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Keeping Energy Companies Out of Trouble- Dealing with the SEC Ethical Dilemmas, and Avoiding Criminal Liability Charles Parker Locke Liddell & Sapp LLP.

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Presentation on theme: "Keeping Energy Companies Out of Trouble- Dealing with the SEC Ethical Dilemmas, and Avoiding Criminal Liability Charles Parker Locke Liddell & Sapp LLP."— Presentation transcript:

1 Keeping Energy Companies Out of Trouble- Dealing with the SEC Ethical Dilemmas, and Avoiding Criminal Liability Charles Parker Locke Liddell & Sapp LLP Houston, Texas

2 SENTENCING GUIDELINES VS. SIXTH AMENDMENT RIGHT TO JURY TRIAL

3 Blakely vs. Washington U.S. Supreme Court Contested factors that increase a sentence under sentencing guidelines scheme must be determined by a jury beyond a reasonable doubt. not by a judge at a sentencing hearing and not by a lesser burden of proof

4 SEC “WILDCATTING” FOR FRAUD

5 “Cash market manipulation s = JAIL TIME + lying to index publications = JAIL TIME. Any questions?”

6 Reported data to Inside FERC “ according to [his] book bias” rather than “verifiable fixed price trades only.” Indicted for false reporting under the Commodity Exchange Act and Wire Fraud.

7 Survey of Traders – Asking if they favored going back to reporting book bias (as in the past) or reporting variable fixed price trades only (as requested by Inside FERC). “It’d be nice if EVERYONE reported their actual deals, but with no enforcement by IF, we’re going to get run over. Go with book bias.” “I vote for Number One (book bias). In my view most all of the other shops report their books in their bias.” “What are the odds of I FERC doing an audit if they are suspicious?” “That’s the point. They can’t audit.”

8 SEC TONE AT THE TOP

9 SARBANES OXLEY: General Counsel reports to the Board and Audit Committee Directors Active Audit Committee – Direct Responsibility Board of Directors and Senior Management set the tone of the top.

10 Corporate officers must also be aware of the following effects of Sarbanes Oxley: Makes it unlawful to fraudulently influence, coerce, or mislead an auditor. Provides for the forfeiture of certain compensation following the issuance of a “non-compliant” financial document. Requires attorneys to report evidence of material violations. Prohibits loans to officers and directors.

11 Attorney Ethical Issues Section 307 of Sarbanes Oxley Mandates that attorneys report evidence of material violations of securities law, or breaches of fiduciary duty..., to the chief legal officer or CEO. “Report Up”

12 The New Cooperation Thompson Memo SEC Enforcement

13 The El Paso CFTC Order The settlement in this matter takes into consideration the nature and extent of cooperation provided to the Commission...

14 Excerpts… Prior to the Division... discovering violative conduct, EPME initiated an internal investigation by hiring an independent law firm to conduct a timely investigation EPME voluntarily provided Commission staff with interview reports of current and former EPME traders and analyzed and compiled trading data.

15 Finally, after uncovering the violative conduct, El Paso decided to cease trading operations and the employees responsible for the activities referenced above are no longer with the Company.

16 SEC FINES LUCENT $25 MILLION FOR FAILING TO COOPERATE Non-Cooperative Actions: (1) incomplete and untimely document production; (2) comments from outside counsel that undermined the settlement; and (3) expanding the scope of employees that could be indemnified.

17 Fired CFO Wins Early Sarbanes Claim Whistle-Blower Wanted His Own Lawyer at Internal Hearing

18 Aiding and Abetting Back “Creator Test” “Manipulative or deceptive device or contrivance.”

19 Foreign Corrupt Practices Act Fifth Circuit, decision of February 4, 2004: Holds that FCPA not limited solely to obtaining or retaining government contracts. Payments made to foreign officials need not directly relate to a specific business opportunity to violate the FCPA. Whether the bribery was intended to produce an effect that would “assist in obtaining or retaining business?”


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