Why Did BHP Billiton Settle an FCPA Case Including 7+ Year-Old Conduct?

May 21, 2015

Topics: FCPA

Remember the Water Cube from the 2008 Olympics in Beijing?  BHP Billiton has probably had reason to think about it recently.  On Wednesday it settled an FCPA case with the SEC arising out of the company’s sponsoring the attendance of foreign government officials at the Summer Olympics seven years ago.  Here’s what the SEC says happened:

BHP Billiton failed to devise and maintain sufficient internal controls over its global hospitality program connected to the company’s sponsorship of the 2008 Summer Olympic Games in Beijing.  BHP Billiton invited 176 government officials and employees of state-owned enterprises to attend the Games at the company’s expense, and ultimately paid for 60 such guests as well as some spouses and others who attended along with them.  Sponsored guests were primarily from countries in Africa and Asia, and they enjoyed three- and four-day hospitality packages that included event tickets, luxury hotel accommodations, and sightseeing excursions valued at $12,000 to $16,000 per package. . . .

According to the SEC’s order instituting a settled administrative proceeding, BHP Billiton required business managers to complete a hospitality application form for any individuals they sought to invite to the Olympics, including government officials.  However, the company did not clearly communicate to employees that no one outside the business unit submitting the application would review and approve each invitation.  BHP Billiton failed to provide employees with any specific training on how to complete forms or evaluate bribery risks of the invitations.  Due to these and other failures, a number of the hospitality applications were inaccurate or incomplete, and BHP Billiton extended Olympic invitations to government officials connected to pending contract negotiations or regulatory dealings such as the company’s efforts to obtain access rights.

As a result of this conduct, the SEC says, the company violated the FCPA’s internal controls and books and records provisions.  BHP Billiton will be paying a $25 million civil penalty to resolve the matter. The SEC also says the settlement reflects the company’s remedial efforts and cooperation with the SEC’s investigation.

My question is: why is this case happening now?  Does the statute of limitations mean nothing?  Under 28 U.S.C. § 2462, the SEC has five years to bring cases including “punitive remedies,” which includes civil money penalties such as the one in this case.  In 2013, the Supreme Court held in Gabelli v. SEC that the Commission can’t use the discovery rule to toll the statute of limitations.  If a defendant fraudulently conceals securities violations, that can toll the statute.  But it doesn’t sound like that’s what happened here.  It appears that the SEC first contacted the company about these issues in August 2009.  And based on the cooperation with the investigation acknowledged in the press release, I suspect the company entered into a tolling agreement with the SEC.  So I suppose my next question is, why did it take so long?  The SEC knew about the alleged conduct one year after the Olympics ended.  Why couldn’t it resolve the investigation over the next four?  Or five?  What would the result have been if BHP Billiton had refused to enter a tolling agreement?  Charges under the anti-bribery provisions?   A parallel case brought by the Justice Department?  What was the prize for agreeing to the extension?

I’m full of questions, not answers.  Answers cost money, but feel free to send answers if you have them.

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