The Man From FCPA tends to see FCPA enforcement actions as both teaching vehicles for compliance professionals and communication tools of government enforcement agencies such as the SEC and the Justice Department. He found the recently released Nu Skin FCPA enforcement action both provided both. The matter was relatively small enforcement, in terms of the monetary sanctions, with a civil money penalty in the amount of $300,000, coupled with a disgorgement profits in the amount of $431,088, plus prejudgment interest of $34,600. However, the matter has several interesting aspects for the Chief Compliance Officer or compliance practitioner to consider.
There were three immediate lessons not often observed in FCPA enforcement actions. First, although it might seem somewhat unusual for such an entity to become embroiled in a FCPA enforcement action doing business under a Multi-Level Marketing (MLM) sales model. Next the case involved corruption around a charitable donation and it, therefore, serves as a stark reminder of the high-risk of charitable donations under the FCPA. Finally, the matter reminds everyone of the strict liability nature of violations of the Accounting Provisions of the FCPA including both internal control provisions and books and records provisions of the Act.
Yet there is one overriding communication in the Nu Skin enforcement action from the SEC, put forward in a very dramatic manner. This case was highly unusual in that it was a one-transaction enforcement action. The bribe paid was a one-time event. So Nu Skin reminds us that there must always be continued vigilance around compliance. If you fail to follow your own compliance program for one high risk transaction and that transaction violated the FCPA, the cost will be far greater than simply the cost of the fines and penalties. While the monetary sanction was ‘only’ $765,688.00; you can be certain that the internal investigation was greater by a factor of two to six times; probably multi-million at least.