Lessons Learned from the Goodyear FCPA Settlement
The U.S. Securities and Exchange Commission's settlement agreement with Goodyear Tire & Rubber Co. underscores the risks of inadequate due diligence in acquisitions, among other issues.
April 22, 2015 at 09:21 AM
8 minute read
The U.S. Securities and Exchange Commission announced in February that it had entered into a settlement agreement with Goodyear Tire & Rubber Co. to resolve claims that Goodyear violated the books and records provisions of the Foreign Corrupt Practices Act (FCPA). The allegations involved bribes paid by two of the company's African subsidiaries. Goodyear agreed to pay $14.1 million in disgorgement and $2.1 million in prejudgment interest, but no civil fine, in connection with the administrative order entered by the SEC.
On balance, the result was favorable for Goodyear, as it escaped paying a fine for its conduct. In this respect, the case highlights the benefits when a company cooperates with the SEC. It also underscores, however, the risks of inadequate due diligence in acquisitions, which is perhaps the most significant takeaway from the settlement for companies and their counsel.
The Alleged Misconduct
The enforcement action arose out of Goodyear's ownership interest in retail tire distributors Treadsetters Tyres Ltd. in Kenya and Trentyre Angola Lda. in Angola. Goodyear acquired a partial ownership interest in Treadsetters in 2002 and became majority owner of the company in 2006, while Trentyre is its wholly owned subsidiary.
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