SEC ENFORCMENT CONTINUES TO FOCUS ON THE FCPA
The SEC continued to emphasize FCPA enforcement. On Friday, the Commission filed a settled case against Nature’s Sunshine Products, Inc and its CEO, Douglas Faggioli and CFO, Craig D. Huff. SEC v. Nature’s Sunshine Products, Inc., Case No. 09CV672 (D. Utah Filed Jul. 31, 2009).
The Nature’s Sunshine complaint is based on payments made in 2000 and 2001 by the Brazilian subsidiary of the company to local regulators. The payments were made to circumvent restrictions from then newly enacted regulations in Brazil which reclassified certain vitamins, herbal products and nutritional supplements as medicines. The company was unable to register some of its products for import following the implementation of the new regulations. In an effort to circumvent those requirements and sell those products in Brazil, which was the biggest foreign market for the company, cash payments were made to customs officials. The payments were intended to get the products into the country. The payments were not properly recorded in the books and records of the company.
To resolve the case, the three defendants consented to the entry of permanent injunctions prohibiting future violations of the antifraud and books and records and internal control provisions of the federal securities laws. In addition, the company agreed to pay a civil penalty of $600,000 while Messrs Faggioli and Huff each agreed to pay a civil penalty of $25,000. See also Lit. Rel. No. 21162 (Jul. 31, 2009). http://www.sec.gov/litigation/litreleases/2009/lr21162.htm
Nature’s Sunshine is just one in a series of FCPA cases brought recently by the SEC. Frequently those cases are brought in conjunction with the Department of Justice and are based on self-reporting. The continuing focus in this area should serve as a reminder to all issuers to carefully review their compliance procedures in this critical area.