The FCPA Is No Joke
California Lawyer

The FCPA Is No Joke

July 2012

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High on the list of in-house lawyer concerns is how to keep companies on the right side of the Foreign Corrupt Practices Act. Yet for all the lip service the FCPA is paid, much of corporate America still seems woefully out of compliance with the federal anti-bribery law. How else to explain the more than $500 million in fines and forfeitures that the Justice Department collected last year for violations of the law? Or the scandal that erupted this spring when the New York Times broke a story about Wal-Mart employees allegedly paying out more than $24 million in bribes to Mexican government officials?

To be sure, any such payments would probably have occurred several years ago. But that's beside the point. Wal-Mart's lawyers and senior managers should have been on top of the situation from the get-go. But apparently that's not what happened, and so instead of being revealed in a press release from the company's public relations department, it was a team of investigators from the Times that brought the allegations to light.

Compare this scenario with the way another iconic American company behaved. In 2010, when top managers at Avon caught wind of possible FCPA violations within their company, they not only alerted the feds but also launched an internal investigation that has so far cost Avon almost $250 million. The investigation also resulted in resignations and firings - and that's before the government filed any charges.

Of course, some companies may believe that since everybody violates this law, it's OK to ignore it. A slightly more sophisticated view is that the FCPA imposes an American way of doing business on cultures where bribery is a widely accepted practice. But ours is a global economy where increasingly countries are having to play by the same rules. Just last year the United Kingdom enacted a tough new anti-bribery law. And even in China - which Transparency International ranked last year as the 75th most corrupt economy in the world - the state has been known to execute people convicted on bribery charges.

There is yet a third reason the Foreign Corrupt Practices Act still isn't being taken very seriously: Federal investigators sometimes seriously screw up.

I remember a couple years ago when news broke about an FBI sting operation at an arms trade show in Las Vegas. The 22 targeted employees worked for an assortment of small companies that sold items like handguns and bulletproof vests to police forces all over the world. Undercover FBI agents had posed as bribe-hungry buyers for an African government. In various meetings the agent/buyers and an informant working with them had told the company employees that they would have to pay a "commission" to someone in the African government to obtain orders to outfit the country's presidential guard.

At the time the arrests were reported, I was in Athens to give an FCPA training seminar to my company's European sales force. Needless to say, this was a very compelling news hook for my talk. But in the weeks and months to follow, the government's case fell apart. One reason was the failure of the undercover FBI agents ever to use the words bribery or kickback during their sting operation. (Instead, they talked about the "commission.") And the unprofessional, sometimes racy text messages that FBI agents exchanged with each other and their informant - a man with a checkered past - didn't help either. After a few acquittals and some hung juries, the Justice Department raised the white flag and abandoned all remaining prosecutions. Thus, what started out as a high-profile crackdown ended up looking like a TV sitcom.

It may seem a little odd for a corporate attorney like me to complain about bribery defendants getting off the hook. But when the government screws up that badly - never used the word bribery? really? - it doesn't make my job any easier. And that job, as I see it, is to make sure my people understand that FCPA violations are no laughing matter.

Rich Gray is the Silicon Valley-based vice president and group general counsel of Spirent Communications.

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