Settlements by the U.S. Securities and Exchange Commission increased in the first quarter of 2009, and enforcement policies announced by new Chairman Mary Schapiro may continue that trend.
The SEC reached 182 new settlements in the first quarter of 2009, compared to 157 settlements during the same period last year and 123 settlements in the final quarter of 2008, according to a report by NERA Economic Consulting.
NERA, a global firm based in New York, reported that the 10 largest settlements totaled more than $480 million. The two largest settlements were with UBS AG, which paid $200 million, and with Halliburton Co., which paid $177 million.
UBS AG disgorged $200 million after allegations that it operated as an unregistered broker/dealer to help certain taxpayers evade federal taxes.
Halliburton and one of its subsidiaries, KBR Inc., settled charges that KBR had bribed Nigerian government officials for 10 years to obtain construction contracts.
KBR also agreed to pay $402 million to settle parallel criminal charges brought by the Department of Justice. The combined $579 million represents the largest-ever combined Foreign Corrupt Practices Act settlement.
(The SEC settled with Siemens AG for $350 million in the fourth quarter of 2008.)
None of the companies with the largest settlements are based in Western New York. A class action securities litigation case against Bausch & Lomb Inc. was dismissed in the Western District of New York in November 2008. On March 25, the Financial Industry Regulatory Authority, an independent body that oversees securities firms, ordered Morgan Stanley to pay $7.2 million, including $4.2 million in restitution to 90 Rochester area Eastman Kodak Co. and Xerox Corp. retirees.
SEC settlements reached in the first quarter resulted from "investigations that have happened over a period of months or even years," Carolyn Nussbaum, a partner at Nixon Peabody LLP, said Monday. Nussbaum represents Bausch & Lomb.
"Some of these settlements may well reflect a recognition that the SEC is going to step up enforcement activity," Nussbaum said.
Gordon E. Forth, a partner with Woods Oviatt Gilman LLP, wrote in an e-mail that Schapiro’s new policies "are having their intended effect."
Among the changes, Schapiro ended a "penalty pilot" program that required SEC staff to obtain pre-approved settlement ranges before negotiating with publicly traded companies.
"This together with the criticism being leveled against the SEC arising out of the Madoff scandal have set the stage for a new era of enforcement at the SEC," Forth wrote.
Schapiro recently announced plans to provide more rapid approval of subpoena power for SEC staff, and to seek authority to compensate whistleblowers.
Public companies and other regulated entities should "spend more time, effort and energy to make sure they’re complying with both the letter and the spirit of the regulations. They are complex and not always quite intuitive," said Daniel R. Kinel, a partner at Harter Secrest & Emery LLP.
Proposed Senate legislation would add 100 new SEC enforcement division employees, and President Obama has proposed increasing the SEC’s fiscal 2010 budget by 13 percent over its 2008 budget, according to NERA’s report.
The 10 largest SEC settlements in the first quarter of 2009 were: UBS AG ($200 million); Halliburton Co. ($177 million); E*Trade Capital Markets LLC ($34 million); One Universe Online Inc. ($26.3 million); SG Americas Securities LLC ($8.4 million); James T. Anderson ($8 million); Susquehanna Investment Group ($7.6 million); Goldman Sachs Execution & Clearing LP ($7.2 million); Merrill Lynch, Pierce, Fenner & Smith Inc. ($7 million) and Tecumseh Holdings Corp. ($6.4 million).