The Company’s solutions are found in the end markets of transportation (including automotive, commercial vehicle, e-bike, aerospace, bus and rail), cloud computing infrastructure, construction equipment and consumer appliance.

As highlighted in this prior post, in late 2024 Methode disclosed FCPA scrutiny.

The company stated:

“The Company received a subpoena from the SEC dated November 1, 2024 seeking documents and information relating to, among other things, the Company’s operations in certain foreign countries, certain financial and accounting matters relating thereto, compliance with the Foreign Corrupt Practices Act and other anti-corruption laws, and material weaknesses in the Company’s internal control over financial reporting previously reported in its public filings. The Company is cooperating with the SEC. The subpoena and related investigation or other future requests for information could result in costs to the Company, including the expenditure of financial and managerial resources. In addition, this request may lead to the assertion of claims or the commencement of legal proceedings against the Company, which in turn may lead to material fines, penalties or other liabilities. However, at this time, the Company is unable to reasonably estimate an amount or range of reasonably possible loss, if any, that may result from these matters.”

Methode’s most recent quarterly filing (March 2026) likewise stated:

“The Company received subpoenas from the SEC dated November 1, 2024 and March 12, 2025 seeking documents and information relating to, among other things, the Company’s operations in certain foreign countries, certain financial and accounting matters relating thereto, compliance with the Foreign Corrupt Practices Act and other anti-corruption laws, material weaknesses in the Company’s internal control over financial reporting previously reported in its public filings, deficiencies and significant deficiencies in the Company’s internal control over financial reporting, accounting and finance policies and procedures and other accounting and finance matters including new business bookings, certain financial metrics and performance indicators, performance relative to targets and guidance for certain periods, executive compensation policies and amounts, hotline tips and complaints, and terminations or resignations of company executives. The Company is cooperating with the SEC. The subpoenas and related investigation or other future requests for information have resulted and could result in future costs to the Company, including the expenditure of financial and managerial resources. In addition, this request may lead to the assertion of claims or the commencement of legal proceedings against the Company, which in turn may lead to material fines, penalties or other liabilities. However, at this time, the Company is unable to reasonably estimate an amount or range of reasonably possible loss, if any, that may result from these matters.”

In a recent filing, the company stated:

“As previously disclosed, the Company was subject to an investigation by the Securities and Exchange Commission. On May 14, 2026, the SEC Staff notified the Company that it has concluded its investigation and does not intend to recommend an enforcement action.”

Yesterday, the SEC rescinded the policy.

The SEC release states:

“The Securities and Exchange Commission today rescinded a policy, codified in Rule 202.5(e) of its informal rules of procedures, stating that when it chooses to settle an enforcement action in which a sanction is imposed, it will not settle unless the defendant or respondent also agrees not to publicly deny the allegations in the complaint or administrative order. Rescinding Rule 202.5(e) aligns the Commission with the overwhelming majority of federal agencies that do not have a similar rule and gives the Commission more flexibility in settling enforcement actions, which conserves resources, provides certainty, and potentially expedites the return of money to injured investors. The recission recognizes that the effect on the public interest from such denials may be minimal and that the policy itself may have created an incorrect impression that the Commission is trying to shield itself from criticism.”

The release further states:

“For more than 50 years, the Commission has conditioned settlement on a defendant’s promise not to publicly deny the Commission’s allegations. I am pleased that we are rescinding the no-deny policy today,” said SEC Chairman Paul S. Atkins. “Speech critical of the government is an important part of the American tradition. This recission ends the policy prohibiting such criticism by settling defendants.”

There is no known instance of the Commission seeking to reopen an administrative or civil proceeding as a consequence of a defendant or respondent violating a no-deny provision to which they have consented.

In light of the recission of Rule 202.5(e), the Commission will not enforce existing no-deny provisions that have already been entered. In the event of a breach of an existing no-deny provision, the Commission will take no action to ask a district court to vacate a settlement (or to reopen an adjudicatory proceeding) in connection with the terms of the settlement agreement.

The Commission generally does not require settling defendants to admit to allegations. Today’s recission does not affect the Commission’s practice related to admissions in settlements and does not affect the Commission’s discretion to settle with defendants who decline to admit facts or liability or its discretion to negotiate for admissions as part of a settlement.”

SEC Commissioner Hester Peirce, long a critic of the settlement policy, released the following statement.

“[T]he Commission rescinded its decades-old no-admit/no-deny policy governing the settlement process. Under this policy, settling defendants cannot publicly deny the allegations in a complaint or permit anyone else to do so.  The Commission will no longer require and demand that defendants in its enforcement actions curtail their right to speak as a condition of settlement.  For reasons I have explained before, this result is good and brings the Commission into alignment with nearly every other part of the federal government. Settlements shrouded in forced silence by the non-governmental party do not serve either the markets or the Commission’s investor-protection mission.  To the contrary, people’s freedom to speak against the government contributes to its ability to govern well. Transparent enforcement of the securities laws helps create the environment in which free markets thrive, and enabling both parties in an enforcement action to speak freely contributes to transparency.

Ending this imprudent policy, of course, does not mean that the Commission will stop resolving cases through settlement.  The excellent investigative work of our professional, dedicated staff stands on its own ground, notwithstanding a defendant’s protestations of innocence.  The public now will be able to assess the Commission’s case in light of a defendant’s denials.  The result, I expect, will be what free speech often produces: somewhere between cacophony and euphony—neither terribly pleasing to the ear, not entirely unpleasant to hear.  That the noise happens at all, however, is a substantial step forward for both the Commission and the right of a free people to speak their mind.”

Both the SEC and DOJ enforcement actions included a Foreign Corrupt Practices Act component (see here and here), but not as to Gautam Adani (a citizen of India and founder of the Adani Group which includes numerous portfolio companies including Adani Green Energy – and Indian energy company) and Sagar Adani (a citizen of India and Gautam Adani’s nephew and Executive Director of Adani Green’s Board of Directors) perhaps due to jurisdiction issues.

Nevertheless, Gautam Adani and Sagar Adani were civilly charged with securities fraud in connection with the same core conduct.

As alleged in the SEC civil complaint:

“In 2021, two senior executives of Adani Green Energy Ltd. (“Adani Green”)— Gautam Adani, Adani Green’s founder and controlling shareholder, and Sagar Adani, Adani Green’s Executive Director (collectively, “Defendants”)—engaged in a bribery scheme involving the equivalent of hundreds of millions of dollars to obtain contracts that benefitted Adani Green, while, at the same time, falsely touting the company’s compliance with antibribery principles and laws in connection with a $750 million bond offering (the “Offering”).

Gautam Adani founded Adani Green and Defendants are part of a four-person management team that controls it. For years, Defendants positioned Adani Green to investors and the public as a leader among its peers and within India in principles of good corporate governance, highlighting Adani Green’s purportedly rigorous anti-bribery and anti-corruption principles and policies, and seeking to appeal to investors who valued governance factors.

In September 2021, Defendants leveraged that narrative in the Offering to sell $750 million of Adani Green corporate bonds (“Notes”), including more than $175 million in Notes to investors in the United States.

In connection with the Offering, Adani Green told purchasers of the Notes that none of Adani Green’s directors or officers, including Defendants themselves, had paid or promised to pay bribes to government officials or attempted to unduly influence those officials. Adani Green and Defendants also emphasized to underwriters and potential investors that Adani Green had implemented robust anti-bribery and anti-corruption processes and that Adani Green was a leader in India in good corporate governance.

None of this was true. In the months and weeks before making these representations in connection with the Offering, Defendants were personally involved in paying or promising the equivalent of hundreds of millions of dollars in bribes to Indian state government officials to induce Indian state governments to enter into contracts necessary for Adani Green to develop India’s largest solar power plant project, from which Adani Green stood to earn billions of dollars.

A second company involved in that power plant project, Azure Global Power Limited (“Azure”), agreed to pay a portion of those bribes and Defendants were also personally involved in collecting payment from Azure.

Gautam Adani and Sagar Adani lied to purchasers of Adani Green’s Notes about Adani Green’s and their own involvement in a complex and high value bribery scheme. Those lies, made in connection with the offer and sale of Notes to investors in the United States, violated the antifraud provisions of the federal securities laws.”

Last week, the SEC announced:

“Without admitting or denying the allegations in the complaint, Gautam Adani and Sagar Adani each consented to the entry of final judgments, subject to court approval, that would permanently enjoin each from violating [various securities law provisions]. In addition, the final judgments, if approved by the court, would order Gautam Adani and Sagar Adani to pay civil monetary penalties of $6,000,000 and $12,000,000, respectively.”

In connection with the same core conduct Gautam Adani and Sagar Adani were also criminally charged with securities fraud conspiracy and wire fraud conspiracy.

Today, the DOJ filed a consent motion to dismiss the case, not just against the Adanis but other defendants as well.

The motion states;

“The government respectfully submits this motion, pursuant to Federal Rule of Criminal Procedure 48(a), requesting that the Court dismiss the indictment in this case with prejudice. The Department of Justice has reviewed this case and has decided, in its prosecutorial discretion, not to devote further resources to these criminal charges against individual defendants. See United States v. Blaszczak, 56 F.4th 230, 238-42 (2d Cir. 2022) (“The government may elect to eschew or discontinue prosecutions for any of a number of reasons. Rarely will the judiciary overrule the Executive Branch’s exercise of these prosecutorial decisions.”). No defendant has appeared. Counsel for all defendants consent to this relief.”

Woodcock stated that his goals are “to return the enforcement program back to basics” with an “emphasis on quality over quantity.”

Whether Woodcock’s speech was relevant to the Foreign Corrupt Practices Act (part of the securities laws after all) is your call.

Off the rails FCPA enforcement by the SEC has been highlighted on these pages for years.

In pertinent part, Woodcock stated:

“I want to share a bit about how I intend to lead the Division.

Simply put, my role is to ensure that our staff are empowered, supported, and equipped to execute the Commission’s mission. I intend to provide hands-on leadership that allows our teams to focus on the fundamentals – the blocking and tackling if you will, with professionalism, efficiency, and fairness. In doing so, I am committed to ensuring the Division remains the global gold standard in securities law enforcement.

As a matter of first principles, my goals are aligned to those of Chairman Atkins: to return the enforcement program back to basics. That means vigorously protecting investors and safeguarding markets, while also providing transparency and certainty to those we regulate.

A quick aside, there has been considerable attention paid to the decline in the number of cases brought over the last several years. Let me be clear: this Commission has deliberately shifted toward an emphasis on quality over quantity, and I fully support that direction.

Our focus is, and will remain, on protecting investors and safeguarding markets from real harm. That means identifying and stopping fraud and manipulation in all its forms—for instance, offering frauds, accounting and disclosure fraud, insider trading, market manipulation, fraud by foreign actors targeting U.S. markets and investors, and breaches of fiduciary duties by advisers misusing client assets.

These are the types of cases contemplated when the Division was created, and these are the cases the Division intends to pursue aggressively during my tenure.”

In 2020, based upon the same core conduct, Goldman Sachs resolved a net $1.66 billion FCPA enforcement action – the largest ever FCPA settlement.

Leissner pleaded guilty, was ordered to forfeit $43.7 million, and in 2025 was sentenced to prison for two years. (See here for the prior post).

In 2022, Ng was found guilty at trial of FCPA and related charges and in 2023 was sentenced to ten years in prison. (See here for the prior post).

Jho Low remains a fugitive and there has not been any entry on the court docket for the case in approximately three years.

However, according to the DOJ Office of the Pardon Attorney website, this year Low petitioned for a pardon. Below is the entry on the DOJ’s website.

For additional reading, see here from the Wall Street Journal.

“In October 2023, the Group received a document request from the U.S. Securities and Exchange Commission (“SEC”) as it relates to Telkom Infra’s involvement in a project with the Indonesian Information and Telecommunication Accessibility Agency of the Ministry of Communication and Informatics (“BAKTI Kominfo”) regarding the provision of 4G Base Transceiver Station (“BTS”) infrastructure.”

The disclosure continues:

“The SEC has since expanded its investigation to include accounting and disclosures issues relating to the Group’s revenue recognition and financial reporting practices and internal control over financial reporting, as well as public reports regarding certain Indonesian legal proceedings involving the Group, certain subsidiaries and affiliates, and certain of the Group’s clients and suppliers. Through our internal audit process and investigations, we have determined, or we suspect (for those projects and transactions which are still under investigation) that certain transactions lack economic substance. Beginning in May 2024, the Group also received additional requests for information from the U.S. Department of Justice (“DOJ”) focused on compliance with the U.S. Foreign Corrupt Practices Act (“FCPA”). The Group retained outside counsel and a forensic accounting firm to assist with its internal investigation into the issues being investigated by the SEC and DOJ. The Internal Investigation is substantially complete while the SEC and DOJ’s investigations remain ongoing and the Group continues to cooperate with the U.S. authorities.

Based on the results of the Internal Investigation to date, the Group has identified that approximately 140 transactions, primarily those occurring prior to 2021 and particularly between 2016 and 2019 and relate primarily to the enterprise business segment, lacked economic substance and were not in compliance with applicable financial reporting standards as well as the Group’s policies and internal controls, resulting in an overstatement of certain financial information.

[…]

The Group has also cooperated with Indonesian government law enforcement authorities, and has in certain instances self-reported to them various matters involving alleged or potential violations of Indonesian laws and regulations by the Group, certain subsidiaries and affiliates, including anti-corruption, alleged fraud, embezzlement, and issues associated with trade receivables, some of which are related to the above-described matters investigated by the SEC and the DOJ. The Group has implemented various remedial actions, including strengthening policies, procedures, and internal controls, as well as enhancing its compliance function and corporate governance.”

Unlike certain other lists, the below list is calculated after consistently accounting for certain credits or deductions in several enforcement actions involving foreign companies and/or related foreign law enforcement actions.

1. Goldman Sachs

• $1.66 billion
• ($1.263 billion DOJ)($400 million SEC)
• 2020

2. Ericsson

• $1.27 billion
• ($727 million DOJ)($540 million SEC)
• 2019 / 2023

3. MTS

• $850 million
• ($750 million DOJ)($100 million SEC)
• 2019

4. Siemens

• $800 million
• ($450 million DOJ)($350 million SEC)
• 2008

5. Alstom

• $772 million
• ($772 million DOJ)
• 2014

6. KBR/Halliburton 

• $579 million
• ($402 million DOJ)($177 million SEC)
• 2009

7. Teva Phrama

• $519 million
• ($283 million DOJ)($236 million SEC)
• 2016

8. Telia

• $483 million
• ($275 million DOJ)($208 million SEC)
• 2017

9. Gunvor

• $474.4 million
• ($474.4 million DOJ)
• 2024

10. Glencore

• $443 million
• ($443 million DOJ)
• 2022

For prior posts on the case, including the bizarre trial, and post trial briefs see here, here, here, here, here, and here.

Judge Hoyt’s Memorandum and Order Dismissing the Indictment and Granting an Acquittal provided the following background.

“At pretrial proceedings, during trial and post-trial, Rovirosa asserted objections, primarily concerning his Sixth Amendment right to confront government witnesses whose testimony was necessary, he argued, to a fair trial and that was, instead offered through electronic messages. His objections focused primarily on the electronic messages between himself and Avila and between Avila and several alleged co-conspirators. These offerings, he contends violate Bruton v. United States, 391 U.S. 123, 88 S.Ct. 1620 (1968), as they involved conversations between Avila and alleged co-conspirators, and crucial Supreme Court precedent that addresses the interphase between the admission of “hearsay” statements allegedly made by Avila and co-conspirators, and the Sixth Amendment.”

“Rovirosa, therefore, contends that the electronic messages offered by the government are testimonial and, thus, are subject to the Confrontation Clause of the Sixth Amendment. In particular, he argues that the electronic messages that were translated from Spanish to English, were inadmissible because the Translators were not made available at trial for cross-examination. Further, he argues, their testimony was not offered to him prior to trial. As such, the admission of the Spanish or English translations violated the principles established in Crawford v. Washington, 541 U.S. 36 (2004) and Ohio v. Clark, 576 U.S. 237 (2015). As a result, during and at the conclusion of the government case and again after the jury verdict, Rovirosa presented a Rule 29(c)5 motion to dismiss the Indictment and acquitted him on all charges based on violations of his Sixth Amendment right to confront his accusers.”

“The government objected, then and now, to Rovirosa’s claim that a Sixth Amendment violation occurred, arguing that: (a) the electronic messages (Spanish to English translations) are to be evaluated no differently than other foreign language statements, writings, or recordings because they are hearsay in nature and communication between co-conspirators; (b) the proper procedure, the government asserts, for the admission of electronic messages is set out in United States v. Llinas, 603 F.2d 50 (5th Cir. 1979) and (c) “the translations were prepared by qualified Translators that supported their translations with certifications attesting to the truthfulness and accuracy of their translations. In addition, the government argues that the translations, were rereviewed by the case agent, Special Agent Maria Elena Varga, whom the government claims is equally, if not better, qualified then the Translators.”

Judge Hoyt concluded:

“After considering the relevant circumstances surrounding the government’s case, and its intended use of electronic messages between the alleged co-conspirators and the co-defendant, the Court determines that the messages are testimonial and are governed by common law and the Confrontation Clause of the Sixth Amendment. The Court finds that the messages of the coconspirators and, in particular, the co-defendant Avila, while they constitute hearsay messages, and would be admissible in a conspiracy setting, they are not automatically admissible here because, as translations, and when used to establish the case, they are testimonial. The government’s primary purpose for offering the messages was to convict Rovirosa, i.e. to prove the elements of the crimes charged in the Indictment. See Crawford, 541 U.S. at 51.

In reaching this conclusion, the Court finds that the government has not produced evidence showing that the Translators were unavailable or that Rovirosa was given an opportunity to cross-examine them prior to trial. The precedent is clear, the government had a duty to produce the Translators for cross examination.

The government turns next to the certification sequence for admissibility. It argues that Google or Yahoo and WhatsApp recorded the transmittals between Rovirosa, and between the alleged co-conspirators that were made on their own electronic devices capturing them in the regular course of their business activities. Hence, the government argues the messages are admissible under the business [records] exceptions rules. See Fed. R. Evid. 803(6). The government also argues that the Translators certified their translations under oath; and that Special Agent Varga reviewed the Translators’ translations and certified the accuracy of their translations. The Court will address these arguments, however, they are all unavailing.

Fed. R. Evid. 801(c) and (d) and 803(6), address hearsay exceptions that apply to business records or electronic messages when they are offered into evidence. Rovirosa does not argue that the translations were not properly certified by Google or others, or that the business records exception, generally, satisfies the hearsay rule exception such that out-of-court hearsay statements or documents may be admitted. Instead, he argues that, even if the federal rules of procedure or evidence are satisfied, the electronic messages must be excluded because: (a) the messages offered were translations from Spanish to English, between and among alleged co-conspirators and, as such, the Confrontations Clause prohibits admission if they are testimonial statements by a non-testifying witness. The precedent exceptions to this rule do not apply here because Rovirosa had no prior opportunity to cross-examine the witnesses.

The record shows that the government intentionally did not call as witnesses the Translators. Hence, Rovirosa was not provided an opportunity to cross-examine them prior to or during trial. Moreover, there is no evidence that the government could not have produced them. Nor is there evidence that the government made an effort to produce them. Hence, the Court concludes that Rovirosa’s right to cross-examine the Translators and the co-defendant, cannot be truncated by offering certifications, particularly since the Translators were available to the government. Moreover, Rovirosa’s right to cross-examine the Translators is not satisfied by the government’s tender of Special Agent Varga to testify that she re-examined the Translator’s translations and is of the opinion that they are accurate. To permit this type of “expert” evidence, turns on its head the science and art of proper translation considerations.

It is well accepted that Translators fall into one of two camps, those who use the pedagogic/literal format – word for word, or exercise poetic/dynamic, where the Translator seeks the pulse and tone of expressions in order to capture words and expressions. Cross-examination permits recognition of cultural sensitivity issues, specialized knowledge, and the level at which the Translator’s education and usage of the language may rest. To that add regional nuances and contextual consideration as the occasion dictates. To ignore the art and science of the translation process is to render cross-examination of the Translators, useless or questionable.

The jury recognized that the English translations short-circuited its review of the evidence, an evidentiary fact missed by the Court. During deliberations, the jury requested that the Court provide the Spanish messages during deliberations. The Court could not provide the Spanish messages because they had not been offered into evidence by the government. This failing by the government becomes more poignant when considered in the light of Rovirosa’s complaint that the government failed to produce forensic copies of the Spanish messages taken from both defendants’ electronic devices.

The government promised to produce the screen shots on at least two occasions. On September 26 and October 1, 2025, Department of Justice Attorney, Bennett Starnes, promised the materials. The materials were never produced, and this failing is also fatal to the government’s case.”

Judge Hoyt ended his decision:

“Based on the Court’s findings and conclusions, the Court GRANTS the defendant Rovirosa’s motion to dismiss the Indictment pursuant to Fed. R. Crim. Pro. 29(c); alternatively, to ACQUIT him of all charges based on lack of evidence to support his conviction in violation of the Confrontation Clause of the Sixth Amendment. He is ORDERED released, forthwith.”

Last week, the DOJ filed the below notice of appeal.

As Uyeda explained, “the broken windows hypothesis, as described in a seminal article published in The Atlantic by James Q. Wilson and George Kelling, posits that visible signs of disorder, when left unaddressed, create an environment that encourages more serious crime.”

Uyeda then commented on a paper titled “Broken Windows Securities Enforcement” and stated:

“The empirical literature on this theory remains contested, but its migration into securities is not merely academic. The paper focuses on a period in the past when the Commission explicitly implemented a broken windows policy, about which concerns have been expressed. Whether the broken windows theory translates effectively in the securities enforcement context is an interesting question, particularly as this theory was implemented by prior Commission leadership.

This particular paper asserts that it “provides the first empirical evidence consistent with a broken windows securities enforcement policy reducing the incidence of severe financial misconduct.” The paper does, however, recognize that such a policy may not be effective overall in a white-collar setting because enforcing minor violations could divert limited resources and attention away from pursuing the more serious violations.

I appreciate the efforts to use various metrics in empirical studies in this field. My reactions to the paper are based on nearly twenty years of service at the SEC, half of which has been spent on the executive staff. During that period, I have reviewed thousands of recommendations from the Division of Enforcement.

When it comes to “broken windows,” Wilson and Kelling identify two separate, but related, fears. The first is the fear of being a victim of crime, especially crime involving a sudden, violent attack by a stranger. The second is the fear of being bothered by disorderly people. As Wilson and Kelling describe this group, they are “not violent people, nor, necessarily, criminals, but disreputable or obstreperous or unpredictable people.”

Wilson and Kelling further describe a neighborhood as being made up of “regulars” and “strangers.” Rules regulating order were defined and enforced in collaboration with the “regulars” on the street – and not necessarily by the rules established exclusively by law.

In other words, to achieve order, there was a set of regularly expected behaviors among participants in a neighborhood. In a certain sense, that regular expectation of rules and norms exists in the securities markets as well. Leaking material non-public information to a golfing buddy with the expectation that your friend can trade profitably on such information – definitely prohibited behavior. But requiring monitoring and retention of all texts on personal mobile devices by persons working for broker-dealers and investment advisers? Is that a violation of the technical meaning of the laws and regulations? Perhaps. However, given the reaction to the SEC’s sweep effort on off-channel communications, communicating on personal devices was not the type of behavior that was viewed as unambiguously impermissible.

When it comes to regulatory enforcement, one should also be considering the incentives and metrics designated by agency leadership for that program. If the metrics being stressed focus on the number of enforcement actions being brought and the amount of dollars collected in the form of disgorgement and civil penalties, then agency personnel will act in accordance with such instructions and incentives.

The SEC’s rulebook has expanded dramatically in volume and complexity over the decades, which leaves significant ground for the Commission staff to exercise discretion in making and recommending enforcement decisions. Without limitations on the exercise of such discretion, there are many violations and novel legal interpretations that can be asserted as the basis for sanctions against virtually any asset class or market participant.

However, random acts of regulatory enforcement dressed up as broken windows enforcement are unlikely to succeed at achieving behavioral conformity with widely-accepted norms intended to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Abusing our discretionary authority undermines the regulatory predictability that efficient markets require or chills market activity that may be socially valuable.

The author finds that sweep investigations opened during the broken windows era were 8-9% more likely to result in an enforcement action, which can be partially explained by strict liability violations that do not require proving negligence or scienter. The author also divides SEC enforcement actions based on the tenure of various SEC chairman. However, the paper does not appear to make adjustments to reflect that SEC enforcement investigations, particularly for complex accounting cases, can take years between initiation and the bringing of any actual action. Thus, the enforcement actions taken during the early tenure of any chairman often reflects investigations initiated under the prior chairman – and enforcement initiatives undertaken by one chairman may only come to fruition, if at all, during the tenure of his or her successor.

Nonetheless, I appreciate the efforts of researchers to study the actions of regulatory agencies. Their efforts play a role in holding the government accountable to the people.”

Conduct at issue and how it is framed, charges, settlement amount, post-enforcement action obligations can all be the subject of negotiation.

Rarely though is the back and forth of negotiations – including as to settlement amount – in the public domain.

This recent post discussed how Clear Channel generally prevailed in an FCPA-related insurance coverage dispute.

The judicial decision by a Delaware Superior Court judge also highlights the back and forth negotiations between Clear Channel and the SEC ultimately resulting in the September 2023 $26.1 million enforcement action (disgorgement of $16,355,567, prejudgment interest of $3,760,920, and a civil monetary penalty in the amount of $6,000,000).

The decision states:

“The [SEC enforcement action] also followed extensive negotiation based on the information the SEC obtained. In December 2021, the SEC made a “reverse proffer” seeking $32.44 million in disgorgement, $8.8 million prejudgment interest on that amount, and civil penalty of $18.8 million.

The disgorgement amount consisted of $30.66 million “in estimated benefit based on advertising contracts with state-owned affiliated entities from 2013-2017” that the SEC “characterized as obtained through improper cash payments in the customer development scheme” and $1.78 million “in revenue obtained in Shanghai and Hangzhou from end of 2016 through January 2018,” which the SEC “tied to entertainment expenses, business development assistance fees, and special fees.”

Clear Channel and the SEC disagreed regarding the appropriate methodology for calculating disgorgement, particularly with respect to the SEC’s initial $30.66 million customer development expenses calculation. For its calculation of “tainted revenue,” the SEC relied on evidence of improper consultant payments and extrapolated to a broader geographic area and timeframe.

Clear Channel contended that this extrapolation method “is inconsistent with governing case law” which requires that disgorgement “not exceed net profits from the improper activity.” In Clear Channel’s view, disgorgement could be based only on “actual, documented revenue.”

This disagreement and the disgorgement calculation were the subject of extensive discussion and analysis by Clear Channel and the SEC. Clear Channel also disagreed that any civil penalty was warranted.

Based on these disagreements, in April 2022, Clear Channel made a counteroffer to settle the matter for disgorgement of about $4.6 million, prejudgment interest of $1.07 million, and a civil penalty of $1.4 million.

Following Clear Channel’s counteroffer, with the parties’ positions set forth, negotiations “stalled.” In an effort to break the impasse, in September 2022, the SEC reached out to Clear Channel to consider whether, “t[aking] a step back and look[ing] at the big picture,” the parties might be able to “agree on a range of a number and figure out a way to get to that number.”

That outreach caused the parties to resume negotiations. The SEC made an offer that included $16.75 million in disgorgement and a $10 million civil penalty, which it subsequently reduced to $16.35 million and $7 million. Clear Channel was able to negotiate the civil penalty further down to $6 million but, in Clear Channel’s counsel’s recollection, the SEC “made clear that [it] would not reduce the disgorgement amount any lower.”

In the end, the SEC “determined to accept” the offer reflected in the Cease-and-Desist Order, including approximately $16.35 million in disgorgement and a $6 million civil monetary penalty.”

If you are scoring at home, the negotiations generally went as follows.

• SEC requests $60 million
• Five months later, Clear Channel agrees to settle for $7.1 million
• Negotiations “stall” – five months later SEC reaches out to Clear Channel and requests approximately $30.5 million.
• SEC requests approximately $27.5 million.
• Clear Channel agrees to settle for approximately $26.2 million

The settlement negotiation process took approximately 1.8 years.