On May 20, BHP Billiton Ltd. and BHP Billiton Plc (BHPB), a global resources company that sponsored the 2008 Beijing Summer Olympic Games, settled Securities and Exchange Commission charges of Foreign Corrupt Practices Act (FCPA) violations. The SEC found that BHPB violated the FCPA by failing to devise and maintain internal controls over a global hospitality program that used BHPB’s Olympics sponsorship as a platform to entertain government officials.
BHPB is one of the world’s leading commodities producers with operations in 25 countries. In 2005, BHPB agreed to be an official sponsor of the 2008 Beijing Olympics by paying a fee and providing raw materials for Olympic medals. As a sponsor, BHPB had, among other things, priority access to tickets, hospitality suites and accommodations. BHPB decided to use its sponsorship as a business development tool and created an Olympics hospitality program with the stated goals of “reinforc[ing] and develop[ing] relationships with key stakeholders” in China and other regions where BHPB had existing, or sought to have, operations. To that end, BHPB invited approximately 176 government officials and employees of state-owned enterprises, along with spouses, to attend the Olympics, including officials from countries in Africa and Asia with long histories of corruption. BHPB’s invitations included luxury hotel accommodations, meals, event tickets and other excursions, valuing up to $16,000.
Aware that the hospitality program presented a risk of violating anti-corruption laws and BHPB’s internal policies, BHPB devised special procedures for all invitations to the Olympics. Each such invitation required the BHPB employee to submit an application that included answers to specific questions regarding the invitee’s business relationship with the company, including whether the invitee could influence any actual or potential contracts, licenses or agreements with third parties.
The SEC found that BHPB’s compliance procedures for the Olympics hospitality program were inadequate to thwart anti-bribery risks, and principally found BHPB’s implementation of the review process to be problematic. Specifically, the applications were not subject to an independent legal or compliance review, and BHPB did not train employees on how to complete the questionnaires. Although BHPB employees understood that the applications would be reviewed by an ethics panel, to the extent any review occurred, it was not substantive. Further, members of the ethics panel viewed their role as “purely advisory,” and believed the business managers should bear sole responsibility for balancing business goals against the limitations of the anti-bribery laws. Further, although the application asked whether business was “expected to develop” with the invitee, employees were not instructed to update the applications if the relationship changed. To illustrate the inadequacy of BHPB’s internal controls, the SEC cited four examples of improper invitations to government officials who were directly involved in, or in a position to influence, pending business matters. (Notably, in three instances, the invited official either cancelled, or the invitation was withdrawn shortly before the Olympics.)
The SEC acknowledged that BHPB provided significant, voluntary cooperation by undertaking an extensive internal investigation and sharing the results with the SEC. In addition, BHPB instituted numerous remedial actions as a result of that investigation. Nevertheless, the SEC found that BHPB’s actions violated Section 13(b)(2)(A) and Section 13(b)(2)(B) of the Securities Exchange Act of 1934 and, without admitting or denying the charges, BHPB agreed to a monetary penalty of $25 million. BHPB also agreed to cease and desist from future violations and to make a follow-up written report to the SEC on the sufficiency of the company’s anti-corruption compliance program.
In re BHPB Billiton Ltd. and BHP Billiton PLC, SEC No. 3-16546 (May 20, 2015)