DOJ Takes Aim at FCPA Violators

Although it's been more than 30 years since Congress passed the Foreign Corrupt Practices Act of 1977 (FCPA) to prohibit Foreign Bribery by U.S. Corporations, the Department of Justice (DOJ) recently dusted it off for renewed use as a potent legal weapon.

The FCPA makes it a criminal offense for a U.S. citizen or organization to bribe a foreign official for the purpose of gaining a commercial advantage. In 2008, the DOJ stepped up enforcement efforts, prosecuting 20 more FCPA-related cases than it had the year before. This year, the number is likely to be even higher, according to a DOJ press release dated February 11, 2009.

Government Agencies Working in Tandem towards a Crackdown

The DOJ is not the only federal agency to crack down on FCPA-related offenses. According to a Bureau of National Affairs press release titled "Key Trends in FCPA Enforcement in 2008" (2/9/09), the Securities and Exchange Commission (SEC) also increased its scrutiny of corporate bribery schemes, bringing 13 prosecutions in 2008, up from eight cases in 2006.

The ongoing economic downturn is playing a big part in the increased number of FCPA prosecutions. In reviewing recently proposed legislation designed to use law enforcement as a means of improve the economy, Acting Assistant Attorney General at the DOJ's Criminal Division, Rita Glavin, had this to say:

"The financial crisis demands an aggressive and comprehensive law enforcement response, including vigorous fraud investigations and prosecutions of securities and commodities firms, banks, and individuals that have defrauded their customers and the American taxpayer and otherwise placed billions of dollars of private and public money at risk."

Consequences for Individuals and Organizations Doing Business Abroad

Newly-proposed legislation and increased prosecution of FCPA offenders are not the only recent developments likely to have an adverse effect on individuals and organizations doing business abroad. Further consequences to be faced are:

• The government is raising the stakes by seeking larger monetary penalties from convicted offenders;
• The accused are now being targeted by more than one government agency: reasonable suspicion of a corporation's involvement in foreign bribery means being scrutinized not only by the DOJ and SEC, but also being sighted in the cross-hairs of collateral civil litigation brought by competitors. Also, activist organizations seeking to take political advantage about difficulties with foreign countries may also file lawsuits against the accused;
• Federal prosecutors are developing closer relationships with counterparts abroad to promote coordination between countries as they seek to enforce FCPA Compliance. Indeed, proposals are being considered to extent the jurisdiction of federal law abroad, giving U.S. and foreign law enforcement increased prosecutorial power and strengthening their ties for more concerted-and, therefore, more effective-attacks on alleged FCPA violations.

A Case in Point: Fines Imposed on Kellogg, Brown & Root

Kellogg, Brown & Root (KBR), a multinational construction and engineering services corporation, was charged under the FCPA with offering bribes to officials in Nigeria in return for lucrative government contracts. The DOJ vigorously prosecuted the case, which resulted in a guilty plea in February of this year and a criminal fine of $402 million against KBR-the second largest FCPA penalty every paid.

KBR also had to settle legal action brought by the SEC, which resulted in additional fines, bringing the total amount of civil and criminal penalties levied against the corporation to $579 million.

But U.S. prosecutors didn't stop with the corporate entity. KBR's CEO also was indicted. The DOJ's prosecution ended in a plea bargain in which the CEO pled guilty to the charge of "conspiracy to violate the FCPA."

Outlook for the Future

Numerous FCPA commentators insist that the trend of increased vigilance by the government in its enforcement of FCPA will last throughout 2009 at least.

In a press release dated February 11, 2009 and titled "Kellogg Brown & Root LLC Pleads Guilty to Foreign Bribery Charges and Agrees to Pay $402 Million Criminal Fine," the DOJ prosecutor was quoted as saying that the agency "will continue to investigate these matters by working in partnership with other law enforcement agencies, both foreign and domestic, to ensure that corporate executives who have been found guilty of bribing foreign officials in return for lucrative business contract are punished to the full extent of the law."

Because it's widely believed that the government's failure to prosecute white-collar crimes was responsible for the current nationwide economic downturn in the wake of the subprime mortgage crisis, Congress is seeking to appropriate additional funds for DOJ prosecutions. New legislative proposals and more money will combine to produce a single adverse effect on U.S. corporate efforts to win business abroad, namely, harsher sentences and stiffer monetary penalties for those convicted of violating the FCPA. In the opinion of numerous legal commentators, the U.S. governments is now moving towards an over-criminalization of white collar offenses.

If you are an individual or organization doing business abroad, or affiliated with companies having international commercial interests, you need to steer clear of any involvement with the FCPA. Because of DOJ efforts to ramp up prosecution of FCPA-related offenses, playing it too close to the line could end in disaster for you, your company, or your business affiliates.

The Blanch Law Firm's pro-active approach to every criminal case can help you endure an on-going government investigation and, if caught early enough, we can nip FCPA-related difficulties in the bud to prevent criminal charges from even being filed against you.

For a free and confidential consultation, Contact The Blanch Law Firm by calling 917-472-9883 or 1-866-690-9316.