SEC to Unveil FCPA Actions Against Individuals by Year's End

By   Yin Wilczek

Oct. 3 — The Securities and Exchange Commission will be announcing a number of Foreign Corrupt Practices Act actions against individuals before the end of 2014, Kara Brockmeyer, chief of the SEC Enforcement Division's FCPA Unit, said Oct. 2.

“You're going to see us continue to focus on individuals,” Brockmeyer told a legal gathering. “I've said this again and again and people keep saying, where are the cases?” There are cases in the pipeline, and “I hope that before the end of the calendar year we'll have a number of cases to talk about,” she said.

“As the SEC and DOJ rightly recognize, corporate-only enforcement does not adequately deter like individual enforcement can.”Mike Koehler Southern Illinois University School of Law

Brockmeyer spoke on a panel at the American Bar Association's National Institute on International Regulation and Compliance in Washington. She and co-panelist Patrick Stokes, chief of the Justice Department Fraud Section's FCPA Unit, said they were voicing their own opinions and weren't speaking on behalf of their respective agencies.

Dearth of Individual Cases

Brockmeyer's announcement is significant given the dearth of recent SEC enforcements against individuals under the FCPA.

Mike Koehler, the founder and editor of FCPA Professor and a law professor at Southern Illinois University School of Law, said the commission has not brought an FCPA action against an individual in almost two and a half years.

The SEC's website highlighting its FCPA activities bears this out. According to the website, the most recent enforcement action against an individual—Garth Peterson, a former Morgan Stanley executive—was filed in April 2012.

An SEC representative told Bloomberg BNA the enforcement list is up to date.

Peterson pleaded guilty to criminal charges that he conspired with a Chinese official to evade Morgan Stanley's internal accounting controls to acquire an ownership interest in a building in Shanghai. He was sentenced in August 2012 to nine months in prison .

Brockmeyer, responding to Koehler's point, said the SEC has spent the last two and a half years litigating, to different degrees of success, three FCPA cases in which allegations were filed against 15 individuals.

Lessons Learned

“We have learned lessons along the way, including the fact that for us, personal jurisdiction over foreign nationals is turning out to be a significant hurdle,” Brockmeyer said. The problem is especially acute in FCPA matters given that in many instances, the individual against whom the commission has the best case may not be a U.S. national, she said.

However, while it is more difficult to bring a case against individuals than against companies, the SEC nonetheless is actively seeking to charge individuals where it can, Brockmeyer said. There will be “peaks” where the SEC will announce a “bunch” of FCPA cases against individuals, and there will be “valleys” where none is announced, she said. “The issue of individual liability is always one that is out there for us, and it's not an easy one,” she said.

Speaking to Bloomberg BNA after the panel, Koehler encouraged the SEC to keep trying. “As the SEC and DOJ rightly recognize, corporate-only enforcement does not adequately deter like individual enforcement can,” he said.

Third Parties

In other comments, Brockmeyer said third-party intermediaries continue to be a source of risk for companies. It is “heartening” to see that companies are starting to develop better due diligence and that some are obtaining internal audits of some of their big third-party intermediaries, she said.

“But we also want to encourage people to think outside the box,” Brockmeyer said. It isn't always the third-party consultant that companies hire to get them the contract that can be problematic, she said. “It can be the small payments made by a foreign law firm that you hired to get you permits or licenses that may not be doing business in the way that you need them to be doing business,” she said.

Brockmeyer also said her unit is going to focus some attention on raising awareness among small and medium-size companies on the need for effective compliance controls when they try to break into other markets, especially in high-risk jurisdictions. These smaller companies don't have the international experience or the resources that bigger companies have, she said.

The SEC's recent case against Smith & Wesson for FCPA violations was a bid to send that message, she said.

DOJ Statistics
Meanwhile, Stokes provided some statistics regarding FCPA enforcement by the DOJ

Since 2013, the department has prosecuted and resolved FCPA cases against 10 corporations and obtained penalties of nearly $800 million. It also charged, unsealed charges against or pleaded out 25 individuals, he said.

Further, since 2009, the DOJ has convicted 50 individuals and resolved more than 50 cases against companies with penalties amounting to almost $3 billion, Stokes noted.

The DOJ official offered three “takeaways,” saying the department:

  •  doesn't focus on any particular industry but is “opportunistic” and “follows the evidence where it leads”;
  •  will aggressively prosecute not just corporations but also individuals where it can; and
  •  will reward self-reporting and cooperation.

Panel moderator Peter B. Clark, a partner at Cadwalader, Wickersham & Taft LLP in Washington, asked whether the DOJ can offer some information, such as yearly statistics, on the number of FCPA cases it declined to prosecute because of companies' cooperation.

Stokes said that while the department is “very aware” of the interest by companies and the defense bar in data about FCPA declinations, it is also concerned about the privacy issues that might arise. “We do talk and are talking about ways to get the information out there,” but “we are constrained about what we can make public,” he said.

It also is a challenge to “encapsulate in a meaningful way” why the DOJ declined to prosecute certain FCPA cases, Stokes added. “We are considering” putting out some information, “but it is a fairly difficult and nuanced issue,” he said.

To contact the reporter on this story: Yin Wilczek in Washington at

To contact the editor responsible for this story: Phyllis Diamond at