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September 13, 2024

Political Spending: “Dark Money” Leads to $100 Million SEC Settlement

Yesterday, the SEC posted a settlement of an administrative action relating to a bribery scandal that has been the topic of shareholder derivative litigation and DOJ enforcement (with the politician who was involved now serving a 20-year prison sentence). In its bite at the apple, the Commission’s enforcement claims were based on:

– False & misleading statements – that the company acted properly and ethically with respect to its political contributions

– Failing to disclose related-party transactions – because the company made payments to a 501(c)(4) that, while appearing independent on paper, was controlled by company executives

– Inadequate disclosure controls & procedures – the company’s accounting records did not correctly describe the payments as illegal or reflect them as related party transactions

The company settled the SEC’s claims for $100 million. While this situation was egregious, it’s a reminder that if “crisis communications” aren’t accurate, they can end up deepening the crisis – a violation of “Dave’s First Law of Holes.” Check out my blog from last year about reducing risks associated with corporate political spending.

Liz Dunshee

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