Valérie Antoinette's Blog

Some of you wrote to me observing that dissecting the Foreign Corrupt Practices Act (FCPA) was a bit depressing so close to the Holidays.  You have a point. But giving you access to this important information that could keep you and your company out of legal trouble is meant as our gift to you.

Once again, here is Mr. Bruce Alan Johnson finishing up our  FCPA three-part series:

“When the world’s largest retailer, Wal-Mart, disclosed a few days ago that it is thoroughly investigating itself for suspected violations of the Foreign Corrupt Practices Act, do you honestly believe that your own company can’t also possibly be in violation? Wal-Mart maintains a huge staff of inside counsel, has a solid compliance policy in place worldwide, and employs a large number of compliance executives. Yet even Wal-Mart had to say publicly, “We are taking a deep look at our policies and procedures in every country in which we operate. As a result of information obtained in that process, we have begun an internal investigation related to our compliance with the Foreign Corrupt Practices Act.” (Wal-Mart operates 9,000 stores across 28 countries.) Wal-Mart has learned the bitter lesson that there is simply no way to know if one’s company is in compliance with or in violation of the FCPA without turning to outside experienced help that knows the many dark turns and corners of the Act, and can spot the danger flags and errant practices.

We explained last week that if your company is hit with a Deferred Prosecution Agreement (DPA) by either the Department of Justice or the Securities & Exchange Commission over an accused violation of the Foreign Corrupt Practices Act (FCPA), you’re basically going to have to fold. (We also pointed out that this is a vicious practice that completely eviscerates the sacred legal principle in this country of the presumption of innocence, but that’s for another blog.)

There was a case just a week ago that some have hailed as a major breakthrough in favor of American business under Federal scrutiny in connection with the FCPA. The senior executives of the Lindsey Manufacturing Company had been convicted of violating the FCPA, but from the very outset, these executives decided to fight the government. After a protracted court fight and millions of dollars in legal fees, a US District Court sent down a ruling that overturned their convictions—the first and only such reversal in FCPA history, out of hundreds of successful Federal victories. Clearly, the odds are not with you.

Perhaps the most telling remark came from Lindsey’s lead counsel, Jan Handzlik (of the law firm Venable), who said: “In addition to charging huge multinationals with bribing foreign officials, the Justice Department has made a practice of going after small companies with a limited ability to fight—they have no choice but to roll over because it’s a matter of life and death.” [emphasis added]

It is indeed a matter of life and death for your company. The intricacies of the FCPA simply cannot be mastered through a seminar or webinar. This is because, over the years, even basic definitions of terms like “foreign official” have been twisted to mean relationships that most American companies don’t even know exist in their own overseas operations.

Remember: it doesn’t really matter which countries you’re doing business in or with: the FCPA applies to ALL of them. But if you’re concerned that your company might get flagged and tagged by the Federal government, we suggest you see the map in our 28 November blog. Are there, though, any specific countries which tend to trigger FCPA investigations and accusations more swiftly than others? Unofficially, yes. They include—but are by no means limited to—Brazil, Russia, India, China (two companies indicted so far are Lucent and ITT), Korea, Mexico, Nigeria, Afghanistan, Venezuela, United Arab Emirates, Iraq, Philippines, South Africa, Russia, Kazakhstan, Saudi Arabia, most of Eastern Europe, Argentina, Ukraine, Turkey, Pakistan, Indonesia. Thailand, and the Philippines. Actually, we’re not sure we should have offered that unofficial list, because you might look at it and breathe a sigh of mock relief. Whew—we don’t deal with any of those, so we’re fine! On the contrary, those countries are the ones that are likely to trigger automatic investigations. But investigations by the SEC or DOJ have been launched against American companies doing business in at least sixty-three other countries not on this list! Bottom line: you’re not safe.

Oh, that one successful reversal case we cited above? The judge was outraged by some of the Federal practices exposed during the trial. They included FBI agents who lied to grand juries; material falsehoods used to obtain search warrants under false pretenses; improperly reviewed confidential e-mail correspondence between one defendant and her lawyer; reckless failure to comply with discovery obligations; and outright misrepresentations to the court. But since we know these now to be longstanding Federal practices in FCPA investigations, you can be certain that any fight you elect to wage is going to be terribly expensive and terribly difficult to defend successfully. Far wiser is a decision right now to undertake a thorough test of your company’s compliance with the Foreign Corrupt Practices Act. It’s the only hope you have of staving off a fight that could bring your company to its knees. As the lawyer put it, “…It’s a matter of life and death.” It is.”