The Foreign Corrupt Practices Act: A Pitfall in International Trade

18 February 2015 Manufacturing Industry Advisor Blog

The Foreign Corrupt Practices Act (“FCPA”) should be top of mind for any manufacturer conducting or considering international business. Indeed, any doubts that the government was still interested in investigating and prosecuting companies and individuals for violations of the FCPA were put to rest in 2014. This is so because government enforcement authorities disclosed two enforcement actions in 2014 that resulted in two of the top 10 fines ever paid for violations of the FCPA. Don’t just take our word for it. “This is a wake-up call for small and medium-size businesses that want to enter into high-risk markets and expand their international sales,” said the chief of the Security & Exchange Commission’s FCPA enforcement group after settling an FCPA case.

What Does the FCPA Cover?

Generally speaking, the FCPA prohibits the payment of a bribe or the offer to pay anything of value, directly or indirectly, to a foreign official for the purpose of influencing the official in some official act in order to obtain or retain business. The FCPA also imposes certain recordkeeping and internal control requirements on public companies. The anti-bribery provisions are particularly relevant to companies that engage in business in certain foreign countries, including emerging giants such as Brazil, Russia, India, and China, where common business practices can lead companies to run afoul of the FCPA. These realities have led to an abundance of FCPA-enforcement actions, which can cost companies hundreds of millions of dollars.

The U.S. Government Is Dedicated to FCPA Enforcement

Although several executives have prevailed in FCPA-enforcement actions in recent years, companies have not been as fortunate. And the government has not been deterred; the FBI continues to aggressively investigate FCPA violations. In fact, last month, the Department of Justice (“DOJ”) announced three new squads dedicated solely to foreign bribery. In 2013, more than 90 public companies reported they were subjects of FCPA investigations. Recently, among others, Bank of New York Mellon announced it is under investigation for FCPA violations. The bottom line: the government does not appear to be deterred from aggressively enforcing the FCPA in the foreseeable future.

FCPA Violations Cost Companies

In December 2014, the DOJ’s settlement with Alstom SA set a new record–$772M. Earlier in 2014, Alcoa, Inc. entered into a $384 million settlement with government authorities, also breaking into the “top ten” of FCPA settlements of all time. Yet it is not just the fines and penalties that raise concerns, it is the costs of investigation.  Indeed, in 2014, Wal-Mart Stores, Inc. disclosed that it had spent over $282 million dollars in fiscal year 2014 alone for investigation fees and expenses in response to an FCPA investigation.

Because the FCPA includes internal control requirements (for public companies) and the penalties are so steep, Benjamin Franklin’s old adage, “An ounce of prevention is worth a pound of cure,” could not be more apropos. At the end of the day, the consequences of an FCPA investigation range from “huge” to “catastrophic.”

Stay tuned because the Manufacturing Industry Advisor will cover the FCPA in more depth in coming posts. Specifically, the MIA will address topics such as who is subject to the FCPA, what the FCPA actually prohibits and requires, defenses and exceptions to the FCPA, the FCPA’s penalties, and keys to an FCPA compliance program.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Related Services

Insights

Hatch Comments on DNC-Related Construction Projects in Milwaukee
14 June 2019
Milwaukee Business Journal
Bernard Quoted on Debt-Relief Settlement with ITT Tech Lender
14 June 2019
Wall Street Journal
Dodd and Daughter Profiled in Wisconsin Golf
13 June 2019
Wisconsin Golf
Brinckerhoff Comments on SCOTUS Ruling in Patent Case
11 June 2019
Intellectual Property Magazine
Review of 2020 Medicare Changes for Telehealth
11 December 2019
Member Call
2019 NDI Executive Exchange
14-15 November 2019
Chicago, IL
Association for Corporate Counsel Annual Meeting 2019
27-30 October 2019
Phoenix, AZ
Foley's Government Contracts Annual Update
16 October 2019
Liviona, MI