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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION ____________________________________ ) SECURITIES AND EXCHANGE ) COMMISSION, ) ) Plaintiff, ) Case No. 4:12-cv-00563 ) v. ) ) MARK A. JACKSON and ) JAMES J. RUEHLEN, ) ) Defendants. ) ____________________________________) PLAINTIFFS CONSOLIDATED RESPONSE IN OPPOSITION TO DEFENDANTS JACKSONS AND RUEHLENS MOTIONS TO DISMISS

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TABLE OF CONTENTS TABLE OF AUTHORITIES ......................................................................................................... iii PRELIMINARY STATEMENT .....................................................................................................1 STATEMENT OF FACTS ..............................................................................................................5 NATURE AND STAGE OF PROCEEDING .................................................................................7 ISSUES PRESENTED.....................................................................................................................8 STANDARD OF REVIEW .............................................................................................................8 ARGUMENT .................................................................................................................................10 A. THE COMPLAINT STATES A CLAIM UNDER THE FCPAS ANTI-BRIBERY PROVISIONS ...........................................................................10 1. The Complaint Adequately Alleges the Involvement of Any Foreign Official ..............................................................................12 a. b. The Allegations in the Complaint Regarding the Foreign Officials Satisfy Rule 8(a)s Notice Pleading Standard ...............12 Defendants Proposed Re-Definition of Any Foreign Official to Require Specific Identity Finds No Basis in Law or Legislative History ............................................................14

2. 3.

The Complaint Alleges The Acts The Foreign Officials Were Bribed to Undertake ...................................................................................19 The Complaint Sufficiently Pleads That The Payments Were Proscribed Bribes and Not Permissible Facilitating Payments ..................22 a. b. The SEC Need Not Plead to Negate the Narrow Exception for Routine Governmental Action .............................22 The Payments Alleged in the Commissions Complaint Do Not In Any Event Fall Into the Narrow Exception for Facilitating Payments .....................................................................24 The Routine Governmental Action Exception Is Not Unconstitutional .............................................................................27

c.

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4.

The Complaint Sufficiently Pleads That Jackson and Reuhlen Acted Corruptly .........................................................................................29 a. b. Corruptly Does Not Require Specific Intent To Violate A Particular Law ...............................................................30 The Complaint Sufficiently Alleges Defendants Corrupt Intent .................................................................................32

B. C.

THE COMPLAINT SUFFICIENTLY PLEADS DEFENDANTS VIOLATIONS OF SECTION 13(B)(5) AND RULE 13B2-1 ..............................35 THE COMPLAINT SUFFICIENTLY PLEADS DEFENDANTS AIDING AND ABETTING VIOLATIONS OF SECTIONS 30A, 13(B)(2)(A) AND 13(B)(2)(B) ..............................................................................39 THE COMPLAINT SUFFICIENTLY PLEADS JACKSONS LIES TO AUDITORS, FALSE CERTIFICATIONS, AND LIABILITY AS A CONTROL PERSON ............................................................................................40 THE COMMISSIONS COMPLAINT IS TIMELY .............................................43 1. 2. 3. 4. The Complaint Alleges Misconduct Within The Statute of Limitations .................................................................................................43 The Continuing Violation Doctrine Tolled the Statute of Limitations .................................................................................................45 The Fraudulent Concealment Doctrine Tolled the Statute of Limitations .................................................................................................46 The Statute of Limitations Does Not Apply to Equitable Remedies ....................................................................................................47

D.

E.

CONCLUSION ..............................................................................................................................49

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TABLE OF AUTHORITIES CASES Abbott v. Equity Group, Inc., 2 F.3d 613 (5th Cir. 1993) ............................................39, 41 Abels v. Farmers Commodities Corp., 259 F.3d 910 (8th Cir. 2001)..................................9 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ................................................................................8 Badaracco v. C.I.R., 464 U.S. 386 (1984) .........................................................................48 Bass v. Stryker Corp., 669 F.3d 501 (5th Cir. 2012) .........................................................10 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) ...................................................8, 10 Castro v. United States, 248 F. Supp. 2d 1170 (S.D. Fla. 2003) .......................................17 Cook v. United States, 84 U.S. 168 (1872) ........................................................................23 County of El Paso, Tex. v. Jones, No. EP-09-CV-00119-KC, 2009 WL 4730305 (W.D. Tex. Dec. 4, 2009)...............................................................................................9 Crissey v. Morrill, 125 F. 878 (8th Cir. 1903) ...................................................................47 Cuvillier v. Taylor, 503 F.3d 397 (5th Cir. 2007) ..............................................................10 Dennis v. General Imaging, Inc., 918 F.2d 496 (5th Cir. 1990) ........................................41 Dist. 1199P Health & Welfare Plan v. Janssen, L.P., 784 F. Supp. 2d 508 (D.N.J. 2011)..................................................................................................................9 E.I. Du Pont de Nemours & Co. v. Davis, 264 U.S. 456 (1924) .......................................48 Exploration Co. v. United States, 247 U.S. 435 (1918) .....................................................46 Florida v. DLT 3 Girls, Inc., No. , 2012 WL 1565533 (S.D. Tex. May 2, 2012) .............10 G.A. Thompson & Co. v. Partridge, 636 F.2d 945 (5th Cir. 1981) ...................................41 Havens Realty Corp. v. Coleman, 455 U.S. 363 (1982) ....................................................45 Hershey v. Energy Transfer Partners, L.P., 610 F.3d 239 (5th Cir. 2010) .........................8 Hertzberg v. Dignity Partners, Inc., 191 F.3d 1076 (9th Cir. 1999) ..................................15

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Holmberg v. Armbrecht, 327 U.S. 392 (1946)...................................................................46 In re Int'l Admin Servs., 408 F.3d 688 (11th Cir. 2005) ....................................................47 Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, ___U.S. ___, 130 S. Ct. 1605 (2010) .....................................................................32, 33 McKelvey v. United States, 260 U.S. 353 (1922).........................................................23, 24 McLaughlin v. Anderson, 962 F.2d 187 (2d Cir. 1992) .......................................................9 Meek v. Howard, Weil, Labouisse, Friedrichs, Inc., 95 F.3d 45 (5th Cir. 1996) ..............41 Merck & Co. v. Reynolds, ___ U.S. ___, 130 S. Ct. 1784 (2010) .....................................46 Pinney Dock and Transp. Co. v. Penn Cent. Corp., 838 F.2d 1445 (6th Cir. 1988) ............................................................................................................................47 Rosen v. Brookhaven Capital Management Co., 194 F. Supp. 2d 224 (S.D.N.Y. 2002)..........................................................................23 SEC v. BankAtlantic Bancorp, Inc., 2012 WL 1936112 (S.D. Fla. 2012) ...........................9 SEC v. Berry, 580 F. Supp. 2d 911 (N.D. Cal. 2008) ........................................................48 SEC v. Brown, 740 F. Supp. 2d 148 (D.D.C. 2010) ..........................................................46 SEC v. Carroll, 2011 WL 5880875 (W.D. Ky. 2011) .........................................................9 SEC v. Diversified Corporate Consulting Grp., 378 F.3d 1219 (11th Cir. 2004) .............48 SEC v. Gabelli, 653 F.3d 49 (2d Cir. 2011)...........................................................46, 47, 48 SEC v. Geswein, No. 5:10CV1235, 2011 WL 4541303 (N.D. Ohio Sept. 29, 2011) ..........................................................................................45 SEC v. Huff, 758 F. Supp. 2d 1288 (S.D. Fla. 2010) .........................................................45 SEC v. Jones, 476 F. Supp. 2d 374 (S.D.N.Y. 2007).........................................................48 SEC v. Kelly, 663 F. Supp. 2d 276 (S.D.N.Y. 2009) ..................................................45, 48 SEC v. Kornman, 391 F. Supp. 2d 477 (N.D. Tex. 2005) ...................................................9 SEC v. Kovzan, 807 F. Supp. 2d 1024 (D. Kan. 2011) ................................................45, 46

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SEC v. Lorin, 869 F. Supp. 1117 (S.D.N.Y. 1994) ............................................................48 SEC v. Nacchio, 614 F. Supp. 2d 1164 (D. Colo. 2009)....................................................48 SEC v. O'Hagan, 703 F. Supp. 218 (D. Minn. 1992) ........................................................48 SEC v. Ogle, No. 99 C 609, 2000 WL 45260 (N.D. Ill. Jan. 11, 2000) .............................45 SEC v. Pentagon Cap. Mgmt. PLC, 612 F. Supp. 2d 241 (S.D.N.Y. 2009) ......................45 SEC v. Ralston Purina Co., 346 U.S. 119 (1953) ........................................................23, 24 SEC v. Rind, 991 F.2d 1486 (9th Cir. 1993) ......................................................................48 SEC v. Solucorp Industries, Ltd., 274 F. Supp. 2d 379 (S.D.N.Y. 2003) ..........................38 SEC v. Tambone, 550 F.3d 106 (1st Cir. 2008) ..................................................................48 SEC v. Williams, 884 F. Supp. 28 (D. Mass. 1995) ...........................................................48 SEC v. World-Wide Coin Investments, Ltd., 567 F. Supp. 724 (N.D. Ga. 1983)...............36 Smith v. Duff & Phelps, Inc., 5 F.3d 488 (11th Cir. 1993) ................................................47 State of N.Y. v. Hendrickson Bros., Inc., 840 F.2d 1065 (2d Cir. 1988)............................47 Stichting Ter Behartiging Van de Belangen Van Oudaandeel-houders In Het Kapitaal Van Saybolt Int'l B.V. v. Schreiber, 327 F.3d 173 (2d Cir. 2003).......................................................................17, 30, 31, 32 Stripling v. Jordan Prod. Co., 234 F.3d 863 (5th Cir. 2000).............................................49 Swierkiewicz v. Sorema, 534 U.S. 506 (2002) ...................................................................32 TRW, Inc. v. Andrews, 534 U.S. 19 (2001) ........................................................................46 Texas v. Allan Const. Co., 851 F.2d 1526 (5th Cir. 1988)...........................................46, 47 Turner v. Pleasant, 663 F.3d 770 (5th Cir. 2011)..............................................................10 United States ex rel. Barajas v. United States, 258 F.3d 1004 (9th Cir. 2001) .................15 United States v. Blondek, 741 F. Supp. 116 (N.D. Tex. 1990), aff'd and adopted by United States v. Castle, 925 F.2d 831 (5th Cir. 1991) ......................................15, 18 United States v. Castle, 925 F.2d 831 (5th Cir. 1991) .....................................15, 17, 18, 19 v

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United States v. Duvall, 846 F.2d 966 (5th Cir. 1988) ......................................................31 United States v. Hopkins, 916 F.2d 207 (5th Cir. 1990) ....................................................37 United States v. Iron Mountain Mines, Inc., 987 F. Supp. 1244 (E.D. Cal. 1997) ............23 United States v. Jacobs, 431 F.2d 754 (2d Cir. 1970) .......................................................31 United States v. Jennings, 471 F.2d 1310 (2d Cir. 1973) ..................................................17 United States v. Johnson, 621 F.2d 1073 (10th Cir. 1980) ................................................17 United States v. Kay, 359 F.3d 738 (5th Cir. 2004) ...................................10, 18, 21, 25, 29 United States v. Kay, 513 F.3d 432 (5th Cir. 2007) ....................................21, 29, 30, 31, 35 United States v. Kozeny, 667 F.3d 122 (2d Cir. 2011).......................................................13 United States v. Liebo, 923 F.2d 1308 (8th Cir. 1991) ......................................................35 United States v. Outler, 659 F.2d 1306 (5th Cir. 1981) ...............................................23, 24 United States v. Poly-Carb, Inc., 951 F. Supp. 1518 (D. Nev. 1996) ................................23 United States v. Pommerening, 500 F.2d 92 (10th Cir. 1974) ...........................................29 Wilson v. Birnberg, 667 F.3d 591 (5th Cir. 2012) .............................................................24 STATUTES, RULES AND REGULATIONS Federal Rules of Civil Procedure Rule 8(a).................................................................................................................11, 12 Rule 8(a)(2) ....................................................................................................................8 Rule 9(b) ..................................................................................................................9, 32 Rule 12(b)(6) ................................................................................................................10 Rule 15(a).....................................................................................................................49

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Securities Act of 1933 Section 4(a)(2) [15 U.S.C. 77d(a)(2)] .......................................................................23 Securities Exchange Act of 1934 Section 13(b)(2)(A) [15 U.S.C. 78m(b)(2)(A)] ........................................................36 Section 13(b)(5) [15 U.S.C. 78m(b)(5)] ...................................................................36 Section 20(a) [15 U.S.C. 78t(a)] ...............................................................................41 Section 20(e) [15 U.S.C. 78t(e)] ...............................................................................39 Section 21D(b)(2) [15 U.S.C. 78u-4(b)(2)] ................................................................9 Section 30A [15 U.S.C. 78dd-1] ....................................................................... passim Section 32(c)(2)(A) [15 U.S.C. 78ff(c)(2)(A)] .........................................................31 Section 32(c)(2)(B) [15 U.S.C. 78ff(c)(2)(B)]..........................................................31 Rule 13b2-1 [17 C.F.R. 240.13b2-1] ........................................................................36 18 U.S.C. 201 ............................................................................................................17, 29 18 U.S.C. 371 ..................................................................................................................18 18 U.S.C. 666 ............................................................................................................17, 18 28 U.S.C. 2462 ..........................................................................................................43, 48

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MISCELLANEOUS Commentaries on the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, 37 I.L.M. 1 (1998) ...................20, 31 H.R. Conf. Rep. No. 100-576 (1988), reprinted in 1988 U.S.C.C.A.N. 1547 ......13, 16, 26 H.R. Rep. No. 95-640 (1977)...........................................................................16, 25, 26, 30 H.R. Rep. No. 105-802 (1998)...........................................................................................21 S. Rep. No. 95-114 (1977), reprinted in 1977 U.S.C.C.A.N. 4098 .......................15, 16, 30 S. Rep. No. 105-277 (1998) ...............................................................................................21 Report of the Securities and Exchange Commission on Questionable and Illegal Corporate Payments and Practices, reprinted in Sec. Reg. & L. Rep. (BNA) (Special Supp. May 19, 1976)......................................................................................16

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Plaintiff, the United States Securities and Exchange Commission (SEC or Commission), respectfully submits this consolidated memorandum of law in opposition to the motions to dismiss filed by defendants Mark A. Jackson and James J. Ruehlen pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure (FRCP). PRELIMINARY STATEMENT The Complaint charges defendants Jackson and Ruehlen, a former and current senior officer of Noble Corporation (Noble), respectively, with multiple violations of the antibribery and accounting provisions of the Foreign Corrupt Practices Act (FCPA), 15 U.S.C. 78dd-1, and other violations of the federal securities laws. Noble, an international oil drilling company, used for years an intermediary customs agent to pay bribes to government officials of the Nigerian Customs Service and other Nigerian government officials. Jackson and Ruehlen were intimately involved in arranging, approving, falsely booking, and concealing Nobles bribe payments to foreign officials. Together, the defendants participated in paying hundreds of thousands of dollars in bribes to improperly obtain approximately eight illegitimate duty exemptions, known as temporary import permits (TIPs), and twenty-two TIP extensions. These TIPs and extensions were obtained illicitly so that Nobles oil rigs offshore in Nigeria could continue to operate under lucrative drilling contracts. Jackson approved the payments and concealed the payments from Nobles audit committee and auditors. Ruehlen prepared false documents as to the movement of the rigs, sought approval for the payments from Jackson and others at Noble, and processed and paid the bribe money to the intermediary customs agent. The First and Second Claims of the Complaint allege that Jackson and Ruehlen violated the anti-bribery provisions of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. 78dd-1, directly and by aiding and abetting Noble and others violations. The Third Claim

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alleges that defendants aided and abetted Nobles violations of the books and records and internal controls provisions of Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B), 15 U.S.C. 78m(b)(2)(A) and (B), relating to the bribery scheme. The Fourth Claim alleges that defendants, by falsifying or causing to be falsified Nobles books and records, and by failing to implement or circumventing internal controls, violated Exchange Act Section 13(b)(5), 15 U.S.C. 78m(b)(5), and Rule 13b2-1, 17 C.F.R. 240.13b2-1. Claims Five and Six charge Jackson for making false certifications in management representation letters in violation of Exchange Act Rule 13b2-2, 17 C.F.R. 240.13b2-2, and for signing false personal certifications in violation of Rule 13a-14, 17 C.F.R. 240.13b2-2. Claim Seven seeks to hold Jackson liable as a control person for having controlled Noble, Ruehlen, and others during the violations, and indeed, while he was aware of the bribery, participating in the bribery, lying to auditors, and signing false certifications to conceal the bribery. The SEC seeks penalties and an injunction. Defendants contend that the Commission has failed to state a claim upon which relief may be granted pursuant to FRCP 12(b)(6). They attack the sufficiency of the Complaint in scattershot fashion, but their arguments distilled to their essence advance six primary arguments for dismissal: First, the defendants argue that the SEC must allege the specific identity of Nigerian officials for whom the defendants authorized the payment of bribes. This line of argument finds no support in the text, legislative history, case law, or purposes of the FCPA. Defendants authorized bribes to foreign officials through intermediaries. The Complaint identifies the officials by country and government agency and alleges defendants corrupt intent to improperly influence those officials through the payment of money. Neither the FCPA nor the

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notice pleading standards of Federal Rule of Civil Procedure 8(a) require anything more. As the language, text, legislative history and policies of the FCPA confirm, a violation of its provisions rests with the intent of the person authorizing the bribes, not with the identity or role of the official targeted for bribery. The name, title or exact position of the official need not be pleaded or proved, as confirmed by decisions under analogous domestic bribery statutes. Second, the defendants argue that the Complaint fails to allege facts to support the inference that their payments fell outside of the FCPAs statutory routine governmental action (a.k.a. facilitating payments) exception. Yet, the SEC is not required to plead preemptively around a statutory exception that a defendant might invoke. For over a century, including in the securities context, the Supreme Court has held that a pleading based on a general provision that defines the elements of a statutory violation need not negate an exception made by proviso or otherwise to those elements. The facilitating payments exception fits that rule. Thus, the defendants, not the SEC, must raise the exceptions application in the pleadings and prove its applicability at trial. Moreover, the Complaint satisfies any purported need to plead around the exception. The well-pled facts, such as that the bribes were paid to induce foreign officials to falsely certify facts and accept false paperwork, indicate that defendants bribes were not facilitating payments, i.e., payments authorized to expedite or secure the performance of an ordinarily or commonly performed official act. Third, Ruehlen claims that the FCPAs routine government action exception is unconstitutionally vague as applied to him. Claims of this nature have been soundly rejected by the courts, including by the Fifth Circuit. Also, the Complaint abundantly alleges that Ruehlen sought and obtained authorizations to pay bribes that cannot be understood reasonably as anything other than crossing the line of prohibited conduct.

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Fourth, the defendants contend that the Complaint does not allege facts giving rise to the inference that they acted corruptly. This attack on the Complaint ignores the well-pled facts and misconstrues the law. The legislative history of the FCPA and the decisions in the Fifth Circuit and elsewhere reject defendants definition of corruptly. Defendants also overlook that states of mind, such as intent and purposes, may be alleged generally. The Complaint alleges defendants corrupt intent, and the allegations are supported by ample facts. Fifth, the defendants seek to dismiss the Complaint as insufficiently pleading alleged securities violations other than bribery. Defendants, for example, argue that the SEC fails to specify the books and records that were falsified and the internal controls that they evaded. Defendants line of arguments directed to these issues are, first, largely premised on their attack on the Commissions bribery claims an attack that this Court should reject. In addition, the defendants simply ignore the facts actually pled in the Complaint. The allegations set forth in great detail what Jackson and Ruehlen claim not to find in the Complaint, including identifying the books and records falsified and the internal controls evaded or not implemented. Sixth, the defendants argue that the Complaint is untimely because the applicable statute of limitations permits relief only for conduct occurring five years before the filing of the Complaint on February 24, 2012. Yet buried in footnotes in their briefs, the defendants admit that they signed tolling agreements extending the statute of limitations. The Complaint alleges violative conduct within the limitations period even absent the tolling agreement. What is more, various equitable doctrines would apply to toll the statute. And the statute of limitations does not apply to claims for equitable relief such as injunctions. Finally, throughout each of their briefs, defendants intermittently challenge facts asserted in the Complaint, advance facts not alleged in the Complaint but purportedly reflected

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elsewhere, and argue for inferences favorable to them. At the pleadings stage, these arguments are not a proper basis for granting a motion to dismiss and must be rejected. The Commission has stated a claim upon which relief may be granted for each of Claims One through Seven, and defendants motions to dismiss should be denied. STATEMENT OF FACTS Noble is an international oil drilling firm that, during the relevant period, was headquartered in Sugar Land, Texas. Complaint 2, 16. As detailed in more than 140 paragraphs of facts alleged in the SECs Complaint, defendants, Nobles senior employees Jackson and Ruehlen, among other things, authorized the repeated bribery of Nigerian customs officials through intermediaries to obtain illicit TIPs and TIP extensions for Nobles oil drilling rigs. Id. 2-5, 8-144. Jackson was a Noble officer from September 2000 through September 20, 2007, serving at times as its CFO, COO, and ultimately its President, CEO and Chairman of the Board of Directors. Id. 5, 8-11. As CFO, Jackson had responsibility for Nobles FCPA compliance and for providing written pre-approval of all payments to government officials. Id. 9, 24, 4042. Ruehlen was, and continues to be, a Noble employee. He served from September 2004 through at least early 2011 as the Division Manager of Nobles subsidiary, Noble-Nigeria, the highest executive of that subsidiary. Id. 1, 13-15. 1 Before that time, he worked in Nobles corporate internal audit groups. Id. 14. During the relevant time period, Nobles rigs operated in Nigerian waters under illicit TIPs obtained from the Nigeria Customs Service (NCS) through bribery. Id. 18. TIPs were Paragraph 13 of the complaint states that Ruehlen is still the Division Manager of NobleNigeria. The SEC has since learned that Ruehlen is no longer working in Nigeria, but serving as the Division Manager of Nobles operations in Mexico. 5
1

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valid only for one year, id. 19, and NCS had the discretion to grant up to only three six-month extensions to a TIP, id. 20. At the expiration of any TIP and extensions, NCS required the rig to be exported out of Nigeria. Id. 20. If a rig needed to remain in country to complete drilling contract work past the expiration of a TIP, NCS required the rig to be exported and then reimported on the basis of a new TIP. Id. 20, 76. From about September 2004 to about May 2007, Noble did not export its rigs at the expiration of the period set by the TIP and any extensions, as required by Nigerian law, the TIPs terms, and NCS. Id. 22. Instead, Ruehlen and other Noble officials, together with Nobles customs agents, created false documents purporting to show that rigs moved out of and back into Nigerian waters, when the rigs in fact never moved. Id. 22, 70, 74, 105, 108, 131. Jackson knew that the rigs moved only on paper and approved the use of false documents to obtain the TIPs. Id. 22, 34-36, 50-53, 82-90, 101, 116. To ensure that NCS officials granted these falsely documented TIPs and ignored the fact that the rigs did not move, Ruehlen and Jackson authorized Nobles customs agent to pay Nigerian government officials amounts between 6.9 million and 7.2 million Naira 2 per rig. Id. 22, 69-70, 80, 82-95 (Jackson and Ruehlen authorize payments); id. 103-13, 131-36 (Ruehlen authorizes payments). With these payments, Ruehlen and Jackson sought and received official documents from government agencies, such as the Nigerian Port Authority and the National Maritime Authority, falsely evidencing rig movement into and out of Nigeria as well, from NCS, new TIPs. Id. 24-30, 73, 80-81, 92, 106, 109-10, 112, 135-36. Ruehlen and Jackson took these acts to retain business under lucrative drilling contracts, obtain profits from

Naira is the Nigerian currency. As detailed in the Complaint, the tens of millions of Naira that flowed to foreign officials as bribes was equivalent to more than $700,000. Id. 27-31. 6

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operating rigs in Nigeria, and avoid the payment of permanent import duties on Nobles rigs. Id. 32, 76-78, 85. Similarly, Ruehlen and Jackson authorized Nobles customs agent to pay Nigerian government officials amounts between 1.6 million Naira to 5 million Naira per rig to obtain discretionary TIP extensions. Id. 31, 54-61, 96-98, 115, 117-25. Ruehlen also authorized the customs agent to pay Nigerian government officials an amount of 7 million Naira to obtain a fourth TIP extension in 2007 that he knew NCS officials were not permitted to grant, and did not grant, as a matter of policy. Id. 66, 71, 76, 78, 126-30. In addition to acts in furtherance of these payments, defendants took steps to conceal the bribery. Defendants knew that these practices were improper and had subjected Noble to fines in Nigerian previously. Id. 34-36, 40-41, 45, 47-53, 64, 71, 76-78, 81, 106, 109. They also knew that the Audit Committee of Nobles Board of Directors had expressed concern about the improper practices and had given instructions in 2004 that the practices stop. Id. 50-53, 8390, 142. Yet, after Ruehlen explored lawful, albeit expensive, alternatives, id. 20, 53-68, 85, defendants resumed the bribery in 2005. Id. 68-90. Neither Jackson nor Ruehlen informed the Audit Committee that they had resumed making the payments, in direct contradiction to the Audit Committees directive. Id. 68, 90. And both of them proceeded to conceal the fact of the resumption and the nature of the payments not only from the Audit Committee but also from later CFOs, auditors, and others at the company. Id. 104, 107, 121-23, 142-43. NATURE AND STAGE OF PROCEEDING The Commission filed suit on February 24, 2012. On May 8, each defendant filed his motion to dismiss (Dkt. Nos. 35, 36). With the Courts leave, which was granted on June 12, the SEC is responding to each defendants motion in this single, consolidated opposition.

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ISSUES PRESENTED The issue before the Court is whether the Complaint contains factual allegations that, when taken as true and in the light most favorable to the SEC, plausibly state claims for relief. Specifically, the defendants motions to dismiss contend that: 1. The Complaint fails to allege the specific identity or specific functions of the Nigerian officials for whom the defendants authorized the payment of bribes in violation of the FCPA; 2. The Complaint fails to allege facts to support the inference that the payments at issue do not fall within the statutory facilitating payments exception to FCPA liability; 3. The FCPA is unconstitutionally vague as applied to defendant Ruehlens conduct; 4. The Complaint fails to allege facts giving rise to the inference that the defendants acted corruptly in authorizing and otherwise acting in furtherance of the bribe payments; 5. The Complaint fails to specify the books and records falsified and the internal controls evaded by the defendants; and 6. The Complaint fails to allege facts demonstrating that the misconduct at issue here occurred within the five year statute of limitations found in 28 U.S.C. 2462. STANDARD OF REVIEW When filing a complaint, FRCP 8(a)(2) requires a short and plain statement of the claim showing that the pleader is entitled to relief sufficient to provide fair notice of the claim and the grounds upon which it rests. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Detailed factual allegations are not required. Hershey v. Energy Transfer Partners, L.P., 610 F.3d 239, 245 (5th Cir. 2010) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

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FRCP 9(b) provides that, for claims sounding in fraud, the complaint must state with particularity the circumstances constituting fraud. Claims under the FCPA, including bribery claims, do not fall within the scope of this provision and need not be alleged with particularity. See, e.g., Abels v. Farmers Commodities Corp., 259 F.3d 910, 919 (8th Cir. 2001) (noting that Rule 9(b) would not apply to an allegation of bribery); Dist. 1199P Health & Welfare Plan v. Janssen, L.P., 784 F. Supp. 2d 508, 529 (D.N.J. 2011) (holding that bribery does not invoke the heightened pleading requirements of Rule 9(b), but rather need only satisfy the more liberal pleading requirements of Rule 8(a) (internal quotation marks omitted)); County of El Paso, Tex. v. Jones, No. EP-09-CV-00119-KC, 2009 WL 4730305, at *19 (W.D. Tex. Dec. 4, 2009) (noting that the heightened pleading requirements of Rule 9(b) do not apply to bribery claims); cf. McLaughlin v. Anderson, 962 F.2d 187, 194 (2nd Cir. 1992) (holding that heightened standard of Rule 9(b) did not apply to an extortion claim). Further, even under the heightened pleading standard of FRCP 9(b), intent, knowledge, and other conditions of a persons mind may be alleged generally. This means that a level of particularity alleging the who, what, when, where and how, is not required to allege intent, knowledge, and other conditions of the mind. See, e.g., SEC v. BankAtlantic Bancorp, Inc., No. 12-60082-Civ, 2012 WL 1936112, at *8 (S.D. Fla. May 29, 2012); SEC v. Carroll, No. 3:11CV-165-H, 2011 WL 5880875, at *6 (W.D. Ky. Nov. 23, 2011). Nor is the SEC subject to the Private Securities Litigation Reform Act, 15 U.S.C. 78u-4(b)(2), and its heightened pleading requirements with regard to mental states, which is only required for private litigants. See, e.g., SEC v. Kornman, 391 F. Supp. 2d 477, 494 (N.D. Tex. 2005) (observing that the SEC need not satisfy the PSLRAs requirement to plead with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind).

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Under FRCP 12(b)(6), a defendant may move to dismiss a complaint for failure to state a claim. In this circuit, such a motion is viewed with disfavor and is rarely granted. Turner v. Pleasant, 663 F.3d 770, 775 (5th Cir. 2011). In ruling on a motion to dismiss, [a]ll wellpleaded facts in the complaint are accepted as true and viewed in the light most favorable to the nonmovant. Bass v. Stryker Corp., 669 F.3d 501, 506 (5th Cir. 2012). To survive a Rule 12(b)(6) motion, a complaint need only contain enough facts to raise a right to relief above the speculative level. Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (quoting Twombly, 550 U.S. at 555); see also Florida v. DLT 3 Girls, Inc., No. 4:11-cv-3624, 2012 WL 1565533, at *1 (S.D. Tex. May 2, 2012) (this Court observing that the standard is neither evidentiary nor akin to a probability requirement). ARGUMENT A. THE COMPLAINT STATES A CLAIM UNDER THE FCPAS ANTIBRIBERY PROVISIONS.

The anti-bribery provisions of the FCPA proscribe acting by any means or instrumentality of interstate commerce corruptly in furtherance of a payment, offer, promise or authorization of payment to any foreign official, including through an intermediary, with the purpose to influence or induce the foreign official to misuse his official position to assist a corporation in obtaining or retaining business. 15 U.S.C. 78dd-1. Recognizing that bribes to foreign officials may be disguised through the use of intermediaries, the FCPA broadly prohibits both direct and indirect payments to foreign officials. It also encompasses mere offers, promises or authorizations to pay foreign officials, regardless of whether the bribe is actually paid and the official actually corrupted. See United States v. Kay, 359 F.3d 738, 75556 (5th Cir. 2004) (Kay I) (Congress intended for the FCPA to apply broadly to payments intended to assist the payor, either directly or indirectly.). 10

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To state a claim that Jackson and Ruehlen violated the FCPA by engaging in bribery perpetrated through intermediaries, as alleged in the Complaint, the SEC must allege facts plausibly showing that the defendants were officer[s], director[s], employee[s], or agent[s] of [an] issuer who: ma[de] use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money . . . or giving of anything of value to , (3) any person, while knowing that all or a portion of such money . . . will be offered, given, or promised, directly or indirectly, to any foreign official for purposes of (A)(i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such foreign official , or (iii) securing any improper advantage in order to assist such issuer in obtaining or retaining business for or with, or directing business to, any person. 15 U.S.C. 78dd-1(a)(3). The general allegations in the Complaint easily satisfy the notice pleading standard of FRCP 8(a) and properly allege these elements. The Complaint alleges that Jackson (a Noble officer at the time of the alleged violations) and Ruehlen (a Noble employee), acting on behalf of Noble (an issuer of securities), using e-mails (and other instrumentalities of interstate commerce), corruptly (see infra at 29-35) authorized the payment of tens of millions of Naira, to employees of the Nigerian government, including officials of the NCS, the Nigerian Port Authority, and the National Maritime Authority (all foreign officials). It also alleges that the defendants authorized these payments for purposes of influencing or inducing those officials to create and process false documents, grant TIPs based on those false documents, and extend TIPs that they had the discretion to deny or should have denied (any act or decision of such foreign official in his official capacity or any act in violation of his lawful duty). The Complaint further alleges that defendants authorized Nobles payments so as to continue operating under and maintain lucrative oil drilling contracts (assist the issuer in 11

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obtaining or retaining business). Under FRCP 8(a), these allegations sufficiently allege that the defendants violated the anti-bribery provisions of the FCPA through their authorization of bribes to any foreign official. The 149-paragraph summary of the allegations is a comprehensive description of the conduct with which the defendants are charged and provides ample information from which the defendants can understand the claims against them. 1. The Complaint Adequately Alleges the Involvement of Any Foreign Official.

Defendants challenge the pleading sufficiency of the any foreign official element by arguing that the SEC must specifically identify in its Complaint the foreign official to whom the illicit payment was paid by name, or by job title, or position, or job responsibility. Jackson Mot. at 11; Ruehlen Mot. at 8. Defendants are mistaken. Under the notice pleading standard of FRCP 8(a), the Complaint adequately alleges that the defendants sought to make corrupt payments to Nigerian officials. Nothing in the FCPAs provisions requires alleging, or proving, the specific identity of a foreign official by using his name, title or job description. Nor has any court ever determined that the government must plead, or prove, the specific characteristics of the official. And for good reason: such a requirement would run counter to the language of the FCPA and Congresss intent to combat often difficult-to-detect foreign bribery by broadly proscribing direct or indirect bribery of foreign officials, as well as criminalizing bribes that were never completed such as the offer or promise of a bribe. a. The Allegations in the Complaint Regarding the Foreign Officials Satisfy Rule 8(a)s Notice Pleading Standard. As required by FRCP 8(a), the Complaint provides a short, plain statement regarding the foreign officials bribed. First, it alleges that foreign officials were the intended recipients of payments authorized by defendants. Paragraphs 23 and 25, for example, allege that to obtain TIPs with false paperwork, Ruehlen sought authorization for, and Jackson authorized, illicit 12

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payments to Nigerian government officials and that he authorized the agent to proceed with the payments to ensure the favorable processing and grant of TIPs or TIP extensions. Second, the Complaint identifies these foreign officials by country, government agency, and action sought. It alleges that the NCS was responsible for approving and granting TIPs and TIP extensions and that, in exchange for those actions, NCS officials received Jacksons and Ruehlens authorized payments. See, e.g., Complaint 18-22; id. 73, 109; id. 81; id. 62, 96-98; id. 129. The Complaint also alleges that officials of agencies such as the Nigerian Port Authority (NPA) and National Maritime Authority (NMA) received payments that defendants authorized, in exchange for creating false papers, receipts, and evidence of export and import related to the securing of false paperwork TIPs. See id. 69, 80, 110, 92, 112. Third, the Complaint alleges that Ruehlen and Jackson knew, firmly believed, or were aware to a high probability3 that these payments were going to Nigerian government officials and that the customs agent specifically told them as much. See, e.g., id. 39-41, 69, 80. For example, the customs agent identified the undocumented payments to foreign officials as special handling or procurement both on price proposals for obtaining the TIPs and TIP extensions, and on invoices. See id. 23-24, 80, 89, 92-94, 103, 107, 110, 112. Paragraphs 23 and 24 also allege that (1) Ruehlen understood 4 that all payments specifically labeled special
3

Actual awareness is not a requirement. Under the FCPA, a persons state of mind is knowing if he is substantially certain, has a firm belief, or is aware of a high probability. 15 U.S.C 78dd-1(f)(2)(A). This includes the concept of conscious disregard and precludes any head in the sand defense. H.R. Conf. Rep. 100-576 (1988), reprinted in 1988 U.S.C.C.A.N. 1547, 1952-54. See United States v. Kozeny, 667 F.3d 122, 132 (2d Cir. 2011).

Jackson wrongly argues that each and every allegation of knowledge is conclusory as a matter of law. Jackson Mot. at 7. The SEC need only allege general allegations of knowledge. See cases cited supra 8-10. Moreover, when viewed in its entirety, the general averments of Jacksons knowledge are well-supported by the other facts regarding, for example, Jacksons positions, his communications with others, his presence at audit meetings, his payment approvals, and his quarterly review of payments. See, e.g., facts at 13-14 (knowledge of 13

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handling or procurement without supporting documentation were payments to government officials, and that (2) Jackson understood that all requests from Ruehlen to pay special handling charges for TIPs and TIP extensions were requests to make payments to government officials to secure false paperwork TIPs or discretionary TIP extensions. See also, e.g., id. 59, 82-94, 115. Also, defendants knew, firmly believed, or were aware to a high probability that these Nigerian government agency officials were receiving the payments because the government agencies were identified on the custom agents price proposals and invoices. See, e.g., id. 69, 80, 92, 110, 112, 136. In sum, the SEC has more than adequately pled the involvement of foreign officials and Ruehlens and Jacksons knowledge of that involvement. No more specific allegations are necessary to give them notice of the claims against them. b. Defendants Proposed Re-Definition of Any Foreign Official to Require Specific Identity Finds No Basis in Law or Legislative History. In the face of well-pled allegations, defendants ask the Court to rewrite the FCPAs any foreign official language to require proof of payment to a specifically identified government official. Jackson Mot. at 11; Ruehlen Mot. at 8. Such specificity is not required by the language of the FCPA or the relevant pleading standards, and there are several reasons this Court should reject it. First, the FCPAs language requires only that the defendants have acted corruptly in furtherance of an authorization of illicit payments to any person knowing that all or a portion of those payments would be offered, given, or promised to, directly or indirectly, any foreign official. 15 U.S.C. 77dd-1(a), (a)(3) (emphasis added). These terms defining the violation expressly contemplate and proscribe not only direct bribery, but also circuitous, indirect bribery through third party intermediaries to foreign officials. The FCPAs definition payments), 6 (false paperwork), 20-21 (discretionary actions), and 7, 20, 27-28, 32-33 (unlawfulness and other facts). 14

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of foreign official includes the term any five times. See 15 U.S.C. 78dd-1(f)(1)(A). Moreover, [t]he term any is generally used to indicate lack of restrictions or limitations on the term modified. United States ex rel. Barajas v. United States, 258 F.3d 1004, 1011 (9th Cir. 2001); see Hertzberg v. Dignity Partners, Inc., 191 F.3d 1076, 1080 (9th Cir. 1999) (observing that the dictionary defines any as one, no matter what one and that the broad meaning of any has been recognized by courts). Thus, consistent with Congresss use of any, this Court should give a broad construction to the FCPA generally and, specifically, to the phrase any foreign official. In view of this statutory language broadly proscribing bribery payments to any foreign official, this Court should require no greater specificity than the SEC has already alleged. The defendants cite no cases because there are none where a court has compelled the government to plead, let alone prove, the specific identify and characteristics of the foreign officials that the defendant believes to be involved in the corrupt scheme, and such a request would be inconsistent with the FCPAs broadly encompassing language. Second, the FCPAs legislative history confirms that the government need not specifically name the foreign officials who are the intended recipients of the bribes. The legislative history reflects that Congress deliberately refused to make foreign officials themselves liable for bribery or to allow as a defense the fact that the foreign official himself demanded payment. S. Rep. No. 95-114, at 10-11 (1977), reprinted in 1977 U.S.C.C.A.N. 4098, at 4108). As indicated throughout the legislative history, the FCPAs clear focus is on the intent of the person authorizing or paying the bribe, not the bribe recipient or his identity. See also United States v. Blondek, 741 F. Supp. 116, 117, 119 n.2 (N.D. Tex. 1990), affd and adopted by United States v. Castle, 925 F.2d 831 (5th Cir. 1991) (tracing the legislative

15

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history). 5 Particularly in cases involving bribery through a third party as presented here the legislative history makes plain that where the corporation [or individual] knows the payment will be passed on for a proscribed purpose, the violation is complete. S. Rep. No. 95-114 at 11 (1977), reprinted in 1977 U.S.C.C.A.N. 4098, at 4109. Based on these pronouncements focusing squarely on the bribe-payers wrongful intent to corrupt any foreign official, the Court, again, should reject any effort to engraft additional requirements on the statute to provide specific information about the alleged corrupt officials particularly at the pleadings stage. Third, requiring specificity would also run counter to the purpose of the FCPA. By enacting the FCPA with broad provisions, Congress was particularly concerned with widespread but indirect bribery of foreign officials through agents and intermediaries. 6 These practices lent plausible deniability to those seeking to pay or paying bribes by enabling the bribe-payers to disclaim knowledge of the bribes ultimate recipient. Congress aimed to outlaw this practice. For this reason, Congress established a knowledge requirement that included willful blindness and criminalized bribes paid to unidentified foreign officials indirectly. See supra at 13 n.3. Requiring that the targeted official be specifically identified would thwart these goals by enabling bribe-payers to deliberately avoid specific knowledge of those they seek to corrupt by using a third party to make the payment to public officials. That is why the language of the FCPA reads in such a broad way to redress the harm caused by indirect bribes, including through corrupt acts in furtherance of an authorization of the payment of any money to
5

Defendant Jackson concedes the point: The essence of a violation of the Foreign Corrupt Practices Act is the purpose of the payment, and the defendants knowledge and intent on making it. Jackson Mot. at 17.
6

See, e.g., Report of the Securities and Exchange Commission on Questionable and Illegal Corporate Payments and Practices, reprinted in Sec. Reg. & L. Rep. (BNA) (Special Supp. May 19, 1976), at 12-13; H.R. Rep. No. 95-640, at 6 (1977); H.R. Conf. Rep. 100-576, reprinted in 1988 U.S.C.C.A.N. 1547, 1952-54 (1988). 16

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any person knowing that all or a portion of it will be offered, given, or promised, directly or indirectly, to any foreign official. 15 U.S.C. 78dd-1(a), (a)(3). So long as the bribe payer believes that any foreign official will be paid, directly or indirectly, the government has met its pleading and proof obligations. Finally, this interpretation is fully consistent with how courts have viewed analogous anti-corruption statutes, 7 such as the domestic bribery statute (18 U.S.C. 201) and the statute outlawing bribery relating to federal programs (18 U.S.C. 666). Like the FCPA, these bribery statutes focus on the intent of the bribe-payer, and do not require knowledge of the specific traits and characteristics of the official to be bribed. See United States v. Jennings, 471 F.2d 1310, 1311-13 (2d Cir. 1973) (holding that knowing the title and position of the government official is not necessary for liability under the domestic bribery statute because the sole scienter required is knowledge of the corrupt nature of the offer and an intent to influence [an] official act); Castro v. United States, 248 F. Supp. 2d 1170, 1183-84, 1186 (S.D. Fla. 2003) (holding under 18 U.S.C. 666, which renders criminally liable any person who corruptly gives anything of value to any person, with intent to influence or reward an agent of a[] local government, or any agency thereof ., that the identity of the agent whom defendant sought to influence is clearly not among the elements of the offense ., and that the government was not required to allege in the indictment or prove at trial the identity of the agent [defendant] sought to influence (citations omitted)); see also United States v. Johnson, 621 F.2d 1073, 1076 (10th Cir. 1980) ([I]t need not be shown that the public official was actually corrupted nor that he accepted the bribe, and the object of the bribe need not even be

See Stichting Ter Behartiging Van de Belangen Van Oudaandeel-houders In Het Kapitaal Van Saybolt Intl B.V. v. Schreiber, 327 F.3d 173, 182 (2d Cir. 2003) (Stichting) (drawing on domestic bribery law in interpreting the FCPA); Castle, 925 F.2d at 834 (same). 17

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attainable to support a conviction. [S]o long as the money is offered with corrupt intent, the official does not necessarily even need to be aware of the bribe. (citations omitted)). The argument against imposing additional pleading or proof burdens as to the identity of the bribe recipient is even stronger in the foreign context, where the nature of the schemes makes specific identification of the officials pocketing the bribes far more difficult than in domestic bribery schemes. Indeed, the identity of the foreign official is sometimes shielded from the bribe payor so the official can maintain his anonymity in an effort to avoid detection. Defendants cite Kay I, to suggest that the specific identification of foreign officials and their roles, duties, and functions is an essential element of the FCPA. See Ruehlen Mot. at 7; Jackson Mot. at 10-12. In fact, Kay I says no such thing. The Kay I opinion simply recognizes, in dicta, the unremarkable proposition that one element of an FCPA violation is the identity of the foreign country and the officials to whom the suspect payments are made. Kay I, 359 F.3d at 760. Nowhere does Kay I suggest that the identity of the foreign official need be specified with the level of detail that the defendants demand. Consistent with Kay Is dicta, the Complaint identifies the foreign country (Nigeria) and officials to whom defendants bribes were directed (government officials, including at NCS, the Nigerian Port Authority, and the National Maritime Authority). Particularly at the pleading stage, Kay Is passing statement in dicta in a criminal case should not be read to contradict the pleading standards of FRCP 8(a) and the language, legislative history, and purposes of the FCPA itself. 8

Defendants reliance on Blondek, 741 F. Supp. at 117 n.1, affd and adopted by Castle, 925 F.2d at 831, is misplaced. Blondek and Castle involved the governments effort to prosecute foreign officials who could not be charged with FCPA violations but were charged with a violation of 18 U.S.C. 371, under a general conspiracy theory. The reference quoted by defendants from that case to a foreign official as a necessary party to an FCPA violation does not respond to the argument made here and again is pure dicta. If anything, Blondek and Castle support the SECs position in confirming that the FCPAs focus is on the briber, not the foreign 18

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2.

The Complaint Alleges The Acts The Foreign Officials Were Bribed to Undertake.

Defendants next argue that the Complaint fails to identify the actions the Nigerian officials were asked to take in exchange for the bribes. Jackson Mot. at 12-13; Ruehlen Mot. at 10. Yet the Complaint provides abundant factual support for the conclusion that the bribes were authorized for purposes proscribed by the statute to (1) influence an official act or decision, (2) induce an official to disregard his lawful duty, or (3) secure an improper advantage. The first unlawful purpose is to influence[] any act or decision of such foreign official in his official capacity in order to assist an issuer to obtain or retain business. 15 U.S.C. 78dd1(a)(3)(A)(i). On this score, the Complaint alleges that defendants understood that NCS officials were the officials who could grant or extend TIPs (see, e.g., Complaint 19-22, 6267, 71, 76, 85), and that defendants understood that such officials would not grant or extend TIPs absent payments (see, e.g., id. 59, 73, 78, 92-94, 126). The Complaint also alleges that Jackson and Ruehlen authorized payments to such officials in order to obtain TIPs and extensions. See id. 20-26, 56, 60, 70, 82-94, 96, 98, 103-05, 107-08, 115, 118, 129, 134. The Complaint further sufficiently alleges that defendants authorized payments for the second purpose proscribed under the FCPA: to induce any foreign official to violate his lawful duty. 15 U.S.C. 78dd-1(a)(3)(A)(ii). 9 As alleged, NCSs policies prohibited fourth TIP official. See, e.g., Castle, 925 F.2d at 834 & n.2 (noting that Congress was concerned solely with regulating the conduct of U.S. entities and citizens; its exclusive focus was on the briber). Finally, defendants reliance on and citation of the courts oral statements in OShea is unpersuasive. Ruehlen Mot. at 8-9; Jackson Mot. at 10 n.14. Judge Hughess oral statement is unclear, offers no analysis, and does not address the pertinent statutory language and legislative history. As a result, it has no precedential value that this Court should (or can) consider. Defendants argue that a determination of lawful duty turns on the specifics of Nigerian law, which they claim has not been sufficiently pled. Jackson Mot. at 13; Ruehlen Mot. at 13-14. Defendants are wrong. First, nothing in the FCPA suggests that reference to Nigerian law is required. Rather, the alleged conduct of the foreign officials is per se unlawful officials 19
9

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extensions, Complaint 66, 71, 76, 78, and Ruehlen knew this fact, id. 71, 76, 78 and 126. Yet in 2007 Ruehlen authorized the payment of 7,000,000 Naira, the largest TIP extensionrelated payment yet, to induce officials to grant a fourth extension. See, e.g., id. 126-29. The Complaint also alleges that Jackson and Ruehlen authorized payments to Nigerian officials to secure TIPs and extensions to which Noble was not entitled. See, e.g., Complaint 19-32. Paragraph 19 alleges, for example, that [u]nder Nigerian law, NCS grants TIPs for rigs that, subject to any other conditions imposed by NCS, will be in country only temporarily and that TIPs are valid for only one year. Paragraphs 81, 106, and 109, allege the specific conditions of the TIPs granted by NCS, which makes clear that the rigs had to be exported out of Nigeria at the end of the year. Paragraph 20 alleges that NCS had the discretion to grant up to three sixmonth extensions to a TIP, but that NCS required export of the rig at the expiration of a TIP and any TIP extensions. See also id. 62-63, 97, 118. Finally, the Complaint alleges that Jackson (e.g., Complaint 34-36, 53, 83-85) and Ruehlen (e.g., id 45, 47, 53, 62-67, 71, 76, 78, 8385, 97, 118, 128) knew that NCS required the rigs be exported, and that [c]ontrary to Nigerian law, Noble-Nigeria did not export its rigs at the expiration of TIPs and extensions and did not convert its rigs to permanent import status and pay permanent import duties. Id. 22.

cannot legally lie on documents they generate or process, approve documents they know to be false, and take bribes. See infra at 24-27 (discussing the routine government exception and how the payments at issue were for non-routine, improper or discretionary actions); see also Commentaries on the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, 37 I.L.M. 1, 8 (1998) ([I]t was understood that every public official had a duty to exercise judgment or discretion impartially and this was an autonomous definition not requiring proof of the law of a particular officials country.). But even if allegations and proof of Nigerian law were necessary, which they are not, the Complaint alleges more than sufficient facts at this stage of the case. As alleged, Ruehlen and Jackson knew the pertinent Nigerian law which was reflected, among other places, in the permits themselves. See 19-21 (improper advantage and proscribed purposes discussion), 26-29 (facilitating payment discussion) and 32-33 (corrupt intent discussion). 20

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Paragraphs 68-95, 101, 103-13, 116, and 131-36 detail each instance that Noble, with Ruehlens or Jacksons assistance, paid officials to grant the false paperwork TIPs, even though Noble was neither qualified nor entitled to them. 10 The third purpose proscribed by the FCPA securing any improper advantage, see 15 U.S.C. 78dd-1(a)(3)(A)(iii) is also properly alleged. As the Fifth Circuit noted when discussing the FCPAs improper advantage language in Kay I, 359 F.3d at 753-54, Congress added this language to implement the Organization of Economic Cooperation and Developments Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the OECD Convention). See also H.R. Rep. No. 105-802, at 17-19 (1998); S. Rep. No. 105-277, at 2-3 (1998). The OECD convention defined improper advantage broadly as something to which the company concerned was not clearly entitled. Kay I, 359 F.3d at 754. As stated in Kay I, to obtain an improper advantage, one need not have a benefit over another, but a benefit that one is not entitled to and likely will not receive absent a payment to an official to ignore the deficiency. Id. at 754-56. The allegations that satisfy the other prohibited purposes, discussed above, satisfy this aspect of the FCPA as well. 11 In short, the Complaint alleges that defendants authorized payments to foreign officials, identifying the actions the Nigerian officials were asked to take in exchange for the bribes and for purposes proscribed by the statute. The SEC has gone well beyond what is required to state a claim that Jackson and Ruehlen are liable for violating the FCPA.
10

Jackson attacks all allegations that he or Ruehlen acted to influence or induce official action as conclusory. Jackson Mot. at 7. But again, because states of mind can be alleged generally including purpose these assertions are without merit. See supra 9 & 13 n.4.
11

Even if all other companies are engaging in bribery to obtain the same benefit, the improper advantage proscription will still be satisfied. As held in United States v. Kay, 513 F.3d 432 (5th Cir. 2007) (Kay II), [t]he fact that other companies were guilty of similar bribery during the 1990s does not excuse ARIs actions; multiple violations of law do not make those violations legal. Id. at 441. 21

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3.

The Complaint Sufficiently Pleads That The Payments Were Proscribed Bribes and Not Permissible Facilitating Payments.

Ruehlen next argues that the SEC must plead facts which he wrongly asserts the Complaint fails to do that demonstrate that the payments he authorized were not permissible payments for routine governmental action. Ruehlen Mot. at 7; see 15 U.S.C. 78dd-1(b) (Exception for Routine Governmental Action). Ruehlen misconstrues the rule that governs pleading requirements with regard to statutory exceptions. It has long been established that, as a general matter, the burden is on the defendants, not the plaintiff, to raise the application of the exception at the pleadings stage and to prove its applicability at trial. Yet even assuming that the SEC must plead preemptively around the statutory exemption, the Complaint pleads more than sufficient facts to indicate that the payments could be illegal bribes under the statute, and not permissible facilitating payments. a. The SEC Need Not Plead to Negate the Narrow Exception for Routine Governmental Action. Payments to a foreign official to facilitate or expedite the performance of a routine governmental action are exempted from the otherwise very broad anti-bribery provisions of the FCPA: Subsections (a) and (g) shall not apply to any facilitating or expediting payment to a foreign official, the purpose of which is to expedite or to secure the performance of a routine government action by a foreign official . 15 U.S.C. 78dd-1(b). It has been the long-standing rule that statutory exceptions, especially ones that are narrowly drawn, constitute defenses that must be pleaded and proved by the defense: By repeated decisions it has come to be a settled rule that an indictment or other pleading founded on a general provision defining the elements of an offense, or of a right conferred, need not negative the matter of an exception made by a proviso or other distinct clause, whether in the same section or elsewhere, and that it is incumbent on one who relies on such an exception to set it up and establish it.

22

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McKelvey v. United States, 260 U.S. 353, 357 (1922); see also Cook v. United States, 84 U.S. 168, 177 (1872). Applying this principle, [c]ourts have specifically held in the securities context that defendants have the burden to plead and prove statutory exemptions, not the plaintiff. Rosen v. Brookhaven Capital Management Co., 194 F. Supp. 2d 224, 228 (S.D.N.Y. 2002) (citing SEC v. Ralston Purina Co., 346 U.S. 119, 126 (1953)) (other citations omitted). In finding that the SEC had no requirement to plead the statutory exemption, the Supreme Court in Ralston dealt with a securities provision of the same linguistic form as 15 U.S.C. 78dd-1(b): The provisions of section 5 shall not apply to transactions by an issuer not involving any public offering. 15 U.S.C. 77d(a)(2). Citing the long-standing rule concerning exceptions made by proviso or other distinct clauses, and noting the broadly remedial purposes of federal securities legislation, the Supreme Court held that the burden rested with a defendant who sought to invoke that exception, not the SEC. Ralston, 346 U.S. at 126. Here, as in Ralston, Cook and McKelvey, the defendants, and not the SEC, must plead and prove the routine governmental action exception. Ruehlen cites two cases that are materially different from this one, neither of which has anything to do with the securities laws or bribery. 12 The district court decision in Poly-Carb has been discredited with regard to its holding that an exclusion must be pled simply because the exclusion does not appear as one of the [statutory] affirmative defenses. See, e.g., United States v. Iron Mountain Mines, Inc., 987 F. Supp. 1244, 1248-49 & n.6 (E.D. Cal. 1997) (Poly Carb is contrary to all other authority) (citations omitted). In Outler, the Fifth Circuit expressly drew upon a single rare instance to depart from McKelvey, where an exception can be so necessary to a true definition of the offense that the elements of the crime are not fully
12

See Ruehlen Mot. at 7, citing United States v. Outler, 659 F.2d 1306 (5th Cir. 1981) and United States v. PolyCarb, Inc., 951 F. Supp. 1518 (D. Nev. 1996). 23

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stated without the exception. 659 F.2d at 1310. This is not the case here. And Ruehlen provides no argument why or how the exception for routine governmental action is necessary to an understanding of what are proscribed bribes under the FCPA. This deficiency is not surprising given that Ruehlen also fails to acknowledge the McKelvey rule, acknowledge Outlers holding as a rare exception, and acknowledge Ralstons securities law holding. If defendants wish to take advantage of the routine governmental action exception, they must controvert the SEC allegations on the purpose of the bribes. The SEC need not preemptively plead the exceptions inapplicability. b. The Payments Alleged in the Commissions Complaint Do Not In Any Event Fall Into the Narrow Exception for Facilitating Payments. Even if the SEC has the burden to plead facts establishing that the narrow facilitating payments exception does not apply, the Complaint pleads facts alleging that Ruehlen and Jackson bribed Nigerian officials with payments that were not permissible facilitating payments. 13 Defendants authorized payments to Nigerian officials so that those officials would (1) lie on government papers, (2) improperly process documents they knew to be false, (3) approve TIPs for rigs that did not qualify for temporary import status and exemption from duty, (4) grant extensions to TIPs they had the discretion to deny, and (5) grant a fourth TIP extension that they were obligated to deny. The payments at issue were authorized to evade the requirements for TIPs and secure exemptions to which Noble was not entitled. This is not the type of routine governmental action to which the exception applies.
13

Jackson maintains that there is an obvious alternative explanation for his decision to make corrupt payments to Nigerian officials, and that he acted in good faith. Jackson Mot. at 15. The well-pled facts contradict Jacksons assertions. But if he wants to dispute the allegations about his mental state, he can do so at trial. A motion to dismiss is not the proper forum for these assertions. See Wilson v. Birnberg, 667 F.3d 591, 600 (5th Cir. 2012) ([A]t the motion to dismiss stage, courts must limit their inquiry to the facts stated in the complaint and the documents either attached to or incorporated in [it]. (internal quotation and citations omitted)). 24

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The statute defines a routine governmental action to mean only an action which is ordinarily and commonly performed by a foreign official in (i) obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; . 15 U.S.C. 78dd-1(f)(3)(A). The Fifth Circuit has recognized that this exception is narrowly drawn and that Congress was carving out very limited categories of permissible payments from an otherwise broad statutory prohibition. Kay I, 359 F.3d at 745. According to Kay I: A brief review of the types of routine governmental actions enumerated by Congress shows how limited Congress wanted to make the grease exceptions. [R]outine governmental action does not include the issuance of every official document or every inspection, but only (1) documentation that qualifies a party to do business and (2) scheduling an inspection very narrow categories of largely non-discretionary, ministerial activities performed by mid- or low-level foreign functionaries. Id. at 750-51 (emphasis added). Defendants suggest that since the duty exemptions they sought and obtained were called temporary import permits, they somehow fall within the routine governmental action exception. But the exception does not apply to any and all payments to a foreign official related to any and all permits. Rather, as indicated by the narrow textual definition of the exception, and its interpretation by the courts, including this circuit, it is sharply limited both by purpose and by the action obtained. To fall within the exception, the purpose of the payment must be to expedite or to secure the performance of a routine governmental action. 15 U.S.C. 78dd-1(b). A routine government action is one which is ordinarily and commonly performed. Id. 78dd1(f)(3)(A). See H.R. Rep. No. 95-640, at 8 (1977) (explaining that Congresss intent is to carve out only payments which merely move a particular matter toward an eventual act or decision or which do not involve any discretionary action or payments made to assure or to speed the

25

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proper performance of a foreign officials duties). The legislative history underscores that an ordinarily and commonly performed action is a proper action that does not involve discretion. See H.R. Conf. Rep. No. 100-576 (1988), at 921, reprinted in 1988 U.S.C.C.A.N. 1547, at 1954 (The Conferees wish to make clear that ordinarily and commonly performed actions with respect to permits or licenses would not include those governmental approvals involving an exercise of discretion by a government official.) (emphasis added). Here, the payments were not made to expedite or secure the proper granting of lawful and non-discretionary TIPs and TIP extensions that would qualify as routine governmental action. The conduct secured by the payments was not the type of conduct ordinarily and commonly performed by government agency officials. Lying on official documents, as alleged in the Complaint, cannot be construed as routine governmental action. Nor is it common and ordinary for a government official to issue receipts or certifications showing the occurrence of an event that did not happen. E.g., Complaint 80. Yet such receipts and evidence of export and import for rigs that never actually moved were obtained from NPA and NMA officials through payment of special handling charges authorized by Ruehlen and, later, by Jackson. Id. 80, 92. These acts, as pled, do not qualify as routine acts which do not involve any discretionary action. See H.R. Rep. No. 95-640, at 8 (1977). Nor is favorably processing duty exemptions based on known false documents routine governmental action. Government officials do not commonly or ordinarily act on the basis of paperwork known to be false. Yet, for example, in exchange for payments authorized by Ruehlen and later Jackson, NCS accepted false paperwork showing a rig export when the rig did not in fact leave Nigerian waters. NCS also cancelled bonds securing the value of the duties owed based on bogus evidence of export. See, e.g., Complaint 73, 106, 109, 135. In

26

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exchange for further payments, NCS officials also granted new TIPs on documents falsely indicating export and import of rigs that they knew had not moved. See, e.g., id. 81, 92, 106, 109, 110, 112. As alleged, therefore, defendants authorizations to line the pockets of Nigerian officials with bribe money called for per se violations of those officials duties, which cannot automatically be permissible facilitating payments as defendants claim. 14 Indeed, in view of the details alleged in the Complaint, defendants, at best, raise issues as to the routine governmental action exception that are questions of fact and must be determined at a later stage and cannot be a matter of law for which a Rule 12(b)(6) motion is applicable. c. The Routine Governmental Action Exception Is Not Unconstitutional. Finally, Ruehlen argues the FCPAs routine governmental action exception is unconstitutionally vague as applied to him. Ruehlen Mot. at 17-18. He claims that nothing in the Complaint shows that he could have known that the payments were not permissible facilitations payments. Such an argument is without the merit, especially at the pleadings stage. This case is not about the finer points of the facilitating payments exception. The SEC has alleged official acts that cannot reasonably be understood as anything other than nonroutine, especially at the deferential pleadings stage. There is nothing subjective or extraordinary about the fact that the law prohibits paying government officials to lie, process false documents, and grant ultra vires exemptions. In fact, as alleged, the first time Ruehlen learned of Nobles use of false paperwork to obtain TIPs, he thought the practice was wrong
14

Also outside of routine action, and in exchange for special handling payments, officials granted unlawful extensions, see, e.g., id. 66, 71, 76, and 128, and granted TIP extensions that the official had discretion to deny. As alleged, NCS had the discretion to grant up to three six-month TIP extensions (Complaint 20), and did not, as a matter of policy, grant fourth extensions. Ruehlen and Jackson both authorized payments to NSC officials to secure those discretionary extensions. See, e.g., id. 31, 56, 59, 98, 115, 117-18. Ruehlen also authorized payment to NCS officials for a fourth extension. See id. 66, 71, 76, 128. Since granting the extensions involved an exercise of discretion or a violation of policy, the grants fell outside routine and the payments to officials were not facilitating ones as defined by the statute. 27

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and subjected Noble to the risk of additional fines for the improper use of the temporary import permit system. Complaint 47. Ruehlen and Jackson also knew that the Audit Committee had directed the process to stop because it was a violation of Nigerian law. Id. 50-53, 82-85. Indeed, under Ruehlens reading of the statute, a person could bribe foreign officials with impunity as long as the bribe somehow related to a permit. Ruehlen Mot. at 19. The Complaint abundantly supports a conclusion that Ruehlen (as well as Jackson) knew what he was paying for non-routine, unlawful, and sometimes discretionary TIP grants, renewals and extensions and that the officials to be bribed would be the ones to carry out these actions. Ruehlen is the one who: (1) dealt directly with the customs agents (see, e.g., id. 23, 25, 26, 55, 57, 66, 70, 96, 103, 105, 108, 117, 126), (2) received their proposals detailing the special handling payments to government officials to obtain the illicit acts (see id. 55, 57, 69, 80, 92, 98, 103, 107, 110, 112, 117, 119, 132, 136), (3) received the TIP grants and TIP extensions that stated the rig had to be exported (see id. 62, 81, 97, 106, 109, 118), (4) resumed the use of false paperwork in contravention of Nobles Audit Committees instructions (see id. 66-85), (5) prepared the false TIP applications and assisted with the fabrication of documents (see id. 70, 74, 108, 131, 134, 135), and (6) sought a fourth extension through payment of bribes because he knew NCS did not grant fourth extensions (see id. 126-30). He and Jackson also knew that TIP-related payments to government officials were large, unusual, [and] non-routine payments and treated them as such. Complaint 91. The relevant statutory provisions are sufficiently clear to a person of common intelligence that they withstand any constitutional scrutiny. Here, an ordinary person would have understood that payments to officials to lie and act on false paperwork were improper. As

28

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the Fifth Circuit stated in considering a similar argument about the business nexus element of the FCPA: A man of common intelligence would have understood that ARI, in bribing foreign officials, was treading close to a reasonably-defined line of illegality. As the Supreme Court in Boyce held, no more than a reasonable degree of certainty can be demanded [in a criminal statute]. Nor is it unfair to require that one who deliberately goes perilously close to an area of proscribed conduct shall take the risk that he may cross the line. Defendants took this risk, and splitting hairs as to the illegality of one type of action under the business nexus test does not allow them to argue successfully that the FCPAs standards were vague. Kay II, 513 F.3d at 442; Kay I, 359 F.3d at 744 n.16. Hence, even if the routine government action exception was ambiguous in some far-fetched hypothetical situation which it is not that ambiguity would not rise to the level of rendering the FCPA or the exception on its face unconstitutionally vague. See also Kay II, 513 F.3d at 444 ([Defendants] unlucky status as two of the few individuals that the Government has vigorously prosecuted under the Act does not permit them to argue successfully that they were unaware of the boundaries of illegality under the Act). 15 Furthermore, certainly under the facts as they are alleged against Ruehlen in this case, Ruehlens as applied vagueness challenge lacks any merit. Every one of the payments in this case was for obviously and objectively non-routine actions. 4. The Complaint Sufficiently Pleads That Jackson and Reuhlen Acted Corruptly.

The defendants also argue that the corrupt intent of an FCPA violation is insufficiently alleged in the Complaint. Ruehlen Mot. at 13-15; Jackson Mot. at 14-19. The Complaint adequately alleges that defendants authorized payments to Nigerian officials with the wrongful
15

Similar arguments have been made and dismissed in the context of domestic bribery. For example, in United States v. Pommerening, 500 F.2d 92, 97 (10th Cir. 1974), the Court held that the domestic bribery statute, 18 U.S.C. 201, was not unconstitutionally vague even though it did not define corruptly, value, and influence, because [i]t is obvious from reading 201(b) that Congress intended to prohibit individuals from giving government employees, while they are acting in their official capacity, compensation in return for special favors. Id. 29

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intent to influence them to misuse their official positions. Therefore, the SEC has sufficiently pled that Jackson and Ruehlen acted corruptly. a. Corruptly Does Not Require Specific Intent To Violate A Particular Law. While the FCPA itself does not define the term corruptly, the legislative history accompanying the original enactment of the FCPA addresses the meaning of that term. Congress defined the word corruptly to mean an intent or desire wrongfully to influence or induce a foreign official to misuse his position: The word corruptly is used in order to make clear that the offer, payment, promise, or gift, must be intended to induce the recipient to misuse his official position; for example, to induce a foreign official to fail to perform an official function. The word corruptly connotes an evil motive or purpose such as that required under 18 U.S.C. 201(b) which prohibits domestic bribery. As in 18 U.S.C. 201(b), the word corruptly indicates an intent or desire wrongfully to influence the recipient. It does not require that the act be fully consummated or succeed in producing the desired outcome. H.R. Rep. No. 95-640, at 7-8 (1977); S. Rep. No. 95-114, at 10, reprinted in 1977 U.S.C.C.A.N. 4098, at 4108. In light of this legislative history, the Second Circuit, in Stichting, 327 F.3d 173 (2d Cir. 2003), held that corruptly signifies, in addition to the element of general intent present in most criminal statutes, a bad or wrongful purpose and an intent to influence a foreign official to misuse his official position. Id. at 183. See also Kay II, 513 F.3d at 446 (upholding jury instructions in the criminal context that defined a corrupt act as one that is done voluntarily and intentionally, and with a bad purpose or evil motive of accomplishing either an unlawful end or result, or a lawful end or result by some unlawful method or means). Drawing on domestic bribery law, Stichting observed that Congress intended to incorporate within the FCPA the elements of the crime of bribery, which we have described broadly as in essence

30

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an attempt to influence another to disregard his duty while continuing to appear devoted to it or to repay trust with disloyalty. 327 F.3d at 182-183 (citation omitted). Acting with evil motive and purpose or a bad purpose or evil motive means no more than that the briber sought through payment to subvert a government officials loyalty and judgment, or to pervert the judgment or conduct of a person in a position of public trust. United States v. Duvall, 846 F.2d 966, 972 (5th Cir. 1988) (domestic bribery statute); see also Commentaries on the Convention, 37 I.L.M. at 8, cited in full supra at 19-20 n.9; United States v. Jacobs, 431 F.2d 754, 759 (2d Cir. 1970). Hence, contrary to Ruehlens and Jacksons arguments (Ruehlen Mot. at 13-15; Jackson Mot. at 16), evil motive and purpose does not require the briber to know whether the foreign official is violating any in particular law. So long as the briber authorizes a payment to induce misuse of an official position, the act is undertaken with evil motive or purpose. Stichting, 327 F.3d at 182, 183 n.9. Inducing a foreign official to misuse his position is per se an act done unlawfully. See id. 16 In order to act corruptly the briber also need not know that he is violating the FCPA. Kay II, 513 F.3d at 448 (knowledge by a defendant that it is violating the FCPA that it is committing all the elements of an FCPA violation is not itself an element of the FCPA crime.) (agreeing with and quoting Stichting, 327 F.3d at 181)). This is consistent with the common maxim, familiar to all minds, that ignorance of the law will not excuse any person,

16

This is particularly true in the civil context where the Commission need not show that a defendant acts willfully. Compare 15 U.S.C. 78ff(c)(2)(A) (criminal fines require showing willful violations of the FCPA) with 15 U.S.C. 78ff(c)(2)(B) (civil action brought by the Commission does not require a showing of willfulness). To read evil motive or purpose any other way would run contrary to the fact that a showing of willfulness is not required in a civil action brought by the SEC. 31

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either civilly or criminally. Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 130 S. Ct. 1605, 1611 (2010) (internal quotations and citations omitted). Finally, Stichting considered whether a companys plea of guilty to violating the FCPA and resultant admission that it acted with corrupt intent precluded it from claiming in a later legal malpractice suit that it had relied in good faith on an attorneys advice that the actions were permissible under the FCPA. Stichting, 327 F.3d at 180-81. In holding that there was no preclusion, the court reasoned that there is nothing in that word [corruptly] or anything else in the FCPA that indicates that the government must establish that the defendant in fact knew that his or her conduct violated the FCPA to be guilty of such a violation. Id. at 183. The Second Circuit distinguished legal advice that (1) the benefit sought from the foreign official would not require the official to misuse his position or breach his duties from legal advice that (2) the payments did not violate the FCPA. It held that the former advice would negate corrupt intent and be relevant precisely because corruptly is an element of the offense. Stichting, 327 F.3d at 183. However, the latter advice would not negate corrupt intent because the FCPA is not a specific intent statute, and mistake of law is no defense. See id.; see also Jerman, 130 S. Ct. at 1611 (observing the general rule as deeply rooted in the American legal system). b. The Complaint Sufficiently Alleges Defendants Corrupt Intent.

Here, the Complaint unmistakably alleges both defendants corrupt intent. Corrupt intent is a state of mind that the SEC need plead only generally, not with particularity. See Fed. R. Civ. P. 9(b). 17 The Complaint easily meets this standard. The Complaint sets forth facts showing that Jackson and Ruehlen each knew that using false paperwork to show rig movement and obtain TIPs to which Noble was not entitled was
17

If defendants thought the Complaints allegations were indefinite, a Rule 12(e), not a 12(b)(6), motion should have been filed. Swierkiewicz v. Sorema, 534 U.S. 506, 514 (2002). 32

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improper and subjected Noble to fines. See, e.g., Complaint 34-36, 40-41, 45, 47-53. They also knew that Nobles Audit Committee had expressed concern about this practice and asked that it stop in 2004. See, e.g., id. 50-53, 83-90, 142. Because they knew that obtaining TIPs through false paperwork was wrong, unlawful, and contravened Noble policy, Ruehlen explored alternatives to paying for false paperwork TIPs. See, e.g., id. 53-68. Both Jackson and Ruehlen knew there were lawful, albeit expensive, alternatives. See, e.g., id. 85. Yet each resumed the practice in 2005, without informing the Audit Committee. See id. 68-94. In fact, both of them concealed the fact of the resumption and the nature of the payments from later CFOs, auditors, and others. See, e.g., id. 104, 107, 121-23, 142-43. Ruehlens corrupt purpose is further evidenced by the fact that, before resuming the paper process, he received a legal opinion specifically advising Noble to comply with all temporary import requirements and noting that items imported on a temporary basis must be exported at the end of the import period or be subject to fines and forfeiture. Complaint 64. Ruehlens contemporaneous e-mails show his awareness of (1) Nigerian law relating to TIPs, (2) the NCS requirement that the rigs should be exported and re-imported in reality, not just on paper, and (3) the fact that he was authorizing bribes to induce NCS officials to ignore the law. See, e.g., id. 71, 76-78. See also id. 81, 106, 109 (express terms of TIPs stating they were conditioned on the proper import and subsequent export of the rig out of Nigeria). As alleged in paragraph 78, Ruehlen personally acknowledged that Nigerian law does not allow for a rig to be on temporary importation in Nigeria for more than two and one-half years at a time and only temporarily imported for one contract period. Ruehlen also said that NCS required the physical export and re-import of the rigs, even if they were still on contract. Id. 76. Ruehlen then stated, [t]his situation has been exploited by the customs authority and used to pressure

33

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contractors into paying a high price to maintain rigs in country for contract duration in excess of two and one half years. Id. 78. These statements strongly support corrupt intent and are more than enough to meet the minimal requirements at the motion to dismiss stage. Jacksons and Ruehlens wrongful intent also is evidenced by the circumstances surrounding the discretionary extensions. For example, when Noble sought a third TIP extension in August 2004, both Ruehlen and Jackson were alarmed by the high price of 5,000,000 Naira in special handling to get it done. See, e.g., id. 56-59. Not only did they find the charge excessive, but they also knew that additional extensions would require exorbitant amounts in payments to government officials. See, e.g., id. 56-57. Ruehlen even had discussions with his operations manager who did not have a good feeling about the customs agent and felt that the way the[y] work is not sound and above the table precisely because the 5,000,000 Naira in payments to government officials was so high. Id. 58. Nevertheless, both defendants authorized payment because it was a necessary cost to obtain the extensions, (see, e.g., id. 56, 59) and continued to do so through May 2007. See, e.g., id. 96-98, 115-37. In each instance, they knew that NCS officials had the discretion to deny TIP extensions because NCS had in fact denied extensions in the past. See, e.g., id. 54, 66, 67, 71, 76, 82-89. Thus, each time Jackson and Ruehlen authorized the special handling payments, they did so to ensure the officials favorably exercised their discretion. Ruehlen argues that he lacked corrupt intent because Nobles senior management knew about the payments and he relied in good faith on directions from superiors. Ruehlen Mot. at 13, 15-17. As an initial matter, this argument is one for the ultimate fact-finder, not for the Court on a motion to dismiss where the evidence must be taken in the light most favorable to the plaintiff. But in any event, Ruehlens argument ignores key alleged facts and misstates the

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law. First, the allegations make clear that Ruehlen often acted on his own initiative, getting approval after the fact. See, e.g., Complaint 25, 56, 68, 70, 74-75, 82, 87, 96, 117-19. Ruehlen is alleged to have repeatedly lied to or misled management so that they would approve the payments. See, e.g., id. 102, 104, 107, 121, 127-28. The unsupported claim that he acted with the approval of others does not eliminate corrupt intent in any case. As stated in Kay II, 513 F.3d at 442, multiple violations of a law do not make those violations legal. The alleged facts are that Ruehlen acted voluntarily and intentionally, aware that what he was doing was wrong. Any pre- or post-hoc approval of his actions did nothing to mitigate that intent. The Eighth Circuits decision in United States v. Liebo, 923 F.2d 1308 (8th Cir. 1991), cited by Ruehlen (Mot. at 16), is not to the contrary. While the Liebo court held that evidence of supervisory approval is evidence that could, depending on the facts, support a finding that defendant did not intend to cause the official to misuse his position, the Liebo decision did not hold that such evidence is conclusive on the question of corrupt intent. Liebo, 923 F.2d at 1312. At most, then, Liebo holds that Ruehlen could present and argue any supervisory approval of his conduct at the trial. But, for now, at this stage, such evidence is of no moment. B. THE COMPLAINT SUFFICIENTLY PLEADS VIOLATIONS OF SECTION 13(B)(5) AND RULE 13B2-1.

Jackson and Ruehlen further argue that the Complaint fails sufficiently to plead violations of the books and records and internal controls provisions of the FCPA because they are derivative of the anti-bribery claims. Jackson Mot. at 22; Ruehlen Mot. at 21. Ruehlen also argues that the Complaint fails to state a claim because it does not allege the identity of specific falsified books and records, or circumvented controls. Ruehlen Mot. at 21. And both Jackson and Ruehlen argue that they cannot be liable for falsifying books and records because they did 35

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not themselves book or record payments. Ruehlen Mot. at 22-23; Jackson Mot. at 24. Defendants simply ignore the facts actually pled in the Complaint. Section 13(b)(5) of the Exchange Act provides that [n]o person shall knowingly circumvent or knowingly fail to implement a system of internal accounting controls or knowingly falsify any book, record, or account required to be maintained pursuant to Exchange Act Section 13(b)(2), which itself requires public companies to maintain books, records, and accounts which accurately and fairly reflect transactions and dispositions of [] assets. 15 U.S.C. 78m(b)(5); 15 U.S.C. 78m(b)(2)(A). 18 Rule 13b2-1 provides that [n]o person shall, directly or indirectly, falsify or cause to be falsified, any book, record, or account maintained pursuant to Section 13(b)(2)(A). 17 C.F.R. 240.13b2-1. As demonstrated above, the Complaint contains numerous factual allegations that support the claims that Jackson and Ruehlen each violated the anti-bribery provisions of the FCPA. The Complaint also pleads facts that show that defendants violated the books and records and internal controls provisions of the FCPA. In particular, the allegations show that Jackson was responsible 19 for reviewing payments to government officials and ensuring no corrupt payments were paid. See, e.g., Complaint 8-11, 24, 40-42, 101, 114. Yet, he authorized corrupt payments. See id. 59-60, 82-89, 93-94, 98, 115, 116. The allegations also provide a basis to find that Jackson did not have a good faith belief that the payments he authorized and approved were facilitating payments. See, e.g., id. 34-36, 42, 49, 51-53, 59,

18

Section 13(b)(2)(A) covers essentially all corporate financial records. See SEC v. WorldWide Coin Investments, Ltd., 567 F. Supp. 724, 748-49 (N.D. Ga. 1983) ([V]irtually any tangible embodiment of information made or kept by an issuer is within the scope .). Jackson is plainly wrong in arguing that factual statements that summarize Nobles policies and Jacksons responsibilities (see, e.g., Complaint 8-11, 24, 37-42, 48-53, 82, 101, 116, 124, 145-46) are legal conclusions.
19

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83-85, 91, 94, 100, 115-16; see supra at 6-7 & 29-35. Indeed, as described already, Jackson intentionally, voluntarily and corruptly authorized payments to Nigerian government officials to influence or induce them to process and grant TIPs based on false paperwork and grant extensions they had the discretion to deny. He further concealed the resumption of the false paperwork TIPs and payments to government officials. See, e.g., Complaint 90, 142-44. He then ensured that subsequent CFOs or other executives would approve these illicit payments and thereby circumvented internal controls by not informing the executives that the payments were for false paperwork TIPs in contravention of Noble policy and an Audit Committee directive. See, e.g., id. 104, 107. He also did not tell them that the payments were to induce the officials to favorably exercise their discretion. See, e.g., id. 120-27. Jackson even went so far as to direct the new CFO, who expressed concerns about the requests, to approve payments to officials that the Controller/Internal Auditor approved without telling the CFO that the Controller/Internal Auditor was complicit in the bribery. See, e.g., id. 122-23. It is thus more than plausible that Jackson, at a minimum, directly or indirectly, caused Nobles books and records to be false by authorizing bribes and knowingly allowing them to be booked as legitimate operating expenses. See, e.g., Complaint 60-61, 91, 95, 98-99, 100, 115-16. Although he did not personally book or enter the payments into Nobles accounts, his approval of the illicit payments caused them to be booked as a legitimate expense. He also knew how the payments were booked improperly because, among other reasons, he received quarterly reports of payments made to government officials. See, e.g., id. 91, 100, 116. 20 Because his actions directly caused the bribes to be inaccurately booked as legitimate

20

See, e.g., United States v. Hopkins, 916 F.2d 207, 216 (5th Cir. 1990) (There was ample evidence from which the jury could reasonably have concluded that Harrell did cause false entries. . . . Harrell personally approved an expense report of one of the institutions officers 37

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expenses, Jackson violated Rule 13b2-1. These allegations also fully support the conclusion that Jackson knowingly circumvented Nobles internal controls in violation of Section 13(b)(5). See, e.g., id. 48-52, 90, 104, 107, 122-27, 143-49. Jackson, a senior officer of Noble having knowledge of the deficiencies in Nobles controls such that bribery payments were falsely booked as legitimate expenses, also may be held liable for knowingly failing to implement proper internal accounting controls. The same is true for Ruehlen. As already discussed, Ruehlen acted with corrupt intent when he authorized bribe payments to Nigerian government officials. See supra at 6-7 & 2935. Ruehlen also processed, approved and paid invoices that falsely represented rig movement. See Complaint 86-89, 95, 99, 111, 113, 115, 119. Ruehlen knew the payments were being booked as legitimate operating expenses, when they were in fact paid corruptly. See, e.g., id. 60-61, 91, 95, 99, 111, 113, 115, 119. The mere fact that Ruehlen himself did not enter the payments into Nobles accounting system does not affect his liability. Ruehlens authorization and processing of the payments caused the bribes to be booked as legitimate expenses, and he knew it. The allegations specify the amounts, the approximate dates, and the purposes of the payments falsely booked. There is no need to identify also the names or account numbers to which the payments were booked to give Ruehlen fair notice of the Commissions claims. Regarding the circumvention of internal controls, the Complaint is replete with allegations that show Ruehlen, once a member of Nobles auditing team, violated policy and fabricated documents. As discussed above, Ruehlen ignored Nobles policy of obtaining

which disguised a political contribution as travel expenses.); SEC v. Solucorp Indus., Ltd., 274 F. Supp. 2d 379, 416, 420-21 (S.D.N.Y. 2003) ([Defendant] also improperly recognized revenue based upon a contract that Mantia and Herman knew, or were reckless in not knowing, was not finalized and was backdated to support improper revenue recognition. . . . As a result, Mantia and Herman violated Section 13(b)(5) of the Exchange Act, Rule 13b2-1 . . .). 38

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written pre-approval from the CFO prior to authorizing payments to government officials for TIPs and TIP extensions. See, e.g., Complaint 56, 68, 70, 74, 82, 87, 96, 117-21. When Ruehlen did obtain approvals, he concealed the true and corrupt nature of the payments and other information necessary for the CFO to recognize these payments were bribes. See, e.g., id. 90, 104, 107, 121, 128. Ruehlen also backdated documents, falsified compliance certifications and signed false management representations letters to hide his circumvention of internal controls. See, e.g., id. 75-79, 138-41. The Complaint has sufficiently pled Ruehlens violations of the books and records and internal controls provisions of the FCPA. C. THE COMPLAINT SUFFICIENTLY PLEADS DEFENDANTS AIDING AND ABETTING VIOLATIONS OF SECTIONS 30A, 13(B)(2)(A) AND 13(B)(2)(B).

Defendants Jackson and Ruehlen also argue that the aiding and abetting claims the Second and Third Claims fail because the Complaint has not stated a plausible claim for relief under the anti-bribery provisions of the FCPA that could have been aided and abetted. Section 20(e) of the Exchange Act defines aiding and abetting as knowingly or recklessly providing substantial assistance to another person in violation of a provision of the Exchange Act or any rule or regulation thereunder. 21 As shown above, the allegations leave no doubt that, if true, defendants violated the FCPA on multiple occasions. The allegations further support Nobles primary violation of Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B), through the actions of Jackson, Ruehlen, the Director of Internal Audit and others. As a result, the allegations plausibly state that Ruehlen substantially assisted the FCPA violation of Noble, Jackson and

At the time of the violations, Section 20(e) defined aiding and abetting as knowingly providing substantial assistance. The Fifth Circuit held that knowingly included recklessness if there was some special duty of disclosure or the assistance to the violator was unusual in character or degree. See Abbott v. Equity Group, Inc., 2 F.3d 613, 621 (5th Cir. 1993). 39

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others. The allegations also plausibly state that Jackson substantially assisted the FCPA violations of Noble, Ruehlen and others. To the extent that Jackson and Ruehlen claim that they did not knowingly provide this substantial assistance, the allegations as discussed at length elsewhere show otherwise. See discussion supra at 6-7 & 29-35. See also, e.g., Complaint 68-95. Jackson also knowingly and substantially assisted in ensuring the corrupt payments to Nigerian government officials continued when he, for example, lied to auditors and told a subsequent CFO to approve the payments if the Director of Internal Audit who he knew was complicit in the bribery approved them. Complaint 122-23; see also id. 90, 104, 107, 120-27. The SECs Complaint, therefore, sufficiently alleges that both Jackson and Ruehlen aided and abetted Nobles and others violations of Sections 30A, 13(b)(2)(A) and 13(b)(2)(B). D. THE COMPLAINT SUFFICIENTLY PLEADS JACKSONS LIES TO AUDITORS, FALSE CERTIFICATIONS, AND LIABILITY AS A CONTROL PERSON.

Claims Five through Seven of the Complaint concern Jacksons lies to auditors, false certifications attached to Nobles public filings, and liability as a control person of Noble, Ruehlen and others. Jackson argues that these claims fall because the Complaint does not show that Jackson violated the anti-bribery provisions of the FCPA, but that he acted in good faith on the belief that the payments were permissible. Jackson Mot. at 24-25. Yet, again, as discussed above, the Complaint has sufficiently alleged that Jackson corruptly authorized payments to the customs agent, knowing those payments would be passed on to Nigerian government officials to influence and induce them to grant false paperwork TIPs and discretionary TIP extensions to which Noble was neither qualified nor entitled to receive. See supra at 6-7 & 29-35; see also Complaint 59-60, 82-89, 93-94, 98, 115-16. The allegations also fully set forth facts showing that Jackson did not act in good faith and did not have any basis to believe that the 40

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payments he authorized and allowed to continue through May 2007 were anything but bribes. See discussion supra at 6-7 & 29-35. As a result, Jackson lied when he certified in management representation letters to auditors that he was unaware of any FCPA violations or other violations of law, and that the company had maintained effective internal controls. See, e.g., id. 145. Similarly, Jackson lied when he claimed on personal certifications that he had disclosed all significant deficiencies and material weaknesses in the design or operation of internal controls. See id. 146. Paragraphs 142 through 146 state with particularity the who, what, when, where and why of Jacksons false statements. The Complaint sufficiently claims violations of Rule 13b2-2 and Rule 13a-14. The Complaint also more than plausibly states a claim against Jackson for control person liability. Section 20(a) of the Exchange Act provides that a person who directly or indirectly controls any other person who violates the securities laws will be equally liable for the violation, unless the controlling person acted in good faith and did not directly or indirectly induce the violation. 15 U.S.C. 78t(a). In the Fifth Circuit, control requires a showing of actual power or influence over the controlled person. Dennis v. General Imaging, Inc., 918 F2d 496, 509-510 (5th Cir. 1990). This means a showing that: (1) the defendant had the power to control the general affairs of the entity primarily liable at the time the entity violated the securities laws; and (2) the defendant had the requisite power to directly or indirectly control or influence the specific corporate policy, transaction, or activity that resulted in the liability. See Abbott v. Equity Group, Inc., 2 F.3d 613, 620-21 (5th Cir. 1993); Meek v. Howard, Weil, Labouisse, Friedrichs, Inc., 95 F.3d 45 (5th Cir. 1996). The Fifth Circuit does not require a showing that the controlling person actually exercised his powers or participated in the activity causing the primary violation. Abbott, 2 F.3d at 620; see G.A. Thompson & Co. v. Partridge,

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636 F.2d 945, 958 (5th Cir. 1981) (holding lack of participation and good faith is an affirmative defense but does not impact whether the person is a control person in the first place). Jackson was an officer and director of Noble throughout the period of the bribery. See, e.g., Complaint 5, 8. Jackson attended board meetings, reported to the Audit Committee, and had power over Nobles management and policies. See, e.g., id. 9-11, 51, 53, 122, 143. As CFO, he was responsible for Nobles FCPA compliance, for reviewing and approving all payments to officials, and for the accuracy and legitimacy of Nobles books and records and internal controls. Id. 9, 11, 24, 37, 59-60, 82-95, 98-100, 114-16. The director of internal audit reported directly to Jackson. Id. 9. When Jackson became COO and President of Noble, Jackson was responsible for the West Africa Divisions operations, and Ruehlen directly reported to him. See, e.g., id. 10, 101. Even as CEO and Chairman, Jackson continued to be responsible for Nobles operations world-wide, including the West Africa Division. Id. 10, 11, 122-24. Ruehlen also continued to report to Jackson through early 2007. Id. 10, 101. As a result of his position, his power over Nobles FCPA compliance, and his power over the director of internal audit and Ruehlen, Jackson had control over the entity and persons committing the bribery, the bribery itself, and Nobles books and records and internal controls. Jackson also induced and participated in the violations, as thoroughly discussed already. See, e.g., id. 59-60, 82-95, 98-100, 101, 104, 107, 114-16, 122-24, 142-49. Because Jackson had previously approved the special handling charges for TIPs and extensions, Nobles later CFOs continued the process of paying NCS and other Nigerian government officials to obtain the permits. See, e.g., id. 30, 102-04, 107, 123-24. Jackson also told one of the CFOs to approve the payments if the director of internal audit also approved the payments without telling the CFO that he was complicit in the bribery. See id. 122-24. Thus, even though

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Jackson was no longer in the approval chain for the 2006 and 2007 paper process moves and certain payments for TIP extensions, his prior approvals and his subsequent discussion with Nobles CFO directly induced Nobles violations of the FCPA in 2006 and 2007. The allegations of the Complaint plausibly indicate Jacksons liability as a control person. E. THE COMMISSIONS COMPLAINT IS TIMELY.

Finally, Jackson and Ruehlen argue that the Complaint is untimely because the applicable statute of limitations permits relief only for conduct occurring five years prior to filing of the Complaint on February 24, 2012. Jackson Mot. at 19; Ruehlen Mot. at 23. Buried in footnotes in their briefs, the defendants disclose that they signed tolling agreements extending the statute of limitations. Jackson Mot. at 20 n.22; Ruehlen Mot. at 24 n.17. These agreements toll the running of the limitations period at least 290 days, thereby extending it to include conduct as early as May 10, 2006. What is more, because various equitable doctrines apply, even the Commissions penalty claims for misconduct before May 10, 2006 are not time-barred. And the statute of limitations does not apply to claims for equitable relief such as injunctions. For all these reasons, the defendants statute of limitations arguments should be rejected. 1. The Complaint Alleges Misconduct Within The Statute of Limitations.

Title 28 U.S.C. 2462 is the limitations provision governing the Commissions claims here. It provides that an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued. Here, the Complaint was filed on February 24, 2012. In addition, as acknowledged in their briefs, both defendants signed three tolling agreements that suspended the running of the statute of limitations for a total of 290

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days. See Declaration of Moira T. Roberts, Exhibits A-F, Tolling Agreements. 22 As a result, the Complaints penalty claims are timely as to any conduct occurring on or after May 10, 2006. Here, the Complaint alleges that, on or after May 10, 2006, the defendants approved the payment of certain bribes to NCS government officials through a customs agent. Complaint 110-34. Within five years of the Complaint, Ruehlen authorized bribes for three false paperwork TIPs and an ultra vires fourth extension. See, e.g., id. 126-41. In the period between May 10, 2006 and five years of the Complaint, Ruehlen authorized two additional false paperwork TIPs and approximately five discretionary extensions. See, e.g., id. 111-40. Throughout this period, Jackson either participated in the authorization of the bribes, was in control of Ruehlen or the authorization, or induced the authorizations, for example by directing a new CFO in November 2006 to rubber stamp the approval of a Controller/Internal Audit Director who was complicit in the bribery. See, e.g., id. 114-16, 122-24, 142-49. Thus, the request for penalties is timely for the FCPA bribery claims (First and Second Claims). Similarly, with regard to the Third and Fourth Claims concerning the false books and records and the failure to maintain a system of, or the circumvention of, internal controls, the Complaint alleges that this conduct continued into 2007, well within the limitations period. See, e.g., id. 125-28, 138-49. Among other things, Ruehlen prepared and signed at least one, if not two, false quarterly representation letters to Noble management. See, e.g., id 141. Jackson concealed the bribes from auditors and Nobles Audit Committee and signed false While the defendants are certainly correct that the SEC did not allege the existence of the tolling agreements, this was on the assumption that defense counsel would make only good faith arguments in their motions to dismiss. That assumption proved inaccurate, and, thus, if the Court deems it necessary, the SEC requests leave to amend the Complaint to add that allegation. Alternatively, because the defendants have admitted the existence of those tolling agreements in their briefs, the SEC submits that the defendants statute of limitations argument can be rejected on the basis of that admission. The agreement themselves preclude defendants arguments. See Declaration of Moira T. Roberts 8 & 2 of each attached agreement.
22

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annual and quarterly representation letters and false personal certifications. See, e.g., id 14346. These creations of false records and evasions of controls occurred well within the limitations period. Finally, concerning the Fifth through Seventh Claims, the Complaint alleges that Jackson had control over Ruehlen, the West Africa Division, and Noble as a whole in 2006 and 2007 (when Ruehlen authorized bribes), and that Jackson lied to auditors and signed false certifications within the limitations period. E.g., id 8-12, 122-24, 142-46. Accordingly, those claims too are timely. 2. The Continuing Violation Doctrine Tolled the Statute of Limitations.

The SECs penalty claims are also tolled by the continuing violations doctrine. Under that doctrine, a violation that begins outside the limitations period but continues into the limitations period is not time-barred. See Havens Realty Corp. v. Coleman, 455 U.S. 363, 38081 (1982). Courts have applied this continuing violation doctrine to securities enforcement actions brought by the SEC. SEC v. Geswein, No. 5:10CV1235, 2011 WL 4541303, at *2 (N.D. Ohio Sept. 29, 2011); SEC v. Kovzan, 807 F. Supp. 2d 1024, 1035-36 (D. Kan. 2011); SEC v. Huff, 758 F. Supp. 2d 1288, 1340-41 (S.D. Fla. 2010); SEC v. Kelly, 663 F. Supp. 2d 276, 288 (S.D.N.Y. 2009); SEC v. Pentagon Cap. Mgmt. PLC, 612 F. Supp. 2d 241, 267 (S.D.N.Y. 2009); SEC v. Ogle, No. 99 C 609, 2000 WL 45260, at *5 (N.D. Ill. Jan. 11, 2000). Here, the Complaint alleges in the Third Claim that the defendants aided and abetted Noble in its failure to keep accurate books and records and to devise and maintain a system of internal controls. Complaint 157-63. Similarly, the Complaint alleges in the Fourth Claim that the defendants failed to implement a system of internal controls at Noble. Id. 164-67. Such conduct is inherently continuing in nature, and the Complaint alleges that

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this conduct continued into May 2007. See, e.g., id. 141, 144-46. The SEC filed its Complaint in February 2012. Accordingly, the penalty claims for those continuing violations are not time-barred, regardless of whether the conduct began outside the limitations period. 23 3. The Fraudulent Concealment Doctrine Tolled the Statute of Limitations.

As noted above, Section 2462 provides that penalty claims must be brought within five years of the date on which the action accrues. In cases involving claims of fraud or concealment, the discovery rule delays accrual of a cause of action until the plaintiff has discovered it. Merck & Co. v. Reynolds, 130 S. Ct. 1784, 1793 (2010). This equitable doctrine is read into every federal statute of limitation, and this is so even though there be no special circumstances or efforts on the part of the party committing the fraud to conceal it from the knowledge of the other party. Holmberg v. Armbrecht, 327 U.S. 392, 397 (1946); see also TRW, Inc. v. Andrews, 534 U.S. 19, 27 (2001); Exploration Co. v. United States, 247 U.S. 435, 447 (1918); SEC v. Gabelli, 653 F.3d 49, 59 (2d Cir. 2011). The courts have recognized the doctrine of fraudulent concealment as distinct from the discovery rule, and the fraudulent concealment doctrine is not limited to claims sounding in fraud. Rather, fraudulent concealment provides an alternative basis for extending the statute of limitations as to claims of any type. See Texas v. Allan Const. Co., 851 F.2d 1526, 1529 (5th Cir. 1988) (explaining that the discovery rule should not be confused with fraudulent

23

At a minimum, this Court should defer ruling on the application of the continuing violation doctrine until discovery is complete. See SEC v. Kovzan, 807 F. Supp. 2d 1024, 1036 (D. Kan. 2011) (deferring consideration of the application of the continuing violation doctrine until discovery is complete and the court has the benefit of a more fully developed factual record); SEC v. Brown, 740 F. Supp. 2d 148, 159 (D.D.C. 2010) (same). 46

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concealment). 24 The fraudulent concealment doctrine requires proof of (1) fraudulent means to conceal the claim, 25 and (2) that the concealment actually prevented the plaintiff from learning of the claim. Id. at 1529. These elements are both present here. Specifically, the Complaint alleges that the defendants falsified the books and records of their companies, thereby fraudulently concealing their misconduct. See Complaint 147-49. In addition, the allegations of the Complaint and the admission by Jackson that Noble did not reveal its conduct until June 2007, see id. 14344 & Jackson Mot. at 2 n.2, renders it plausible that the SEC was prevented from learning of the misconduct until that time. 26 Because the defendants acted to conceal their misconduct and because the SEC plausibly may have not learned of the misconduct at least until June 2007 within the five year statute of limitations the Commission has alleged all that is required as to the fraudulent concealment doctrine at this stage of the proceedings. 27

24

For further discussion of the tendency to confuse the doctrines, see SEC v. Gabelli, 653 F.3d 49, 59 (2d Cir. 2011) (the all-too-common mistake by which the discovery rule is sometimes confused with the concept of fraudulent concealment (internal quotation marks omitted).
25

Notably, each defendant need not engage in an act of concealment for the fraudulent concealment doctrine to apply; it is sufficient if any one defendant engaged in an act of concealment. See In re Intl Admin Servs., 408 F.3d 688, 701 (11th Cir. 2005); State of N.Y. v. Hendrickson Bros., Inc., 840 F.2d 1065, 1084-85 (2d Cir. 1988) (acts of concealment by one defendant can be attributed to a co-schemer). Here, however, the Complaint alleges that each of the defendants fraudulently concealed their improper actions. Again, if the Court deems it necessary, the SEC would request leave to amend its Complaint to incorporate any additional facts into the Complaint for statute of limitations purposes.
26

27

Because the statute of limitations is an affirmative defense to be pled and proved by the defendant, see Crissey v. Morrill, 125 F. 878, 885 (8th Cir. 1903); Gabelli, 653 F.3d at 60 (holding that [t]he lapse of a limitations period is an affirmative defense that a defendant must plead and prove (citation omitted)), the defendants have the burden of proving that the Commission did or should have discovered the alleged fraud earlier, see Gabelli, 653 F.3d at 61; Smith v. Duff & Phelps, Inc., 5 F.3d 488, 492 n.9 (11th Cir. 1993); Pinney Dock and Transp. Co. v. Penn Cent. Corp., 838 F.2d 1445, 1465 (6th Cir. 1988). 47

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4.

The Statute of Limitations Does Not Apply to Equitable Remedies.

Finally, the defendants argue that the limitations provision of Section 2462 applies to equitable relief such as an injunction. Jackson Mot. at 19 n.20; Ruehlen Mot. at 24-25. This argument is easily dismissed as contrary to long-established law. By its terms, the limitations provision of Section 2462 applies only to a suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture. Section 2462 makes no mention of and has no application to injunctive relief. Accordingly, courts have repeatedly rejected the argument that SEC actions for injunctive relief are subject to a limitations period. SEC v. Rind, 991 F.2d 1486, 1491-92 (9th Cir. 1993); see also SEC v. Tambone, 550 F.3d 106, 148 (1st Cir. 2008); SEC v. Diversified Corporate Consulting Grp., 378 F.3d 1219, 1224 (11th Cir. 2004); SEC v. Nacchio, 614 F. Supp. 2d 1164, 1175 (D. Colo. 2009); SEC v. Berry, 580 F. Supp. 2d 911, 919 (N.D. Cal. 2008); SEC v. Williams, 884 F. Supp. 28, 30 (D. Mass. 1995); Kelly, 663 F. Supp. 2d at 287; SEC v. Lorin, 869 F. Supp. 1117, 1129-1130 (S.D.N.Y. 1994); SEC v. OHagan, 703 F. Supp. 218, 221 (D. Minn. 1992). This is consistent with the longestablished doctrine that [s]tatutes of limitations sought to be applied to bar rights of the government must receive a strict construction in favor of the government. E.I. Du Pont de Nemours & Co. v. Davis, 264 U.S. 456, 462 (1924); see Badaracco v. C.I.R., 464 U.S. 386, 391 (1984). Thus, the SECs claim for injunctive relief is not subject to Section 2462. 28

28

Ruehlen relies on SEC v. Jones, 476 F. Supp. 2d 374 (S.D.N.Y. 2007), to argue that the claim for injunctive relief must be dismissed because the passage of time since his conduct renders an injunction unnecessary. Ruehlen Mot. at 24-25. As the Second Circuit recently held, such an argument is, at best, premature at the motion to dismiss stage. See Gabelli, 653 F.3d at 60. 48

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CONCLUSION For the foregoing reasons, the SEC respectfully requests that Mark A. Jacksons and James J. Ruehlens motions to dismiss be denied in their entirety. However, if for any reason the court finds the allegations of the Complaint insufficient, the SEC requests leave to amend to cure any defects. Leave to amend shall be freely given when justice so requires. Fed. R. Civ. P. 15(a). The Fifth Circuit has held that, [u]nless there is a substantial reason to deny leave to amend, the discretion of the district court is not broad enough to permit denial. Stripling v. Jordan Prod. Co., 234 F.3d 863, 872 (5th Cir. 2000) (internal quotation marks omitted). Dated: June 22, 2012 Respectfully submitted, /s/ Kenneth W. Donnelly KENNETH W. DONNELLY D.C. Bar No. 462996 SHARAN K.S. CUSTER D.C. Bar No. 464495 Securities and Exchange Commission 100 F Street, NE Washington, DC 20549-5949 Telephone: (202) 551-4946 Facsimile: (202) 772-9292

Of Counsel: Gerald W. Hodgkins Moira T. Roberts Securities and Exchange Commission 100 F Street, NE Washington, DC 20549-6010

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CERTIFICATE OF SERVICE I certify that on June 22, 2012, I electronically filed the foregoing opposition brief with the Clerk of the Court for the Southern District of Texas, Houston Division, by using the CM/ECF system, which will send a notice of filing to all CM/ECF participants for this matter. /s/Kenneth W. Donnelly ________________ Kenneth W. Donnelly

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION ____________________________________ ) SECURITIES AND EXCHANGE ) COMMISSION, ) ) Plaintiff, ) Case No. 4:12-cv-00563 ) v. ) ) MARK A. JACKSON and ) JAMES J. RUEHLEN, ) ) Defendants. ) ____________________________________)

[PROPOSED] ORDER Upon consideration of Defendant Jacksons Motion to Dismiss the Complaint Under Rule 12(6)(6) for Failure to State a Claim Upon Which Relief Can Be Granted (Docket No. 35), and Defendant Ruehlens Motion to Dismiss Plaintiffs Complaint for Failure to State a Claim (Docket No. 36), it is hereby ORDERED that both motions are DENIED. IT IS SO ORDERED on this _______ day of ____________, 2012

_______________________________ KEITH P. ELLISON UNITED STATES DISTRICT JUDGE

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