The FCPA: What Is Your Risk?

The FCPA is a very broad statute. It essentially covers any U.S. company. The companies which have to particularly pay attention to the anti-bribery parts of the statute are those that have significant overseas operations. More particularly, when you’re dealing with foreign government agencies, officials, that’s when you have to keep your radar up to make sure that you’re in compliance with the FCPA.

An Increase in Investigations

In recent years, we’ve seen stepped-up enforcement of the statute by the U.S. law enforcement officials. They’ve also done that in cooperation with foreign government officials and law enforcement agencies. For example, in December of 2008, a foreign company that is subject to the FCPA paid a record $800 million fine to settle charges under the U.S. statute and also paid a significant amount of money under the foreign statute.

Prosecution of Individuals

The FCPA has always been a statute for which criminal prosecution could occur. I’m going to read something from the DOJ’s Criminal Division from a recent speech. They say:

“The prospect of significant prison sentences for individuals should make clear to every corporate executive, every board member and every sales agent that they will seek to hold you personally accountable for FCPA violations.”

That statement indicates exactly what’s going on—that the U.S. law enforcement efforts are focused not only on corporations and collecting large amounts of money but putting responsible individuals in jail.

Warning Signs

Companies should be particularly sensitive to FCPA issues when they’re beginning a new business in a foreign country or acquiring an existing business in a foreign country or engaging in some sort of joint venture with an existing business. Things to look for are:

• Is there a history of corruption in the country in which you’re engaging in business?
• Is there a culture of the giving of excessive gifts?
• Is there a history of prior violations in a similar industry?

Some other warning signs are that the company is directed to use a particular agent or it’s suggested that a particular agent be used by the new business. Those agents, obviously, have to be carefully checked out. Background checks have to be conducted.

Avoiding Problems

Every company should have an effective education program where they educate and re-educate their employees, particularly on an annual basis, about the FCPA enforcement policies of the company. Each of the employees of the company should be required to sign a certification that they have read the business conduct guidelines and the compliance policies of the company, and that they agree to abide by them. In addition, the company will have to have an effective internal audit program. There is no system of compliance policies that has yet been devised that will permit a company to absolutely protect itself against the payment of a bribe in violation of those policies. Once a company uncovers a violation of the FCPA, it is important that swift remedial action be taken. That remedial action will include disciplining the employees who are responsible in some appropriate manner.

Repercussions of an Investigation

Some of the repercussions can be, you could be subject to a monitor. Another potential repercussion is you could end up with securities litigation and take a hit to your stock price. Another possible repercussion of an FCPA investigation is that you could be subject to debarment if you do business with the government.