Is Your Company Heading Towards An FCPA Investigation? Do You Know How To Steer The Ship?

Enacted in 1977, the FCPA prohibits corrupt payments to foreign officials for
the purposes of procuring or maintaining business. Today, adhering to the mandates of the FCPA is one of the most prominent issues in corporate compliance. A company that fails to take FCPA compliance seriously exposes itself to substantial risk.

The ramifications of a DOJ investigation on an organization can be considerable, settlements can be costly, and indictments can be crippling.

The FCPA has two constituent parts: (1) the record keeping and internal controls
provisions, primarily enforced by the Securities and Exchange Commission (the “SEC”) and (2) the anti-bribery provisions, enforced by the DOJ.1 This report focuses on compliance with the anti-bribery provisions, because they typically are the impetus for investigations and harsh penalties, which include civil fines, criminal sanctions, the loss of government contracts, and the loss of future contracts through disbarment.

To successfully prosecute an anti-bribery violation, the government generally must prove that an entity either offered or gave something of value to a foreign official for the purpose of favorably influencing such an official. The FCPA permits an exception for facilitating payments (i.e., those payments made to expedite ordinary and common actions of a foreign official, and not those payments used to procure or maintain business).

It also provides two affirmative defenses. First, defendants can prove that their payments or promises were lawful under the written laws of the relevant foreign countries. Second, defendants can prove that their payments or promises were reasonable and bona fide expenditures related to (1) the promotion, demonstration, or explanation of products or services or (2) the execution or performance of a contract with a foreign government. In accordance with the FCPA’s purpose of preventing corruption, both of these defenses are construed narrowly.

Companies derive three distinct benefits by establishing effective FCPA compliance programs. First, the DOJ explicitly places independent value on whether companies have effective compliance programs in their decision whether to pursue charges of FCPA violations. Second, effective compliance programs actually prevent future FCPA violations, thus limiting companies’ exposure to liability. Third, effective compliance programs assist companies in mitigating the harm resulting from any violations that are not prevented.1**

(1**The University of Chicago Corporate Lab Published by the Global Anti-Corruption Task Force )  

On June 10th, Kroll co-sponsored a Federal Corrupt Practice Act seminar  in New York City.  We sponsored the program with the law firm of Paul Hastings.

The FBI Special Agent in charge of a newly established New York City-based FCPA "squad" presented along with Joe Spinelli of Kroll, and the lawyers from Paul Hastings.  

Key Takeaways: from a very informative presentation.  

1) Transparency International reports $100 million (U.S.) paid in total brides every hour across the globe.

2) 1 in 4 survey respondents say they have paid a bribe. 25%

3) The U.S. Department of Justice is pouring resources into this area of law enforcement.  30 new full time prosecutors have been hired in Washington, DC.  3 new dedicated FBI squads (each with 8 FBI agents) - totaling 24 full-time agents and support staff have been established.

4) The FBI and DOJ are receiving increased international cooperation.  FBI agents are now stationed in friendly and cooperative countries.  Some of these countries are the source of investigative information.

5)  The FBI is using  investigative techniques - sting operations, informants, and wires, including wiretaps – techniques historical used in organized crime and other similar types of investigations.

6) The U.S. government plainly is making a huge investment in this area and that means more and more cases will be investigation and prosecutions initiated.  Other governments are investing in this area of investment as well and are providing “tips” to the United States.  The increasing prevalence of whistle-blowers is adding to the mix.

Developing good strategies to address these issues can help keep you company on course through calm seas.