SEC Investigates Potential FCPA Violations in Film Industry

The Securities and Exchange Commission has sent letters to all six of the major Hollywood studios and to DreamWorks Animation as part of an investigation of the film industry’s potential violations of the Foreign Corrupt Practices Act (FCPA) in their business dealings in China, according the Los Angeles Times.

Paramount Pictures, Twentieth Century Fox, Universal Pictures, Sony Pictures, Warner Bros., Walt Disney Studios, and DreamWorks Animation all export movies into the Chinese market on a regular basis. Last year alone, the Chinese market generated over $2 billion in box-office revenue. Moreover, the six major Hollywood studios, as members of the Motion Picture Association of America, supported trade negotiations earlier this year that resulted in the Chinese government permitting more foreign movies to come into China on a revenue-sharing basis. The agreement increased the percentage of box office revenue that U.S. studios could receive.

Moreover, Sony co-produced with China Film Group the 2010 movie “The Karate Kid,” and Disney is producing “Iron Man 3” with Beijing’s DMG Entertainment. DreamWorks Animation is building a studio in Shanghai with two Chinese state-owned firms.

The letters are said to ask a broad range of questions and do not seem to focus on particular aspects of the film industry’s dealings in China. However, given the FCPA’s anti-bribery provisions, it may be that the SEC suspects that bribes are involved in some of Hollywood’s dealings in China, in matters such as producing partnerships, the selection of films for import, or other interactions.

Waters & Kraus is a national firm with highly skilled lawyers practicing qui tam litigation in four offices, including Dallas, Los Angeles, San Francisco, and Baltimore. Our attorneys have decades of experience successfully representing whistleblowers in a variety of fraud cases. Contact us or call our attorneys at 800.226.9880 to learn more about our practice and how we can assist.

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