The Foreign Corrupt Practices Act (“FCPA”) (15 U.S.C. §§ 78dd-1 et seq.) contains an anti-bribery provision that makes it unlawful for U.S. companies, U.S. citizens and resident aliens to bribe a foreign government official by offering him anything of value in order to assist in obtaining or retaining business or directing business to any person. Both the U.S. Securities and Exchange Commission (“SEC”) and the Department of Justice (“DOJ”) interpret this provision broadly. The FCPA also contains an accounting provision. This provision requires companies whose stock is registered with the SEC (“issuers”) to (1) maintain accurate books and records, and (2) create a system of internal controls to ensure that transactions are properly authorized. The SEC typically enforces civil violations while the DOJ prosecutes criminal ones, but they often conduct parallel investigations. The accounting provisions apply to all issuers, both foreign and domestic. The anti-bribery provisions generally require some connection between the bribery scheme and the territory of the U.S. An increasing number of foreign governments are cooperating with the U.S. in complementary foreign asset recovery schemes (e.g., Swiss Return of Illicit Assets Act; UK Bribery Act, also criminalizes commercial bribery).
In 2010, seven of the nine largest collective FCPA settlements involved non-U.S. companies. BAE Systems, a British defense, security and aerospace company was sentenced to pay a $400 million criminal fine for making false statements about its FCPA compliance program. Snamprogetti Netherlands B.V./ENI S.p.A. of Holland/Italy paid a $240 million criminal fine to settle DOJ charges for conspiracy and aiding and abetting violations of the FCPA. One of Snamprogetti’s three other joint venturers in the Bonny Island project to design and build liquefied natural gas production plants in Nigeria, Technip S.A. of France, also agreed to pay a $240 million criminal fine to resolve the DOJ’s charges of conspiracy and violating the FCPA, and agreed to disgorge $98 million to settle a civil action with the SEC. Daimler AG of Germany agreed to pay criminal fines and penalties totaling $93.6 million upon pleading guilty to conspiracy to violate the FCPA’s anti-bribery provisions and to violating those provisions for improper payments to Russian government officials to secure contracts to sell vehicles. Daimler also agreed to pay $91.4 million to settle civil charges with the SEC for violating the FCPA’s books and records and internal controls provisions. Alcatel-Lucent, a French telecommunications company, and three of its subsidiaries agreed to pay a $92 million penalty to resolve FCPA criminal charges based on the companies having made improper payments to foreign officials to obtain and retain business in Costa Rica, Honduras, Malaysia, and Taiwan. Panalpina, a freight forwarding company based in Switzerland, agreed to pay $70.56 million penalty and to plead guilty to FCPA anti-bribery charges for improper payments to government officials in Nigeria, Angola, Brazil, Russia, and Kazakhstan to obtain preferential customs, duties, and import treatment for Panalpina’s customers in connection with international freight shipments. Panalpina also paid $11.3 million in disgorgement to settle SEC civil charges, even though it technically is not an issuer, because Panalpina aided and acted as an agent of the issuers in violating the FCPA’s accounting provisions. ABB Ltd, a Swiss builder of power grids, and two of its subsidiaries agreed to pay $19 million in criminal penalties to resolve FCPA charges with the DOJ based on alleged misconduct in Mexico and Jordan.
The increased focus and resources devoted to FCPA enforcement, particularly against non-U.S. companies, by the SEC and DOJ suggests that FCPA prosecutions will likely continue. Certain industries have been, and likely will continue to be, a focus of SEC and DOJ enforcement efforts -- oil & gas, military and law enforcement products, pharmaceutical, and telecommunication. The DOJ and SEC have made it clear that large corporate settlements do not foreclose the possibility of individual prosecutions against the directors, officers and general counsels. To guard against FCPA exposure, multinational corporations should implement and monitor compliance procedures and stay up-to-date with industry best business practices. Taking a proactive approach to investigating and, if necessary, self-reporting FCPA violations to the SEC and/or the DOJ may avoid sizeable liability and criminal prosecution.
For further information, please contact: Nicholas P. Connon, Managing Partner and Chair of the Middle East Practice Group; Tel: +1.626.638.1757;
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