The Securities and Exchange Commission (SEC), the agency empowered to enforce federal securities laws and regulations, imposed administrative sanctions on two American businessmen for violations of the Foreign Corrupt Practices Act (FCPA), 15 U.S.C. § 78dd-1. The agency accepted offers of settlement from both respondents, resulting in civil monetary penalties and a cease-and-desist order. Matter of Timms, et al, Release No. 73616, File No. 3-16281, order (PDF file) (SEC, Nov. 17, 2014).
Administrative sanctions are similar to criminal penalties, although they generally have different procedural requirements and a much lower burden of proof. In a criminal proceeding, the state must prove that a defendant is guilty of all of the statutory elements of an offense beyond a reasonable doubt. Administrative sanction proceedings are conducted by a government agency or administrative law judge. The agency typically must establish violations of applicable laws or regulations by a preponderance of evidence. Penalties often consist of monetary fines, license suspension, and injunctions.
During the relevant time period, the two respondents were employed by an American defense contractor in its office in Dubai, United Arab Emirates. They both worked as sales executives, with responsibility for obtaining contracts to sell binoculars and security cameras to Saudi Arabia’s Ministry of the Interior (MOI). As a condition for a binoculars contract, the respondents’ employer was to conduct a “factory acceptance test” at a facility in Massachusetts in July 2009. The respondents arranged for MOI officials to travel to the U.S. for the test. According to the SEC, this trip included a 20-day “world tour” with stops in Casablanca, Paris, New York City, and Dubai, all at the contractor’s expense. The respondents reportedly also presented five MOI officials with $1,425 watches.
A review of expenses in the contractor’s Dubai office flagged the request for reimbursement for the watches. One respondent reportedly claimed that the request for $7,000 was an error, and that it should have been for 7,000 Saudi Riyal, equal to about $1,900. The respondents then submitted falsified invoices. They also reportedly claimed that the “world tour” had been charged to the company by mistake and submitted additional falsified invoices. Ultimately, the company received about $28 million in payments from the MOI for the two contracts.
The SEC commenced a cease-and-desist proceeding against the respondents, which it is authorized to do if it suspects that “any person is violating, has violated, or is about to violate any provision of” the Securities Exchange Act of 1934, 15 U.S.C. § 78u-3(a). The agency must conduct a hearing 30 to 60 days after serving notice of the proceeding. It has the authority to take certain actions to prevent further violations, including temporarily freezing assets.
In this case, the SEC alleged that the respondents violated the FCPA, which prohibits employees of publicly traded companies from influencing or attempting to influence foreign officials in their official capacity, or in order to obtain a benefit or advantage. Under their settlement offer, the SEC ordered both respondents to cease and desist from any violations of the Securities Exchange Act. It also imposed civil money penalties of $50,000 on one respondent, who was in a supervisory position, and $20,000 on the other respondent.
These blog posts are meant to be illustrative only. Unless expressly stated to the contrary herein, these matters are not the result of any legal work of Michael J. Brown, but are used to communicate a particular point of view. Michael J. Brown does not claim credit for any legal work done by any lawyer or law firm either generally or specifically, with respect to the matters contained in this blog.
Criminal defense attorney Michael J. Brown represents the rights of people in west Texas in criminal proceedings at the state and federal level. To schedule a confidential consultation with a knowledgeable and experienced legal advocate, contact us today online or at (432) 687-5157.
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