Keeping Energy Companies Out of TroubleDealing with the SEC
Ethical Dilemmas, and Avoiding Criminal
Liability
Charles Parker
Locke Liddell & Sapp LLP
Houston, Texas
SENTENCING GUIDELINES
VS.
SIXTH AMENDMENT
RIGHT TO JURY TRIAL
Blakely vs. Washington
U.S. Supreme Court
Contested factors that increase a sentence under sentencing
guidelines scheme must be determined by a jury beyond a
reasonable doubt.
•
not by a judge at a sentencing hearing
•
and not by a lesser burden of proof
SEC
“WILDCATTING”
FOR FRAUD
Emails = JAIL TIME
“Cash market manipulation
+ lying to index publications
= JAIL TIME.
Any questions?”
Indicted for false reporting under the Commodity Exchange Act
and Wire Fraud.
Reported data to Inside FERC “ according to [his] book bias”
rather than “verifiable fixed price trades only.”
Survey of Traders – Asking if they favored going back to
reporting book bias (as in the past) or reporting variable fixed
price trades only (as requested by Inside FERC).
•
“It’d be nice if EVERYONE reported their actual deals, but with no
enforcement by IF, we’re going to get run over. Go with book bias.”
•
“I vote for Number One (book bias). In my view most all of the
other shops report their books in their bias.”
•
“What are the odds of I FERC doing an audit if they are suspicious?”
•
“That’s the point. They can’t audit.”
SEC
TONE AT THE TOP
SARBANES OXLEY:
•
General Counsel reports to the Board and Audit Committee
•
Directors Active
•
Audit Committee – Direct Responsibility
•
Board of Directors and Senior Management set the tone
of the top.
Corporate officers must also be aware of the following
effects of Sarbanes Oxley:
•
Makes it unlawful to fraudulently influence, coerce, or
mislead an auditor.
•
Prohibits loans to officers and directors.
•
Provides for the forfeiture of certain compensation following
the issuance of a “non-compliant” financial document.
•
Requires attorneys to report evidence of material
violations.
Attorney Ethical Issues
•
Section 307 of Sarbanes Oxley
•
Mandates that attorneys report evidence of material violations
of securities law, or breaches of fiduciary duty . . ., to the chief
legal officer or CEO.
•
“Report Up”
The New Cooperation
•
Thompson Memo
•
SEC Enforcement
The El Paso CFTC Order
• The settlement in this matter takes into consideration
the nature and extent of cooperation provided to the
Commission . . .
Excerpts…
•
Prior to the Division . . . discovering violative conduct,
EPME initiated an internal investigation by hiring an
independent law firm to conduct a timely investigation
•
EPME voluntarily provided Commission staff with
interview reports of current and former EPME traders
and analyzed and compiled trading data.
Finally, after uncovering the violative conduct, El Paso
decided to cease trading operations and the employees
responsible for the activities referenced above are no
longer with the Company.
SEC FINES LUCENT $25 MILLION
FOR FAILING TO COOPERATE
Non-Cooperative Actions:
(1) incomplete and untimely document production;
(2) comments from outside counsel that undermined the
settlement; and
(3) expanding the scope of employees that could be
indemnified.
Fired CFO Wins Early Sarbanes Claim
• Whistle-Blower Wanted His Own Lawyer at Internal
Hearing
Aiding and Abetting Back
• “Creator Test”
• “Manipulative or deceptive device or contrivance.”
Foreign Corrupt Practices Act
Fifth Circuit, decision of February 4, 2004:
•
Holds that FCPA not limited solely to obtaining or
retaining government contracts.
•
Payments made to foreign officials need not directly relate to
a specific business opportunity to violate the FCPA.
•
Whether the bribery was intended to produce an effect
that would “assist in obtaining or retaining business?”