The U.S. Securities and Exchange Commission (SEC) obtained an
unprecedented result when The Bank of New York Mellon (BNY Mellon)
agreed to settle charges that it violated the Foreign Corrupt
Practices Act (FCPA) by providing internships to relatives of
officers of a Middle Eastern sovereign wealth fund. BNY Mellon will
pay US$14.8 million in penalties, disgorgement and interest.
The FCPA applies to issuers whose securities are traded on a
U.S. stock exchange or over-the-counter market, business entities
organized or based in the U.S., and foreign entities that act in
the U.S. in furtherance of a corrupt payment, as well as the
officers, directors and employees of such entities. It prohibits
those entities and persons from giving anything of value to a
foreign official to influence him or her in order to obtain or
The BNY Mellon situation is noteworthy for several reasons. BNY
Mellon did not pay a "bribe" in the usual sense of that
word. It offered internships, one of which was unpaid, not to
foreign officials themselves (the sovereign wealth fund officers)
but to their relatives. The SEC did not identify any specific
business BNY Mellon secured as a result of providing the
internships, but found that BNY retained and increased its existing
business with the fund.
In many ways, BNY Mellon’s conduct was not unusual as Wall
Street firms regularly do favors to woo client business. In this
case, however, the client was affiliated with a foreign government,
the internships were provided outside BNY Mellon's established
intern program, and e-mails among BNY Mellon employees suggested
that the internships were a quid pro quo to assure
continued business from the fund. For example, a BNY Mellon
employee with primary responsibility for the asset management
relationship with the foreign fund wrote, "I am working on an
expensive 'favor' for [Official X] – an internship
for his son and cousin (don’t mention to him as this is not
official)." The SEC also concluded that the interns "were
less than exemplary employees," observing that two were
repeatedly absent and the third "wasn’t actually as
BNY Mellon had a code of conduct and specific FCPA policy that
prohibited employees from providing money, gifts or anything of
value to foreign officials. The SEC found, however, that BNY Mellon
did not ensure that all employees received training for or
understood the policy and that senior managers were able to approve
hires requested by foreign officials with no mechanism to ensure
that potential violations were reviewed by BNY Mellon’s legal
or compliance departments.
Remedial steps BNY Mellon is required to take include amending
its FCPA policy to address the hiring of foreign officials’
relatives; requiring that all employment and internship
applications route through a centralized process; mandating that
employees certify on an annual basis that they have not hired
through a non-centralized process; and requiring all employment
applicants to disclose relationships with government officials.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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