Attorneys McGovern, Goldschmidt Analyze More Aggressive FCPA Enforcement

February 8, 2010
1 minutes

Government enforcement partner Michael McGovern says the settlement of an SEC enforcement action in which the SEC invoked §20(a) of the Securities Exchange Act of 1934 to impose FCPA liability on two corporate executives for allegedly failing to supervise subordinates’ accounting activities may be “a harbinger of even more aggressive FCPA enforcement to come.” 

In “Snaring ‘Control Person’ Executives in FCPA Liability: How Sharp is the §20(a) Saber the SEC Has Been Rattling?,” an article the attorneys authored for a special white collar crime supplement of the New York Law Journal, Michael and Steven assess the impact of the July 31, 2009 settlement of SEC v. Nature’s Sunshine Products Inc. The case, which was the first time the Securities and Exchange Commission invoked §20(a) to impose FCPA liability on corporate executives based solely on the allegation that they were “control persons” with supervisory authority over the company employees who had committed the primary FCPA violations, appeared to be unleashing a new and less exacting standard of FCPA liability. The authors examine just how much of a shift the case represents, and note that “[w]hile it is not yet clear whether ‘Nature’s Sunshine’ will, in the long run, represent a seismic shift or a small tweak in the enforcement landscape, it cannot be doubted that failure to keep a watchful eye on activities of one’s subordinates can result in heavy personal cost.”