International Trade Law News

Published by Jacobson Burton Kelley PLLC

The Titan Corporation, a San Diego, California-based military intelligence and communications company, today settled enforcement actions brought by the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ) for violating the anti-bribery, internal controls and books and records provisions of the U.S. Foreign Corrupt Practices Act (FCPA). Titan agreed to plead guilty to one felony count of violating the anti-bribery provisions of the FCPA, one felony count for falsifying the books and records of Titan, and one felony count for violating Title 26 U.S.C. Section 7206(2).

Without admitting or denying the SEC's allegations, Titan consented to the entry of a final judgment permanently enjoining it from future violations of the FCPA and requiring it to:

• pay approximately $15.5 million in disgorgement and prejudgment interest,
  
• pay a $13 million penalty, which will be deemed satisfied by Titan's payment of criminal fines of that amount in parallel proceedings brought by the U.S. Attorney's Office for the Southern District of California and the U.S. Department of Justice, Fraud Section, and
  
• retain an independent consultant to review the company's FCPA compliance and procedures and to adopt and implement the consultant's recommendations.
  

The $28.5 million penalty is the largest FCPA penalty paid by a publicly traded company. In 1995, Lockheed Inc. (now Lockheed Martin Corp.) paid a $24.8 million penalty for violating the FCPA.

Among other things, DOJ and SEC alleged that Titan funneled approximately $2 million, via its agent in the West-African country of Benin, towards the election campaign of Benin's then-incumbent President. The SEC's complaint alleged that Titan made these payments to assist the company in its development of a telecommunications project in Benin and to obtain the Benin government's consent to an increase in the percentage of Titan's project management fees for that project. A former senior Titan officer directed that these payments be falsely invoiced by the agent as consulting services and that actual payment of the money be broken into smaller increments and spread out over time.

The SEC contended that, despite utilizing over 120 agents and consultants in over 60 countries, Titan never had a formal company-wide FCPA policy, disregarded or circumvented the limited FCPA policies and procedures in effect, failed to maintain sufficient due diligence files on its foreign agents, and failed to have meaningful oversight over its foreign agents.

In bringing its action against Titan, the SEC alleged that the company's proposed merger agreement with Lockheed Martin was misleading because Titan represented that it had not violated any provisions of the FCPA. Lockheed Martin subsequently terminated the $1.6 billion agreement to acquire Titan after Titan was unable to settle the FCPA charges in a timely manner.