By David Simon
and John Turlais
Foley & Lardner LLP
What has in the past been a concern principally for massive multi-national corporations in the oil-and-gas and defense industries is now a real and serious risk for almost any company — large, medium or small; public or private. In other words, any company that sells, manufactures or otherwise operates oversees.
The FCPA is a federal anti-bribery statute. It imposes criminal penalties on those found guilty of paying of anything of value to a government official or employee of a state-owned commercial enterprise in order to exercise improper influence, or to obtain or retain business. Unlike most federal laws, the FCPA applies extra-territorially.
That means that a U.S. company or the employee of one can be prosecuted in this country for bribes paid abroad. This prohibition extends to bribes paid by a subsidiary or an affiliate — or even by an agent with little connection to the U.S. headquarters.
The consequences of getting caught up in an FCPA enforcement action can be catastrophic. Criminal fines routinely register in the tens of millions of dollars. The largest fines and penalties are in the hundreds of millions. Company officers and other employees, meanwhile, can be prosecuted and sent to prison.
FCPA enforcement remains a top enforcement priority for the U.S. Department of Justice and the Securities and Exchange Commission. In fact, the DOJ has repeatedly stated that FCPA enforcement is second among its priorities only to anti-terrorism. Just last month, the DOJ announced the formation of three new FBI squads with more than 30 special agents assigned to investigate instances of foreign bribery.
Foley GRS provides companies with a comprehensive, technology-driven, turnkey solution that addresses the hallmarks of an effective anti-corruption compliance program identified by the DOJ and SEC.
And FCPA enforcement is no longer directed solely toward large multi-national corporations. Many actions have been brought against small- and medium-sized companies. Just last year, the head of SEC’s FCPA enforcement division, while announcing a $2 million settlement with Smith & Wesson Holding Corp., made clear that mid-size companies are now in regulators’ crosshairs.
“This is a wake-up call for small- and medium-size businesses that want to enter high-risk markets and expand their international sales,” said Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA unit.
To manage FCPA risk, every company should have meaningful corporate-compliance standards and internal controls designed to prevent and detect FCPA violations. An effective FCPA-compliance plan has many benefits, including:
- Preventing violations in the first place, through clear, effectively communicated anti-bribery policies and through employee training;
- Allowing a company to detect potential problems and find remedies early, before they grow into big problems that are likely to result in an enforcement action;
- Winning credit with enforcement authorities in the event of an FCPA complaint. An effective compliance plan is something the DOJ will consider in determining whether it should even bring criminal charges against a company; and
- Obtaining meaningful reductions in the fines and penalties to which a company would otherwise by subject if it were charged with an FCPA violation.
It is a mistake for small- and medium-sized companies that operate internationally to ignore the real and significant risks posed by the FCPA. Burying one’s head in the sand will not make the risk go away. Committing to developing and following an effective FCPA compliance plan will yield significant benefits and is a prudent way to mitigate risk.