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FCPA Blog Daily News

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Tuesday
Oct282014

Layne Christensen pays $5.1 million in SEC settlement

Layne Christensen Company, a Texas-based water management, construction, and drilling firm, paid just over $5 million Monday to resolve FCPA charges brought by the SEC for bribes in a half dozen Africa countries to reduce taxes and speed up customs inspections and work permits.

The SEC and Layne settled the FCPA allegations through an administrative order without going to court.

The agency found that Layne Christensen violated the anti-bribery, books and records, and internal controls provisions of the FCPA that are part of the Securities Exchange Act of 1934. 

The company agreed to pay $3.9 in disgorgement, nearly $859,000 in prejudgment interest, and a $375,000 penalty.

The lenient penalty, the SEC said, reflected "Layne’s self-reporting, remediation, and significant cooperation with the SEC’s investigation." 

Layne is required to report to the SEC on the status of its "remediation and implementation of measures" to comply with the FCPA for two years, the SEC said.

The company consented to the administrative order without admitting or denying the SEC’s findings.

In 2012, Layne Christensen said in an SEC filing that an internal investigation "found documents and information suggesting that improper payments" went to officials in Africa "relating to the payment of taxes, the importing of equipment and the employment of expatriates."

The company self-reported the findings to the DOJ and SEC.

The DOJ didn't announce any enforcement against Layne Monday.

The SEC said the company "received approximately $3.9 million in unlawful benefits during a five-year period as a result of bribes typically paid through its subsidiaries in Africa and Australia." 

Some payments were funded through cash transfers from Layne’s U.S. bank accounts, the SEC said.

Among the findings in the SEC’s order:

Layne paid nearly $800,000 to foreign officials in Mali, Guinea, and the Democratic Republic of the Congo (DRC) to reduce its tax liability and avoid associated penalties for delinquent payment. The bribes enabled Layne to realize more than $3.2 million in improper tax savings.

Layne made improper payments to customs officials in Burkina Faso and the DRC to avoid paying customs duties and obtain clearance to import and export its equipment. The bribes were falsely recorded as legal fees and commissions in the company’s books and records.

Layne paid more than $23,000 in cash to police, border patrol, immigration officials, and labor inspectors in Burkina Faso, Guinea, Tanzania, and the DRC to obtain border entry for its equipment and employees.  The bribes also helped secure work permits for its expatriate employees and avoid penalties for non-compliance with local immigration and labor regulations.

Layne’s misconduct occurred from 2005 to 2010, the SEC said. 

The company cooperated with the SEC’s investigation by "providing real-time reports of its investigative findings, producing English-language translations of documents, and making foreign witnesses available," the SEC said. 

Layne also "undertook an extensive remediation effort," the SEC said. That usually means firing or re-assigning people, dropping agents, adopting a stronger and more comprehensive compliance program, beefing up the compliance staff, and training executives and employees.

“Layne’s lack of internal controls allowed improper payments to government officials in multiple countries to continue unabated for five years,” said Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA Unit.

“However, Layne self-reported its violations, cooperated fully with our investigation, and revamped its FCPA compliance program," she said. "Those measures were credited in determining the appropriate remedy.”

The SEC's administrative order In the matter of Layne Christensen Company (Securities Exchange Act of 1934
Release No. and Administrative Proceeding File No. 3-16216, dated October 27, 2014) is here (pdf).

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.