United States SEC Fines & Charges: Chemical Group Albemarle Fined $103.6 Million for Bribery in China, India, Vietnam, Indonesia & UAE, Electric Vehicle Company Spruce Power XL Fleet Fined $11 Million for Misleading Investors with Speculative Revenue Projection of $1 Billion, Energy Group Exelon Fined $46.2 Million for Fraud to Influence & Reward Democratic Party Politician Michael Madigan, Advertising Group Clear Channel Outdoor Fined $26 Million for Bribing China Government Officials
30th September 2023 | Hong Kong
The United States Securities & Exchange Commission (SEC) Fines & Charges – 1) Chemical Group Albemarle fined $103.6 million for bribery in China, India, Vietnam, Indonesia & UAE. 2) Electric vehicle company Spruce Power XL Fleet fined $11 million for misleading investors with speculative revenue projection of $1 billion. 3) Energy group Exelon fined $46.2 million for fraud to influence & reward then-Democratic party politician Michael Madigan. 4) Advertising group Clear Channel Outdoor fined $26 million for bribing China government officials. See below for more info:
” Chemical Group Albemarle Fined $103.6 Million for Bribery in China, India, Vietnam, Indonesia & UAE, Electric Vehicle Company Spruce Power XL Fleet Fined $11 Million for Misleading Investors with Speculative Revenue Projection of $1 Billion, Energy Group Exelon Fined $46.2 Million for Fraud to Influence & Reward Democratic Party Politician Michael Madigan, Advertising Group Clear Channel Outdoor Fined $26 Million for Bribing China Government Officials “
1) Chemical Group Albemarle Fined $103.6 Million for Bribery in China, India, Vietnam, Indonesia & UAE
The Securities and Exchange Commission today announced that Charlotte-based Albemarle Corporation, a global specialty chemicals company, agreed to pay more than $103.6 million to settle the SEC’s charges that it violated the anti-bribery, recordkeeping, and internal accounting controls provisions of the Foreign Corrupt Practices Act (FCPA). According to the SEC’s Order, despite significant red flags, Albemarle used agents from at least 2009 through 2017 that paid bribes to obtain sales of refinery catalysts to public-sector oil refineries in Vietnam, India, and Indonesia and to private-sector oil refineries in India. In addition, the Order finds that Albemarle violated the FCPA’s recordkeeping requirements and failed to devise and maintain a sufficient system of internal accounting controls to provide reasonable assurances that payments made to agents in Vietnam, Indonesia, India, China, and the United Arab Emirates were for legitimate services.
“Despite repeated and glaring bribery-related red flags, Albemarle failed for many years to implement sufficient internal accounting controls relevant to the use of agents by its global refining solutions business to make sales to state-owned customers around the world,” said Charles Cain, Chief of the SEC Enforcement Division’s FCPA Unit. “This failure set the stage for wide-ranging misconduct.”
Albemarle consented to the SEC’s Order finding that it violated the anti-bribery, recordkeeping, and internal accounting controls provisions of the Securities Exchange Act of 1934. Albemarle has agreed to cease and desist from committing or causing any future violations of these provisions and to pay disgorgement of more than $81.8 million plus prejudgment interest of more than $21.7 million, totaling more than $103.6 million.
In a parallel action, the U.S. Department of Justice announced today it has entered into a non-prosecution agreement in which Albemarle agreed to pay a $99 million criminal fine and to a forfeiture of approximately $98 million, of which $81.8 million will be satisfied by the company’s payment of disgorgement pursuant to the SEC Order. The SEC’s investigation was conducted by Christine Neal, M. Shahriar Masud, and Brittany Prelogar of the SEC’s FCPA Unit, with assistance from Fernando Campoamor. The SEC appreciates the assistance of the U.S. Department of Justice Criminal Division’s Fraud Section, the IRS-Criminal Investigation, the Anti Corruption Centre of the Dutch Fiscal Intelligence and Investigations Service, the Netherlands Public Prosecution Service for Serious Fraud and Environmental Crime, the Australian Securities and Investments Commission, the Securities and Exchange Board of India, and the Indonesia Financial Services Authority.
2) Electric Vehicle Company Spruce Power XL Fleet Fined $11 Million for Misleading Investors with Speculative Revenue Projection of $1 Billion
The Securities and Exchange Commission today charged Denver-based Spruce Power Holding Corporation, the successor to XL Fleet Corp., for misleading investors about revenue projections that topped $1 billion within three years of going public. XL Fleet, which provided hybrid electric vehicle systems for commercial fleet vehicles, went public through a 2020 merger with a special purpose acquisition company (SPAC). According to the SEC’s order, XL Fleet publicly claimed to have a more than $220 million 12-month sales pipeline, which purportedly backed its near-term revenue projections of up to $75 million and longer-term projections of up to $1.4 billion. The order finds that the company’s projections, which were featured in public filings ahead of the SPAC merger, were misleading because the sales pipeline consisted almost entirely of speculative opportunities, including sales to potential customers with whom XL Fleet had little or no contact; customers to whom XL Fleet could not legally sell its products; and stale sales opportunities that had not been updated within the company’s systems. The order also finds that XL Fleet claimed to have applied a historical conversion rate to its sales pipeline as part of its revenue projections, when, in reality, the conversion rate did not support the company’s projections.
“It goes without saying that investors commonly rely on revenue projections when deciding how and where to invest, and that’s perhaps especially true for investment decisions involving early-stage companies in the SPAC market,” said Mark Cave, Associate Director of the Division of Enforcement. “By linking its bold revenue projections to misleading claims about the company’s historical performance, XL Fleet misled investors by inhibiting their ability to differentiate between credible facts and mere aspiration.”
The order finds that Spruce Power, as the successor to XL Fleet, violated certain antifraud, proxy, and reporting provisions of the federal securities laws. Without admitting or denying the findings in the order, Spruce Power consented to a cease-and-desist order and a civil penalty of $11 million, which took into consideration the company’s cooperation and remedial efforts. The SEC’s investigation was conducted by Mark Oh and Christine Chen, with assistance from John Archfield and Timothy Halloran, and was supervised by Jeffrey Weiss, Kristen Dieter, and Mr. Cave.
3) Energy Group Exelon Fined $46.2 Million for Fraud to Influence & Reward Democratic Party Politician Michael Madigan
The Securities and Exchange Commission today charged Exelon Corporation, electric utility company Commonwealth Edison Company (ComEd), which is Exelon’s subsidiary, and former ComEd CEO Anne Pramaggiore with fraud in connection with a multi-year scheme to corruptly influence and reward then-Speaker of the Illinois House of Representatives Michael Madigan. Exelon and ComEd agreed to settle the charges, with Exelon paying a civil penalty of $46.2 million. The charges against Pramaggiore will be litigated. According to the SEC’s order against Exelon and ComEd, from 2011 through 2019, ComEd arranged for various associates of Madigan to obtain jobs, subcontracts, and monetary payments, all with the intent to influence Madigan regarding legislation favorable to ComEd. The order finds that ComEd arranged payments to Madigan’s associates through third-party vendors to conceal the size of the payments and to assist ComEd in denying responsibility for oversight of Madigan’s associates, who in some instances did little to none of the work for which they were hired. The order finds that ComEd made indirect payments totaling more than $1.3 million to Madigan’s associates. In a deferred prosecution agreement entered into with criminal authorities, ComEd acknowledged that Madigan’s support of legislation favoring ComEd resulted in reasonably foreseeable anticipated benefits to ComEd of more than $150 million. The SEC’s complaint against Pramaggiore alleges that she participated in, and in some instances directed, the bribery scheme. The complaint alleges that Pramaggiore did not disclose the bribery scheme and instead misled investors when she characterized ComEd’s lobbying activities as legitimate. The complaint also alleges that, as part of the scheme, Pramaggiore lied to Exelon’s auditors and filed false certifications.
“As alleged in our complaint, Pramaggiore’s remarks to investors about ComEd’s lobbying efforts hid the reality of the long-running political corruption scheme in which they were engaged,” said LeeAnn G. Gaunt, Chief of the SEC Enforcement Division’s Public Finance Abuse Unit. “When corporate executives speak to investors, they must not mislead by omission.”
Exelon and ComEd consented to the SEC’s cease-and-desist order finding that they violated antifraud and books and records and internal accounting controls provisions of the federal securities laws. Exelon agreed to pay a $46.2 million civil penalty. The SEC’s complaint alleges that Pramaggiore violated antifraud and books and records and internal accounting controls provisions of the federal securities laws and that she aided and abetted Exelon’s and ComEd’s violations of books and records and internal accounting controls provisions. The SEC seeks permanent injunctive relief, disgorgement plus prejudgment interest, a civil penalty, and an officer and director bar against her. The SEC’s investigation was conducted by Natalie Garner, Sally Hewitt, and Kristal Olson of the Public Finance Abuse Unit and Will Saylor of the SEC’s Chicago Regional Office. The investigation was supervised by Brian Fagel. The SEC’s litigation will be conducted by Jonathan Polish. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Northern District of Illinois.
4) Advertising Group Clear Channel Outdoor Fined $26 Million for Bribing China Government Officials
The Securities and Exchange Commission today announced that Clear Channel Outdoor Holdings Inc. agreed to pay more than $26 million to resolve charges that it bribed Chinese government officials to obtain outdoor advertising contracts in violation of the Foreign Corrupt Practices Act (FCPA). The SEC’s order finds that Clear Channel, a U.S. based company in the out-of-home advertising industry, violated the FCPA in connection with the actions of its agent, Clear Media Limited, which, at the relevant time, was a Clear Channel majority-owned subsidiary in China. Specifically, the order finds that, from at least 2012 through 2017, Clear Media bribed Chinese government officials to obtain contracts required to sell advertising services to public and private sector clients for display on public bus shelters and other outdoor displays. In addition, the order finds that Clear Media used sham intermediaries and false invoices to generate cash for off-book “customer development” consultants engaged to win advertising business from government and private customers. According to the order, Clear Media’s improper payments were falsely characterized as legitimate entertainment, cleaning and maintenance, and “customer development” expenses in Clear Channel’s consolidated books and records. The order further finds that, from at least 2012 through 2019, Clear Channel failed to ensure that sufficient internal accounting controls were in place at Clear Media.
“As the SEC’s order finds, Clear Media bribed Chinese officials with expensive gifts and entertainment and used off-book consultants to obtain contracts from Chinese authorities,” said Charles Cain, Chief of the SEC Enforcement Division’s FCPA Unit. “Despite repeated red flags raised by its internal auditors, Clear Channel failed to address the deficient internal accounting controls that allowed Clear Media to continue these improper payments for many years.”
Clear Channel consented to the SEC’s order finding that it violated anti-bribery, recordkeeping, and internal accounting controls provisions of the Securities Exchange Act of 1934. Without admitting or denying the findings, Clear Channel has agreed to cease and desist from committing or causing any future violations of these provisions, pay disgorgement plus prejudgment interest totaling approximately $20.1 million, and pay a $6 million civil penalty. The SEC’s investigation was conducted by Christine Neal, M. Shahriar Masud, Sonali Singh, and Brittany Prelogar of the FCPA Unit. The SEC appreciates the assistance of the Hong Kong Securities and Futures Commission, the Stock Exchange of Hong Kong Limited, and the United Kingdom Financial Conduct Authority.
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