Yesterday, the SEC announced that KBR and Halliburton have settled their Foreign Corrupt Practices Act case with the SEC and Department of Justice for total fines and disgorgement of $579 million. The underlying bribes apparently totalled far less: a mere $5 million paid to a Nigerian political party for a train contract.
At this point, a voice inside my head keeps screaming, “What about Madoff?!” The FCPA violation alleged here is essentially a victimless crime, functionally a penny-ante “bailout” of a few Nigerians that actually helped the companies’ shareholders. Yet, this SEC complaint is undersigned by no fewer than six SEC attorneys who, judging from the factual timeline, were busily engaged on this case — together with uncounted DOJ counterparts — over at least the past five years while Bernie Madoff made off with $30-50 billion belonging to investors.
Who at the SEC was responsible for this astounding misallocation of resources? Six supposedly bright attorneys — although after last Wednesday’s Capital Markets Subcommittee hearing, one wonders — spent years fiddling with a few relatively innocuous millions in Nigeria while billions ran away just a few clicks away, in Manhattan. Why?
Forgive me if I feel compelled to diminish the fact that this KBR-Halliburton settlement is, as the SEC crows, “the largest combined settlement ever paid by U.S. companies since the FCPA’s inception.” Something is dreadfully wrong with a regulator that focuses on minutiae like bribery while billion-dollar Ponzi schemes proliferate in New York. This settlement is no reason to celebrate. It should prompt some serious introspection.
After watching outgoing SEC enforcement chief Linda Thomsen testify last week on the Madoff affair, I think I know one reason why the SEC didn’t discover Madoff until he called them to confess. Thomsen’s testimony was meandering, non-responsive and, at times, downright inarticulate. It left me with the disquieting impression that the head of the SEC’s Enforcement Division had no idea of how markets work or how to inspire people to get things done. It was a dreadful performance.
Perhaps Thomsen wasn’t at the top of her game, but that hearing was no time to get sloppy. Her hearing performance raises other questions. How could a person like Thomsen rise to a position of such importance in the securities enforcement apparatus? It defies explanation.
We can only hope that the SEC — if it is to continue in existence, which it may not according to Capital Markets Subcommittee Chair Rep. Paul E. Kanjorski — learns how to hire and promote people who know markets, understand the importance of wise resource allocation, and are capable of organizational execution.
Read the entire SEC complaint here.