by T. GormanPosted on Posted in SECActions

The Department of Justice and the Securities and Exchange Commission continue to focus on FCPA prosecutions. Last week DOJ, along with the SEC and the Munich Public Prosecutors Office filed a record setting case, settled FCPA action against Siemens A.G. Now, another FCPA action has been brought, this one involving Fiat S.p.A. While not as spectacular as the Siemens case, it is the latest in a series of FCPA cases based on the U.N. Oil For Food Program.

The Department brought actions against Fiat, an Italian manufacturer, and three of its subsidiaries, Iveco S.p.A. (“Iveco”), CNH Italia S.p.A. (“CNH Italia”) and CNH France, S.P. (CNH France). Iveco and CNH Italia were each charged with conspiracy to commit wire fraud and to violate the books and records provisions of the FCPA. CNH France was charged with conspiracy to commit wire fraud. Specifically, the charges claim that from 2000 to 20002 Iveco, CNH Italia and CNH France paid about $4.4 million to the Iraqi government in connection with the humanitarian aid side of the U.N. program. As in other cases, the fees were paid by inflating the contract prices by 10% before the agreements were submitted to the United Nations for approval. The contracts were for industrial pumps, gears and other equipment.

Under the terms of the deferred prosecution agreement, Fiat agreed to pay a $7 million penalty. In entering into the agreement Fiat acknowledged responsibility for the actions of the subsidiaries and agreed to cooperate with the Department’s on-going Oil for Food Program.

The Department agreed to the deferred prosecution agreement in view of the cooperation of Fiat and its adoption of enhanced compliance procedures. If Fiat abides by the terms of the agreement, the charges will be dismissed after three years. U.S. v. Iveco S.p.A. and U.S. v. CNH Italia S.p.A. Both cases were filed in the District of Columbia on December 22, 2008.

The SEC filed a settled, related case. SEC v. Fiat S.p.A., Case No. 1:08-cv-02211 (D.D.C. Filed Dec. 22, 2008). The SEC complaint only names as defendants Fiat and CNH Global, N.V., a Dutch subsidiary which is a provider of agricultural and construction equipment. However, it involves Inveco, CNH France and NCH Italia. The SEC’s complaint alleges that the two defendants made about $4.3 million in kickback payments in connection with the sale of humanitarian goods to Iraq under the U.N. program. The action was settled with the entry by consent of a permanent injunction prohibiting future violations of the books and records provisions and an agreement to pay disgorgement of about $5.3 million plus prejudgment interest and a civil penalty of $3.6 million.

by T. GormanPosted on Posted in SECActions

The children are all finishing their letters to Santa Claus, hoping that on Christmas morning they will find those special toys they have wanted for so long in their stockings and under the tree. President-elect Barack Obama is also writing to Santa this week in the hope of delivering on his promise of change to the country. One of his letters is for his nominee as SEC Chairwoman, Mary Schapiro. The President-elect asked Santa to put three things in the Chairwoman’s stocking, but they are big items:

Tone at the top: He wants the SEC to once again be the top cop of Wall Street. That begins at the top – the White House and the SEC Chairwoman’s office. The tone at the top must tell all that the SEC is back and on patrol, walking the beat, not just of Wall Street, but in the board room and across the country. If there is wrong-doing, those responsible will caught and brought to justice. If market professionals are violating the rules, they will be stopped. If corporate America is fudging the account principles, they will be discovered. If insiders are abusing their trust, they, along with all who are violating the rules, will be found in a timely fashion and promptly brought to justice. This message must come from the top and be clear, unequivocal and fairly delivered, not just on the first day, but every day.

Scrutiny at the bottom: Those in the trenches have to get the message from the top and apply it. Intake is key and effectively conducting the initial, informal inquiry is critical. When investor complaints come in, they have to be carefully reviewed. When information is obtained from the SRO’s, it has to be reviewed and carefully analyzed. When there are media reports raising questions about matters, they must be evaluated and followed up. At the same time, initial informal investigations, which the staff has the authority to open and close without asking the Commission, must be carefully conducted, the facts and data analyzed and rapidly pursued to make sure that the proper conclusion is reached. Intake and the initial investigations are critical to effective enforcement.

Economy in the middle: It is essential that the mid-level supervisory staff take a hands-on approach and use their expertise to make sure that the staff doing intake and conducting the initial investigations is searching out all potential leads, that the evidence is being carefully analyzed and at the pertinent legal issues are being fully evaluated. Mid-level staff must avoid the temptation to get caught up in reviewing memoranda which summarize information, rather than taking a hard look at actual pieces of key evidence. They must resist falling into a routine of running from meeting to meeting, leaving the actual collection and analysis of evidence – that is, the real investigation – to the most inexperienced staff members. It is thus essential that the staff operations be refocused to a more hands on approach. This will ensure that tone from the top and the scrutiny at the bottom come together to create effective enforcement.

If Santa fills Ms. Schapiro’s stocking with tone at the top, scrutiny at the bottom and economy in the middle, the President-elect will bring the change he promised to the Securities and Exchange Commission.