Government Ramps Up Prosecution of Corporate Corruption

by Teresa Anderson

Government prosecution of companies under the Foreign Corrupt Practices Act (FCPA) remained steady in 2008 after an all-time high in 2007. The FCPA makes it a crime for U.S. companies to engage in bribery of any government's officials. At a conference April 21, 2009, a panel of government officials, legal experts, and corporate compliance officers warned that company executives must be aware of the act to avoid hefty fines and even prison sentences.

The Department of Justice (DOJ) was, as of the end of 2008, still pursuing more than 100 active cases under the act, according to a report issued by Hughes Hubbard & Reed LLP, a sponsor of the event along with BNA. The report, FCPA/Anti-Bribery Year-End Alert 2008, provides an overview of government action on the FCPA for 2008 and the beginning of 2009.

In addition to enforcement actions and case law, the DOJ provides opinion procedure releases addressing specific situations. These opinion procedures can be helpful to companies in complying with the FCPA, according to Kate Hamann, attorney with the DOJ's Fraud Section in Washington, D.C. The opinion procedures address specific questions from actual companies so they cannot be widely applied as is case law. However, Hamann noted, companies can use them to avoid legal pitfalls. Also, companies can seek an opinion procedure about a specific problem. Before companies take any action that might violate the FCPA, they can consult the DOJ. "This is one area of the law where if you have a question about an activity, you can ask us, and we'll tell you," said Hamann.

For example, in 2008, a nonprofit organization, TRACE International, requested guidance on its plan to provide travel and meal expenses for Chinese journalists. Because most media outlets in China are owned by the government, TRACE asked the DOJ whether paying for the journalists to attend a press conference would run afoul of the FCPA. In a detailed opinion procedure release, the DOJ concluded that it was okay to do this because TRACE could clearly document that the amount paid for the travel was reasonable and fell within the "promotional expenses" exception to the FCPA. The exception exempts expenses related to the promotion, demonstration, or explanation of a company's products or services.

Victoria Lazar, senior counsel for GE Oil and Gas in Houston, Texas, said that the first step in complying with FCPA is to foster a culture that is intolerant of corruption. Then, putting processes in place to conduct due diligence becomes easier. "This program is not just about the FCPA," said Hamann. "It's about wiping out corruption. Companies must start with the attitude that they don't break the law and go from there."

Several panelists also addressed the costs of FCPA compliance. Due diligence can be costly, especially in developing countries admitted Kevin T. Abikoff, partner with Hughes Hubbard & Reed LLP. However, he noted that this should serve as a red flag. "If a deal is so small or so expensive that you can't justify adequate due diligence, you shouldn't be involved in that deal," he said.


DOJ Opinion Release

A quote from Opinion Procedure Release 08-03:

"TRACE proposes to pay certain expenses for approximately 20 journalists employed by media outlets based in the People's Republic of China ("PRC") to enable them to attend a press conference being held by TRACE in Shanghai."

Shanghai is not in the US last time I checked - check your facts before you publish the story.

View Recent News (by day)


Beyond Print

SM Online

See all the latest links and resources that supplement the current issue of Security Management magazine.