On May 20, 2015, BHP Billiton, a global resources company and one of the world’s largest producers of coal, iron ore, copper, uranium, and nickel, settled Foreign Corrupt Practices Act (FCPA) charges brought by the charges U.S. Securities and Exchange Commission (SEC). The SEC alleged that BHP Billiton violated the FCPA by sponsoring dozens of foreign government officials to attend the 2008 Olympics in Beijing, China.
According to the SEC, after agreeing to become an official sponsor of the Beijing Olympics, BHP Billiton established an Olympic hospitality program through which it invited approximately 176 government officials and employees of state-owned enterprises to attend the Olympics on BHP Billiton’s dime. BHP Billiton provided the government officials with three-to four-day hospitality packages; many were also provided round trip business-class airfare. The hospitality packages were valued at approximately $12,000 to $16,000 per package and included tickets to Olympic events, meals, and luxury hotel accommodations. Ultimately, 60 government officials accepted BHP Billiton’s invitation and 24 of them brought their spouses or guests.
The purpose of this hospitality program was to “to reinforce and develop relationships with key stakeholders” in China and in “product and investor markets, and regions” where BHP Billiton had or would like to have operations. The SEC identified several communications between BHP Billiton employees that confirmed the business-related objectives of the Olympic hospitality program. For example, BHP Billiton’s “Olympic Leverage Plans” discussed inviting several key stakeholders, including government officials that could assist BHP Billiton to “gain port access,” “facilitate… approvals for future projects,” and grow BHP Billiton’s business.
Although the hospitality program appears to have been intended to favorably influence foreign government officials, the SEC alleged that BHP Billiton’s violation of the FCPA stemmed from insufficient internal controls of the hospitality program. Specifically, under Section 13(b)(2)(A) of the Exchange Act, the SEC stated that BHP Billiton failed to maintain its books and records with reasonable detail to accurately reflect pending negotiations or business dealings with government officials. And under Section 13(b)(2)(B), BHP Billiton failed to maintain internal accounting controls over the Olympic hospitality program that were sufficient to provide reasonable assurances that access to assets and transactions were executed in accordance with management’s authorization.
The $25 million settlement amount, while seemingly very large, actually takes into account BHP Billiton’s remedial efforts and cooperation with SEC staff. Although BHP Billiton agreed to settlement without admitting to or denying the charges, the company agreed to provide reports of its FCPA and anti-corruption compliance program operations for one year.