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By Bethany Hengsbach

The United Kingdom’s answer to the Foreign Corrupt Practices Act (“FCPA”) has arrived.  The UK Bribery Act 2010, which received Royal Assent on April 8, 2010, is both stricter and broader than the FCPA.  The U.K. Ministry of Justice announced on July 23, 2010 that the implementation of the Act will be delayed until April 2011, which gives companies much-needed time to prepare for the changes it will bring.

The following article by Bethany Hengsbach was originally published in the Financial Executive. To read the article please click here, or visit the Financial Executive website.

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By Bethany Hengsbach

Primarily as a result of the recent dramatic increase in the U.S. government’s enforcement effort, the Foreign Corrupt Practices Act (“FCPA”) has received a great deal of attention of late. The financial reform legislation signed by President Obama on July 21, 2010 adds an incentive that will likely further increase the dangers posed to companies and individuals by the FCPA. The law contains a provision that will reward whistleblowers who voluntarily provide information leading to the successful enforcement of U.S. securities laws, including the FCPA, with between 10% and 30% of any recovery over $1,000,000. The whistleblower must provide “original” information, not already known to the SEC and not merely derived from existing investigations, audits, or reports. The SEC will have discretion to set the amount within the 10% - 30% range, based on the significance of the information to the success of the action, the whistleblower’s degree of assistance, and the interest of the SEC in using whistleblower payments to deter problematic conduct in the future. The provision also extends the reward to “related actions” taken by other prosecuting agencies based on the reported information, and thus will apply to actions initiated by the DOJ and other federal, state, and foreign law enforcement agencies. 
 

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By Neil Ray

The U.K. Bribery Act 2010 (the “Act”) represents a fundamental reform of the U.K. anti-bribery regime and greatly expands the potential legal exposure of companies and individuals that do business, including practice of a trade or profession, in the U.K. For example, it criminalizes purely private bribery with no involvement of a government official and creates a new corporate offence of “failing to prevent” bribery. These offences are subject to unlimited fines and a 10-year maximum prison sentence for individuals. The Act bears some similarity to its U.S. counter-part, the Foreign Corrupt Practices Act (“FCPA”), but is in general stricter and broader. Accordingly, companies with business operations in the U.K. must not assume that even robust FCPA compliance programs will assure compliance with the requirements of the Act.
 

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By Bethany Hengsbach

An often-overlooked provision in the financial reform legislation now before Congress would allow employee whistleblowers to receive a reward of up to 30% of the fines collected by the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) from corporations who violate the Foreign Corrupt Practices Act (“FCPA”). We have reported in this blog on several occasions the increase in FCPA enforcement by the government in recent years. The passage of a bill containing this proposed whistleblower provision could lead to even more government enforcement, as well as multi-million dollar awards to whistleblowers.
 

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The recent explosion in Foreign Corrupt Practices Act ("FCPA") enforcement has made headlines of late, with three articles in the Wall Street Journal alone during the week of April 12th. Numerous multi-million dollar settlements and indictments of individuals demonstrate that no company with any international presence is beyond the reach of the statute.
 

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2010 is promising to be a banner year for enforcement of the Foreign Corrupt Practices Act ("FCPA"). In mid-January of this year, the DOJ unsealed sixteen indictments charging twenty-two individuals with violations of the FCPA's anti-bribery provisions. A few weeks later, in early February, British defense industry giant, BAE Systems plc ("BAE"), announced that it would plead guilty to one charge of conspiring to make false statements to the U.S. Government regarding its ongoing compliance with the FCPA. In connection with its guilty plea, BAE also agreed to pay a $400 million penalty. Notably, the DOJ did not allege that BAE violated the FCPA or that BAE executives willfully looked the other way while their agents or subordinates violated the Act. Instead, the crux of the DOJ’s case appears to be that BAE failed to install a compliance system capable of detecting FCPA violations in the first place.
 

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Recent trends demonstrate that virtually every industry is vulnerable to potential liability under the Foreign Corrupt Practices Act (FCPA) and global Anti-Bribery Conventions. Moreover, regulators are increasingly conducting both industry-wide reviews and global investigations of targeted organizations. The recent indictments of twenty-two individuals in the military equipment industry demonstrate that, regardless of size, any company involved in international commerce is now a potential target.
 

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On January 19, 2010, the Department of Justice (“DOJ”) unsealed sixteen indictments charging twenty-two individuals with violations of the Foreign Corrupt Practices Act (“FCPA”), allegedly arising from schemes to bribe foreign government officials. The DOJ also announced that, in connection with the indictments, the FBI had executed fourteen search warrants across the U.S., and the City of London police had executed seven search warrants in the U.K. The product of an FBI sting operation hailed in a DOJ press release as “the largest single investigation and prosecution against individuals in the history of the DOJ’s enforcement of the [FCPA],” the indictments may signal a fundamental shift in the DOJ’s ongoing campaign “to erase foreign bribery from the corporate playbook.”
 

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On July 10, 2009 a federal jury in New York convicted Frederic Bourke, co-founder of handbag maker Dooney & Bourke, of conspiring to violate the Foreign Corrupt Practices Act ("FCPA"). The conviction is significant for the two FCPA enforcement trends it highlights. First, the prosecution of Mr. Bourke demonstrates that both the U.S. Department of Justice and the U.S. Securities and Exchange Commission are focused on investigating and charging individuals for violating the FCPA. In the first half of 2009 alone, the Department of Justice indicted eight people on charges of violating the FCPA, illustrating that no longer will companies alone be the subject of FCPA prosecutions.
 

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Please click here to read about the Foreign Corrupt Practices Act: provisions, penalties, compliance programs and trends.

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The Foreign Corrupt Practices Act (FCPA) is a federal law which prohibits companies from obtaining or directing business through the payment of bribes to foreign governmental officials and political figures. The renewed focus on corporate accountability in recent years has led to a dramatic increase in the number of FCPA enforcement actions -- from 5 in 2004 to 38 in 2007. The attached presentation, utilized in connection with a recent in-house presentation, summarizes the FCPA and why it is imperative that every company doing business in the global marketplace be aware of its provisions and serious penalties, including civil penalties, criminal fines, and imprisonment, in the event of a violation.

Click here to view the presentation.

Presented by:

Bethany Hengsbach

(213) 617-4125

bhengsbach@sheppardmullin.com

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A Dozen Questions to Ask

• Are you an issuer, US person or US entity?
• Have any foreign agents or subsidiaries?
• Are you a foreign person or company whose transactions touch the US?
• Promised or paid anything of value to a foreign official (governmental, political, NGO) for business purposes?
• Did you or a third party know or suspect it would be passed on to a foreign official?
• Have you consciously disregarded circumstances indicating improper payments occured?
• Do you maintain an adequate system of internal controls?
• Was the payment to facilitate a routine governmental action (grease payment) permitted by the foreign country?
• Do your books fairly reflect the transactions and properly characterize expenditures, such as "entertainment?"
• Have you conducted comprehensive due diligence on your foreign business partner?
• Is your industry historically prone to corruption?
• Are you doing business in a country with a "corrupt" environment?

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