Introduction: The SEC has taken legal action against Colombian conglomerate Grupo Aval Acciones y Valores S.A., commonly known as Grupo Aval S.A., along with its subsidiary, Corporación Financiera Colombiana S.A. (Corficolombiana), for their alleged violation of the Foreign Corrupt Practices Act (FCPA). This case sheds light on illicit activities within the corporate realm and their far-reaching consequences. Grupo Aval, a company listed on the New York Stock Exchange, has agreed to a substantial settlement amount of $40 million to resolve the SEC charges.
The Allegations and Violations: According to the SEC’s order, the subsidiary Corficolombiana, in collaboration with a joint venture partner, secured a contract from the Colombian government for a significant 328-mile highway infrastructure project within the country. However, the SEC’s investigation has unveiled that this contract extension was obtained through bribery. Allegedly, Corficolombiana, facilitated by its former president, engaged in bribing Colombian government officials to secure the contract extension. These illicit payments, amounting to at least $28 million, were made with the full knowledge, approval, and assistance of Corficolombiana’s former president. Furthermore, the SEC order points out that Corficolombiana’s actions contributed to Grupo Aval’s regulatory violations and provided the conglomerate an improper financial gain, totaling approximately $32 million.
Impact and Regulatory Commentary: Commenting on the case, Charles Cain, Chief of the SEC’s FCPA Unit, highlighted the vulnerabilities in lax control environments, emphasizing how improper practices can thrive under such circumstances. He noted that this case underscores the significance of robust internal accounting controls over third-party transactions. The allegations against Grupo Aval and Corficolombiana exemplify the grave consequences of disregarding the principles of fair business conduct and ethical practices.
Settlement and Consequences: Both Grupo Aval and Corficolombiana have consented to a cease-and-desist order, acknowledging their violations of the accounting provisions and, in the case of Corficolombiana, the anti-bribery provisions of the FCPA. As part of the settlement, Grupo Aval has agreed to pay a substantial penalty of $40 million. The decision to accept the settlement offer takes into account Grupo Aval’s cooperation with authorities and its efforts towards remediation.
In addition to the SEC settlement, Corficolombiana has taken further steps to address the legal ramifications. The subsidiary has entered into a deferred prosecution agreement with the U.S. Department of Justice, signifying its commitment to addressing criminal charges. Corficolombiana has agreed to pay over $20 million in criminal fines as part of this agreement.
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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.