a purpose or are merely parasitic ac-tions which feed off FCPA scrutinyand enforcement in this new era.So, yes, companies should be con-cerned about increased shareholderlitigation, as well as other aspectsthat have come to deﬁne this new era.The question remains, though: hasFCPA scrutiny and enforcement be-come a boondoggle for many in- volved in FCPA Inc. (including plain-tiffs’ lawyers), and has this all be-come just a ‘‘racket’’ (to paraphrasethe title of a Forbes article)?
: How have companies seek-ing to defend FCPA enforcement ac-tions been most successful?
: In the FCPA’s history,only two companies have mounted anactual legal defense against FCPA charges and put the DOJ to its burdenof proof. In 1991, Harris Corporation(and certain of its executives) pre- vailed in an FCPA trial when the judge granted a verdict of acquittalafter the DOJ’s evidence.In 2011, Lindsey Corporation (andcertain of its executives) were foundguilty by a federal jury of conspiracyto violate the FCPA and substantiveFCPA violations (26 CCW 158,5/18/11). However, the convictions were vacated and the charges dis-missed after the trial court judgefound numerous instances of pros-ecutorial misconduct.Both companies succeeded byforcing the DOJ to prove elementsand by shining a light on the DOJ’sinvestigative methods.
: What are the difﬁculties of complying with this law?
: The book exposes the fal-lacy that ‘‘good companies don’tbribe, period’’ by demonstrating,among other things, that several com-panies that have resolved FCPA en-forcement actions or been the subjectof FCPA scrutiny have been desig-nated, during the same general timeperiod, as being among the ‘‘world’smost ethical companies.’’So why is compliance difﬁcult foreven the most well-managed and well-intentioned companies doingbusiness in the global marketplace? Among other reasons, consider what 99 percent compliance reallymeans. A typical multinational com-pany employs over 10,000 workers as well as over 1,000 third parties (oftenrequired by local law). Even if thiscompany engaged leading compli-ance professionals and spent millionsimplementing FCPA compliance poli-cies and procedures consistent withbest practices, and even if 99 percentof the company’s employees andthird parties abided by the policiesand procedures in all respects on adaily basis, this still means that morethan 100 instances of non-compliance—and thus potentialFCPA scrutiny—occur every day.If a student scores 99 percent onan exam, it is a phenomenal accom-plishment worthy of celebration. If apitcher takes the mound and throws99 percent strikes, it is a phenomenalaccomplishment worthy of celebra-tion. You get the point. Yet when itcomes to 99 percent FCPA compli-ance within a business organization,the company is, subject to the opaquediscretion of the enforcement agen-cies, susceptible to an enforcementaction.There ought to be a more sensibleposition as a matter of law, and I havelong suggested an FCPA compliancedefense applicable when a non-executive employee or agent actscontrary to a company’s pre-existingcompliance policies and procedures. An FCPA compliance defense is sup-ported by a chorus of former high-ranking DOJ ofﬁcials and would bet-ter align the FCPA with FCPA-likelaws in other jurisdictions.
: How far do companies haveto go in overseeing the activities of third party agents working in othercountries? What types of due dili-gence would you recommend?
: In passing the FCPA, Con-gress recognized that a direct prohi-bition of payments to ‘‘foreign ofﬁ-cials’’ to ‘‘obtain or retain’’ business,by itself, would be ineffective as pay-ments could be funneled to ‘‘foreignofﬁcials’’ through various third par-ties. Thus, the FCPA’s so-called third-party payment provisions apply notonly to direct payments, but pay-ments to any person while ‘‘know-ing’’ that money will be given orpromised to a ‘‘foreign ofﬁcial.’’ TheFCPA’s knowledge deﬁnition encom-passes not only actual knowledge,but so-called constructive knowledgeas well as willful ignorance.
[T]he majority of corporate FCPA enforcement actions concern the conduct of various thirdparties. Companies are wise tohave speciﬁc policies andprocedures regarding pre-engagement, engagement andpost-engagement of third parties.
Indeed, the majority of corporateFCPA enforcement actions concernthe conduct of various third parties.Because of this, companies are wiseto have speciﬁc policies and proce-dures regarding pre-engagement, en-gagement and post-engagement of third parties. Such policies and pro-cedures include, among other things,pre-engagement due diligence de-signed to illicit information capableof identifying various red ﬂags, me-morializing in a written agreementthe relationship with the third party,and post-engagement monitoring andsupervision of a third party.Even though the FCPA contains abroad knowledge standard, the ques-tion nevertheless must be asked whether the current enforcement en- vironment has created a paranoiaamong companies regarding thirdparties. Companies may be inclinedto start from the mind-set that a thirdparty is corrupt and is an FCPA viola-tion waiting to happen and may en-gage in extensive and expensive duediligence in an attempt to prove thenegative. Such paranoia is often fear-based, not risk-based, not to mentionunfair to the third party, yet is oftenfacilitated by this new era of FCPA enforcement.
: The top 10 largest FCPA settlements have occurred just since2008; does this indicate an enforce-ment trend of the agencies seekinghigher penalties?
: This is because, to a largeextent, several foreign companiessubject to the FCPA (such as Sie-mens, Total, and Daimler) resolvedlarge historical cases during this timeperiod (23 CCW 385, 12/17/08). More-over, three of the cases in the top 10involve the same historical briberyscheme related to a $6 billion oil andgas project in Nigeria.
2014 BY THE BUREAU OF NATIONAL AFFAIRS, INC. CCW ISSN 0886-0475