Charitable Contributions and the FCPA: Schering-Plough and the Increasing Scope of SEC Enforcement

• Published in: The Business Lawyer Vol. 61; no. 1; pp. 135 - 154
• Main Author: Giraudo, John P.
• Format: Journal Article Trade Publication Article
• Language: English
• Published: Chicago Section of Business Law of the American Bar Association 01.11.2005; American Bar Association
• Subjects: Accounting policies; Bribery; Business; Charitable giving; Charities; Charity; Commercial law; Conventions; Corporate governance; Corporate social responsibility; Corporations; Corrupt practices; Criminal legislation; Decisions; Donations; Enforcement; Fines & penalties; Foreign Corrupt Practices Act 1977-US; Foreign governments; Foreign subsidiaries; Government officials; Internal controls; International organizations; Law enforcement; Laws, regulations and rules; Multinational corporations; Parent companies; Payments; Public officials; Scandals; Securities and exchange commission; Social responsibility; Subsidiary companies; Subsidiary corporations; United States; Violations; Poland; United States > US
• ISSN: 0007-6899; 2164-1838

Schenng-Plough recently settled an SEC enforcement action that alleged violations of the FCPA's accounting provisions, agreeing, without admitting wrongdoing, to pay a fine of $ 500,000. The complaint alleged that Schenng-Plough's subsidiary in Poland made chantable contributions to a Polish histonc preservation organization, the President of which was the Director of a government program that financed the acquisition of medical supplies in the Polish region of Silesia. Coincident with the contributions, there was a significant increase in sales by Schenng-Plough to the Silesian government's health-care network Schering-Plough's country manager, who authonzed the payments, was jound to have falsified the chantable contributions on the subsidiary's books and to have concealed them from the head office of the parent company. The case is noteworthy for a number of reasons. It is the first instance in which making chantable contributions was alleged to violate the FCPA. Consequently, the case has implications for corporate chantable giving and the social responsibility projects supported by many multinational companies. The case also underscores the SEC's position that enforcement actions under the books and records and internal controls provisions of the FCPA may be brought against parent companies for the actions of their subsidianes even when the parent has no knowledge of the subsidiary's actions. More importantly, the case suggests that registrants may be liable for FCPA violations if they fail to install internal controls to scrutinize links between government officials and the activities of their overseas subsidiaries, including their chantable giving. Finally, the case highlights the widening scope of the SEC's FCPA enforcement activities, jacilitated by the increased resources that were made available to the Commission in the aftermath of recent corporate scandals.