SEC procedural overview of deferred prosecution and non‑prosecution agreements

77 In May of 2011, SEC entered into its first deferred prosecution agreement against a company for violating the FCPA.*® In that case, a global manufacturer of steel pipe products violated the FCPA by bribing Uzbekistan govern- ment officials during a bidding process to supply pipelines for transporting oil and natural gas. The company made almost $5 million in profits when it was subsequently awarded several contracts by the Uzbekistan government. The company discovered the misconduct during a world- wide review of its operations and brought it to the govern- ment’s attention. In addition to self-reporting, the company conducted a thorough internal investigation; provided complete, real-time cooperation with SEC and DOJ staff; and undertook extensive remediation, including enhanced anti-corruption procedures and training. Under the terms of the DPA, the company paid $5.4 million in disgorge- ment and prejudgment interest. The company also paid a $3.5 million monetary penalty to resolve a criminal investi- gation by DOJ through an NPA.**° For further information about deferred prosecution agreements, see SEC’s Enforcement Manual” Non-Prosecution Agreements A non-prosecution agreement is a written agreement between SEC and a potential cooperating individual or com- pany, entered into in limited and appropriate circumstances, that provides that SEC will not pursue an enforcement action against the individual or company if the individual or company agrees to, among other things: (1) cooperate truth- fully and fully in SEC’s investigation and related enforce- ment actions; and (2) comply, under certain circumstances, with express undertakings. If the agreement is violated, SEC staff retains its ability to recommend an enforcement action to the Commission against the individual or company. For further information about non-prosecution agreements, see SEC’s Enforcement Manual>* Termination Letters and Declinations As discussed above, SEC’s decision to bring or decline to bring an enforcement action under the FCPA is made pursuant to the guiding principles set forth in SEC’s Enforcement Manual. The same factors that apply to SEC staffs determination of whether to recommend an enforce- ment action against an individual or entity apply to the decision to close an investigation without recommending enforcement action.*” Generally, SEC staff considers, among other things: e the seriousness of the conduct and potential viola- tions; e the resources available to SEC staff to pursue the investigation; e the sufficiency and strength of the evidence; e the extent of potential investor harm ifan action is not commenced; and e the age of the conduct underlying the potential violations. SEC has declined to take enforcement action against both individuals and companies based on the facts and cir- cumstances present in those matters, where, for example, the conduct was not egregious, the company fully coop- erated, and the company identified and remediated the misconduct quickly. SEC Enforcement Division policy is to notify individuals and entities at the earliest opportu- nity when the staff has determined not to recommend an enforcement action against them to the Commission. This notification takes the form of a termination letter. In order to protect the privacy rights and other inter- ests of the uncharged and other potentially interested par- ties, SEC does not provide non-public information on mat- ters it has declined to prosecute. What Are Some Examples of Past Declinations by DOJ and SEC? Neither DOJ nor SEC typically publicizes declina- tions but, to provide some insight into the process, the fol- lowing are recent, anonymized examples of matters DOJ and SEC have declined to pursue: Example 1: Public Company Declination DOJ and SEC declined to take enforcement action against a public U.S. company. Factors taken into consider- ation included: HOUSE_OVERSIGHT_022579