Home -> Law Blog Directory -> International Law Blogs -> The FCPA Blog

International Law

: The FCPA Blog

Cases We'll Never Report

Not all Foreign Corrupt Practices Act violations make the news. Here are three reasons why:

Reason #1. Ignorance. Some companies don't discover their own FCPA problems. It sounds improbable, but it happens. The usual scenario is this: One or more employees in a foreign outpost game the company's accounts-payable or expense-reporting system to create a slush fund. They use the cash to bribe government officials to obtain business. Sometimes it's one employee in a sales job or government-relations role, or a small group whose pay and bonuses depend on the office's performance. The expatriate supervisor, if there is one, is duplicitous or oblivious, so the phony accounting and illegal payments remain a local secret.

Reason #2. Silence. When organizations know about their own FCPA problems, they have a choice -- to self-disclose or keep quiet. Public companies ought to be disclosing just about everything these days. Sarbanes Oxley targets illegal conduct anywhere, including overseas bribery. So the number of issuers not reporting potential FCPA offenses -- both antibribery and books and records violations -- should be small. Privately-held companies, however, are more likely to stay silent. That's most common, we suspect, where founding-families are still in charge. Sadly for them, someone in the conspiracy of silence usually plays ball with the DOJ to save their own skin. The former insiders -- now known as co-operating witnesses -- are a potent prosecutorial weapon.

Reason #3. Compliance. How many potential FCPA violations are discovered, self-disclosed to the DOJ or SEC, but never publicized or prosecuted? Nobody on the outside knows the numbers. But here's what happens. When a compliance-minded organization reports its own potential violation to the feds, it also demonstrates that:

(1) It had an effective compliance program before the problem occurred;

(2) There are no prior offenses;

(3) Although the compliance program didn't prevent the conduct this time, it detected it quickly;

(4) This was an isolated event -- a rogue employee broke the rules for personal gain and not for the company's sake;

(5) The culprit has already been fired and the company is suing for restitution of misused corporate funds;

(6) Supervision over the problem office has been reorganized and managers replaced;

(7) The company's compliance program has already been reviewed and tweaked to prevent similar incidents from happening;

(8) The company reported the problem to authorities in the U.S. and the host country right away, and is eager to help them with their own investigations; and

(9) Management's commitment to compliance has never been stronger.

A year goes by, maybe more. One day the company's lawyers receive a call from the DOJ. It's off the record. "We're satisfied justice has been served," the caller says. "Case closed."

.

Full post as published by The FCPA Blog on June 22, 2008 (boomark / email).