SEC/DOJ Continue To Focus On The FCPA; Another ARS Case
FCPA Enforcement: DOJ and the SEC continued their focus on FCPA enforcement, bringing actions against the Albert Jackson Stanley, the former CEO of Kellogg, Brown & Root, Inc., now a subsidiary of Halliburton Company, for bribery and books and records violations. SEC v. Stanley, 08-cv-02680 (S.D. Tex. Filed Sept. 3, 2008). According to the SEC’s complaint, between 1995 and 2004 Mr. Stanley engaged in a scheme to bribe Nigerian government officials to obtain multiple contracts with a total of over $6 billion to build liquefied natural gas production facilities in Bonny Island, Nigeria. To conceal the payments, Mr. Stanley and others used a Gibraltar shell company controlled by a U.K. solicitor and a Japanese agent as conduits for the bribes.
To settle with the SEC, Mr. Stanley consented to the entry of a permanent injunction prohibiting future violations of FCPA anti-bribery and books and records provisions. In a related criminal case, Mr. Stanley pled guilty to one count of conspiring to violate the FCPA and one count of conspiring to commit mail and wire fraud unrelated to the FCPA charge. Mr. Stanley is awaiting sentencing.
Auction Rate Securities: The SEC brought another action based on events in the auction rate securities market. This case is against two former Credit Suisse brokers. According to the complaint, the two brokers, Julian Tzolov and Eric Butler, defrauded customers by selling them auction rate securities backed by subprime mortgages, collateralized debt obligations and other collateral rather than the federally guaranteed student loans the customers were led to believe backed the securities. In total, customers of the two brokers held over $800 million in illiquid securities. The complaint alleges violations of Section 10(b) of the Exchange Act and Section 17(a) of the Securities Act. The case is in litigation. SEC v. Tzolov, Case No. 08 Civ. 7699 (S.D.N.Y. Filed Sept. 3, 2008).