Corporate Officers of Public Companies for Foreign Corrupt Practices

On Jul 31, 2009 the U.S. Securities and Exchange Commission (SEC) filed a settled enforcement of $600,000 against Nature's Sunshine Products Inc. (NSP) and $25,000 against NSP Chief Executive Officer Douglas Faggioli and former Chief Financial Officer Craig D. Huff.  NSP's Brazilian subsidiary allegedly paid the Brazilian custom officials to import unregistered products into Brazil and subsequently falsified its books and records to conceal the payments.  

The SEC based its charge on NSP's violations of the anti-bribery provision of the Foreign Corrupt Practices Act (FCPA).  But, according to Philip Urofsky, a former federal prosecutor of FCPA claims, the SEC also invoked, for the first time, Section 20(a) of the Securities Exchange Act of 1934 to hold NSP's officers liable.  

In an interview with the National Law Journal on Control Person Liability theory, Mr. Urofsky, who now is a partner in the Washington office of New York's Shearman & Sterling, described this theory as an easy way to hold corporate individuals:  the executives, directors, and accountants liable for the corporation's books, records and internal controls violations "without pleading any knowledge or culpable involvement in the underlying bribes or accounting issues."