by T. GormanPosted on Posted in SECActions

p>Aon Corporation, one of the largest insurance brokerage firms in the world, resolved FCPA charges with the Department of Justice and the Securities and Exchange Commission. The firm entered into a non-prosecution agreement with the DOJ. In connection with that agreement, the company admitted that its books and records did not accurately reflect the purpose of certain expenses and that it failed to devise an adequate system of internal controls as they relate to its foreign sales activities. Under the terms of the agreement the company will pay a $1.76 million criminal fine and adhere to rigorous compliance and internal control procedures.

The firm also settled with the SEC. Publically traded Aon consented to the entry of a permanent injunction prohibiting future violations of Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B) without admitting or denying the allegations in the complaint except as to jurisdiction. The firm also agreed to pay disgorgement of $11,416,814 along with prejudgment interest. SEC v. Aon Corporation, Civil Action No. 1:11-cv-02256 (D.D.C. Filed Dec. 20, 2011). Aon also paid a fine in the amount of ₤5.25 million to the UK’s Financial Services Authority.

The criminal investigation focused on payments made between 1997 and 2005 by Aon Limited, the firm’s United Kingdom subsidiary. That subsidiary administered certain training and education funds in connection with its reinsurance business with Instuto Nacional De Seguros or INS, Costa Rica’s state-owned insurance company. The supposed purpose of the payments was for the education and training of INS employees. In fact, significant portions of the money were used for other purposes, according to the DOJ. Those included travel with spouses to overseas tourist locations or for purposes which could not be determined. Many of the invoices did not specify a legitimate business purpose for the expenditure.

The Commission’s complaint focuses on the payments made in Costa Rica as well as those in Egypt, Vietnam, Indonesia, United Arab Emirates, Myanmar and Bangladesh. According to the SEC, a total of $3.6 million in improper payments were made by subsidiaries of the firm between 1983 and 2007. All of the payments were to either those who could award business or were in a position to influence others who could award business. The payments were made for travel and entertainment and to third-party facilitators.

The settlement in the criminal investigation is based on what criminal prosecutors termed the “extraordinary” cooperation of the firm with the DOJ and the SEC. That cooperation included timely and complete disclosure of the improper payments in Costa Rica. It also included disclosure of other improper payments discovered during a thorough investigation of Aon’s global operations. In addition, the DOJ considered the early and extensive remedial efforts taken by the firm as well as the fine paid to the SFA in the United Kingdom. The SEC did not disclose the predicate for its settlement.

Tagged with: , , ,

by T. GormanPosted on Posted in SECActions

The Center for Capital Markets Competitiveness, U.S. Chamber of Commerce, published a new report calling for what it terms “transformational change” at the SEC. It is aptly titled: “U.S. Securities and Exchange Commission: A Roadmap for Transformational Reform”

The Report concludes in its opening paragraphs that while the SEC has for much of its history been “the preeminent financial regulator” that time has passed. It goes on to state that for “more than a decade, the SEC regulatory and enforcement structures have failed to keep pace with rapidly changing markets . . .[now there is a] need for transformational change. . . “ Too this end the Report sets forth four key proposals:

  • A bold clear plan should be developed, “including how to make rulemaking, supervisory inspections, and enforcement more effective.”
  • A person should be put in charge of implementing this plan by increasing the size of the Commission from five to seven members, including a new Deputy Chairman for Management and Operations to take charge of the transformation.
  • Statutory and practical obstacles must be removed to permit the Commission to hire the right people with the appropriate skill set to ensure “that staff are put in positions to succeed – or are removed.”
  • Increases in funding and resources should be tied to the implementation of the transformation process.

The Report includes an evaluation of the Division of Enforcement and its recent reorganization. It concludes that the changes made by the reorganization were “largely positive and should, over time, improve the effectiveness of SEC enforcement [but] it is too soon to conclude that they are already successful.” It goes on to offer nine recommendations (the Report makes 28 overall) to improve the operations of the Division which are largely procedural rather than transformational. The recommendations include:

  • Training: An in-depth training program on investigative techniques should be developed.
  • Reduction in open case inventory: The Division should establish a goal of reducing its open case inventory each year by implementing appropriate procedures. These would include the utilization of a presumption that any inquiry over 18 months old or based on possible violations older than three years should be closed absent a certification to the contrary by the Division Director or Deputy Director.
  • Assignment of investigations: A new process for the assignment of investigations should be developed based on expertise, experience and the availability of resources.
  • Case mix: The Division should assess the case mix to ensure that it is bringing cases that advance the Commission’s entire regulatory agenda.
  • Problems: An internal procedure should be crafted to assess difficulties and incorporate the learning into the training process.
  • New specialty units should be created: These should include one responsible for complex accounting frauds or misstatements and one focused on corporate debt markets. The staffing for all units should be increased to about 40% of the Division.
  • Consistency: Specialty staff should promote consistency throughout the Division by in part having group leaders with broad oversight authority over all investigations relevant to their subject authority.
  • Cooperation: Seaboard should be updated and procedures crafted to implement the principles wherever applicable.
  • Metrics: Consistent metrics should be developed for the Division which focus on the importance and timeliness of the cases rather than statistics. These should include credit for staff that complete and close a through investigation that does not result in an enforcement action.
Tagged with: , ,