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FCPA-Inspired Civil Suits Take Center Stage

The always-helpful D & O Diary has a great post about FCPA-related civil litigation here. The topic is big news these days, with interest spurred by front-page suits brought by alleged victims of overseas public corruption -- most lately the government of Iraq, Bahrain's Alba and Denver oilman Jack Grynberg.

In the post and in a memo linked in the post here, the D&O Diary moves the discussion further downstream -- to shareholder derivative suits based on FCPA-related conduct or allegations. And the topic isn't merely academic.

There's Willbros' $10.5 million settlement of a class action suit after the company restated its financial results and upped its reserve to cover potential FCPA-related penalties; Immuncor's $2.5 million settlement of a suit claiming the company and some of its leaders misled investors about business practices and internal controls; and an ongoing securities lawsuit in which the plaintiffs claim that Nature's Sunshine Products, Inc. lacked internal controls and didn't properly account for foreign transactions.

Shareholder derivative suits have also been filed against BAE Systems and Alcoa (see Alba above) -- based on allegations of overseas public bribery. Those cases, the memo says, illustrate how leading plaintiffs securities lawyers are jumping with both feet into FCPA-related civil litigation.

The survey of coverage risks in directors' and officers' liability policies for FCPA-related suits of all types is eye-opening. For example, D&O policies sometimes contain a so-called "commissions exclusion." It precludes coverage for losses from claims related to payments to or for an agent or employee of any foreign government. If that sounds just like a prohibited payment under the FCPA, it's because the exclusion, as the memo notes, was created right after the FCPA's enactment. Then there's excluded coverage for FCPA-related fines and penalties, defense expenses for enforcement actions and . . . . well, lots more.

This time and always, the D&O Diary is a comprehensive source of reliable and otherwise hard-to-find information. A special thanks to Kevin LaCroix and his D&O Diary.

View our prior posts on the private right of action for FCPA-related conduct here.
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Full post as published by The FCPA Blog on July 09, 2008 (boomark / email).