On February 17, 2022, the Securities and Exchange Commission (SEC) announced the first Foreign Corrupt Practices Act (FCPA) settlement of the year. Seoul-based KT Corporation (KT Corp.), South Korea’s largest telecommunications operator, will pay $6.3 million to resolve charges that it violated the FCPA by providing improper payments for the benefit of government officials in Korea and Vietnam. Of the $6.3 million, approximately $2.8 million is disgorgement while the remaining $3.5 million is a civil monetary penalty. This settlement follows on the heels of South Korean authorities having indicted 14 KT Corp. executives for the same conduct in November 2021.
According to the SEC press release announcing the resolution, KT Corp. engaged in “multiple schemes to make improper payments in Korea and Vietnam.” The company “lacked sufficient internal accounting controls over charitable donations, third-party payments, executive bonuses, and gift card purchases.” This lack of internal controls led to compliance failures and FCPA violations where “high-level executives . . . were able to generate slush funds that were used for gifts and illegal political contributions to government officials in Korea who had influence over KT Corp.’s business.”
The SEC noted in its order that the company “had no relevant anti-corruption policies or procedures with respect to donations, employment candidates, vendors, subcontractors, or third-party agents.” It explained that, at certain points, this lack of anti-corruption guardrails “allowed KT employees to provide benefits improperly to government officials and to seek business from government customers.” KT Corp’s misconduct amounted to a violation of the books and records and internal accounting controls provisions of the FCPA. The SEC noted the company’s remedial acts and cooperation prevented a more substantial civil penalty.
KT Corp.’s investigation and resolution with the SEC is in line with the Biden Administration’s emphasis on wide-reaching anti-corruption initiatives. In December 2021, the Biden Administration highlighted this expansive anti-corruption focus in its first-ever U.S. Strategy on Countering Corruption, which delineated a plan to reduce corruption across the globe using pointed sanctions, aggressive enforcement actions, and other tools. The Strategy states that it will “continue to enhance” the Administration’s “strong enforcement efforts” while “applying existing laws with vigor,” particularly the FCPA.
Although the number of FCPA enforcement actions in 2021 was much lower than in prior years, this settlement demonstrates that the SEC and Department of Justice will continue to prioritize FCPA enforcement.
