SEC v. Nature’s Sunshine Products, Inc., Douglas Faggioli, and Craig D. Huff (D. Utah 2009)

• Case Name
• SEC v. Nature’s Sunshine Products, Inc., Douglas Faggioli, and Craig D. Huff (D. Utah 2009)

• Date Filed
• 07/31/2008

• Enforcement Agency
• SEC

• Countries
• Brazil

• Foreign Official
• Brazilian customs official.

• Date of Conduct
• 2000 to 2001

• Nature of Business
• Importation and sale of nutritional and personal care products by Nature’s Sunshine Productos Naturais, Ltda., a wholly owned Brazilian subsidiary of Nature’s Sunshine Products, Inc. (“NSP”), a U.S. corporation.  Douglas Faggioli is the former COO of NSP and its current CEO.  Craig D. Huff is the former CFO of NSP.  

• Influence to be Obtained
• NSP manufactures and sells nutritional and personal care products.  Brazil became NSP’s largest foreign market soon after it established a wholly owned subsidiary in Brazil, Nature’s Sunshine Productos Naturais, Ltda. (“NSP Brazil”), in 1994.  In 1999 and 2000, the Brazilian government reclassified specified vitamins, herbal products, and nutritional supplements as medicines, which required companies selling those products to register them for importation and sale in Brazil.  NSP Brazil was unable to register some of its products and consequently experienced a sharp decline in sales.  In an effort to circumvent the new registration requirements, NSP allegedly made over $1 million in undocumented cash payments to customs brokers.  Some of these “importation advances” were allegedly paid to Brazilian customs officials to allow NSP Brazil to import unregistered products.
  
  NSP controllers, one of whom was a former corporate officer and the corporate controller, allegedly conducted interviews with NSP Brazil’s employees in December 2000.  NSP Brazil’s operations manager allegedly discussed the cash payments and the fact that NSP Brazil was selling unregistered products.  Nevertheless, the payments were allegedly improperly recorded in NSP Brazil’s books and records and later accounted for in NSP’s 2001 financial statements as though they were legitimate import expenses.  

• Enforcement
• On July 31, 2009, the SEC filed a settled complaint alleging that NSP violated the FCPA’s anti‑bribery, books and records, and internal controls provisions.  The SEC further charged NSP with violating additional anti‑fraud and issuer reporting provisions of the federal securities laws.  The SEC charged Faggioli and Huff with responsibility as “control persons” within the meaning of Section 20 of the Securities Exchange Act of 1934 (15 U.S.C. § 78t(a)) for NSP’s violations of the FCPA’s books and records and internal control provisions.  Without admitting or denying the allegations, all three defendants agreed to orders enjoining them from future violations and requiring NSP to pay a civil penalty of $600,000 and Faggioli and Huff to each pay a civil penalty of $25,000. 

• Amount of the Value
• More than $1 million.

• Amount of Business Related to Payment
• Not Stated

• Intermediary
• Customs brokers.

• Citizenship of Parent Entity
• United States

• Total Sanction
• $ 600,000

• Compliance Monitor
• No

• Reporting Requirements
• No

• Case is Pending?
• No

• Total Combined Monetary Sanction
• $ 600,000

Nature’s Sunshine Products, Inc.

• Citation
• SEC v. Nature’s Sunshine Prods., Inc., et al., No. 2:09-cv-0672 (D. Utah 2009).

• Date Filed
• 07/31/2008

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Anti-Bribery
  • Books-and-Records
  • Internal Controls

• Other Statutory Provision
• Exchange Act Section 10(b) and Rule 10b-5 (Securities Fraud); Exchange Act Section 13(a) (Securities Reporting).

• Disposition
• Complaint and Consent Order

• Defendant Jurisdictional Basis
• Issuer

• Defendant's Citizenship
• United States

• Individual Sanction
• $600,000

Douglas Faggioli

• Citation
• SEC v. Nature’s Sunshine Prods., Inc., et al., No. 2:09-cv-0672 (D. Utah 2009).

• Date Filed
• 07/31/2008

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Books-and-Records
  • Internal Controls

• Other Statutory Provision
• None

• Disposition
• Complaint and Consent Order

• Defendant Jurisdictional Basis
• Agent of Issuer

• Defendant's Citizenship
• United States

• Individual Sanction
• $25,000.

Craig D. Huff 

• Citation
• SEC v. Nature’s Sunshine Prods., Inc., et al., No. 2:09-cv-0672 (D. Utah 2009).

• Date Filed
• 07/31/2008

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Books-and-Records
  • Internal Controls

• Other Statutory Provision
• None

• Disposition
• Complaint and Consent Order

• Defendant Jurisdictional Basis
• Agent of Issuer

• Defendant's Citizenship
• United States

• Individual Sanction
• $25,000.