By Patrick, Michael; Renzulli, John
National Defense , Vol. 95, No. 681
Companies and individuals are facing dramatically higher penalties and costs for failing to comply with anti-bribery laws around the world, and especially in the United States.
Earlier this year, British Aerospace agreed to plead guilty in the United Kingdom and United States and pay fines totaling 30 million pounds--a record criminal fine in the U.K.--and $400 million to the United States. The average corporate penalty remained relatively low through 2006, usually less than $5 million--but from 2007 to 2009 the average corporate penalty exceeded $45 million.
While corporate penalties are climbing, the Department of Justice, and Securities and Exchange Commission, which carry out enforcement of the foreign Corrupt Practices Act, are trying to stamp out bribery by holding individuals responsible. In 2005 through 2007, fewer than 10 individuals were charged under bribery laws by the Department of Justice, but the agency brought more than 10 enforcement actions in 2008, over 15 in 2009 and almost 25 through April of 2010--including 22 individuals arrested on FCPA charges in January at the SHOT Show in Las Vegas, most of whom were executives for defense-related companies.
When an indictment is issued, agencies are permitted to suspend an individual or company from government contracts pending the outcome of the case. Given the risks involved, companies are taking steps to evaluate their compliance programs.
One of the keys to understanding the latest uptick in enforcement actions is the considerably broader application given to the FCPA's terms by the U.S. government. Congress passed the FCPA in 1977 to curb participation of domestic corporations, foreign subsidiaries of U.S. corporations and individuals in the corruption of foreign governments. In its broadest terms, the FCPA criminalizes corrupt payments--defined broadly as "anything of value"--to a foreign government official that are intended to obtain or maintain business.
Payments to foreign officials, whether they are direct or through third parties or labeled as "fees" or "commissions," will violate the FCPA if they are intended to obtain or maintain business from the foreign official's government.
One of most common misconceptions of the FCPA is mat conduct outside the United States cannot violate the law. Christian Sapsizian, a French citizen, was sentenced to 30 months in prison in 2008 for bribes arranged and paid entirely outside of the United States. DoJ claimed jurisdiction was appropriate because his former employer had American depositary receipts listed in the United States, and Sapsizian had caused related payments to be wired from U.S. banks. US authorities arrested Sapsizian during a layover at a Florida airport while he was traveling to Paris.
In light of this broad application of the FCPA, U.S. companies are obligated to ensure subsidiaries, employees, agents and distributors act properly and in conformity with anti-bribery laws. FCPA violations can be based on the wrongful acts of others under the FCPA's third-party payment provision, which prohibits improper payments made to "any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly to any foreign official."
For each FCPA violation, corporate fines can be assessed up to $2 million. …