Learn From the Costly FCPA Mistakes of Others


A recent Compliance Week article, An Expensive Lesson on FCPA Compliance [subscription required], provides some valuable insights on the direction that our government is taking with enforcement. Foreign Corrupt Practices Act violations are a huge focus of the feds right now. Why? Because there are plenty of violations, there is pressure on the SEC to enforce laws of some sort, and there is money to be made in fining the violators.

According to Richard Kassin at The FCPA Blog:

But no one should be surprised the FCPA is on the radar. In 2004, Mr. Breuer said, two individuals were charged under the FCPA and criminal fines collected that year were around $11 million. In 2009 and 2010, over 50 individuals have been charged, 35 await trial, and nearly $2 billion in fines have been collected.

The SEC press release on the case at hand is here, and it isn’t pretty. Seven companies got whacked for bribing customs officials so they got expedited imports, lower duties and taxes, and extended contracts. Collectively, they will pay $236.5 million to the government. The guilty parties are Panalpina, Pride International, Tidewater, Transocean, GlobalSantaFe, Noble Corporation, and Royal Dutch Shell.

Compliance week reports:

As part of the settlements, the companies agreed to adopt new or to modify existing internal controls, policies, and procedures to ensure that they maintain: (a) a system of internal accounting controls designed to ensure that they make and keep fair and accurate books, records, and accounts; and (b) a rigorous anti-corruption compliance code, standards, and procedures designed to detect and deter violations of the FCPA and other applicable anti-corruption laws.

The agreements detail 13 elements that should be covered, such as a written compliance code; support of, and commitment to, that code by senior management; and compliance standards and procedures to help prevent violations of anti-corruption laws and the company’s code of conduct. Those standards and procedures should include policies that cover items such as gifts, hospitality, entertainment, customer travel, and facilitation payments, among others.

Tom Fox, an FCPA compliance expert, says that there is something to be gained from this for companies not involved in the immediate case: He says the Department of Justice is giving them a lot of information on what it thinks are best practices. What a great start for an FCPA compliance program!

Compliance Week reports:

While the agreements cover many areas companies already know are FCPA risk areas, such as facilitation payments, travel, and gifts, [Fox] says, “Companies don’t necessarily recognize paying their taxes as a risk area.”

They also underscore the importance of conducting a risk-based assessment of the company’s FCPA compliance challenges. Specifically, they direct the companies to develop their compliance standards and procedures based on a risk assessment addressing their individual circumstances—in particular, their foreign bribery risks, including geographical organization, interactions with government officials, industrial sectors of operation, involvement in joint venture arrangements, importance of licenses and permits in operations, degree of governmental oversight, and goods and personnel clearing through customs and immigration.

Oversight of anti-corruption polices and procedures is also addressed. The executive overseeing this mush have direct reporting to “independent monitoring bodies” like internal audit, the board of directors, or a board committee and must have an “adequate level of autonomy from management.”

The Panalpina Plea Agreement offers a wealth of information on the things the company must do in the area of FCPA compliance. Companies can use this as guidance to enhance their own efforts in this area.

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