On July 31, 2009, the SEC filed a settled civil enforcement action against Nature’s Sunshine Products Inc. (“NSP”), a Utah corporation that manufactures nutritional and personal care products, its Chief Executive Officer Douglas Faggioli, and its former Chief Financial Officer Craig D. Huff for violating the Foreign Corrupt Practices Act, and the antifraud, issuer reporting, books and records and internal controls provisions of the federal securities laws.
According to the SEC’s complaint, NSP’s largest foreign market for its nutritional and personal care products was Brazil. In approximately 2000, the Brazilian government reclassified certain vitamins and nutritional supplements as medicines. The reclassification resulted in many NSP products being classified as medicines, which required registration. In an effort to circumvent the new registration requirements, NSP made undocumented cash payments to Brazilian customs brokers, some of which were later paid to Brazilian customs officials to allow unregistered products to be imported and sold in Brazil. NSP falsified its books and records to hide the true nature of these payments. According to the SEC, NSP went so far as to purchase fictitious supporting documents for the undocumented cash payments.
Without admitting or denying the allegations of the complaint, NSP, Faggioli and Huff have consented to the entry of final judgments that would enjoin each of them from future violations of the FCPA and federal securities laws. Additionally, NSP must pay a civil penalty of $600,000, and Faggioli and Huff must each pay a civil penalty of $25,000. The case against the individuals is noteworthy because neither Faggioli nor Huff was alleged to have been aware of the corrupt payments made by the Brazilian subsidiary. Rather, their positions within the company and alleged lack of supervision were sufficient for the government to assert that they should be held liable for the payments.