rose) Carson, Paul Cosgrove, David Edmonds, Flavio Ricotti, and Han Yong Kim) were criminally indicted in April 2009 on charges of, among other things, violating the FCPA (see here).

Friday, August 7, 2009

SEC To Launch "Specialized Unit" Devoted to FCPA

Robert Khuzami, the SEC's Director of the Division of Enforcement, spoke this week to the New York City Bar Association (see here for text of his speech).

During his speech, Khuzami announced that the SEC will be creating five "national specialized units dedicated to particular highly specialized and complex areas of securities law."

One of the units will be an FCPA unit. Here is what Khuzami had to say:

"The Foreign Corrupt Practices Act unit will focus on new and proactive approaches to identifying violations of the Foreign Corrupt Practice Act, which prohibits U.S. companies from bribing foreign officials for government contracts and other business. While we have been active in this area, more needs to be done, including being more proactive in investigations, working more closely with our foreign counterparts, and taking a more global approach to these violations."

Unlike the DOJ which has historically centralized all FCPA prosecutions at "main Justice" in DC, the SEC has traditionally given its regional offices the authority to independently prosecute FCPA cases. With Khuzami's announcement, change appears to be in the works and it will be interesting to see whether this new approach will yield any noticeable differences in SEC prosecution of FCPA offenses.

During the speech, Khuzami also announced that the SEC is working on other "initiatives" - two of which I highlight as being of particular interest to FCPA followers.

First, the SEC is seeking to create a "Seaboard" for individuals, "a public policy statement that will set forth standards to evaluate cooperation by individuals in enforcement actions" as Khuzami explained. All SEC enforcement lawyers have committed to memory the original "Seaboard Report" (see here) - the factors the SEC will consider when deciding whether to pursue a corporate enforcement action - and it appears that additional required reading may soon be available.

Second, and seemingly taking a page from the DOJ's FCPA playbook, Khuzami announced that the Division of Enforcement "will be prepared to recommend to the Commission that the SEC enter into Deferred Prosecution Agreements, in which [Division of Enforcement] agree[s] in the appropriate case to forego an enforcement action against an individual or entity subject to certain terms, including full cooperation, a waiver of statutes of limitations, and compliance with certain undertakings."

"New and proactive" enforcement ... "more needs to be done" ... future SEC deferred prosecution agreements ... these are sure interesting times to be following the FCPA!

Thursday, August 6, 2009

Mixed FCPA Verdict (It Would Seem) in Former Congressman Jefferson Trial

You may have forgotten his name, but you likely have not forgotten the headline grabbing "cash in the freezer" allegations against former Congressman William Jefferson (Louisiana), the first member of Congress ever charged with FCPA violations.

This week, a federal jury delivered a split-verdict on the FCPA charges - or so it would seem (see below).

While Jefferson was found guilty of a variety of other charges (solicitation of bribes, honest services wire fraud, money laundering, racketeering, and conspiracy)(see here for the DOJ release), he was acquitted on the substantive FCPA antibribery charge. That charge, according to the indictment (see here), was principally based on allegations that Jefferson attempted to bribe Nigerian officials (including the former Nigerian Vice President) to assist himself and others obtain or retain business for a Nigerian telecommunications joint venture. The famous "cash in the freezer" was allegedly part of the bribery scheme.

However, the jury did convict Jefferson on a conspiracy count that the indictment charged as conspiracy to solicit bribes, to commit honest services wire fraud, and to violate the FCPA. As reported by Jefferson's home-state newspaper, the Times-Picayune (see here), "the law only require[d][that] the jury find [Jefferson] guilty on two out of three of those counts -- solicit bribes, deprive honest services and violate the Foreign Corrupt Practices Act-- and in announcing the verdict, the deputy clerk did not specify which counts the jury agreed on. It may or may not have included conspiracy to violate the Foreign Corrupt Practices Act."

Perhaps the FCPA portion of the Jefferson verdict will become more clear in the days to come.

Wednesday, August 5, 2009

It's Been A While ... DOJ Issues FCPA Opinion Procedure Release

Thousands of companies face FCPA risks every single day. Many of these companies have legitimate questions as to how its operations in foreign countries could implicate the FCPA. If only there was a procedure in place for companies subject to the FCPA to receive guidance from the DOJ as to its enforcement stance as to particular conduct!

Well ... actually there is, but if you haven't heard about it, don't feel bad, because the Opinion Procedure Release provisions of the FCPA (15 USC 78dd-1(e)) are often overlooked.

After a year hiatus, (the last opinion was released on July 11, 2008), DOJ has penned Opinion Procedure Release 09-01 (see here).

Given the extent to which the health-care sector has come under FCPA scrutiny, it is not a surprise that the "Requestor" is a "domestic concern" "which designs and manufacturers a specific type of medical device."

Big picture ... the Requestor wants to provide a product sample to a foreign government so that government medical centers can evaluate the product to see if it would be eligible for the government subsidized medical device program. Requestor no doubt was nervous about this given that its competitors were already doing business with the foreign government (whereas Requestor was not) and given that the 100 product samples cost $19,000 each - amounting to a $1.9 million donation.

Based on a number of representations from Requestor, including that none of the product samples would go to government officials, the DOJ stated that it did not intend to take any enforcement action with respect to the proposed conduct because "the proposed provision of 100 medical devices and related items and services fall outside the scope of the FCPA in that the donated products will be provided to the foreign government, as opposed to individual government officials, for ultimate use by patient recipients selected in accordance with specific guidelines ..."

Requestor, it would seem, got the certainty it was looking for and can proceed with the arrangement free of FCPA worries.

All of which begs the question ... why isn't the FCPA Opinion Procedure process used more frequently? Common answers often include (i) the opinion expresses only the DOJ's opinion, but not the SEC's (obviously relevant to issuers); (ii) the procedure takes too long and the proposed business conduct is time sensitive (note that in 09-01 the Requestor made two supplemental disclosures); and (iii) the Requestor may receive an answer it doesn't like and thus needlessly raises its FCPA profile.

To read more about the detailed requirements of the FCPA Opinion Procedure process (see here).

Tuesday, August 4, 2009

FCPA Aches and "Payne"s

Helmerich & Payne Inc. ("H&P") is an international drilling contractor headquartered in Tulsa. It has land and offshore operations in South America. To operate in that region, H&P must import and export equipment and materials. According to the DOJ and SEC, therein lies the problem.

H&P recently settled a DOJ and SEC FCPA enforcement action based on the conduct of two wholly-owned second tier subsidiaries, Helmerich & Payne (Argentina) Drilling Company ("H&P Argentina") and Helmerich & Payne de Venezuela, C.A. ("H&P Venezuela").

Pursuant to a two-year DOJ non-prosecution agreement, H&P acknowledged responsibility for the conduct of H&P Argentina and H&P Venezuela in making various improper payments to officials of the Argentine and Venezuelan customs services. According to a DOJ release (see here), the payments "were made in order to import and export goods that were not within regulations, to import good that could not lawfully be imported, and to evade higher duties and taxes on the goods." Pursuant to the agreement, H&P will pay a $1 million penalty.

In a parallel action, H&P agreed to an SEC settlement under which it agreed to pay approximately $375,000. The SEC cease-and-desist order ("Order") (see here) finds that: (i) "H&P Argentina paid Argentine customs officials approximately $166,000 to permit the importation and exportation of equipment and materials without required certifications, to expedite the importation of equipment and materials, and to allow the importation of materials that could not imported under Argentine law; and (ii) "H&P Venezuela paid Venezuelan customs officials approximately 19,673 either to permit the importation and exportation of equipment and materials that were not in compliance with Venezuelan importation and exportation regulations or to secure a partial inspection, rather than a full inspection, of the goods being imported."

According to the Order, the payments were "falsely, or at least misleadingly" described as "additional assessments," "extra costs," "extraordinary expenses," "urgent processing," "urgent dispatch," or "customs processing." The SEC found that as a result of the payments, H&P avoided approximately $320,000 in expenses it would have otherwise incurred had it properly imported and exported the equipment and materials. The subsidiaries' financial results were included in H&P's filings with the SEC and, based on the above conduct, the SEC found that H&P violated the FCPA books and records and internal control provisions.

The Order is silent as to H&P's knowledge of or involvement in the above described payments.

No doubt H&P received an SEC cease and desist order (the least harsh SEC sanction) and a DOJ non-prosecution agreement because of its conduct upon learning of the payments. As described in the Order, during an FCPA training session, an employee voluntarily disclosed some potentially problematic payments, through a customs broker, in Argentina to customs officials. Thereafter, H&P hired FCPA counsel, conducted an internal investigation, and voluntarily reported the conduct at issue to the government.

According to H&P's Form 8-K filed on July 30, 2009 (see here), "[t]here are no criminal charges involved in the settlements and disciplinary action has been taken by the company with respect to certain employees involved in the matter, including in some cases, termination of employment." The 8-K also notes that both settlements "recognize the company's voluntary disclosure, cooperation with both agencies, and its proactive remedial efforts."

Sunday, August 2, 2009

The FCPA ... It's Not Just For Americans

In 1998, the FCPA's antibribery provisions were amended to, among other things, broaden the jurisdictional reach of the statute to prohibit "any person" "while in the territory of the U.S." from making improper payments through "use of the mails or any means or instrumentality of interstate commerce" or from doing "any other act in furtherance" of an improper payment. (see 15 USC 78dd-3(a)). "Any person" is generally defined to include any person other than a U.S. national or any business organization organized under the laws of a foreign nation. (see 15 USC 78dd-3(f)).

Thus, since 1998, and contrary to a still widely-held misperception, foreign nationals can be subject to the FCPA.

Ousama Naaman apparently did not get the memo as the DOJ recently unsealed a criminal indictment charging him with violating the FCPA and conspiracy to violate the FCPA and commit wire fraud. According to a DOJ release (see here) Naaman (a Canadian citizen), acting on behalf of a U.S. public chemical company and its subsidiary, allegedly offered and paid kickbacks to the Iraqi government on five contracts under the United Nations Oil for Food Program. In addition, the indictment alleges that Naaman paid $150,000 on behalf of a U.S. company to Iraqi Ministry of Oil officials to keep a competing product out of the Iraqi market.

This is certainly not the first time a foreign national has been subject to an FCPA enforcement action. Other recent examples include Jeffrey Tesler and Wojciech Chodan (both U.K. citizens criminally indicted for their roles in the KBR / Halliburton bribery scheme)(see here) and Chrisitan Sapsizian (a French citizen who pleaded guilty to violating the FCPA for his role in a scheme to bribe Costa Rican foreign officials) (see here).

Saturday, August 1, 2009

Gray Sky Over Nature's Sunshine As It Settles FCPA Enforcement Action

Companies have varying degrees of FCPA risks. Generally, at the high-end of the spectrum is a resource extraction company operating in a third-world country with an unstable government. At the low-end of the spectrum, it would seem, is a Utah-based company which got its start as a small family business selling encapsulated cayenne and other herbs to health food stores.

Yet, as evidenced by the SEC's recent FCPA enforcement action against Nature's Sunshine Products, Inc. ("NSP"), even a company with a relatively low FCPA risk profile can run afoul of the FCPA.

As described in the SEC's Litigation Release (see here) NSP, without admitting or denying the allegations in an SEC civil complaint, agreed to pay a $600,000 civil penalty to resolve allegations that it violated (among other securities laws - see below) the FCPA's anti-bribery, books and records, and internal control provisions.

According to the SEC complaint (see here), Brazil was NSP's largest foreign market, but in approximately 2000, the Brazilian governmental agency responsible for regulating nutritional products reclassified certain of NSP's products as medicines, thus requiring a registration process prior to import and sale of the products in Brazil. As alleged in the SEC complaint, NSP's wholly-owned subsidiary in Brazil ("NSP Brazil") circumvented the registration process by making approximately $1 million in cash payments to customs brokers, some of which was later used to pay Brazilian customs officials so that they would allow NSP Brazil to import unregistered product into Brazil. According to the SEC, these payments were booked by NSP Brazil as "importation advances," but without supporting documentation. Thereafter, as alleged by the SEC, NSP Brazil purchased fictitious supporting documentation for the payments.

As suggested above, in addition to the FCPA charges, the SEC complaint also charges other securities laws violations not typically found in an FCPA enforcement action such as fraud in connection with the purchase and sale of securities and false filings with the SEC. These other charges appear to be based on the allegation that NSP, in a prior Form 10-K filing with the SEC, stated that NSP Brazil experienced a significant decline in sales "due to import regulations imposed by the Brazilian government" but which failed to disclose any material information related to the above-mentioned cash payments.

Also charged in the SEC complaint were Douglas Faggioli, the current President and Chief Executive Officer of NSP and a member of its board of directors who during the relevant time period was NSP's Chief Operating Officer, and Craig Huff, NSP's former CFO. The complaint alleges that Faggioli and Huff, as "control persons" of NSP, violated the FCPA's books and records and internal control provisions. In language that is sure to induce a cold sweat for any executive, the SEC generally alleged that both Faggioli and Huff had "supervisory responsibilities" over NSP's senior management and policies, yet as "control persons," "failed to make and keep books, records, and accounts, which in reasonable detail, accurately and fairly reflected the transactions of NSP" and failed to devise and maintain an adequate system of internal accounting controls. Without admitting or denying the SEC's allegations, Faggioli and Huff each agreed to pay a $25,000 civil penalty.

According to an NSP press release (see here) no "current NSP officers, directors, or employees are alleged to have participated in or had knowledge of any of the improper conduct" alleged in the SEC complaint. The press release also notes that NSP voluntarily disclosed the conduct at issue to both the SEC and the DOJ and fully cooperated in the government's investigation. The press release also states that NSP "anticipates no action by the DOJ" as to the disclosed conduct.

The NSP FCPA enforcement action, and other such enforcement actions against traditionally low FCPA risk companies, should serve notice to all that no industry is immune from FCPA scrutiny.