sec v. ruehlen (ruehlen motion for summary judgment)

8/12/2019 SEC v. Ruehlen (Ruehlen motion for summary judgment)

1/47

IN THE UNITED STATES DISTRICT COURTFOR THE SOUTHERN DISTRICT OF TEXAS

SECURITIES AND EXCHANGECOMMISSION,

Plaintiff,

v.

MARK A. JACKSON and JAMES J.RUEHLEN,

Defendants.

CIVIL ACTION NO. 4:12-CV-00563

DEFENDANT JAMES J. RUEHLENS MOTION FOR SUMMARY JUDGMENT

AND MEMORANDUM OF LAW IN SUPPORT THEREOF

Case 4:12-cv-00563 Document 146 Filed in TXSD on 03/28/14 Page 1 of 47


2/47

TABLE OF CONTENTS

Page

NATURE AND STAGE OF THE PROCEEDINGS AND ISSUES TO BE RULED

UPON BY THE COURT.................................................................................................. 1INTRODUCTION AND SUMMARY OF ARGUMENT......................................................... 1STATEMENT OF UNDISPUTED MATERIAL FACTS......................................................... 3I. Relevant Background .......................................................................................................... 3

A. Nobles West Africa Division And Jim Ruehlen .................................................... 3B. Mr. Ruehlen Identified The Paper Process As An Issue During The 2004

West Africa Division Audit .................................................................................... 5C. After Researching Alternatives And Receiving Advice From Local

Counsel, Noble Continued To Use The Paper Process In Early 2005 ................ 7II. Payments In Connection With Temporary Import Permits .............................................. 10

A. The Payments Were Reviewed For FCPA Compliance Through A FullyTransparent Process By Multiple Levels Within The Company .......................... 10

B. Mr. Ruehlen Fully Complied With Nobles Internal Controls Over ThePayments ............................................................................................................... 13

C. Mr. Ruehlen Had No Role In Accounting For The Payments .............................. 16D. Mr. Ruehlen Promptly Raised Concerns To Senior Management Upon

Learning Of A Competitors Internal Investigation Related To TemporaryImport Permits ...................................................................................................... 17

LEGAL STANDARD................................................................................................................. 18ARGUMENT............................................................................................................................... 19I. The Court Should Grant Summary Judgment On The SECs Claims For

Violations Of The FCPAs Books And Records Provisions ............................................ 191. There Is No Evidence That Mr. Ruehlen Falsified Any Book,

Record, Or Account, Or That He Aided And Abetted NoblesAlleged Failure To Keep Accurate Books And Records .......................... 20

2. There Is No Evidence That Mr. Ruehlen Believed That ThePayments At Issue Were Unlawful Under the FCPA ............................... 23

3. Section 13(b) Does Not Require That Payments Be Recorded InAn Account Named Unlawful Bribes ................................................... 26

II.

The Court Should Grant Summary Judgment On The SECs Claim For KnowingCircumvention Of Nobles System Of Internal Accounting Controls .............................. 28A. There Is No Evidence That Mr. RuehlenWho Received CFO Approval

For Every Payment At Issue In This MatterCircumvented NoblesSystem Of Internal Accounting Controls .............................................................. 29

B. The SECs Other Theories Of Circumvention Are Meritless AndContradicted By The Undisputed Evidence .......................................................... 31



3/47

TABLE OF CONTENTS

(continued)

Page

ii

1. Audit Committee Resolution ................................................................. 312. Backdated IC Network Certifications ................................................... 313.

Quarterly Representation Letters .............................................................. 33

4. Deceptive Approval Requests ............................................................... 345. Payments Recorded To Other Accounts ................................................... 34

III. The Court Should Grant Summary Judgment On The SECs Bribery Claims ................. 35A. The Paper Process ............................................................................................. 36B. Extensions Of Temporary Import Permits ............................................................ 39

CONCLUSION........................................................................................................................... 40



4/47

TABLE OF AUTHORITIES

Page(s)

iii

CasesBaranowski v. Hart,

486 F.3d 112 (5th Cir. 2007) ..................................................................................................... 19

Boudreaux v. Swift Transp. Co., Inc.,

402 F.3d 536 (5th Cir. 2005) ..................................................................................................... 19

Celotex Corp. v. Catrett,477 U.S. 317 (1986) ............................................................................................................ 18, 19

Hockman v. Westward Commcns, LLC,407 F.3d 317 (5th Cir. 2004) ..................................................................................................... 39

In re Yesner, Exchange Act Release No. 184,75 SEC Docket 156, 2001 WL 587989 (ALJ May 22, 2001) ................................................... 23

Krim v. BancTexas Group, Inc.,989 F.2d 1435 (5th Cir. 1993) ....................................................................................... 28, 39, 41

Mayer Brown LLP v. IRS,562 F.3d 1190 (D.C. Cir. 2009) ................................................................................................ 31

McConville v. SEC,465 F.3d 780 (7th Cir. 2006) ..................................................................................................... 32

SEC v. Cedric Kushner Promotions, Inc.,417 F. Supp. 2d 326 (S.D.N.Y. 2006) ....................................................................................... 23

SEC v. Coffman,No. 06-cv-00088, 2007 WL 2412808 (D. Colo. Aug. 21, 2007) .............................................. 29

SEC v. Das,

723 F.3d 943 (8th Cir. 2013) ..................................................................................................... 25SEC v. Espuelas,

905 F. Supp. 2d 507 (S.D.N.Y. 2012) ................................................................................. 25, 44

SEC v. Goldsworthy,No. 06-10012-JGD, 2007 WL 4730345 (D. Mass. Dec. 4, 2007) ............................................ 27

SEC v. Hopper,No. H-04-1054, 2006 WL 778640 (S.D. Tex. Mar. 24, 2006) .................................................. 20

SEC v. Leslie,No. 07-3444, 2010 WL 2991038 (N.D. Cal. July 29, 2010) ............................................... 22, 25

SEC v. Nacchio,438 F. Supp. 2d 1266 (D. Colo. 2006) ................................................................................ 23, 24

SEC v. Patel,No. 07-cv-39, 2008 WL 782465 (D.N.H. Mar. 24, 2008) ........................................................ 24

SEC v. Patel,No. 07-cv-39-SM, 2009 WL 3151143 (D.N.H. Sept. 30, 2009) ........................................... 2, 24



5/47

TABLE OF AUTHORITIES

(continued)

Page(s)

iv

SEC v. Rivelli,No. 05-cv-1039, 2010 WL 2775623 (D. Colo. July 14, 2010) ................................................. 22

SEC v. Shanahan,No. 4:07-CV-270, 2010 WL 148440 (E.D. Mo. Jan. 12, 2010) ................................................ 22

Willis v. Roche Biomedical Labs., Inc.,61 F.3d 313 (5th Cir. 1995) ....................................................................................................... 19

Statutes15 U.S.C. 78m .....................................................................................................................passim

15 U.S.C. 78t(e) ......................................................................................................................... 20

RulesFed. R. Civ. P. 1 ............................................................................................................................ 18

Fed. R. Civ. P. 56 .......................................................................................................................... 18

Regulations17 C.F.R. 240.13b2-1 ........................................................................................................... 20, 38

TreatisesJoseph P. Covington & Iris E. Bennett,

Practicing Under the U.S. Anti-Corruption Laws(2013 Supplement) ......................... 28, 29, 36

Other Authorities122 Cong. Rec. 30,422 (1976) ...................................................................................................... 33

American Heritage Dictionary, Second College Edition (1991) .................................................. 31

DOJ Criminal Division & SEC Enforcement Division,A Resource Guide to the FCPA(2012) ..................................................................................... 30

Foreign Corrupt Practices Act of 1977, Exchange Act Release No. 34-17500,21 SEC Docket 1466, 1981 WL 3638521 (Jan. 29, 1981) ........................................................ 24

H.R. Rep. No. 100-576 (1988) ...................................................................................................... 33

New Merriam-Webster Dictionary (1989) ................................................................................... 31

Promotion of the Reliability of Financial Information,Exchange Act Release No. 34-13185 (Jan. 19, 1977) ............................................................... 36

S. Rep. No. 94-1031 (1976) .......................................................................................................... 32

S. Rep. No. 95-114 (1977) ................................................................................................ 25, 28, 32

U.S. Sec. & Exch. Commn, Report of the SEC on Questionable and IllegalCorporate Payments and Practices (May 12, 1976) .................................................................. 30

Websters New World Dictionary (3d ed. 1988) .......................................................................... 31

Websters Ninth New Collegiate Dictionary (1988) .................................................................... 31



6/47

1

NATURE AND STAGE OF THE PROCEEDINGS AND

ISSUES TO BE RULED UPON BY THE COURT

On March 25, 2013, Plaintiff Securities and Exchange Commission (SEC) filed a

Second Amended Complaint (the Complaint or SAC) seeking civil monetary penalties and

injunctive relief against Defendants James J. Ruehlen and Mark A. Jackson, a current and former

employee of Noble Corporation (Noble), for alleged violations of the Foreign Corrupt

Practices Act (FCPA). Doc. No. 106. After discovery closed, the SEC, on March 25, 2014,

voluntarily moved to dismiss with prejudice its claims against Mr. Ruehlen for (i) aiding and

abetting Nobles alleged violation of Exchange Act Section 13(b)(2)(B), and (ii) knowingly . . .

fail[ing] to implement a system of internal accounting controls in violation of Section 13(b)(5).

Doc. No. 134. Trial is scheduled for July 9, 2014. Mr. Ruehlen moves for summary judgment

on all remaining claims against him.1

INTRODUCTION AND SUMMARY OF ARGUMENT

The Complaint portrays Jim Ruehlen as a rogue employee who, shortly after being

promoted to the first management-level position of his career, embarked on an intricate scheme

to bribe Nigerian officials to obtain illegal temporary import permits for Nobles rigs; routinely

flouted company policy; ignored directions from Nobles Audit Committee; and concealed illicit

payments in Nobles books and records. At the motion to dismiss stage, the Court was required

to accept those allegations as true. Since then, 15 months of discovery have laid bare the utter

falsity of the SECs narrative.

The undisputed evidence establishes that Mr. Ruehlena diligent and hardworking

operations employee with an impeccable reputation for honesty and integrityat all times acted

1 For its remaining claims, the SEC seeks civil monetary penalties only for violations thataccrued on or after May 12, 2006. SeeDoc. No. 104;see also SAC at 56-57.



7/47

2

in good faith and under the close supervision of Nobles most senior executives. At no point did

he attempt to conceal any conduct or circumvent controls or company processes. To the

contrary, it was Mr. Ruehlen who in 2004 first reported Nobles use of the so-called paper

processthe central focus of the SECs claims in this matter. And it was Mr. Ruehlen who

received approval for every one of the payments at issue from Nobles senior management,

executives who had access to experts to assess the nature and propriety of those payments. It is

undisputed that none of those executives or experts ever raised concerns to Mr. Ruehlen about

the payments. The evidence also shows that Mr. Ruehlen, who had no accounting or legal

training, had no role in determining how the paymentswhich were well known within Nobles

corporate hierarchywere recorded in Nobles books. And to compound the irony of the SECs

charges against Mr. Ruehlen, it was Mr. Ruehlen who independently raised new concerns

regarding the temporary import process in early 2007, prompting Nobles internal investigation

and voluntary disclosure to the U.S. government.

Notwithstanding this evidencemuch of which was known to the SEC well before it

filed this actionthe SEC charged Mr. Ruehlen with violating the FCPAs books and records

and internal accounting control provisions (collectively, the accounting provisions) under

every stretched legal theory imaginable. SEC v. Patel, No. 07-cv-39-SM, 2009 WL 3151143, at

*65 (D.N.H. Sept. 30, 2009). Purportedly to streamline the presentation of evidence to the

jury, the SECon the eve of summary judgmentvoluntarily dismissed two of those claims

(that Mr. Ruehlen failed to implement a system of internal accounting controls and aided and

abetted Nobles alleged failure to devise and maintain such a system). But the SECs

remaining FCPA accounting provision claims fail for the same reasons as the claims it now

tacitly admits lacked meritMr. Ruehlen simply had no responsibility for or authority over the



8/47

3

accounting function at Noble, and had no role in determining how the payments at issue were

recorded. Moreover, the SEC failed to develop any evidence during discovery to support the

numerousand illogicalways that Mr. Ruehlen allegedly circumvented Nobles system of

internal accounting controls. The Court should grant summary judgment on these claims in light

of the undisputed evidence.

The Court should also grant summary judgment on the SECs claims for violations of the

FCPAs anti-bribery provisions. Whether the SEC can prove these claims turns entirely on

Mr. Ruehlens state of mindi.e., whether he acted corruptly. The undisputed evidence

shows that Mr. Ruehlen, like many others within the company, believed in good faith that the

payments were to secure or expedite temporary import permits to which Noble was entitled.

STATEMENT OF UNDISPUTED MATERIAL FACTS

I. Relevant BackgroundA. Nobles West Africa Division And Jim RuehlenNoble is an international offshore oil drilling contractor with rigs located throughout the

world. During the relevant period, Noble maintained its headquarters in Sugar Land, Texas,

where its senior managementincluding its CEO, CFO, Controller, General Counsel,

Operations Vice Presidents, and Director of Internal Auditwere located. Ex. 17 (Julie

Robertson Tr.) at 172:4173:5; Ex. 13 (Thomas Mitchell Tr.) at 164:21165:20.2

Noble began operating in Nigeria in the early 1990s. Ex. 5 (James Day Tr.) at 68:5-11;

Ex. 17 at 121:17-19. Noble makes its money through offshore drilling contracts with

international oil companies (IOCs) such as Shell, Chevron, and Mobil. Ex. 5 at 154:24155:2.

Nigeria is heavily dependent on oil revenue, and its rights in its oil fields are managed by the

2 Ex. refers to the exhibits to the concurrently-filed Declaration of Martin A. Hewett inSupport of Mr. Ruehlens Motion for Summary Judgment.



9/47

4

state-owned Nigerian National Petroleum Corporation (the NNPC). See Ex. 5 at 156:3

157:23; Ex. 9 (Mark Jackson Tr.) at 340:9343:8; Ex. 8 (Johannes Hilhorst Tr.) at 154:11

155:14. The NNPC contracts with IOCs to produce oil from those fields through joint ventures

or production sharing contracts. See Ex. 5 at 155:3-6; Ex. 9 at 340:9343:1. The IOCs, in

turn, contract with oil drilling companies such as Noble. Ex. 5 at 157:3-7; Ex. 9 at 340:9

342:11. Noble essentially rents its rigs to the joint ventures, which control the well sites and

directs the drilling process. Ex. 5 at 23:1924:24; see also Ex. 8 at 26:327:3. Nobles

operations in Nigeria were overseen by Nigerias Department of Petroleum Resources (DPR),

to which Noble submitted weekly reports regarding the status and location of its rigs. Ex. 1

(David Arthur Tr.) at 135:11-19, 136:22138:10.

After graduating from high school, Jim Ruehlen began his career working for Western

Oceanic on an offshore oil rig in the Gulf of Alaska as a roustabout, one of the most junior

positions in the industry. He joined Noble in 1993 as a rig manager when it purchased Western

Oceanic. Ex. 17 at 174:25175:5. From 2002 until September 2004, Mr. Ruehlen was assigned

to Nobles Sugar Land Headquarters to work directly under Robert Rose, Nobles Vice President

of the Eastern Hemisphere, to gain more exposure to various corporate departments and senior

management. Ex. 14 at 49:1-18, 89:4-25; Ex. 9 at 75:2476:24. As part of that assignment,

Mr. Ruehlen was detailed to assist Nobles internal audit department with a review of the West

Africa Division in February and March of 2004 (the 2004 West Africa Division Audit). Ex. 14

at 88:489:22.

Mr. Ruehlen became the Division Manager of Nobles West Africa Division in

September 2004, his first such managerial role. Ex. 19 (James Ruehlen Tr.) at 21:14-17; Ex. 17

at 212:25213:10. As Division Manager, Mr. Ruehlen, in early 2005, moved to Nigeria with his



10/47

5

family, but still reported to Mr. Rose, who was based in Sugar Land. Ex. 19 at 25:1826:1,

123:4-12. Mr. Ruehlen continued as Division Manager of the West Africa Division until 2011,

when he became the Division Manager of Nobles Mexico Division, a position he still holds

today. Id.at 27:1228:18, 36:20-25. During discovery, every witness who had worked with Mr.

Ruehlen long enough to form an opinion, from the CEO on down, testified that he was ethical,

honest, and always attempted to follow the law and company policy. Ex. 5 at 190:16-25; Ex. 9 at

322:21323:14; Ex. 17 at 175:17176:8; Ex. 13 at 146:22148:4; Ex. 11 (Michael Lowther Tr.)

at 114:9116:10; Ex. 14 at 50:2451:23; Ex. 21 (Timothy Thomasson Tr.) at 201:19202:10;

Ex. 12 (Alan Middleton Tr.) at 113:20116:5; Ex. 1 at 93:895:1; Ex. 8 at 130:9132:11.

B. Mr. Ruehlen Identified The Paper Process As An Issue During The 2004West Africa Division Audit

Before and during the relevant period, Noble imported its offshore oil drilling rigs into

Nigeria on the basis of temporary import permits. Mr. Ruehlens first exposure to temporary

import permits was the 2004 West Africa Division Audit, during which he was told by local

personnel that although most drilling contracts in Nigeria ranged from between two to five years,

a temporary import permit was typically granted by the Nigerian Customs Service (NCS) for

an initial 12 month period, and could be extended twice for a period of six months each. Ex. 19

at 52:253:12. Mr. Ruehlen also learned of the West Africa Divisions use of what the SEC calls

the paper processi.e., that Noble had obtained a temporary import permit for one of its rigs

based on documents reflecting physical exportation and re-importation of the rig, though the rig

never actually moved. Id.at 43:10-15.

Because he found it unusual, Mr. Ruehlen immediately reported the paper process to

Thomas ORourke, Nobles Director of Internal Audit, who asked Mr. Ruehlen to prepare an

initial draft of an audit finding regarding the issue. Ex. 48; Ex. 14 at 94:1895:12, 96:1898:8;



11/47

6

Ex. 19 at 45:13-24. After receiving Mr. Ruehlens first draft, Mr. ORourke, along with

Mr. Rose, Timothy Thomasson (Nobles Vice President of Accounting and Tax), Robert Kayl

(Nobles Tax Manager), and auditors from UHYan outside auditing firm that supported

Nobles internal audit functionresearched the issue further and revised the finding. See

Exs. 49-52; Ex. 14 at 106:1108:4, 113:2114:23, 122:12124:18, 126:2-24. Among other

things, the finding was revised to reflect advice from Nobles external auditor,

PricewaterhouseCoopers (PwC), that additional renewals of the temporary import license

may be obtained as long as the Company can justify continued use of the rig in Nigeria. Ex. 52

at 8; Ex. 14 at 126:2-24. Many executives at Noble understood PwCs advice to mean that

Noble was entitled to a permit indefinitely, so long as it had a contract to drill oil in the country.

Ex. 14 at 123:7125:5; Ex. 10 (Robert Kayl Tr.) at 126:4127:1; Ex. 9 at 234:4235:4.

The final audit report was issued on April 12, 2004. Ex. 24; Ex. 14 at 149:22151:13.

Mr. ORourke presented the report to the Audit Committee during an April 20, 2004 meeting.

Ex. 14 at 161:11-19. In attendance were members of the Committee, Mr. ORourke, Robert

Campbell (Nobles General Counsel), Mark Jackson (then CFO), and representatives from PwC.

Id.at 161:20162:3; Ex. 4 (Robert Campbell Tr.) at 139:19140:16; Ex. 9 at 145:8-14; Ex. 21 at

238:25239:5. Mr. Ruehlen, as a relatively junior employee, did not attend Audit Committee

meetings. Contrary to the allegations in the Complaint (seeSAC 75), neither the final report

nor anyone in attendance at the meetingincluding the members of the Audit Committee

directed that the paper process should never be used again, and the Audit Committee issued no

resolution to that effect. Ex. 14 at 162:13163:14; Ex. 9 at 291:7-18; Ex. 21 at 242:12243:2.

Rather, as Mr. ORourke explained, the conclusion reflected in the audit reportand reiterated

by a member of the Audit Committee during the meetingwas that Noble need[ed] to follow



12/47

7

up and figure out whats right, whats wrong, what the [Nigerian] law is and get it fixed. Ex. 14

at 163:5-7;see alsoEx. 9 at 305:8-12; Ex. 5 at 106:3-22.

Mr. Ruehlen was not assigned any responsibility for resolving the temporary import

finding. Rather, the final report (i) recommended that Mr. Rose (Mr. Ruehlens boss) and

Mr. Kayl obtain a detailed understanding of the risks and liabilities associated with temporary

import permits and develop and communicate guidelines for the process; and (ii) charged

Mr. Rose with the responsibility for ensuring the [D]ivisions compliance with all applicable

rules and regulations related to importing and exporting assets. Ex. 24 at NOBLE0014721. In

a July 2004 Internal Audit Update, Mr. ORourke reported to Nobles Audit Committee that

Mr. Thomasson and Mr. Kayl had determined that the [rigs] currently in Nigeria meet the

criteria necessary for an extension of each Temporary Import Permit. Ex. 28 at 8; Ex. 21 at

166:23167:16. Mr. ORourke also reported that, in the event that the NCS request[ed] that a

new [temporary import permit] be executed, as opposed to an extension of an existing [permit],

the Division ha[d] identified a free trade zone whereby export and re-import can be properly and

legally performed. Ex. 28 at 8.

C. After Researching Alternatives And Receiving Advice From Local Counsel,Noble Continued To Use The Paper Process In Early 2005

From August 2004 through early 2005, the West Africa Divisionat the direction of

Mr. Rose, who was charged with overall responsibility for resolving the audit finding

continued to explore potential options for obtaining importation authorization for Nobles rigs.

Mr. Ruehlen at times assisted with that research, both before and after he became Division

Manager in September 2004. Ex. 19 at 99:6100:1. During the course of that work, Noble

learned that there were serious problems with each of the potential alternatives to the paper

process that it explored:



13/47

8

Further Extensions: Notwithstanding Mr. Kayls and Mr. Thomassons conclusionthat Noble was eligible to obtain permit extensions so long as it was under contract,NCS denied an application for a fourth extension in January 2005. Nobles principalcustoms agent, I.C. Network Limited (IC Network), informed Noble that, as amatter of policy now, NCS would not grant more than three extensions. Ex. 66

(emphasis added); Ex. 19 at 116:25119:7.

Use of the Free Trade Zone: Although the July 2004 Internal Audit Updateindicated that a free trade zone could be used to obtain temporary import permits(in the event that NCS request[ed] that Noble apply for a new permit rather than anextension), Mr. Ruehlen subsequently learned from another customs agent, MurphyShipping (Murphy), that the free trade zone could not be used to secure newtemporary import permits. Ex. 68; Ex. 19 at 182:1-15.

Physical Exportation: Mr. Ruehlen understood that the 2.5 year limit for permitsand extensions was in direct conflict with the contracting cycle used by the IOCs

and their majority partner, the NNPC. Mr. Ruehlen also understood that exportingthe rigs out of Nigeriaa process that would interrupt drilling operations and couldtake any[]where from four to six weeks at best, with no apparent purpose or benefitto any party involvedwas not feasible because the IOC and the NNPC(effectively, the Nigerian government) would not acceptthe fact that the [rig] wouldbe unavailable for this time period during the initial term or subsequent extensionperiod of the contract. Ex. 55 at 2; Ex. 14 at 185:2186:1;see alsoEx. 5 at 157:15-18.

Permanent Importation:Jo Onodugo, Nobles long-time outside counsel in Nigeria,advised against permanent importation of Nobles rigs and recommended that

Mr. Ruehlen discuss this option with other drilling contractors in Nigeria.Accordingly, Mr. Ruehlen spoke with a Managing Director of Parker Drillingtheonly other contractor, to his knowledge, that had permanently imported equipmentabout the process. The executive advised against permanent importation because allcost implications are not transparent . . . and the whole process is extremely wroughtwith corruption. Ex. 55 at 2 (emphasis added).

Mr. Ruehlen also spoke with his counterparts at other large drilling contractors

including Parker Drilling, Ensco, and GlobalSantaFeand learned that most had rigs that had

been in Nigeria for more than three years, and that these contractors were also using the paper

process. Ex. 55 at 1. Additionally, Mr. Ruehlen discussed the paper process with Nobles

legal counsel, Ms. Onodugoan experienced Nigerian attorney who was highly regarded by



14/47

9

Noble personnel both in Nigeria and at corporate headquarters.3 Ex. 19 at 169:25172:6; Ex. 9 at

349:9350:1; Ex. 6 (Charles Dowden Tr.) at 121:6125:16; Ex. 17 at 129:11-24; Ex 5 at 67:25

70:13. Ms. Onodugo advised Mr. Ruehlen that NCS was aware that the rigs were not actually

leaving Nigerian waters, and that the paper process was a process that was accepted by

NCS for maintaining the rigs in Nigerian waters[] to continue . . . with drilling operations. Ex.

19 at 90:2094:14. As a result of his conversation with Ms. Onodugo, Mr. Ruehlen understood

that Noble was entitled to a temporary import [permit] for [its] rigs in Nigeria so long as the

rigs were gainfully employed or had a possibility or opportunity for continued work in Nigeria,

and that the authorization to which Noble was entitled could be through an extension, or if they

requested, the paper process. Id.at 133:18134:8.

After collecting this information, which Mr. Ruehlen consistently communicated to his

superior Mr. Rose, Noble used the paper process for three rigs whose extensions were expiring

in late February 2005. Exs. 65, 67; Ex. 19 at 107:4-14, 145:20146:8, 156:6-21. In March 2005,

Mr. Ruehlen informed Mr. ORourke of Ms. Onodugos advice and the Divisions use of the

paper process. Ex. 14 at 178:6180:7. Mr. ORourke asked Mr. Ruehlen to prepare a

memorandum summarizing the information he had learned to memorialize that he had

attempted to follow the letter of the law . . . , renewed the right for the rig(s) to work in Nigerian

waters via the only method available to the Company[,] and notified internal audit of the issue in

a timely manner. Ex. 54; Ex. 14 at 175:21178:7. In or about May 2005, either Mr. ORourke

or Mr. Ruehlen informed Mr. Jackson, who was then Nobles CFO, of Ms. Onodugos advice

3 Noble retained Ms. Onodugo as its local counsel shortly after it began operating inNigeria in the early 1990s on the recommendation of several of its customers, including Shell andChevron. Ex 5 at 67:2568:24; see alsoEx. 14 at 171:2-8; Ex. 17 at 129:1-10. Ms. Onodugo advisedNoble on a variety of Nigerian issues, including labor issues, importation issues, and Nigerian anti-corruption laws. Ex. 4 at 205:12207:5, 216:9-22; Ex. 1 at 64:1765:9; Ex. 6 at 121:22122:7; Ex. 8 at122:7123:11. Nobles personnel in Nigeria typically received advice from Ms. Onodugo by phone. Ex.6 at 123:4125:1; Ex. 8 at 123:2-4.



15/47

10

and the use of the paper process in March 2005. Ex. 14 at 262:5-19; Ex. 9 at 305:8-9. Both

Mr. ORourke and Mr. Jackson were fully satisfied of the legality of the paper process in light

of Ms. Onodugos advice. Ex. 9 at 307:6-9; Ex. 14 at 181:16-24.

II. Payments In Connection With Temporary Import PermitsA. The Payments Were Reviewed For FCPA Compliance Through A Fully

Transparent Process By Multiple Levels Within The Company

Long before Mr. Ruehlen was sent to Nigeria as Division Manager, Noble made various

types of payments to Nigerian officials, including regular payments directly to (i) officials of the

local Nigerian police (to ensure that Nobles facilities and personnel would be protected against

crime and insurrection), (ii) military police officials to escort employees along the dangerous

route to the airport, and (iii) immigration officials in connection with expediting and securing

visas for Nobles expatriate personnel working in Nigeria. Ex. 1 at 47:1454:15; Ex. 8 at 66:9

67:10, 80:7-12, 140; Ex. 6 at 105:19108:17, 117:8121:3. Noble historically also authorized

payments to government officials in connection with the operation and movement of Nobles

rigs, including (i) temporary import permits obtained through the paper process and extensions

of those permits; (ii) the actualphysical import and export of a rig and the application for a

temporary import permit; and (iii) the movement of rigs to Nigerian ports to undergo repairs or

maintenance. Ex. 19 at 236:16240:15, 240:25244:15; Ex. 12 at 157:5159:24, 195:9196:5;

Ex. 1 at 47:2048:21, 53:2-10, 54:855:7. In sum, in Nigeria during the relevant period, all rig

movements and permits required payments to Nigerian officials, whether new permits (with or

without an actual rig movement) or extensions.

Throughout the relevant period, Nobles Audit Committee, senior management

(including its General Counsel), internal audit department, external auditors, and outside counsel

were well aware of the payments to Nigerian officials that were made by the West Africa



16/47

11

Division. Ex. 14 at 72:276:4; Ex. 17 at 191:14193:6; Ex. 9 at 323:23324:18; Ex. 13 at

121:16122:2; Ex. 20 (Richard Shappard Tr.) at 133:4-23. In fact, in early 2003, Noble

established a dedicated general ledger account entitled facilitating payments for payments to

government officials at the advice of Nobles outside FCPA counsel, the law firm of Thompson

& Knight LLP (T&K). Ex. 9 at 183:3-9; Ex. 4 at 135:2-9. In January 2004, Internal Audit

reported to the Audit Committee and PwC the results of a worldwide FCPA compliance audit,

which included the discovery that the West Africa Division had not recorded any payments into

that account in 2003. Ex. 26 at 2; Ex. 14 at 56:258:15. Following a review to identify

payments to government officials that were made in 2003 but were not recorded in the

facilitating payment account, more than $600,000.00 in payments were reclassified into that

account, a large amount of which were payments to IC Network in connection with temporary

import permits. Ex. 47; Ex. 14 at 65:1670:24; Ex. 27; Ex. 21 at 115:5-25; Ex. 9 at 183:23

184:10.

Subsequent to this review, Mr. ORourke provided extensive information concerning the

payments in the account to Robert Campbell (Nobles General Counsel) and T&K, which was

retained by Mr. Campbell to investigate other payments that had been made by the West Africa

Division. Ex. 53; Ex. 14 at 139:3142:9;see alsoDef. Jacksons Mot. Summ. J. at 1314. Both

Mr. ORourke and Mr. Jackson believed that T&K had reviewed all of those payments, including

the payments to IC Network, and had determined that they were lawful facilitating payments

and not FCPA violations. Ex. 14 at 143:12145:1, 169:8-24; Ex. 9 at 184:12185:5, 190:9

191:1.

Following the West Africa Division Audit, Mr. Campbell and T&K drafted a Service

Agreement to govern Nobles relationship with IC Network. Ex. 29; Ex. 4 at 161:3162:16.



17/47

12

Among other things, the lawyers initial draft required IC Network to submit receipts supporting

all charges invoiced to Noble. Ex. 29 at 4.2. IC Network objected to that provision, and

informed Mr. Rose that it would be unable to provide receipts for payments to government

officials in connection with temporary import permits. Ex. 4 at 162:17-24, 163:24165:5; Ex.

40. After learning of IC Networks concern, Mr. Campbell revised the agreement to include a

provision exempting special handling feesa term that Mr. Campbell coined to refer to

unreceipted payments to government officialsfrom the requirement that IC Network submit

receipts for the charges it would invoice Noble. Ex. 40; Ex. 4 at 165:6168:18;see alsoEx. 9 at

188:3-16, 260:9261:11, 262:19263:2. That agreement was executed in July 2004, many

months before Mr. Ruehlen became Division Manager in Nigeria. Ex. 41; Ex. 4 at 169:5-23.

Nobles Internal Audit department regularly audited the West Africa Divisions

facilitating payment account during 2005-2007. Ex. 14 at 168:5-12, 244:16245:7; Ex. 12 at

130:16-134:21; Ex. 21 at 254:16255:3. Internal Audit also periodically reported the amount of

facilitating payments made by the Division to the Audit Committee; for example, in February

2007, Mr. ORourke reported to the Audit Committee that in 2006, the West Africa Division had

made approximately $512,000 in payments to government officials in Nigeria. Ex. 57 at 2; Ex.

14 at 201:12202:17. In addition, PwC was aware of and had full access to Nobles facilitating

payment account. Ex. 20 at 31:18-22, 100:17-24, 130:2-18, 132:15-25.

In sum, from Mr. Ruehlens vantage point as of late 2004 and early 2005 when Noble

sent him to Nigeria, Nobles executives and outside professionals were well aware of and

sanctioned both the paper process and the long-standing regular payments to government

officials that Noble was making in connection with temporary import permits and other matters.

Indeed, Nobles General Counsel personally drafted the agreement with IC Network allowing for



18/47

13

the precise payments at issue here. No one at Noble expressed concerns to Mr. Ruehlen that the

payments violated the FCPA.

B. Mr. Ruehlen Fully Complied With Nobles Internal Controls Over ThePayments

Following a 2002 review of Nobles FCPA compliance policies by T&K, Noble revised

its Administrative Policy Manual (APM) to make the CFO responsible for pre-approving

payments to government officials. During the second half of 2004i.e., after the 2004 West

Africa Division Audit and before and after Mr. Ruehlen became Division Manager in September

2004Mr. Rose and Mr. Thomasson assumed responsibility for submitting requests to Nobles

CFO for approval of IC Networks requests to pay special handling charges in connection with

temporary import permits and extensions, often copying Mr. Ruehlen on the communications.

See Exs. 30, 31, 64, 72, 73; Ex. 18 at 189:15-192:6, 247:17249:4, 249:11250:23, 251:20

253:24, 254:1257:3; Ex. 21 at 179:21184:15

In early 2005, shortly after moving to Nigeria, Mr. Ruehlen assumed responsibility for

requesting and obtaining approval for facilitating payments from Nobles CFO; and in May

2005, Mr. Ruehlen sought and obtained Mr. Jacksons approval of payment of special handling

fees in connection with the three rigs that had used the paper process. Ex. 56; Ex. 14 at

188:19190:10; Ex. 68; Ex. 19 at 182:1185:5, 186:20187:7. Around that time, Mr. ORourke

formalized the process of seeking CFO approval for facilitating payments. Given the frequency

of certain types of payments the Division had to makeincluding payments to Nigerian police

and immigration officials that could entail day to day, hour by hour, approval requests

Mr. ORourke instructed Mr. Ruehlen that, going forward, the Division should prepare a

projection for the total amount of those facilitating payments that the Division would need to

make for each quarter, which Mr. Jackson could then approve in advance. Ex. 69; Ex. 19 at



19/47

14

191:2-9;see also Ex. 14 at 86:688:6; Ex. 12 at 28:2029:13. Under Mr. ORourkes guidance,

payments related to temporary import permitswhich were recurring but less frequent than

other payments to government officialswould continue to be approved individually. Ex. 69.

Mr. ORourke also prepared a template for emails requesting CFO approval for payments related

to temporary import permits, which included (i) what extension was being sought (where

applicable); (ii) the amount of the special handling charge requested; and (iii) whether the

payment and amount were similar to those that Noble had historically made. Ex. 75; Ex. 15

(Thomas ORourke SEC Tr.) at 539:13540:5.

Mr. Jackson became Nobles Chief Operating Officer in 2005, and was succeeded as

CFO by Bruce Busmire. Ex. 17 at 152:10-18; Ex. 3 (Bruce Busmire Tr.) at 28:8-15. After

Mr. Busmires departure in March 2006, Mr. Jackson became acting CFO. Ex. 9 at 351:9-12.

Thomas Mitchell was hired as CFO in November 2006, a position he held until 2011. Ex. 13 at

10:19-22. In their capacities as CFO, each of these senior executives received requests from

Mr. Ruehlen to make facilitating payments in connection with temporary import permits or

extensionsall of which conformed to the template that Mr. ORourke had directed Mr. Ruehlen

to use (and thus included, among other things, the dollar amount)and Mr. ORourke was

copied on most of Mr. Ruehlens approval-request emails.4 In certain instances, Mr. Busmire

and Mr. Mitchell asked Mr. ORourke to weigh in and give a recommendation as to whether

payments should be approved. See Ex. 32; Ex. 13 at 105:7106:10, 109:18112:6; Ex. 3 at

4 Both Mr. Busmire and Mr. Mitchell were certified public accountants who joined Noblefrom different companies and had prior familiarity with the FCPA. Ex. 13 at 15:16-20, 75:2476:1; Ex. 3at 22:323:10, 28:2329:1, 67:1773:22. Both testified that they felt free to contact Mr. Ruehlen orothers within the company if they had any questions concerning the requested payments. Ex. 13 at165:21166:10; Ex. 3 at 95:2397:14.



20/47

15

109:20110:17. Mr. ORourke recommended approval in every instance, and every one of

Mr. Ruehlens requests was approved by the CFO.5

Mr. ORourke and Mr. Jackson both testified that they had no concerns about the

payments that the Division made subsequent to 2004 because they were the exact same

payments as those Noble had made previously and that they believed had been reviewed and

approved by Nobles outside counsel. Ex. 14 at 169:13-24; Ex. 9 at 279:4281:8. Similarly,

neither Mr. Busmire nor Mr. Mitchellwho were never charged by the SECbelieved that the

payments they approved were unlawful under the FCPA. Ex. 3 at 97:15101:25; Ex. 13 at

149:3150:10. In determining whether to approve requests to make facilitating payments, both

executives relied on Mr. ORourke if they had questions. Ex. 3 at 136:10-17, 201:6-17; Ex. 13 at

266:1267:4. Mr. Busmire also recalled discussing Mr. Ruehlens requests for facilitating

payments with Mr. Campbell, who assured him that the payments were consistent with prior

practices and had been reviewed by him and . . . by outside counsel. Ex. 3 at 140:1-25,

97:15-101:25, 109:20111:1. In addition, Mr. Mitchell copied Mr. Campbell on several of his

emails to Mr. Ruehlen approving payments. Exs. 33, 34, 35, 36. Thus, from Mr. Ruehlens

perspective, the payments were consistent with prior practices that had been going on long

before Mr. Ruehlen was sent to Nigeria, were regularly approved at the highest levels of the

companyindeed, no payment request was ever disapprovedand were well-known to the

General Counsel, among others.

5 SeeEx. 74; Ex. 9 at 244:10-23, 247:1-5, 248:15249:22; Exs. 42, 43, 44, 45, 46; Ex. 3 at121:10141:25, 151:10162:7; Exs. 33, 34, 37, 38; Ex. 13 at 107:10116:9, 118:18119:20, 126:21130:2, 150:18151:9.



21/47

16

C. Mr. Ruehlen Had No Role In Accounting For The PaymentsAs Division Manager, Mr. Ruehlenwho is not an accountanthad no responsibility for

overseeing or supervising Nobles accounting function, developing Nobles accounting policies,

or determining how expenditures would be recorded in Nobles books. See, e.g., Ex. 17 at

175:3-16; Ex. 21 at 201:19202:3; Ex. 11 at 55:1556:10. Throughout the relevant period,

Noble, like many companies, segregated the accounting/finance function from operations to

ensure the formers independence. Ex. 13 at 180:16181:11. Noble had an Operations

Controller and a corporate Controller who were located in Nobles headquarters in Sugar Land,

along with the rest of Nobles senior management. Ex. 12 at 18:619:3. Each Division, in turn,

had a Division Controller who reported up directly through the accounting/finance function. See

id.at 18:6-19:3. Mr. Ruehlen had no role in this structure and reporting line.

Alan Middleton became the Division Controller for the West Africa Division in March

2005, shortly after Mr. Ruehlen arrived in Nigeria.6 Ex. 12 at 12:2213:4. As Division

Controller, Mr. Middletons responsibilities included monitoring the West Africa Divisions

compliance with the FCPA. Ex. 39 at 2.9.2.5; Ex. 12 at 126:8128:8. Upon becoming

Division Controller, Mr. Middleton received training from Mr. ORourke, who at that time was

the Director of Internal Audit. Ex. 12 at 23:1824:17. Mr. ORourke reviewed with

Mr. Middleton the types of facilitating payments made by the Divisionincluding payments

related to temporary import permitsand how they should be recorded. Id. at 27:2128:1.

Mr. Middleton understood that, to comply with the FCPA and Nobles policies, payments to

government officials that had been approved by the CFO had to be recorded in Nobles

facilitating payment account. Id. at 131:24132:5, 129:18130:15.

6 Mr. Middleton had approximately 15 years of experience working as an accountant orcontroller prior to joining Noble. Ex. 12 at 113:15-18.



22/47

17

The West Africa Divisions operations personnel had no role in the process of recording

paymentsincluding payments to government officialsinto Nobles books and records.

Ex. 12 at 32:16-24. In particular, Mr. Ruehlen had no role in (i) coding IC Networks

invoices, which entailed determining the general ledger account into which charges on IC

Networks invoices would be recorded; or (ii) preparing the journal entries corresponding to

those charges that were inputted into Nobles accounting system. Id.at 145:17-22, 146:9147:4.

Mr. Middleton could not recall a single occasion where anyone on the operations side

including Mr. Ruehlendirected him how to book payments, including payments that had been

approved by the CFO as facilitating payments. Id. at 202:17203:5. Mr. Middleton determined

whether a particular payment should be recorded to the facilitating payment account based on

whether it was similar to the payments that the Division had historically made, which he had

reviewed with Mr. ORourke shortly after he became Division Controller. Id.at 28:2-10, 30:11-

21. In the event that a new payment had to be made for which there was no historical precedent,

Mr. Middleton asked either Mr. ORourke or Nobles Controller for guidance. Id. at 28:2-10.

Mr. Middletonwho was aware of the paper processbelieved that the accounting entries

corresponding to the payments to IC Network accurately reflected the transactions. Id. at

128:10129:17, 167:19169:9.7 The SEC never charged Mr. Middleton with any violations.

D. Mr. Ruehlen Promptly Raised Concerns To Senior Management UponLearning Of A Competitors Internal Investigation Related To Temporary

Import Permits

On May 3, 2007, Mr. Ruehlen received a press release from another drilling contractor,

Tidewater, which reported that Tidewater had initiated an internal investigation concerning

7 In addition to the facilitating payment account, certain portions of special handling feeswere recorded to a prepaid expense account, and then amortized into the facilitating payment accountover the life of the permit or extension. Ex. 12 at 70:673:16. Mr. Middleton testified that it was hisdecision to amortize the payments, which he believed was consistent with general accounting practice.Id.70:673:16, 140:3141:4.



23/47

18

payments to Nigerian officials in connection with temporary import permits. Ex. 63; Ex. 14 at

345:8-18. Mr. Ruehlen immediately forwarded the release to David Williams, who was then

Nobles Senior Vice President for Operations. Ex. 63; Ex. 17 at 227:1228:3; Ex. 14 at 209:4-

12, 346:7-15. Mr. Ruehlen noted that Tidewater was obtaining temporary import permits in

much the same way as we are. Ex. 63. As a result of Mr. Ruehlens report, Noble engaged a

law firm, Cadwalader, Wickersham & Taft LLP (Cadwalader), to conduct an internal

investigation, and Noble ultimately decided to voluntarily disclose the issue to the SEC and the

Department of Justice. Ex. 17 at 230:21231:7; Ex. 13 at 198:2-8. Mr. Ruehlen cooperated with

both the Cadwalader and SEC investigations, including answering questions during a multi-day

SEC deposition. Ex. 19 at 17:2218:1. Noble has never taken any disciplinary action against

Mr. Ruehlen. Id.at 36:16-19.

LEGAL STANDARD

Summary judgment, far from being a disfavored procedural shortcut, is an integral

part of the Federal Rules as a whole, which are designed to secure the just, speedy and

inexpensive determination of every action. Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986)

(quoting Fed. R. Civ. P. 1). Summary judgment is warranted under Rule 56 if no genuine

dispute as to any material fact exists and the moving party is entitled to judgment as a matter

of law. Fed. R. Civ. P. 56(a); see also Celotex, 477 U.S. at 32223. Importantly, the mere

existence of some factual dispute will not defeat a motion for summary judgment; Rule 56

requires that the fact dispute be genuineand material. Willis v. Roche Biomedical Labs., Inc.,

61 F.3d 313, 315 (5th Cir. 1995) (emphasis in original).

Although the moving party bears the burden of demonstrating that there is no genuine

dispute as to any material fact, it is notrequired to negate the elements of the nonmoving partys

case. SeeWillis, 61 F.3d at 315; Boudreaux v. Swift Transp. Co., Inc., 402 F.3d 536, 540 (5th



24/47

19

Cir. 2005). Rather, the moving party may satisfy its initial burden by showingthat is,

pointing out to the district courtthat there is an absence of evidence to support the nonmoving

partys case. Celotex, 477 U.S. at 325. Once the moving party has done so, the nonmoving

party must come forward with specific evidence in order to raise a genuine issue of material

fact. Baranowski v. Hart, 486 F.3d 112, 119 (5th Cir. 2007).

ARGUMENT

I. The Court Should Grant Summary Judgment On The SECs Claims ForViolations Of The FCPAs Books And Records Provisions

The SEC charges Mr. Ruehlen with violating the FCPAs books and records provisions in

the following ways: (i) aiding and abetting Nobles alleged failure to make and keep books,

records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions

and dispositions of [its] assets, as required by Exchange Act Section 13(b)(2)(A);8 and

(ii) knowingly falsify[ing], or directly or indirectly[] falsify[ing] or caus[ing] to be falsified,

[a] book, record, or account maintained by Noble, in violation of Section 13(b)(5) and Rule

13b2-1. See15 U.S.C. 78m(b)(2)(A), 78m(b)(5), 78t(e); 17 C.F.R. 240.13b2-1.

Each of these claims is premised on a single allegation: that the payments Noble

authorized in connection with temporary import permits were falsely record[ed as legitimate

operating expenseson Nobles books. E.g., SAC 3 (emphasis added). Though not mentioned

in the Complaint, the basis for this allegation is notthat the payments were recorded in any way

to concealthat they werepayments to government officials. Rather, the SEC contends that they

were falsely and [in]accurate[ly] recorded because they were recorded in a general ledger

8 To establish aiding and abetting under Exchange Act Section 20(e), the SEC must prove(i) a primary violation; (ii) knowledge of the violation by Mr. Ruehlen; and (iii) that Mr. Ruehlensubstantially assisted in the primary violation. SeeMem. & Order, Doc. No. 87, at 42 (Dec. 11, 2012).To establish substantial assistance, the SEC must show that Mr. Ruehlens conduct was a substantialcausal factor in the perpetration of Nobles primary violation. SEC v. Hopper, No. H-04-1054, 2006 WL778640, at *15 (S.D. Tex. Mar. 24, 2006) (internal quotation marks omitted).



25/47

20

expense account entitled facilitating payments. Ex. 22 (Pl.s Resp. to Def. Ruehlens Interrog.

Nos. 8-9). According to the SEC, recording the payments in this manner did not accurately and

fairly reflect the transactions because the payments were, in fact, unlawful under the FCPA.

Instead, the SEC contends that Noble should have booked [them] as unlawful bribes.9Id.

Each of the SECs books-and-records claims fail for at least two independent reasons.

First, the undisputed evidence shows that Mr. Ruehlen never made or directed any of the

accounting entries that the SEC claims were false. And second, even assuming, arguendo, that

the accounting was improper and can be attributed to Mr. Ruehlen, there is no evidence that

Mr. Ruehlen acted knowingly. Moreover, the aiding and abetting claim fails for the additional

reason that there is no accounting requirement that Noble maintain and record payments in an

account entitled unlawful bribes. Mr. Ruehlen is accordingly entitled to summary judgment on

these claims.

1. There Is No Evidence That Mr. Ruehlen Falsified Any Book,Record, Or Account, Or That He Aided And Abetted Nobles

Alleged Failure To Keep Accurate Books And Records

The undisputed facts show that Mr. Ruehlen (i) did not make any of the accounting

entries at issue; (ii) was not responsible for determining how payments should be recorded in

Nobles books; and (iii) did not direct accounting personnel as to how they would be booked.

See supra at 1617. The undisputed evidence also shows that Mr. Ruehlen had no responsibility

for supervising the West Africa Divisions accounting function, and the accounting department

9 The SEC has also suggested in discovery that Nobles books and records were false forthe additional reason that in some instances portions of special handling charges were recorded in either(i) a prepaid expense account, and then amortized into the facilitating payment account over time; or(ii) a customs/duties account. Ex. 22 (Pl.s Resp. to Def. Ruehlens Interrog. No. 8). Even assumingthis caused Nobles books to be false, Mr. Middleton made clear in his deposition that (i) he, and notMr. Ruehlen, made the decision to amortize certain charges over time, and (ii) to the extent any portion ofthe charges were booked to the customs/duties account, it was simply a mistake by the Divisionaccounting department. Ex. 12 at 141:22142:16.



26/47

21

did not rely on Mr. Ruehlen in determining how payments should be recorded in Nobles books.

See supraat 17. In light of these undisputed facts, case law and simple logic forecloses each of

the SECs books-and-records claims against Mr. Ruehlen. See, e.g., SEC v. Shanahan, No. 4:07-

CV-270, 2010 WL 148440, at *56 (E.D. Mo. Jan. 12, 2010) (granting summary judgment on

Section 13(b)(2)(A) aiding and abetting claim and agreeing that because it was not [the

defendants] responsibility to maintain the [companys] books and records, his failure to do so

cannot constitute aiding and abetting); SEC v. Nacchio, 704 F. Supp. 2d 1099, 1107, 111518

(D. Colo. 2010) (granting summary judgment on Section 13(b)(2)(A) aiding and abetting and

Section 13(b)(5) and Rule 13b2-1 falsification claims where the defendant was not an

accountant and not involved in decisions as to how [] revenue [was] booked); SEC v. Leslie,

No. 07-3444, 2010 WL 2991038, at *27, 32 (N.D. Cal. July 29, 2010) (granting summary

judgment on Rule 13b2-1 claim where the evidence showed that the companys auditors did not

rely on defendants alleged misrepresentations in preparing the companys financial records, and

therefore [a]ny inaccuracies in the . . . accounting . . . cannot be the result of these

misstatements); SEC v. Rivelli, No. 05-cv-1039, 2010 WL 2775623, at *5 (D. Colo. July 14,

2010) (granting summary judgment on Section 13(b)(2)(A) aiding and abetting and Rule 13b2-1

claims where the accountant who made the accounting entries at issue did not report to, or take

direction from [the defendant], and where there was no evidence that [the defendant]

concealed any information from [the responsible accountant] or from any of [the companys]

senior management); SEC v. Cedric Kushner Promotions, Inc., 417 F. Supp. 2d 326, 337

(S.D.N.Y. 2006) (granting summary judgment on Section 13(b)(2)(A) aiding and abetting claim

where there was no evidence to support the claim that the defendant, a non-accountant

consultant who was also a director, was responsible for [the companys] books and records . . . ,



27/47

22

or that he aided and abetted any violation with respect to th[at] requirement[]); In re Yesner,

Exchange Act Release No. 184, 75 SEC Docket 156, 2001 WL 587989, at *36 (ALJ May 22,

2001) (finding insufficient evidence to support Rule 13b2-1 claim against respondent who did

not supervise the activity giving rise to the allegedly false books and records and where the

individuals in the . . . accounting department took their direction from a vice president of

finance as opposed to the respondent).10

Lacking any evidence that Mr. Ruehlen made or directed any of the accounting entries

for the payments at issue, the SEC appears to base its claims on allegations that (i) Mr. Ruehlen

allowed the payments to be booked as facilitating payments, or (ii) the payments were booked

to that account with Mr. Ruehlens knowledge and approval. SeeSAC 119, 123, 135, 137,

139, 141, 144, 145, 150 (emphasis added). But even assuming that the evidence supported these

allegationswhich it does notreviewing and approving the manner in which the payments

were recorded is not the same thing as falsifying a corporate book or record, no matter how

many times the contention is repeated. Patel, 2009 WL 3151143, at *2728, 3336; see also

SEC v. Nacchio, 438 F. Supp. 2d 1266, 128486 (D. Colo. 2006) (the fact that the defendant

knew of and failed to disclose an allegedly false accounting practice was insufficient to

establish that he caused[the issuers] books and records to be falsified or aided and abetted the

issuers keeping of false books and records) (emphasis in original). Nor can Mr. Ruehlens

involvement in seeking CFO approval to pay IC Networks invoices constitute a knowing

falsification of a subsequent accounting entry for the transactions. See, e.g., SEC v. Patel, No.

10 Notably, many of the cases cited above granted summary judgment or dismissed theSECs (i) books-and-records claims and (ii) internal accounting control claims, including those that theSEC has now voluntarily dismissed in this matter, on thesame groundsi.e., both sets of claims failedbecause the SEC had not alleged or presented evidence sufficient to show that the defendants had any rolein, or responsibility for, the accounting judgments at issue. See, e.g., CedricKushner, 417 F. Supp. 2d at337;Nacchio, 704 F. Supp. 2d at 1107, 111518.



28/47

23

07-cv-39, 2008 WL 782465, at *1819 (D.N.H. Mar. 24, 2008) (dismissing SECs Section

13(b)(2)(A) aiding and abetting claim because the affirmative conduct attributed to [the

defendant]negotiating the . . . deal [that was later allegedly improperly accounted for]is far

too attenuated from the creation of false corporate records to qualify as aiding and abetting a

violation of section 13(b)(2)(A)).11

2. There Is No Evidence That Mr. Ruehlen Believed That ThePayments At Issue Were Unlawful Under the FCPA

Even assuming that the accounting can somehow be attributed to Mr. Ruehlen, there is no

evidence to support the SECs claim that Mr. Ruehlen falsified any book or record

knowingly. To show that Mr. Ruehlen possessed the requisite knowledge, the SEC must show

that Mr. Ruehlen was aware that, in light of the true nature of the transactions, it was improper

to record them as facilitating payments. SEC v. Espuelas, 905 F. Supp. 2d 507, 518 (S.D.N.Y.

2012); see alsoS. Rep. No. 95-114, at 9 (1977) (the term knowingly connotes a conscious

undertaking . . . to falsify records). Given the SECs theory of why Nobles books and records

were falsei.e., they were recorded, but did not actually qualify as a matter of law, as

facilitating paymentsthe SEC must establish that Mr. Ruehlen understood and believed that

the payments were unlawful under the FCPA.12 Cf.Leslie, 2010 WL 2991038, at *27 (granting

11 Moreover, to the extent the SEC argues that Mr. Ruehlen violated the books-and-recordsprovisions by failing to correct the entries after they were made by the accounting department, thatclaim fails as well. As even the SEC has recognized, the responsibility to correct a known falsification .. . arises only when the individual in question is in some respect responsible for the records or controls, or

otherwise supervises the activity giving rise to the violation. Foreign Corrupt Practices Act of 1977,Exchange Act Release No. 34-17500, 21 SEC Docket 1466, 1981 WL 3638521, at *8 (Jan. 29, 1981).

12 Because Rule 13b2-1 does not include a scienter requirement, courts have applied areasonableness standard to determine whether a violation of the Rule has occurred. See, e.g., SEC v.Das, 723 F.3d 943, 954 (8th Cir. 2013). But the only basis for the SECs contention that Mr. Ruehlenacted unreasonably with respect to the manner in which payments related to temporary import permitswere recorded is that he knewthe payments did not qualify as facilitating payments. As such, the SECsinability to prove that Mr. Ruehlen acted knowingly is equally fatal to the SECs Rule 13b2-1 claim. See,e.g.,Espuelas, 905 F. Supp. 2d at 52526 (granting summary judgment on Rule 13b2-1 claim where the



29/47

24

summary judgment on Section 13(b)(2)(A) aiding and abetting claim where the SEC failed to

establish that the defendants not only knew of the relevant accounting principles but also knew

how to apply them correctly). But there is no evidence that Mr. Ruehlen actually held that

belief.

The SEC appears to contend that Mr. Ruehlen must have known that payments in

connection with temporary import permits and extensions did not qualify as facilitating payments

because he knew that the granting of temporary import permits was discretionary and the

payments were not small, two factors identified in Nobles APM as potentially relevant to

whether a payment could qualify as a facilitating payment.

13

SeeSAC 62, 115. But there is

no evidence that Mr. Ruehlenan operations employee in Nigeria who was not tasked with

making, nor qualified by training or education to make, the determination of whether a payment

satisfied the statutory exception(i) had any developed understanding of those factors;

(ii) believed that they were bright-line rules that negated the applicability of the exception to the

payments in connection with temporary import permits14; or (iii) believed that the executives

who were charged with approving the paymentswho were fully aware of the size and purpose

of the payments and had access to professional and legal advice that Mr. Ruehlen did notwere

SEC based its claims . . . solely on the thesis that [the defendant] knew that it was improper to make thealleged accounting entry, but then failed to establish a genuine issue of material fact as to the defendantsknowledge of the true nature of the transactions in question, and explaining that although Rule 13b2-1imposes a reasonableness requirement rather than a scienter requirement, the SEC had not articulatedan alternative argument as to why [the defendants] behavior was unreasonable).

13 Ex. 62 7.6.5.1 (In general terms, a small payment to assure or speed the proper

performance of a foreign officials duties that does not involve a discretionary action by such official maybe considered a Facilitating Payment.).

14 As discussed more fully in Mr. Jacksons memorandum, Mr. Ruehlen attended an FCPAtraining program conducted by T&K in November 2002 which used an example of a $10,000 payment toa government official to overcome a problem relating to importing or exporting a rig. See Def.Jacksons Mot. Summ. J. at 89; Ex. 25; Ex. 17 at 89:1690:3. Those materials concluded that thefacilitating payment exception might apply, and did not suggest that there is any monetary cut-off forwhat may qualify as a facilitating payment.



30/47

25

acting in bad faith. Cf. SEC v. Goldsworthy, No. 06-10012-JGD, 2007 WL 4730345, *15, 19 (D.

Mass. Dec. 4, 2007) (granting summary judgment on Section 13(b)(5) and Rule 13b2-1 claims

where the defendant act[ed] in accordance with the instructions from others in the company

who had more knowledge about the deals at issue and whom he had no reason to distrust).

The onlyevidence the SEC points to in support of the idea that Mr. Ruehlen knew that

payments related to temporary import permit were questionable under the FCPA is

Mr. ORourkesdecision in early 2005 that those payments would not be included with the other

payments that received blanket quarterly approval from the CFO. According to the SEC, that

bifurcated approval structure shows that Mr. Ruehlen understood that payments related to

permits were large, unusual, non-routine payments that did not qualify as facilitating

payments. SAC 115. But the evidence contradicts the SECs allegation. Indeed,

Mr. ORourkewho was fully satisfied that the payments were lawfultestified during the

SECs investigation that payments to Nigerian officials in connection with temporary import

permits were not included in the blanket approval requests because they were not as frequent

as the other payments the Division was making, and not for any other reason.15 Ex. 15 at

436:10-16;see alsoEx. 14 at 87:2188:6.

The SECs allegation is further undermined by a record replete with evidence that

demonstrates Mr. Ruehlens attitude when confronted with other payment requests that he did

believe might run afoul of the FCPA. Mr. Ruehlen refused to even attempt to pursue CFO

approval for various types of payments requested of Noble during the relevant period, including

15 The SECs contention seems to be another example of making the facts fit the theory. IfNoble had included payments in connection with temporary import permits with those grouped forquarterly approval, the SEC undoubtedly would have alleged that such grouping evinced an intent tobury those payments with unrelated smaller payments and thereby conceal them from heightenedscrutiny. By breaking the payments out and submitting them separately, Noble employees increasedtransparency and ensured appropriate review at the highest levels within the company.



31/47

26

(i) a 2005 request by a government official that Noble help the official furnish his new

apartment, and (ii) numerous requests for campaign donations during election season in early

2007. Exs. 70, 71; Ex. 1 at 97:598:14; Ex. 57 at 1; Ex. 14 at 203:4204:25. In fact,

Mr. ORourke described the latter incidents to Nobles Audit Committee in February 2007; told

the Audit Committee that Mr. Ruehlen followed Nobles policies to the letter; and described

Mr. Ruehlen as a strong mitigating control factor with respect to Nobles FCPA risk. Ex. 57 at

1. SeeKrim v. BancTexas Group, Inc., 989 F.2d 1435, 1449 (5th Cir. 1993) (Unsupported

allegations of bad faith will not suffice to enable a party to survive summary judgment,

especially in a case in which there is evidence that the defendant acted in good faith.) (internal

quotation marks and citations omitted).

3. Section 13(b) Does Not Require That Payments Be RecordedIn An Account Named Unlawful Bribes

As Congress recognized when it enacted Section 13(b), an accurate record is one that

reflect[s] transactions in conformity with generally accepted accounting principles. S. Rep.

No. 95-114, at 8; see also Joseph P. Covington & Iris E. Bennett, Practicing Under the U.S.

Anti-Corruption Laws 2:03[A] n.34 (2013 Supplement) (hereinafter Covington & Bennett)

([T]he touchstone [of] . . . compliance with Section 13(b)(2)(A) is whether the books and

records are sufficiently accurate to permit the issuer to generate GAAP-compliant financial

statements.). Here, it is undisputed by the parties experts that there is nothing in GAAP or any

other authoritative accounting literature that requires issuers to maintain and record payments in

an account labeled unlawful bribes. Ex. 77 (Alan Bell Expert Rep.) at 6, 32, 34-37; Ex. 2

(Alan Bell Tr.) at 6:18-22, 246:11-12; Ex. 7 (Jeffrey Harfenist Tr.) at 216:1217:13. The SECs

claim that Noble violated Section 13(b)(2)(A) by failing to make and keep such an account

therefore fails for the simple reason that the applicable accounting standards do not require an



32/47

27

account entitled unlawful bribes. Cf. SEC v. Coffman, No. 06-cv-00088, 2007 WL 2412808, at

*1617 (D. Colo. Aug. 21, 2007) (SEC failed to carry its burden of proving that the defendant

had falsified any books or records because the SEC could not show that the accounting treatment

it advocated for was required under the applicable accounting standards).

Moreover, [t]he essence of Section 13(b)(2)(A) is that the bookkeeping entry . . .

should reflect the true economic substance of the transaction. . . . Covington & Bennett

2:03[A][2] (citing H.R. Rep. No. 94-831, at 10 (1977)) (emphasis added). Here, the economic

substance of the transactionsi.e., that they were payments to government officialswas

abundantly clear from the manner in which they were recorded, since a facilitating payment is,

by definition, a payment to a government official. As such, this case bears absolutely no relation

to cases where payments to government officials were recorded in a manner to disguise or

conceal them16the principal evil that Section 13(b)(2)(A) was designed to prevent. Cf.U.S.

Sec. & Exch. Commn, Report of the SEC on Questionable and Illegal Corporate Payments and

Practices, at 3 (May 12, 1976) (reporting that the SECs investigations leading up to the

enactment of the FCPA uncovered falsifications of corporate financial records[] designed to

disguise or conceal the source and applicationof corporate funds misused for illegal purposes)

(emphasis added).17

16 Cf. DOJ Criminal Division & SEC Enforcement Division, A Resource Guide to theFCPAat 39 (2012), (noting that in prior FCPA enforcement actions, payments to government officialshave been mischaracterized as commissions or royalties, consulting fees, sales and marketing

expenses, scientific incentives or studies, travel and entertainment expenses, rebates or discounts,after sales services fees, petty cash withdrawals, free goods, intercompany accounts, supplier /vendor payments, and write-offs).

17 Accepting the SECs position would also result in troubling consequences that Congresscould not have intended. As construed by the SEC, an issuer violates Section 13(b)(2)(A)which doesnot contain a scienter requirementin any instance where payments to government officials (i) arejudged in good faith to be lawful but are later determined to violate the FCPA, and (ii) were recorded asanything otherthan unlawful bribes when they were made (indeed, even if they were simply recordedto an account entitled payments to government officials). Moreover, employees involved in such



33/47

28

II. The Court Should Grant Summary Judgment On The SECs Claim ForKnowing Circumvention Of Nobles System Of Internal Accounting Controls

Section 13(b)(5) of the Exchange Act provides that [n]o person shall knowingly

circumvent . . . a system of internal accounting controls . . . described in [Section 13(b)(2)]. 15

U.S.C. 78m(b)(5) (emphasis added). Although the Exchange Act does not define the term

circumvent, courts have construed that term in accordance with its ordinary meaning in a

variety of contexts. See, e.g.,Mayer Brown LLP v. IRS, 562 F.3d 1190, 1192 (D.C. Cir. 2009).

With slight variations, circumvent is defined as to avoid or overcome by artful

maneuvering. American Heritage Dictionary, Second College Edition 275 (1991).18

Section 13(b)(2)(B), in turn, requires issuers to devise and maintain a system of internal

accounting controls sufficient to provide reasonable assurances that the following objectives are

met:

(i) transactions are executed in accordance with managements general or specificauthorization;

(ii) transactions are recorded as necessary (I) to permit preparation of financialstatements in conformity with generally accepted accounting principles

[GAAP] or any other criteria applicable to such statements, and (II) to maintainaccountability for assets;

(iii) access to assets is permitted only in accordance with managements generalor specific authorization; and

(iv) the recorded accountability for assets is compared with the existing assets atreasonable intervals and appropriate action is taken with respect to anydifferences.

transactions who believe that the payments were unlawful could be criminally liable for aiding and

abetting the issuers violation of Section 13(b)(2)(A) unless they admit their illegal conductnotwithstanding their Fifth Amendment rightsin the issuers books and records by recording thepayments as unlawful bribes. No plausible interpretation of Section 13(b) can support such results.

18 See alsoWebsters New World Dictionary 255 (3d ed. 1988) (defining circumvent asto get the better of or prevent from happening by craft or ingenuity); Websters Ninth New CollegiateDictionary 243 (1988) (defining circumvent as to manage to get around[,] esp[ecially] by ingenuity orstratagem); The New Merriam-Webster Dictionary 147 (1989) (defining circumvent as to check ordefeat[,] esp[ecially] by stratagem).



34/47

29

15 U.S.C. 78m(b)(2)(B). This definition of a system of internal accountingcontrolsalso

referred to as internal controls over financial reporting (or ICFR)pre-exists the FCPA and

was adopted by Congress from authoritative accounting literature. S. Rep. No. 95-114, at 7-8;

S. Rep. No. 94-1031, at 11 (1976). Examples of internal [accounting] controls include manual

or automated review of records to check for completeness, accuracy and authenticity; a method

to record transactions completely and accurately; and reconciliation of accounting entries to

detect errors. McConville v. SEC, 465 F.3d 780, 790 (7th Cir. 2006).

To establish a violation of Section 13(b)(5), therefore, the SEC must prove that

Mr. Ruehlen, by artful maneuvering, avoid[ed] or overc[ame] Nobles systemof internal

accounting controls. Because there is no evidence to support the SECs various theories of

circumventionmany of which also fail as a matter of law under this standardthe Court

should grant summary judgment on this claim.

A. There Is No Evidence That Mr. RuehlenWho Received CFO Approval ForEvery Payment At Issue In This MatterCircumvented Nobles System

Of Internal Accounting Controls

The SECs principal theory of circumvention is that Mr. Ruehlen sometimes

authorized Nobles customs agents to make payments to government officials without first

obtaining approval from the CFO, as required by Nobles APM.19 SAC 40 (emphasis added);

see also Ex. 22 (Pl.s Resp. to Def. Ruehlens Interrog. No. 11). But it is undisputed that

Mr. Ruehlen requested and received authorization for every one of the payments made to IC

Network during Mr. Ruehlens tenure as Division Manager; not a single one of Nobles CFOs

(or any other witness) testified that Mr. Ruehlen violated company policy; and not a single CFO

19 Ex. 62 at 7.6.5 ([Y]ou should not authorize or make any payment or offer of paymentof anything of value to any foreign official . . . without the prior written authorization of the CompanysChief Financial Officer . . . .).



35/47

30

testified that his decision to approve any payment would have turned out differently had

Mr. Ruehlen sought approval earlier. In light of this evidence, there is no genuine dispute that

the payments at issue were executed in accordance with managements general or specific

authorization. 15 U.S.C. 78m(b)(2)(A)(i);see also122 Cong. Rec. 30,422 (1976) (statement

of Sen. Proxmire) (noting that the FCPAs internal accounting control provisions require[] that

the businessmen of the country must be responsible to set up an accounting system that will

inform them of what happens to their assets so that, if a bribe is paid, they will know).

Moreover, this theory of circumventionwhich the SEC did not bother to ask

Mr. Ruehlen about in his depositionis not premised on any artful maneuvering designed to

evade the APMs CFO-approval requirement. Rather, the SECs claim is essentially that

Mr. Ruehlenfailed to complywith the literal text of Nobles APM by sometimes not obtaining

approval early enough. But as the plain language of Section 13(b)(5) and its legislative history

make clear, circumventing a system of internal accounting controls requires more than a

merefailure to complywith aparticular internal accounting control. To hold otherwise would

mean that every time a public company employee failed to follow an expense policy to the letter,

that failure, regardless of how innocent or immaterial, would give rise to a federal law violation.

This surely is not what Congress intended. Indeed, Congress added Section 13(b)(5) in 1988 to

ensure that penalties were imposed on individuals for conduct calculated to evade a system of

internal controls, and not merely failing to comply with the FCPAs . . . accounting control

provisions. H.R. Rep. No. 100-576, at 916-17 (1988) (emphasis added). As such, this claim is

not only unsupported by any evidence, but also fails as a matter of law.



36/47

31

B. The SECs Other Theories Of Circumvention Are Meritless AndContradicted By The Undisputed Evidence

The SECs remaining theories of circumvention are contradicted by the undisputed

evidence, contradicted by the SECs own claims, or fail as a matter of law.

1. Audit Committee ResolutionThe SEC alleges that Mr. Ruehlen (i) circumvented and directly contravened an Audit

Committee Resolution that false paperwork would not be used to obtain temporary import

permits when the paper process was used in February 2005, and then (ii) failed to report its use

to the Audit Committee. Ex. 22 (Pl.s Resp. to Def. Ruehlens Interrog. No. 11);see alsoSAC

92. But the undisputed evidence shows that the Audit Committee never issued any such

resolution; and even if that was the Audit Committees direction to senior management,

there is no evidence that Mr. Ruehlen was told of that fact. See supraat 67. Moreover, it is

undisputed that Mr. Ruehlen communicated the use of the paper process to the Director of

Internal Audita senior executive with a direct reporting obligationto the Audit Committee

who independentlymade the decision not to report the matter in 2005 to the Committee. Ex. 14

195:3-11. This theory of circumvention is utterly without merit.

2. Backdated IC Network CertificationsThe SEC alleges that following an inquiry from Mr. ORourke in February 2007,

Mr. Ruehlen sought and obtained backdated certifications of [FCPA] compliance from I.C.

Networkwhich IC Network was required to execute annually per the terms of its Service

Agreement with Noble drafted by Robert Campbellfor 2005 and 2006, and then passed them

off as signed on the date indicated.20 Ex. 22 (Pl.s Resp. to Def. Ruehlens Interrog. No. 11);

20 The SEC also alleges that Mr. Ruehlen circumvented internal controls when he failedto ensurethat I.C. Network certified compliance with the FCPA on an annual basis as required under the .. . Service Agreement. Ex. 22 (Pl.s Resp. to Def. Ruehlens Interrog. No. 10) (emphasis added); see



37/47

32

SAC 166. There is no evidence to support these allegations. The evidence shows only the

followingafter Mr. ORourkes inquiry, Mr. Ruehlen sent a single copy of the certification

form that need[ed] to be signed by IC Network to Hans Hilhorst (an Operations Manager),

Ex. 60; and a week later, Mr. Hilhorst sent Mr. Ruehlen two copiesof the certifications that he

had received from IC Network, which were signed by IC Network and dated July 2005 and July

2006, respectively. Ex. 61. Neither Mr. Hilhorst nor any other witness testified that

Mr. Ruehlen asked that the certifications be backdated or that Mr. Ruehlen passed them off as

[having been] signed on the date indicated. SAC 166;see Ex. 8 at 115:11118:19. And even

if they were backdated, the SEC has no plausible explanation for how that resulted in a

circumvention of Nobles system of controls.21

Moreover, this theory of circumvention is premised on an erroneous interpretation of

Section 13(b)(2)(B) that the SEC has now apparently abandonedi.e., that in addition to

internal accountingcontrols, Section 13(b)(2)(B) also applies to any and all controls designed

to prevent violations of the FCPAs anti-bribery provisions. See, e.g., SAC 3 (alleging that

Defendants failed to implement sufficient controls to prevent the [alleged] bribery)

(emphasis added). But nothing in the FCPA or the securities laws applies Section 13(b)s

internal controls requirements to controls designed to prevent corrupt payments to foreign

officials. Covington & Bennett 2.03[B][2] n.52;see alsoDefs. Mot. Excl. Harfenist Test. at

also SAC 16465. Even assuming that Mr. Ruehlen was aware of the requirement prior toMr. ORourkes inquiry in February 2007, Mr. Ruehlens mere failure to follow up and ensure that thecertifications were received annually cannot constitute a knowing circumvention of Nobles system of

internal accounting controls. Simply put, forgetting to ask a vendor to turn in paperwork hardlyconstitutes a violation of federal law.

21 In particular, the SEC has never (i) explained the value or reliability of a Nigeriancustoms agents interpretation of U.S. law; (ii) established why it was improper for IC Network to certifycompliance as of an earlier period; (iii) demonstrated that anyone

sec v. ruehlen (ruehlen motion for summary judgment)

Documents