On February 17, the U.S. Securities and Exchange Commission (SEC) announced that KT Corporation, South Korea’s largest telecommunications operator, will pay $6.3 million to settle charges that it violated the Foreign Corrupt Practices Act (FCPA). The SEC alleges that KT made improper payments for the benefit of government officials in Korea and Vietnam.
According to the SEC, KT “violated the books and records and internal accounting controls provisions of the FCPA.” KT allegedly lacked sufficient internal accounting controls over expenses such as charitable donations, gift card purchases, third-party payments, and executive bonuses. According to the SEC’s order, “this allowed KT employees to provide benefits improperly to government officials and to seek business from government customers.”
“For nearly a decade, KT Corp. failed to implement sufficient internal accounting controls with respect to key aspects of its business operations, while at the same time lacking relevant anti-corruption policies or procedures. Issuers must be sure to devote appropriate attention to meeting their obligations under the FCPA,” said Charles Cain, Chief of the SEC Enforcement Division’s FCPA Unit.
In order to settle the SEC’s charges, KT agreed to pay approximately $3.5 million in civil penalties and $2.8 million in disgorgement. In settling the charges, KT neither admitted nor denied the findings that it violated the FCPA.
The FCPA, passed by Congress in 1977, is a U.S. anti-corruption law that prohibits the payment of anything of value to foreign government officials in order to obtain a business advantage. It also contains accounting provisions that require publicly traded corporations to make and keep books and records that accurately reflect the transactions of the corporation. In 2010, the Dodd-Frank Act, which established the SEC Whistleblower Program, added whistleblower provisions to the FCPA.
Under the Dodd-Frank Act, qualified whistleblowers, individuals who voluntarily provide original information about FCPA violations that leads to a successful enforcement action, are entitled to an award of 10-30% of the funds collected by the government in the enforcement action.
In 2021, the number of FCPA enforcement actions fell to the lowest level in a decade. Even so, in an announcement of 2021 enforcement results, the SEC highlighted enforcing the FCPA as a “key priority area” in which it filed noteworthy enforcement actions over the course of the year. The announcement outlines the four actions filed by the SEC in the 2021 fiscal year and also notes that “the SEC’s whistleblower program was critical to these efforts and had a record-breaking year.”
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Largest South Korean Telecommunications Co. Agrees to Pay the SEC to Settle FCPA Charges
