The Foreign Corrupt Practices Act (FCPA) forbids US companies from engaging in corruption, even outside the US. The complaint for this class action claims that General Cable Corporation paid bribes in six different countries, generating millions of dollars through means that were unsustainable and likely to lead to regulatory scrutiny. Because this is a securities complaint, the primary allegations are the company’s false statements, inflating its stock price, in violation of the Securities Exchange Act of 1934.
The class for this action is all persons and entities who acquired the publicly-traded common stock of General Cable, between February 23, 2012 and February 10, 2016 and were damaged thereby.
General Cable is one of the world’s largest makers of cable made from copper, aluminum, and fiber optics, as well as cable products for use in energy, industry, construction, communications, and specialty applications. Between 2010 and 2012, the company greatly expanded its operations in Africa and the Asian-Pacific region via acquisitions, until its overseas operations brought in nearly two-thirds of its revenues.
According to the complaint, the company assured investors that it had policies to ensure that it complied with the FCPA and procedures to ensure that its books were accurate. Also, the complaint claims that General Cable mentioned certain risks of overseas operations but did not mention the risks that came with the bribing of foreign officials or obtaining business through violations of the FCPA.
The complaint says that the above misrepresentations and omissions were repeated in fifteen annual and quarterly filings, even though the company had not implemented any particular policies or procedures to prevent bribery or other violations of the FCPA. According to the complaint, the company spent more than $13 million in bribes in Angola, Indonesia, Thailand, Bangladesh, China, and Egypt, to obtain more than $50 million in profits.
In January 2014, both the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) began investigations into the company’s overseas operations. The DOJ investigation led to admissions by the company and a Non-Prosecution Agreement (NPA) on December 22, 2016. The SEC issued a cease-and-desist order against the company on December 29 that same year.
Parts of the allegations in this case are taken from the contents of the two documents, plus the accounts of twelve former General Cable employees who acted as confidential witnesses. For example, the confidential witnesses claim the company did not have “even the basic elements of a suitable FCPA compliance program,” the complaint says. The SEC alleges that the company did not “perform any anticorruption due diligence on third parties” with whom it did business. In the NPA, the company admitted to knowingly making corrupt payments in five countries.
At this information, the stock price fell. But that was not the end of the bad news. General Cable eventually divested itself of much of its overseas holdings and had to pay more than $75 million in criminal fines and the disgorgement of profits to resolve the investigations.