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the Exchange Act (15 U.S.C. § 78m(b)(5)) provides that “[nJo person shall knowingly circumvent or knowingly fail to implement a system of internal accounting controls or knowingly falsify any book, record, or account ....”°” The Exchange Act defines “person” to include a “natural person, company, government, or political subdivision, agency, or instrumentality of a government.” An issuer’s officers and directors may also be held civ- illy liable for making false statements to a company’s audi- tor. Exchange Act Rule 13b2-2 prohibits officers and direc- tors from making (or causing to be made) materially false or misleading statements, including an omission of material facts, to an accountant. This liability arises in connection with any audit, review, or examination of a company’s finan- cial statements or in connection with the filing of any docu- ment with SEC” Finally, the principal executive and principal finan- cial officer, or persons performing similar functions, can be held liable for violating Exchange Act Rule 13a-14 by signing false personal certifications required by SOX. Thus, for example, in January 2011, SEC charged the for- mer CEO of a US. issuer for his role in schemes to bribe Iraqi government officials in connection with the United Nations Oil-For-Food Programme and to bribe Iraqi and Indonesian officials to purchase the company’s fuel addi- tives. There, the company used false invoices and sham con- sulting contracts to support large bribes that were passed on to foreign officials through an agent, and the bribes were mischaracterized as legitimate commissions and travel fees in the company’s books and records. The officer directed and authorized the bribe payments and their false recording in the books and records. He also signed annual and quar- terly SOX certifications in which he falsely represented that the company’s financial statements were fairly presented and the company’s internal controls sufficiently designed, as well as annual representations to the company’s external auditors where he falsely stated that he complied with the company’s code of ethics and was unaware of any violations of the code of ethics by anyone else. The officer was charged with aiding and abetting violations of the books and records and internal controls provisions, circumventing internal The FCPA: Accounting Provisions controls, falsifying books and records, making false state- ments to accountants, and signing false certifications.” He consented to the entry of an injunction and paid disgorge- ment and a civil penalty.**! He also later pleaded guilty in the United Kingdom to conspiring to corrupt Iraqi and Indonesian officials?” Criminal Liability for Accounting Violations Criminal liability can be imposed on companies and individuals for knowingly failing to comply with the ECPA’s books and records or internal controls provisions. As with the FCPA’s anti-bribery provisions, individuals are only subject to the FCPA’s criminal penalties for violations of the accounting provisions if they acted “willfully.”? For example, a French company was criminally charged with failure to implement internal controls and failure to keep accurate books and records, among other violations.*® As part of its deferred prosecution agreement, the company admitted to numerous internal control fail- ures, including failure to implement sufficient anti-bribery compliance policies, maintain a sufficient system for the selection and approval of consultants, and conduct appro- priate audits of payments to purported “business consul- tants.” Likewise, a German company pleaded guilty to internal controls and books and records violations where, from 2001 through 2007, it made payments totaling approximately $1.36 billion through various mechanisms, including $805.5 million as bribes and $554.5 million for unknown purposes.“ Individuals can be held criminally liable for accounting violations. For example, a former managing director of a US. bank’s real estate business in China pleaded guilty to conspir- ing to evade internal accounting controls in order to trans- fer a multi-million dollar ownership interest in a Shanghai building to himself and a Chinese public official with whom HOUSE_OVERSIGHT_022546