Statistics option backdating how
SEC enforcement statistics for the first half of this fiscal year may reflect changing trends. The number of cases the Commission settled during the period puts it on track to slightly exceed the number from last year, according to a report released by NERA Economic Consulting (here). To date the SEC has settled with 344 defendants. If this trend continues 688 cases will be settled this year, up slightly compared to the 681 for the prior year.
While a the Commission obtained a number of large monetary judgments in the first six months, only one would make the list of the ten largest post SOX judgments. Those range from the $800 million paid by AIG in 2006 to the $300 million paid by Time Warner in 2005. Heading the list for the first six months of the year is a $310 million judgment against Messrs. Brost and Sorenson in a Ponzi scheme case. That judgment was entered by default however. The second largest is from the misappropriation case against U.S. Pension Trust Company the Commission won after trial.
Several of the other largest judgments obtained last year stem cases that parallel those of DOJ and, in some instances, other regulators. Number 3 on the list, the judgment against Jacob Alexander ($54 million) from an option backdating case, is tied to a DOJ forfeiture action while the one against Joseph Nacchio ($45 million) in an insider trading case, which is number 5, followed his criminal conviction. Two of the others in the top ten, numbers 5 and 10 respectively, come from the FCPA cases against Alcatel-Lucent ($45 million) and Pride International ($24 million), both of which parallel DOJ actions. Likewise, number 7, Banc of America Securities ($36 million) in a bid rigging case, stems from an overall settlement with DOJ and state regulators.
The composition of the Commission’s cases and the related financial judgments appear to be shifting based on the first half statistics. During that period the number of settlements with business organizations increased 43% to 114. If this pace continues the agency would settle 228 cases with corporations. In 2010 the SEC settled with 160 companies. In contrast settlements with individuals decreased by 12% in the first half of the year to 230 for an annual rate of 460. That compares with 521 for fiscal 2010. This may reflect the fact that individuals are more likely to proceed to trial.
The financial component in these cases suggests a different trend. The amount of the average corporate settlement declined to $6.0 million compared to $18.5 million the prior year. The median corporate settlement however increased to $1.4 million compared to $0.8 million a year earlier.
For individuals the trend differs. The median amount was $310,000 while the average was $4.48 million. Both values are larger than in any post SOX year. These values may however have been skewed by the inclusion of the default judgment from the Ponzi scheme case.
Perhaps the most significant statistics are those regarding FCPA and insider trading cases. In the first half of the year the SEC settled 26 FCPA cases. If this trend continues it will be the largest number of post SOX FCPA settlements. The median settlement value also increased, up 40% relative to the post-SOX average. This is consistent with the increased emphasis in this area and the continually spiraling amounts paid in settlement.
Settlements in insider trading cases however declined significantly. In the first half of the year the Commission settled 25 insider trading cases which projects to 50 for the year. This would be the lowest post-SOX year if the trend continues. In contrast the median settlement value for cases with individuals is $203,000. If this trend continues it would be the largest since 2002. Overall the trend in these case appears contrary to the increased emphasis on insider trading. At the same time it may reflect the difficulty of the cases being brought and the willingness of defendants to challenge the Commission in such cases.