SEC Continues Crackdown on Illegal Payments

On January 15, 2002, the Securities and Exchange Commission (SEC) settled a case against BellSouth Corporation involving alleged violations of the Foreign Corrupt Practices Act (FCPA). This case is part of an ongoing crackdown on illegal payments by publicly-owned companies and is believed to be the fifth in a series of cases brought by the SEC in the last 13 months for corporate FCPA violations.

At issue in the BellSouth case were weaknesses in the internal control systems of two Latin American subsidiaries. The SEC faulted these systems for allowing payments in Nicaragua to the wife of a legislator (a practice that violates the anti-bribery provisions of FCPA). In Venezuela, control weaknesses were blamed for obscuring the identities of the ultimate recipients of payments based on fictitious invoices.

In the BellSouth case, the SEC is sending a clear message about the importance of effective corporate codes of conduct and compliance programs to companies with overseas operations. In reaching the settlement, which included a civil penalty of $150,000, BellSouth says the SEC acknowledged the company’s remedial actions and enhanced compliance program.

Prompt remedial actions and effective compliance programs also played a role in reaching settlements on the other recent enforcement proceedings involving alleged FCPA violations, including the SEC’s complaints against IBM Corporation and Chiquita Brands International.

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