## Facts

- BHP Billiton Ltd. (Australia) and BHP Billiton Plc (U.K.) operated as a dual-listed issuer whose American Depositary Shares were registered with the SEC and listed on the NYSE.
- The SEC brought an Exchange Act administrative cease-and-desist proceeding; the matter settled on an offer of settlement without admissions or denials (other than jurisdiction).
- BHP Billiton was an official sponsor of the 2008 Beijing Summer Olympic Games and ran a global hospitality program tied to the sponsorship.
- The program invited approximately 176 foreign government officials and employees of state-owned enterprises to the Olympics at company expense.
- Hospitality packages generally included event tickets, luxury hotel stays, meals and other hospitality, and often business-class airfare for officials and their guests.
- Many invitees were from countries in Africa and Asia identified internally as presenting corruption risk.
- Internal communications described the sponsorship’s objective as strengthening relationships with key stakeholders, and the hospitality program as a primary means to maximize the commercial return on the sponsorship.
- The company identified inviting government officials as creating heightened anti-corruption risk under applicable law and its internal code of conduct.
- BHP Billiton used an application-based approval process requiring business units to identify the official and provide a business rationale for the invitation.
- The SEC found deficiencies in the control framework, including: insufficiently detailed information collected to evaluate an official’s influence over pending or potential business; lack of independent review because approvals were handled within the same business lines requesting the invitations; and inadequate training and guidance on completing applications and assessing corruption risk.
- Due to these deficiencies, invitations included officials who were involved in, or positioned to influence, contract negotiations, access rights, regulatory actions, or other business dealings affecting the issuer.
- The SEC did not charge violations of the FCPA anti-bribery provisions and did not allege that the hospitality constituted bribes; the action focused on the FCPA accounting provisions.

## Issues

1. Whether the issuer failed to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that hospitality provided to foreign officials complied with policy and law, in violation of Exchange Act § 13(b)(2)(B).
2. Whether the issuer’s books and records relating to hospitality expenditures and approvals failed to accurately and fairly reflect transactions and dispositions of assets, in violation of Exchange Act § 13(b)(2)(A).

## Decision

- The SEC found violations of Exchange Act §§ 13(b)(2)(A) and 13(b)(2)(B) arising from the Olympic hospitality program.
- The SEC entered a cease-and-desist order against the respondents.
- The respondents agreed to pay a $25 million civil monetary penalty.
- The respondents undertook compliance-related obligations, including self-reporting for a one-year period concerning remediation and implementation of controls.

## Legal Principles

- An issuer violates Exchange Act § 13(b)(2)(B) when it lacks internal accounting controls reasonably designed to provide assurances that expenditures, including hospitality to foreign officials, are authorized and consistent with management directives and compliance requirements.
- Exchange Act § 13(b)(2)(A) requires issuers to make and keep books, records, and accounts that accurately and fairly reflect transactions; inadequate documentation and approval records for high-risk hospitality can support a books-and-records violation.
- SEC enforcement under the FCPA accounting provisions may proceed without alleging bribery or corrupt intent where control failures and recordkeeping weaknesses create unreasonable risk that improper benefits could be provided to foreign officials.
- For high-value hospitality involving foreign officials, reasonable internal controls may require risk-based information capture (official’s role and influence over business), independent or centralized review, and tailored employee training and monitoring.

## Conclusion

The SEC resolved the matter through a settlement finding that BHP Billiton’s Olympic hospitality program lacked sufficient internal accounting controls and reliable documentation to provide reasonable assurances of compliance when providing high-value benefits to foreign officials, resulting in a cease-and-desist order, a $25 million penalty, and compliance undertakings.


In re BHP Billiton Ltd., Exchange Act Release No. 74998 (May 20, 2015)