Goodyear Rolls Out $16 M Settlement With SEC, Putting Brakes on FCPA Charges

Gavel and Hundred-Dollar Bill

On February 24, 2015, the SEC announced that it had reached an agreement with Goodyear Tire & Rubber Co. (“Goodyear”) for Goodyear to disgorge more than $16 million to settle FCPA charges stemming from its Kenyan and Angolan subsidiaries.  This settlement is notable because it focuses on bribery involving private companies as opposed to official corruption, which is typically prosecuted by the SEC.  While the FCPA’s anti-bribery provisions apply only to improper payments to foreign officials, the SEC charged Goodyear with violations of the FCPA’s books and records provisions, which have no such requirement and instead require a company to keep records that “accurately and fairly reflect the transactions and dispositions of the assets of the issuer” and to “devise and maintain a system of internal accounting controls” sufficient to ensure the integrity of the company’s financial records.  This use of the books and records provisions is important because it signals the SEC’s intent and ability to use the FCPA to bring broad, far-reaching enforcement cases that have the potential to ensnare any public company.

In its administrative order, the SEC alleged that officials at Goodyear’s Kenyan subsidiary – Treadsetters – approved payments for phony promotional products and directed the finance assistant to “write-out the checks to cash.”   That cash was then purportedly used to bribe employees of customers, which included both government-owned entities and private companies.  Regarding Goodyear’s Angolan subsidiary, Trentyre, the SEC alleged that it recorded its bribes as payments to vendors for freight and customs clearing costs on its invoices for tire sales.  The SEC alleged that “[a]ll of these bribery payments were falsely recorded as legitimate business expenses in the books and records of these subsidiaries[,] which were consolidated into Goodyear’s books and records,” and therefore violated the FCPA’s books and records provisions.

In settling the Foreign Corrupt Practices Act charges, Goodyear neither denied nor admitted wrongdoing, but agreed to pay disgorgement of $14.1 million, the alleged amount of its illicit profit, as well as $2.1 million in prejudgment interest.  It also agreed to monitoring by federal officials for three years.

The SEC noted that Goodyear had made substantial efforts both to assist the investigation and to remedy its compliance control problems. Goodyear self-reported the bribes to the SEC and voluntarily produced the results of an internal investigation.  In addition, Goodyear divested one of the offending African subsidiaries and is in the process of divesting the other, and took disciplinary action against executives with oversight responsibility for FCPA training and controls.  Finally, Goodyear agreed to undertake a revamping of its internal processes, providing for additional training of employees, regular audits focused on corruption risk, and technological enhancements to better link subsidiaries with global management.  The SEC stated that Goodyear’s cooperation and remedial efforts played a role in the SEC’s decision to accept Goodyear’s settlement offer.