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SEC v. Delta & Pine Land Company and Turk Deltapine

 
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DeltaPine - Delta & Pine Land Company
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SEC Civil
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July 25, 2007
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SEC v. Delta & Pine Land Company and Turk Deltapine
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SEC v. Delta & Pine Land Company and Turk Deltapine, Inc., No. 1:07-cv-01352, (D.D.C. 2007); Administrative Proceeding No. 3-12712
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This case offers insight into the government's view of the distinction between facilitation payments and "obtain or retain business" payments. In the end, however, the SEC brought charges based on inaccurate books & records and lack of internal controls.
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Agriculture-Food
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Turkey
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2001; 2002; 2003; 2004; 2005; 2006
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Officials of the Turkish Ministry of Agricultural and Rural Affairs
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Delta & Pine settled this action with the SEC without admitting or denying the following facts alleged in the SEC's complaint.
Delta & Pine is a Delaware corporation engaged in the breeding, production, conditioning, and marketing of cotton planting seed. Turk Deltapine is their wholly-owned subsidiary operating in Turkey. In Turkey, officials of the Turkish Ministry of Agricultural and Rural Affairs must inspect all farmers' fields and complete inspection reports before Turk Deltapine may purchase cotton seeds from farmers. The officials must also complete certifications to maintain quality control before Turk Deltapine can export the seed for sale. From 2001 to 2006, Turk Deltapine paid approximately $43,000 to these officials to obtain these inspection reports and certifications.
In 2004, Delta & Pine learned that Turk Deltapine was making illegal payments to Turkish officials, but did not learn of all the facts and circumstances surrounding these payments. Rather than taking actions to stop them, Delta & Pine allowed these payments to continue. Despite its knowledge of the payments, Delta & Pine, as well as Turk Deltapine, also incorrectly recorded the nature of these payments in its books, records, and accounts. Delta & Pine's system of internal controls was insufficient to prevent this misconduct.
The SEC both filed a lawsuit and an administrative order against Delta & Pine for violating the books and records and internal controls provisions of the FCPA. In the administrative proceeding, the SEC ordered Delta & Pine to cease and desist from violating the FCPA and also required it to retain an independent consultant to oversee the company's FCPA compliance procedures. In the federal lawsuit, Delta & Pine and Turk Deltapine consented, without admitting or denying the allegations, to the entry of a final judgment requiring a $300,000 penalty to be paid jointly and severally.
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Books and records (Issuer), Internal controls (Issuer)
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Civil penalty, Injunction/Cease and desist
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Civil penalty of $300,000 paid jointly and severally by Delta & Pine and its subsidiary Turk Deltapine
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300,000
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0
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Issuer
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U.S.
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License/Permit
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Not stated.
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Cash, Gifts, Meals, Travel
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Direct
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43,000
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Turkey
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"Facilitation Payment": Delta & Pine's subsidiary, Turk Deltapine, allegedly made numerous small payments to multiple officials of the Turkish Ministry of Agricultural and Rural Affairs to obtain government reports and certifications that were necessary for Turk Deltapine to operate its business in Turkey. Although some of these payments may arguably fall on one side or the other of the "obtain or retain business" nexus, Delta & Pine's liability arose from its alleged failure to account for these payments on its books & records and its alleged failure to maintain a system of internal controls. It is unclear whether the SEC would have brought an action based solely on such small arguably facilitation payments without the books & records and internal controls violations.
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No
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No