On September 28, 2016, the SEC announced that Anheuser-Busch agreed to pay $6 million to settle charges of Foreign Corrupt Practices Act and Dodd-Frank whistleblower violations. The SEC’s order stated that AB InBev violated the FCPA when an Indian joint venture orchestrated payments to Indian officials to obtain commercial benefits for Crown Beers, AB InBev’s wholly owned Indian subsidiary.
With respect to the whistleblower violations, the SEC stated that a Crown employee had informed AB InBev of the potential FCPA violations in 2010 and 2011, and his employment was terminated in early 2012. At some point the employee began voluntarily communicating with the SEC. The employee mediated his employment law disputes with the company in late 2012 and entered into a settlement agreement, which included a $250,000 liquidated damages provision if the employee violated its confidentiality provisions. After signing the agreement, the employee stopped communicating with the SEC, claiming the agreement prevented him from doing so and he did not want to risk triggering the liquidated damages provision. Only after the Commission issued an administrative subpoena did the whistleblower resume communications with Commission staff.
The SEC held that AB Inbev’s separation agreement violated Rule 21F-17(a), promulgated under Dodd-Frank, which provides that “No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement….” Specifically, the separation agreement’s confidentiality language, which did not contain a carve out for SEC communications, impeded the whistleblower from communicating directly with Commission staff about possible securities law violations.
The SEC’s order noted that AB Inbev had taken various remedial measures before the SEC issued its fine, including amending its separation agreements that impose confidentiality restrictions on departing employees of its US entities to state the following: “I understand and acknowledge that notwithstanding any other provision in this Agreement, I am not prohibited or in any way restricted from reporting possible violations of law to a governmental agency or entity, and I am not required to inform the Company if I make such reports.”
The AB Inbev order is just the latest in a recent string of SEC enforcement activity under Rule 21F-17 (see here and here), and once again highlights the importance that all companies that fall within the SEC’s enforcement jurisdiction (this goes beyond just public companies) make sure that their separation agreements and other employment-related agreements and policies, including confidentiality agreements, codes of conduct, employee handbooks, and equity agreements, do not contain confidentiality, non-disparagement, or other standard provisions that the SEC may interpret as “chilling” employees from communicating with the SEC.
