Avoiding Foreign Corrupt Practices Act FCPA Violations and Fines Can Save Your Company
The Foreign Corrupt Practices Act of 1977 (known as the “FCPA”), was enacted for the primary purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to influence the ability to obtain or retain business, as well as to direct business to another company.
The FCPA applies to both public and private U.S. companies. When certain conditions apply, the FCPA also applies to non-U.S. companies with a U.S. subsidiary.
At its most basic level, the FCPA is about anti-bribery, but the reality of FCPA compliance is complex.
On its website, the U.S. Department of Justice (DOJ) provides a mechanism to allow companies to propose actual, fact-specific situations to the DOJ and receive feedback from the DOJ via its Opinion Procedure.
As a courtesy to assist with compliance, the DOJ provides its Opinion Procedure in fifty languages but cautions that companies should only place credence upon the English version.
Foreign Corrupt Practices Act fines and liability can be extensive when a company fails to properly comply with the Act. In the Department of Justice’s most recent FCPA filing, Alcoa World Alumina LLC, Docket No: 14-CR-00007-DWA agreed to plead guilty and pay $223 million in criminal fines to the DOJ. On top of that, the parent company of Alcoa will fork up another $161 million through disgorgement of profits to the SEC.
In U.S. v. Gregory Weisman, Docket No: 13-CR-00730-JEI, and U.S. v. Sigelman, Docket No: 13-MJ-02087-JS, the two former chief executive officers of a British Virgin Islands oil and gas company with U.S. and Columbia operations, in addition to other crimes, were charged with FCPA violations and fines carrying a maximum penalty of five years in prison for each violation and a fine of the greater of $250,000 or twice the value gained or lost. The Alcoa case ranked as third largest disgorgement of profits in the historical enforcement of the Foreign Corrupt Practices Act. It appears that FCPA penalties are growing steeper.
Foreign Corrupt Practices Act Fines and Statistical Data: Statistical data from the past year lends credence to the notion that FCPA Penalties and fines and penalties are increasingly have grown steeper over the years. In 2013, twelve companies paid $731.1 million to resolve FCPA cases. Worse yet, these figures exclude additional fines imposed by foreign governments for non-compliance with laws aimed at a similar purpose. In 2012, comparatively, twelve companies settled FCPA enforcement actions by paying a total of $259.4 million.
The Department of Justice itself advises that companies engaging in relationships with foreign businesses “should seek the advice of counsel.” Taking a preventive approach to avoid Foreign Corrupt Practices Act fines and liability by instituting an FCPA compliance program is the best way to head off FCPA violations.
The Department of Justice has been forthcoming in stating that having an effective compliance program in place positively impacts settlement negotiations in the face of FCPA violations.
There are a wide variety of sources that a thorough compliance program should account. To name just a couple: the corruption indices data provided by Transparency International and the keywords indicative of bribery problems in a wide variety of languages released by Forbes.
As Transparency International boasts, its Corruption Index that was first released in 1995 has been widely credited with putting corruption on the international policy agenda, which scores countries on the level of corruption perceived to exist within the country’s public companies. Transparency International also provides corruption indices based on region. Forbes also releases the top bribery terminology in an array of languages.
Not only are the liability numbers of FCPA violations daunting, but so is the breadth of liability. For example, a company can even inherit Foreign Corrupt Practices Act fines and violations – handed down from one company to the next via mergers/acquisitions. Notably, when a company comes under the gun for Foreign Corrupt Practices Act violations and FCPA compliance violations, a gut response is to begin hurriedly instituting such a program.
In light of growing liability and the complexity of FCPA compliance, the costs of taking preventive action and utilizing counsel to develop an effective FCPA program prior to paying the penalties for violations is undoubtedly a better approach than a knee-jerk reaction set off after it’s too late.
For immediate help with avoiding Foreign Corrupt Practices Act fines and violations, contact a Foreign Corrupt Practices Act defense attorneys at 1866-601-5518. FREE CONSULTATION.