SEC Penalizes Company For Foreign Corrupt Practices Act Violations

Companies that engage with government contracts overseas should be well aware of the harsh penalties associated with the Foreign Corrupt Practices Act violations (FCPA). 

Getting your internal staffed trained and executives aware of the steep fines and disruption of the business reputation can save you from unnecessary litigation, civil and criminal sanctions.

In a recent case, GlaxoSmithKline (GSK) agreed to pay a  $20 Million Penalty to Settle FCPA Violations on  September 30, 2016. 

The Security Exchange Commission (SEC)  investigation found that the GSK  involved schemes spanned a period of years and involved the transfer of money, gifts, and other things of value to health care professionals, which led to millions of dollars in increased sales of GSK pharmaceutical products to China’s state health institutions.

The participants included certain complicit sales and marketing managers within GSK’s China-based subsidiaries.

Lack of internal controls and policies:  One of the problems for GSK and any company involved with international business contracts or other federal government contracts overseas is their failure to develop and maintain sufficient system of internal controls for accounting and failure to implement effective anti-corruption compliance program policies that would to detect and prevent the schemes found by the SEC.

• Companies can be imputed FCPA penalties for failure to implement internal policies and controls

The possibility of settlement: As part of the settlement for its Foreign Corrupt Practices Act violations, GSK consented to the settlement order without admitting or denying the findings, and agreed to pay a $20 million civil penalty.  Also, the company was also tasked with providing status reports to the SEC for the next two years.

Not only does FCPA penalties imposed additional costly requirements for a corporation,  avoiding penalties can reduce public scrutiny as well as criminal and civil liability.

Collusion: As found in the GSK case, misconduct under the Foreign Corrupt Practices Act can include collusion between third parties and improper benefits.

Violations, Penalties, and Remedial Efforts

In some situations, as in the GSK case, the federal government may consider reasonable remedial efforts. This could include frequent briefings and internal investigations. This could show an effort to avoid future FCPA violations.

Expected changes: Given the new administration and potential efforts envisioned, government contractors should be particularly mindful of the increased oversight with business relations with China and other foreign countries. 

The increased oversight and FCPA penalties could even increase. Companies involved in government investigations should seek professional help in an effort to reduce the impact to the company while showing the potential to minimize future instances. Find out more about FCPA penalties.

For help or legal representation in cases involving government contractors and  Foreign Corrupt Practices violations and penalties under procurement fraud statutes, call the government contract attorneys at Watson & Associates, LLC for immediate help. Call 1-866-601-5518. FREE INITIAL CONSULTATION.