by T. GormanPosted on Posted in SECActions

Each year at the program “SEC Speaks,” the Commission’s and staff gather to discuss recent events at the agency and future directions. Comments by the Commissioners this year recapped past events and raised important issues for future discussion.

Chairman Schapiro reviewed recent reorganizational efforts and the agency as well as selected rule making. Those include:

  • Making better use of the available resources through a better hiring approach, increasing training, upgrading the case management system and improving systems;
  • Managing more effectively and improving agency operations;
  • Crafting a new approaches to try and head off threats by taking steps such as creating new groups in Corp Fin focused on the largest financial institutions, structured finance products and capital markets trends and reorganizing the enforcement division; and
  • Implementing segments of Dodd-Frank.

Commissioner Daniel Gallager focused his comments on issues regarding the question of failure to supervise:

  • A key question is frequently who is a supervisor and at what point can legal and compliance personnel be reasonably deemed “supervisors.” This issue has been raised in a number of Commission decisions which are not entirely clear, according to Commissioner Gallager. At the same time what those cases do stand for is the proposition that “once a person becomes involved in formulating management’s response to a problem, he or she is obligated to take affirmative steps to ensure that appropriate action is taken.”
  • The critical difficulty in this context is to encourage legal and compliance personnel to participate and lend their talents to the organization. “Unfortunately, robust engagement on the part of legal and compliance personnel raises the specter that such personnel could be deemed to be ‘supervisors’ subject to liability . . .”
  • This presents a challenge for the Commission and the SROs to create a framework to encourage participation by in-house legal and compliance officers.

Commissioner Luis Aguilar discussed the timely issue of political contributions and the Supreme Court’s decision in Citizens United in 2010. The Commissioner noted that “shareholders require uniform disclosures regarding corporate political expenditures for many reasons, including that it is impossible to have any corporate accountability or oversight without it.” The Commission has a responsibility to “ensure that investors are not left in the dark while their money is used without their knowledge or consent” the Commissioner stated.

Finally, Commissioner Tory Paredes voiced concerns regarding the Volker rule. Those include:

  • Investors could be disadvantaged by higher costs, fewer investment options, lower returns and less wealth;
  • The U.S. markets may become more volatile and less efficient;
  • Companies may find it more difficult to raise capital; and
  • Agencies, authorities, and instrumentalities of cities, counties, and states could end up struggling to raise funds to finance needed public works and infrastructure projects.
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by T. GormanPosted on Posted in SECActions

Recent set backs in FCPA prosecutions against individuals are not deterring the SEC. Last week the Department of Justice dismissed one of its highest profile FCPA prosecutions against individuals, the so-called African sting case. There 22 defendants had been indicted following the largest sting operation in FCPA history. After two unsuccessful trials for the initial groups of defendants, the DOJ moved to dismiss the action with prejudice (here).

By the end of the week, however, the SEC brought charges against three oil services executives of Noble Corporation in two suits. SEC v. Jackson, (S.D. Tx. Filed Feb. 24, 2012); SEC v. O’Rourke, (S.D.Tx. Filed Feb. 24, 2012). The former names as defendants Mark Jackson, former CEO of Noble, and James Ruehlen, current Director and Division Manager of the firm’s subsidiary in Nigeria. The latter names as a defendant Thomas O’Rourke, former controller and head of internal audit at Noble. Mr. O’Rourke settled with the Commission. The other case is in litigation.

The charges arise from a sweep of the oil services industry in late 2010. At that time Noble Corporation was charged with FCPA violations. The firm entered into a non-prosecution agreement with the Department of Justice and settled with the SEC (here).

The focus of the scheme was to permit the company to keep its drilling equipment in the country and avoid significant import charges. Specifically, temporary import permits allowed the rigs to be in the country for one year. Officials could grant up to three extensions of six months each. After that the rigs had to be exported and then re-imported under a new temporary permit. This required the payment of sizable duties.

Messrs. Jackson and Ruehlen are alleged to have arranged and facilitated the payment of bribes to induce Nigerian customs officials to grant new permits and extend others. The two men arranged to pay hundreds of thousands of dollars in bribes to obtain eleven illicit permits and twenty-nine extensions, according to the complaint. Mr. Jackson is also alleged to have approved the bribe payments and concealed them from the audit committee and auditors. Mr. Ruehlen prepared false documents for the bribes, according to the charging papers.

The complaint against Messrs. Jackson and Ruehlen alleges violations of Exchange Act Sections 30A, 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5). The case is in litigation.

The complaint against Mr. O’Rourke claims that he aided and abetted the violations by the company of the bribery, books and records and internal control provisions of the FCPA and that he directly violated the internal control and false records provisions of the Exchange Act. Mr. O’Rourke settled with the SEC, consenting to the entry of a permanent injunction, without admitting or denying the allegations in the complaint, which prohibits future violations of Exchange Act Sections 13(b)(2)(A), 12(b)(2)(B, 12(b)(5) and 30A. He also agreed to pay a civil penalty of $35,000.

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