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3 Recent FCPA Statute of Limitations Lessons
In 2012, eight companies paid the Securities and Exchange Commission over $118 million to settle civil suits under the Foreign Corrupt Practices Act. Thats an average of nearly $15 million per company, a dollar amount that your company would likely prefer to keep in its bank account. If its any consolation to a company facing the prospects of such a payment, three recent SEC lawsuits offer some insights into an age-old protection for defendants: the statute of limitations.
While there is a clear five-year statute of limitations for the SECs civil suits under the FCPA, the cases described below shed some light on key questions regarding when that five-year period begins and whether there are any exceptions to the rule. In doing so, the cases also provide lessons that might be of use to your company if sued by the SEC for FCPA violations.
1. When does the statute of limitations for civil penalties begin?
In SEC v. Straub, the SEC sought civil penalties from three former executives of Magyar Telekom Plc. (a company that settled its own FCPA charges in 2011 for $95 million). The defendants allegedly bribed numerous Macedonian officials in 2005 and 2006 in order to maintain the companys market share in that country. The SECs complaint was filed on December 29, 2011, more than five years after the most recent of the allegations.
2. Can the SEC use the discovery rule to reach beyond five years?
The second lesson of these cases comes from Gabelli v. SEC, a recent U.S. Supreme Court decision. Although the FCPA was not at issue in Gabelli or even mentioned in the opinion, the ruling has important FCPA implications. In this case, the SEC sought civil penalties for alleged violations of the Investment Advisers Act. Like the FCPA, the IAAs five-year statute of limitations is found in 28 U.S.C. § 2462. However, the SEC filed its complaint more than five years after the alleged conduct had ended.
3. What about the fraudulent concealment rule?
SEC v. Jackson is a Southern District of Texas case that involves a similar statute of limitations question. The SEC is seeking FCPA civil penalties from both a former and current executive of Noble. ( Noble settled its own FCPA charges in 2010). The statute of limitations has been a key issue in this case, and one sticking point is whether the SEC can use the fraudulent concealment rule to include allegations that extended beyond the five-year statute of limitations. Under this rule, the SEC could seek civil penalties for conduct occurring more than five years prior to the lawsuit if the defendant fraudulently concealed the conduct at issue. As Main Justice reported, when the defendants argued that Gabelli prohibited the SEC from using the fraudulent concealment rule, the SEC amended its complaint so that all of the allegations fell within the statute of limitations, as opposed to challenging the defendants Gabelli argument.