FCPA Compliance in the Real World
If you follow any business new sites, you can’t help but notice that the U.S. government is talking tough about enforcement. Issues like insider trading, Foreign Corrupt Practices Act enforcement, and healthcare fraud are hot topics. I question the government’s ability to significantly step up enforcement efforts, particularly in light of budgetary issues related to doing so, but businesses can’t take a chance that they will be able to fly under the radar.
White collar criminal defense lawyer Brian Mahany writes on his blog Due Diligence about why this issue of enforcement and compliance is so important:
It’s not just the Department of Justice that looks at compliance efforts. The Securities and Exchange Commission also considers compliance efforts. For American companies doing business abroad, the Foreign Corrupt Practices Act and the soon to be implemented, tough U.K. Bribery Act look favorably upon businesses with effective compliance efforts.
Have American businesses heeded the warning? Apparently not. According to a study quoted in Corporate Counsel, only 3 of the 1,349 businesses convicted between 1996 and 2009 had effective compliance programs. The others had no or ineffective programs. Remember, even if a business with an effective compliance program is prosecuted, judges can still use evidence of the program’s effectiveness as grounds for a downward departure from sentencing guidelines.
The key to protecting a company is a thorough compliance program that is monitored for effectiveness. This isn’t cheap, but it’s certainly less expensive in the long run than an enforcement action by the Feds.
According to Richard Cassin’s FCPA Blog, the Justice Department had 150 ongoing FCPA investigations and prosecutions at the end of 2010. When you think about how many thousands of companies there are in the U.S., I suppose the odds are pretty good that a company won’t get tagged for an FCPA violation. But do you really want to chance it?
Take the case of Avon, for example. It’s a multi-level marketing cosmetics company that has been around for a long time. The average person probably doesn’t think of Avon as having exposure to international bribery troubles, but nothing could be further from the truth. Avon made Tom Fox’s top 10 FCPA investigations for 2010. According to Tom’s blog Avon’s FCPA problems were going to cost the company more than $215 million through 2010, with investigative costs of $130 million included in that total.
Any business in the U.S. engaging in transactions overseas is in danger of FCPA trouble. So how does a company go about implementing and/or improving a compliance program in the real world? There are plenty of resources out there, and one that is very good just came out. Aaron Murphy of Latham & Watkins (partner in the White Collar and Government Investigations Group) recently wrote a book, Foreign Corrupt Practices Act: A Practical Resource for Managers and Executives
I have just begun reading the book, and look forward to finishing it and writing a review here. I took a quick look at it, and am impressed with what I see. This truly is a “practical resource,” and seems to be a good starting point for anyone who is new to FCPA.
The bottom line is that the Foreign Corrupt Practices Act is one of several enforcement issues businesses may have to contend with if they are not careful. The head-in-the-sand approach to laws like this makes no sense. Such a stance can easily put a company out of business. Take the time to learn about the relevant laws, and then begin compliance efforts immediately.
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Tags: brian mahany, due diligence, fcpa compliance, internal investigation
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