The FBI recently arrested twenty-two business executives and employees for violations of the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA), which prohibits any U.S. person from making a corrupt payment to a foreign official for the purpose of obtaining or retaining business. This investigation hits close to home as one of the individuals arrested is the founder and vice president of a Woodbridge, Virginia company that supplies security-related articles for law enforcement agencies and governments worldwide. It is the largest investigation and prosecution against individuals in the history of the law.
The recent arrests are the result of the first extensive use of undercover federal agents related to the FCPA. In this investigation, the FBI undercover agent posed as a sales agent representing the defense minister of an African nation. After making contact with the defendant, the agent relayed that he had been tasked with obtaining a variety of military and law enforcement products for the African nation’s presidential guard. Allegedly, the $15 million deal struck with each defendant included a 10% payment going directly to the defense minister and another 10% going to the “sales agent.” In addition to allegedly attempting to pay the FBI agent improper “commissions,” the indictment also alleges that the undercover agent met the executives in luxury hotels and expensive restaurants, that the executives provided inflated price quotes for the products and wired bribe money to the “sales agent.”
The Department of Justice (DOJ) has clearly become more aggressive in its enforcement of the FCPA. Notably, the DOJ and Securities Exchange Commission (SEC) have brought substantially more cases against individuals in the past couple of years. In 2008, the Corporate Crime Reporter reported the Deputy Chief of the Justice Department’s Fraud Section as stating that prosecution of individuals is on the rise because of explicit Department policy – sending people to jail will have a credible deterrent effect.
Clearly, business executives and owners of companies who engage in international business transactions must operate with a heightened degree of scrutiny and take considerable measures to prevent their companies from violating the FCPA.
Complying with the FCPA
In general, if your company operates internationally, particularly in high-risk countries or industries, then a rigorous FCPA compliance program is warranted. The elements of such a program depend on many factors, but typically include a comprehensive FCPA policy prohibiting improper payment to foreign officials, education of employees regarding the law, monitoring employee actions for compliance, and procedures and policies related to reporting potential violations.