A consumer loan company settled SEC charges for violating anti-bribery, books and records, and internal accounting controls provisions under the Foreign Corrupt Practices Act ("FCPA").
As described in the Order, the SEC found that the company paid Mexican government officials approximately $4.1 million to obtain and retain business between the company's Mexican subsidiary and Mexican state and federal government employees. The SEC claimed that the company made the bribes so that Mexican government and union officials would enter into the company's loan contracts and ensure the timely repayment of loans. The SEC stated that the company failed to (i) keep accurate books and records and (ii) maintain sufficient internal accounting controls, which would have detected and prevented the bribes. Additionally, the SEC determined that the company did not have sufficient "entity-level controls" over its Mexican subsidiary, and that its management conducted an inadequate internal audit. As a result of the bribery scheme, the SEC found that the company unjustly earned approximately $18 million.
To settle the charges, the company agreed to (i) cease and desist from further violations and (ii) pay $21,726,000 in combined disgorgement, civil penalty, and prejudgment interest.
Commentary
The bulk of the payment of the penalty amount is described as "disgorgement," although the money is being paid to the government, not to the firm's customers, and it is not obvious from the facts of the case that the borrowers were victims, beyond the fact of having to repay the loans through payroll deduction.
Commentary
This case is another example of the SEC's focus on the "tone at the top" of public companies when it comes to their approach to compliance. It is a reminder to executives to prioritize compliance with company internal controls and procedures. The case also further demonstrates the value of cooperation and meaningful remedial efforts during an SEC investigation. It appears the company received a significant break on the amount of its civil penalty-a $2 million dollar penalty in a case with $18 million in disgorgement is low for an FCPA violation and likely reflects significant credit for cooperation and remediation. Specifically, the SEC Order recognized the company's facilitation of bringing witnesses to the U.S. from Mexico during the investigation and its decisions to terminate the senior employees responsible for the misconduct (including the president of the company's Mexico subsidiary as well as the company's CEO and general counsel) and the fact that the company divested its Mexico subsidiary.
Primary Sources
- SEC Press Release: SEC Charges Consumer Loan Company With FCPA Violations
- SEC Order: World Acceptance Corporation
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