Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



FCPA – A New Twist?

There was much fanfare in the general press in January concerning Department of Justice’s arrest and indictment of 22 executives and employees of companies that transact business involving military and law-enforcement products. 16 indictments were handed down in a case alleging there was a grand conspiracy to bribe foreign government officials in order to obtain and retain the presidential guard business for an African nation. The case hit the press when 21 of the 22 defendants were arrested at a Las Vegas trade show. The last defendant was subsequently arrested in Miami. What got everyone’s attention was the widespread use of undercover federal agents in making the case. While it has long been commonplace for law enforcement to use undercover agents, this was apparently the first time such efforts were used in pursuing violations of the FCPA or on such a massive scale.

Justice describes the scheme on its website this way: "During the operation, one of our investigators posed as a ‘sales agent’ representing the defense minister of an African nation (that country was not actually involved, so it was unnamed in the indictment). A business associate of the subjects initially introduced them to the sales agent. The agent said he had been tasked with obtaining various defense-related articles for that nation’s presidential guard and was interested in doing business with them…for a price."

It continues, "In the indictment, the defendants allegedly agreed to pay a 20 percent commission to win a portion of a $15-million deal to outfit the presidential guard…with the understanding that 10 percent of that money would go directly to the defense minister and the other 10 percent would go to the sales agent (our agent) making the deal."

As far back as the 1970s, undercover BIS agents were used to nab exporters with nefarious intentions. It should not be surprising, then, that the use of undercover agents keeps expanding into other areas.

This story demonstrates that it is more important than ever to properly vet your business partners. What procedures do you use? How often are they updated? How often does your company check to make sure those procedures are still being followed by your colleagues and co-workers?

While the financial mess caused by the meltdown of Enron, WorldCom, Tyco and others may have quieted down, in the current troubled economy, the public and law enforcement have little patience for those who do not play by the rules -- any significant rules in any context, not just the FCPA. If you get caught, be prepared to lose your job, pay very significant fines, and probably spend time in jail, even if you were not the boss.

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