Defending SEC and DOJ FCPA Investigations and Conducting Related Corporate Internal Investigations: The Triton Energy/Indonesia SEC Consent Decree Settlements

Northwestern Journal of International Law & Business, Dec 1997

This article will summarize the foreign bribery/corrupt foreign pay- ments provisions of the FCPA, briefly survey the related books and records and internal accounting controls provisions, analyze available defenses to civil and criminal FCPA charges, and explore sensitive substantive and strategic issues that arise in the defense of SEC and DOJ/grand jury investi- gations and in the conduct of related corporate internal investigations. This article will also analyze the recent SEC consent decree settlements in the Triton Energy/Indonesia case, and explore the types of defenses that might be pursued if an FCPA foreign payments case like Triton were litigated rather than resolved by settlement.

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Defending SEC and DOJ FCPA Investigations and Conducting Related Corporate Internal Investigations: The Triton Energy/Indonesia SEC Consent Decree Settlements

Mr. Mathews was a senior partner at Wilmer, Cutler & Pickering, Washington, D.C., and an Adjunct Professor at Georgetown Law Center. Sadly, Mr. Mathews passed away on May Consent Decree Settlements Defending SEC and DOJ FCPA Investigations and Conducting Related Corporate Internal Investigations: The Triton Energ y/Indonesia SEC Arthur F. Mathews 0 1 2 Commons 0 1 2 the Securities Law Commons 0 1 2 0 This Article is brought to you for free and open access by Northwestern University School of Law Scholarly Commons. It has been accepted for inclusion in Northwestern Journal of International Law & Business by an authorized administrator of Northwestern University School of Law Scholarly Commons 1 Arthur F. Mathews, Defending SEC and DOJ FCPA Investigations and Conducting Related Corporate Internal Investigations: The Triton Energy/Indonesia SEC Consent Decree Settlements , 18 Nw. J. Int'l L. & Bus. 303, 1997-1998 2 Part of the Constitutional Law Commons, Criminal Law Commons , International Law Recommended Citation - 18:303 (1998) B. Use of Jurisdictional Facilities "In Furtherance of".........3.2.3...... C. Corruptly.......................................3.2.5...................... D. Payment ofAnything of Value .....................3.2.7.................... E. Authorization of Payment to a Third Party Agent or Consultant While Knowing that All or a Portion Will be Offered or Given to a Foreign Government Official ......32.8..... 1. Knowing Authorization of Corrupt Payments by Agents ..328 2. Foreign Government Official ...................3.3.0.................... F. For the Purpose of Influencing Any Official Act or Decision.. 333 G. Obtaining or Retaining Business ....................3.3.3.................... VIII. OTHER DEFENSE CONSIDERATIONS .......................33.8...................... A. "Due Diligence": Not a Defense, But a Strong Mitigation Element ....................................3.3.8.................... B. The "Act of State Doctrine".......................3.4.1.................... C. National Security Exemption ......................3.4.6.................... D. The Possibility of "Cultural Defenses" When A Foreign Agent or Consultant Is Involved in an FCPA Case.........34.7......... IX. FCPA BOOKS AND RECORDS AND INTERNAL ACCOUNTING CONTROLS PROVISIONS ...............................3.4.9...................... A. New Section 10A ofthe 1934 Act and SEC Rule 10A-1 ....3.5.5... X. THE TRITON ENERGY/INDONESIA CASE ....................3.57..................... A. The "Questionable" Payments .....................3.6.0.................... 1. May 1989 TaxAudit .........................3.60.................... 2. March 1988 Annual Fiscal 1988 Audit .............3.6.1............... 3. March 1989 Annual Fiscal 1989 Audit .............3.6.2............... 4. 1989 Corporate Tax Refund ....................3.6.2.................... 5. Refund ofValue Added Tax....................3.6.3.................... 6. Pipeline Tariff Payment.......................3.6.4.................... 7. "Grease," "Facilitating," Or "Expediting" Payments ....3.6.5... B. SEC Civil Injunctive and Civil Penalty Enforcement Action... 365 C. Companion SEC Administrative Cease-And-Desist Proceedings ..................................36.7.................... XI. WHAT DEFENSES MAY HAVE BEEN EXPLORED IF TRITON ENERGY HAD LITIGATED THE SEC CIVIL ENFORCEMENT ACTION? OR WHAT DEFENSES MIGHT BE WORTHY OF CONSIDERATION IF A COMPARABLE FCPA CORRUPT FOREIGN PAYMENTS CASE WERE FULLY LITIGATED? ..............................3.72...................... A. Statute of Limitations/Laches ......................3.7.4.................... B . Lack ofEquity ................................3.7.6.................... C. Lack ofUse ofUnited States "Jurisdictional Means" "inFurtherance of' the Allegedly Improper Payments ......3.7.8..... D. Lack of "Corrupt" Intent.........................3.7.9.................... E. Lawful Grease or Facilitating Payments ...............3.8.1.................. F. Not for the Purpose of "Obtaining or Retaining Business". ...3.83. XII. REQUIRED PUBLIC DISCLOSURE .........................3.8.7...................... A. "Materiality" Under the Federal Securities Laws .........3.8.7.......... I. INTRODUCTION After a prolonged lull in the Reagan and Bush Administrations, the Securities and Exchange Commission (SEC or Commission) and the Department of Justice (DOJ) renewed prosecutorial interest in civil and criminal enforcement of the foreign bribery/corrupt foreign payments provisions of the Foreign Corrupt Practices Act (FCPA).1 In the February 1997 case SEC v. Triton Energy Corp.,2 the SEC brought its first FCPA corrupt foreign payments civil enforcement action in over a decade.3 SEC v. Triton Energy 'Foreign Corrupt Practices Act of 1977, Pub. L. No. 95-213, 91 Stat. 1494, as amended by Title V of the Omnibus Trade & Competitiveness Act of 1988, Pub. L. No. 100-418, §§ 5001-03, 102 Stat. 1415, 1415-25 (codif (...truncated)


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Arthur F. Mathews. Defending SEC and DOJ FCPA Investigations and Conducting Related Corporate Internal Investigations: The Triton Energy/Indonesia SEC Consent Decree Settlements, Northwestern Journal of International Law & Business, 1997, Volume 18, Issue 2,