This year, many US companies have been on a bumpy rollercoaster ride with the DoJ and SEC when it comes to the four dreaded words: ‘Foreign Corrupt Practices Act‘ (FCPA).
With increasing international trade and attractive cross-border deals, the FCPA has leapt from a seldom enforced, broadly written statute to one of the highest law enforcement priorities today.
‘Companies should know what the FCPA prohibits, what it requires and what are their responsibilities under the law,’ warns Richard Cassin, a lawyer and creator of the FCPA Blog, a site that provides practical information about the FCPA and compliance. ‘The basic prohibitions in the antibribery provisions are that no one subject to the FCPA should corruptly give or promise to give anything of value to a foreign official, directly or indirectly, to obtain or retain business or gain an unfair advantage.’
Unfortunately, not every company understands the scope or the scale of the FCPA. Last week, California-based Lindsey Manufacturing, makers of electrical transmission towers, got a taste of the act when the company’s president, its CFO, and a Mexican sales agent were convicted by a federal jury in Los Angeles for bribing Mexican officials at a state-owned operation, Comisión Federal de Electricidad, through its sales agents during the period 2002-2009.
How did it end? It wasn’t pretty.
After a five-week trial the jury handed down guilty verdicts and the company’s high-powered execs now face a maximum penalty of five years in prison and a fine of at least $250,000 on the FCPA conspiracy charge, together with a further $100,000 for each of five additional FCPA counts.
‘In most cases, the alleged foreign bribery is a team effort, a lot of people are involved. The evidence trail they leave behind is easy for prosecutors and juries to follow,’ Cassin notes. ‘Phony contracts and dummy invoices, hot money bouncing between banks, cancelled checks, shell companies, two sets of books – it’s all there, like breadcrumbs on the ground.’
Lindsey Manufacturing is certainly not alone. This year has seen a string of corporations facing FCPA heat, including Innospec, a global chemical manufacturer, which recently agreed to pay more than $229,000 in penalties to settle charges after the company’s CEO was found bribing Iraqi and Indonesian officials to win contracts for the company’s specialty chemicals.
Then there was Maxwell Tech, where the SEC alleged that one of the firm’s subsidiaries bribed Chinese government officials in an effort to secure sales of its products. The technology company is now set to fork out $14 million in a bribery settlement.
So with such cases in mind, my message is plain: if you do business abroad, watch out. – A breach of the act could cost a lot; it might even destroy your business.
‘In a case last year involving a privately-held company that violated the FCPA, the DoJ required it to end operations and be dissolved,’ Cassin recounts. ‘[And] the worst that can happen (if a company is smacked with an FCPA violation) is that it will be liquidated.’
On the upside, Cassin, who was a senior partner in a major international law firm and managing partner of its Asia practice, helps clients comply with the FCPA and regularly assists companies facing compliance issues. He says it’s not too late to start dodging an FCPA probe. Below is some valuable guidance from the FCPA expert which should help with sniffing out problems.
[Article by Aarti Maharaj, Corporate Secretary]