September 17, 2024 • 37 mins
The United Nations and World Economic Forum calculates that the cost of corporate corruption globally is $5 trillion a year, or 5% of the world’s 2022 GDP.
Corruption can hamper economic growth by discouraging investment, increasing transaction costs, and distorting market competition. It can perpetuate poverty by diverting resources away from essential services and benefiting the wealthy and powerful. It can undermine democratic institutions and erode public trust in governments. It can hinder sustainable development by diverting resources away from essential infrastructure and social services.
The Foreign Corrupt Practices Act, or the FCPA – the government’s leading weapon in this global war on corporate crime – has far-reaching implications for companies engaged in international business. For those who violate it the consequences can be severe. And with the recent addition of the Foreign Extortion Prevention Act (FEPA), the federal government has even more to work with.
I had the pleasure of learning more about this fascinating and complex area of the law by speaking with two attorneys with Reed Smith who practice in the firm’s Global Regulatory Enforcement Group.
Mark E. Bini is a former federal and state prosecutor in New York, has led multiple multi-year cross-border investigations of corporations and individuals and has particular experience in investigations involving potential Foreign Corrupt Practices Act (FCPA) violations. As a prosecutor, he worked closely and in parallel with many domestic and foreign law enforcement agencies and regulators, including the United Kingdom’s Financial Conduct Authority and Brazil’s Ministerio Publico Federal.
Thomas H. Suddath, Jr., is a former Assistant U.S. Attorney in the Criminal Division of the U.S. Attorney’s Office in Philadelphia, has extensive experience conducting international and domestic internal investigations and frequently counsels companies on compliance and voluntary disclosure issues related to the FCPA. He has handled FCPA and other internal investigations in many countries including Russia, Poland, Turkey, Greece, Hungary, Czech Republic, Mexico and Colombia.
Thanks to Mark and Tom for sharing their insights based on decades of experience.
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Episode Transcript
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Speaker 1 (00:01):
Welcome to the Emerging Litigation Podcast.
This is a group project drivenby HB Litigation, now part of
Critical Legal Content and VLEXCompany's Fast Case and Law
Street Media.
I'm your host, tom Hagee,longtime litigation news editor
and publisher and currentlitigation enthusiast.
If you wish to reach me, pleasecheck the appropriate links in
(00:23):
the show notes.
This podcast is also acompanion to the Journal of
Emerging Issues and Litigation,for which I serve as
editor-in-chief, published byFastcase Full Court Press.
And now here's today's episode.
If you like what you hear,please give us a rating.
The long and brawny arm of theForeign Corrupt Practices Act.
(00:44):
Who came up with that title?
That may be.
I may have to change that one.
United Nations and the WorldEconomic Forum calculates that
the cost of corporate corruptionglobally is $5 trillion a year.
That's 5% of the world's 2022GDP.
Corruption can hamper economicgrowth by discouraging
investment, increasingtransaction costs.
(01:06):
It can distort marketcompetition.
It could perpetuate poverty bydiverting resources away from
essential services andbenefiting the wealthy and
powerful.
Nothing wrong with the wealthyand powerful you know.
Unless there is, it canundermine democratic
institutions and erode publictrust in governments.
Can you imagine?
It can hinder sustainabledevelopment by diverting
(01:26):
resources away from essentialinfrastructure and social
services.
Yeah, the Foreign CorruptPractices Act, or the FCPA, the
government's leading weapon inthis global war on corporate
crime, has far-reachingimplications for companies
engaged in, of course,international business.
For those who violate it, theconsequences or the consequences
(01:46):
can be severe.
And with the recent addition ofits little brother, the, or
sister, I don't want to.
You know, I don't want to pick.
And with the recent addition ofthe Foreign Extortion
Prevention Act, or FIPA, thefederal government has even more
to work with.
Now, In 2018, Brazilianstate-owned oil and gas company
trading as Petrobras, found outthe hard way about the long arm
(02:09):
of the FCPA Petrobras orPetrobras Petrobras, I'm not
saying it right, Petrobras, I'mgoing to call it the company.
It was involved in a massivecorruption scandal.
It was undercovered byOperation Car Wash and that was
the name of the investigationlaunched in 2014.
I think naming thoseinvestigations must be the most
(02:31):
fun part of them ofinvestigating a company.
It uncovered a complex web ofbribery, money laundering and
kickbacks all fun thingsinvolving politicians,
executives and contractors.
In 2018, the SEC chargedPetrobras with misleading US
investors by way of falsefinancial statements that
concealed their schemes, inwhich senior executives
(02:52):
conspired with the company'slargest contractors and
suppliers to inflate the cost ofPetrobras' infrastructure
projects.
Get this the executives sharedportions of their billions in
kickbacks with politicians whohelped them get their high-level
positions.
That's a quid pro quo, Ibelieve.
Petrobras falsely reported thatthe payments were to either
(03:13):
acquire new assets or improveexisting assets.
The result was a $2.5 billionoverstatement of assets.
The company ended up paying$1.8 billion in penalties.
That's about all I know aboutthe FCPA, but fortunately I had
two people to talk to recentlyabout it, Two attorneys with
Reed Smith who practice in thefirm's Global Regulatory
(03:35):
Enforcement Group.
They are Mark Binney and TomSudoff.
Mark is a former federal andstate prosecutor in New York.
He's led multiple multi-yearcross-border investigations of
corporations and individuals.
He's got particular experiencein investigations involving
potential FCPA violations.
As prosecutor, he workedclosely and in parallel with
(03:56):
many domestic and foreign lawenforcement agencies and
regulators, including the UnitedKingdom's Financial Conduct
Authority and Brazil'sMinisterio Público Federal.
Tom Suddath is a formerassistant US attorney in the
criminal division of the USAttorney's Office in
Philadelphia.
He has extensive experienceconducting international and
domestic internal investigationsand frequently counsels
(04:19):
companies on compliance andvoluntary disclosure issues
related to the FCPA.
He's handled FCPA and otherinternal investigations in many
countries, including Russia,Poland, Turkey, Greece, Hungary,
the Czech Republic, Mexico andColombia.
What have you done lately, Forthat matter?
What have I done?
Mark and Tom answered questionsaround the purpose and
(04:44):
prohibitions of the FCPA and howit's enforced, the impact on
future enforcement, if any,based on the outcome of the
presidential election you knowthat's coming up, those of you
who don't read the news thepurposes and prohibitions of the
new Foreign ExtortionPrevention Act, Trends in
whistleblowing, corporatecooperation, international
cooperation, Steps companies cantake to stay out of the soup,
(05:08):
and more, because there's alwaysmore.
Thanks to Mark and Tom of ReedSmith for sharing their insights
based on decades of experiencein this area of the law.
I hope you enjoy it.
Okay, we're going to jump rightin.
Let's start off with somebasics for the uninitiated.
What is the FCPA, and can youtell me some of the things that
(05:29):
it prohibits and what's going onwith enforcement of the act?
Mark, do you want to take thatone first?
Speaker 3 (05:35):
Sure.
So the Foreign Corrupt PracticesAct, or the FCPA, is a 1977 law
passed by Congress whichprohibits US individuals or
entities like companies frompaying bribes to foreign
government officials in order towin a business advantage.
(05:59):
So the classic sort of FCPAscenario would be an American
company, a US company or a USindividual rather a citizen or
someone who lives here who paysa bribe to a government official
in a foreign country and thenthat person's company wins a
(06:21):
contract, for example.
So maybe they pay a $50,000bribe to a government official
in a foreign country and then,as a result of that, their
company wins a lucrativecontract, and the FCPA law,
which is designed to preventthat sort of corruption, makes
(06:41):
that a crime and punishable byup to five years in prison for
each penalty or each instance ofit, along with potential for
financial fines.
And oftentimes, when there's anFCPA prosecution in the United
(07:03):
States there's an FCPAprosecution in the United States
, it is going to involve bothindividuals who may be held
(07:26):
accountable, perhaps executivesat the evidence to actually
plead guilty with the Departmentof Justice or enter into a
deferred prosecution agreement.
As a result, this has become avery big area for enforcement
because the fines for thecompanies in particular.
Besides that, individuals cango to prison and face
significant sentences.
The penalties that are assessedto companies can be hundreds of
(07:48):
millions of dollars or in someinstances, even billions of
dollars, for violation of theForeign Corrupt Practices Act.
Speaker 1 (07:58):
That's whopping, Tom.
Did you want to add anything tothat?
Speaker 2 (08:01):
A lot of attention is on the FCPA anti-bribery
provisions.
The FCPA also has accountingprovisions, so it requires that
companies keep proper books andrecords accurate books and
records and also requires themto maintain appropriate internal
controls to prevent corruption.
(08:24):
And so the anti-briberyprovisions that Mark was
focusing upon, those arecriminal provisions that are
enforced by the Department ofJustice and typically the FBI.
The accounting provisions ofthe FCPA they're regulated by
(08:45):
the SEC and, like the criminalprovisions, there's also
substantial financial penaltiesassociated with those.
So basically it requirescompanies to maintain adequate
controls to prevent bribery andalso to accurately keep books
and records.
So in a very simple case, ifyou're paying something to a
(09:10):
foreign government official, ithas to be accurately recorded as
such and not buried or hiddenin some other way.
Speaker 1 (09:19):
Well, Tom, since I've got you going here, what about
industries or regions of theworld where there may be more
activity, FCPA activity orenforcement?
Speaker 2 (09:32):
So I think what we're seeing now is a lot of focus
upon Latin America, southAmerica.
There has traditionally been alot of attention in Eastern
Europe, in Russia, in China, butover the last few years there's
really been a focus on a lot ofprosecutions coming out of
(09:54):
business relationships in SouthAmerica and Latin America.
And as far as the industries,doj and the SEC, they learn an
industry and they learn so that,let's say, they focus upon.
Several years ago was thepharmaceutical, medical device
(10:15):
industry.
They'll focus on that, they'lllearn how bribes are paid and
then, as they move from onecompany, they'll then move to
another company.
So they tend to focus uponindustries for periods of time.
So I would say maybe eight, nineyears ago it was really medical
(10:37):
device, it was pharma, but nowit's a pretty wide variety.
There's energy it's a prettywide variety.
There's energy, mining,telecommunications, oil and
commodities, insurance.
It's a pretty wide variety ofcases.
Basically, if the industry hasrelationships, significant
(11:00):
relationships with governmentofficials, that heightens the
risk for the FCPA and for thegovernment to look into the
relationships with governmentofficials.
Speaker 1 (11:15):
Mark, did you want to add anything to that?
Speaker 3 (11:17):
Yeah, I think that's Tom sort of had explained it so
well.
One thing that I would just addis I think it's also a matter
of when DOJ gets their hooksinto a certain area, they keep
sort of exploiting theinformation that they've
(11:37):
developed.
So, for example, when I was afederal prosecutor in the
Eastern District of New York, Ioften worked together with Maine
Justice.
There's a group at MaineJustice inside the fraud section
that has specificresponsibility over these FCPA
cases, and so I partnered withthem on a number of
(11:58):
investigations cases, and so Ipartnered with them on a number
of investigations, and onestarted with a US company that
ultimately pled guilty to payingbribes in Brazil out of the
Lava Jato scandal that happenedin Brazil, and they also
admitted to that company.
It's public, it's publicinformation otherwise I wouldn't
(12:18):
be able to talk about it, sure,but they ended up also pleading
guilty to paying bribes inother jurisdictions, including
Venezuela, and so oftentimesyou'll see, doj has a case like
that and they developed a lot ofinformation in working on that
case, and then it may give themadditional leads about other
(12:40):
companies in that sector.
And so I think, a lot of timesI think Tom is exactly right
that you see DOJ sort ofchanging their focus.
I think it's also part thatthey get in there.
They learn about that industry.
Maybe they have encountered anindividual who is involved in
paying bribes on behalf of oneAmerican company and it turns
(13:02):
out, oh no, that person's alsopaying bribes for a second or a
third company, and so I thinkthat explains why you really see
DOJ.
Once they get in an area, theyreally sort of look all around
in it.
Speaker 1 (13:16):
It sounds like corruption mining.
Speaker 3 (13:29):
Yeah, the criticism of DOJ is sometimes that it's a
snitch system.
It sounds like corruptionmining, as it's called on others
.
But of course that's the greatsuccess of the Department of
Justice in that they get thoseinsiders and it allows them to
really find a lot of things thatperhaps they wouldn't be able
to find just with a smart FBIagent.
(13:50):
And now putting those togetherthey often will look and find
other areas of criminality.
We'll look and find other areasof criminality.
Speaker 2 (13:59):
One person's snitch is the other person's voluntary
cooperator, and so you know DOJis big on voluntary cooperation,
promoting voluntary cooperation.
But to Mark's point, oftentimeswhen somebody goes in and
voluntarily cooperates andbasically self-discloses about
(14:20):
wrongdoing that may be going onwithin their company, typically
what you'll see is thegovernment DOJ will ask okay,
who are your competitors in thisregion?
Give us a list of thosecompetitors.
And then DOJ will follow upwith letters or some type of
inquiry to those competitors,asking them about their
(14:40):
relationships with certaingovernment officials or certain
government ministries.
So there is, yeah, they use itto.
They take the cooperation thatone company gives them and then
they look to see whether or notthere are similar schemes going
on with other companies withinthe same either region or maybe
(15:00):
elsewhere, and that they'redoing business.
Speaker 1 (15:03):
I remember years ago writing some story about this
where one big company wasgetting investigated and really
was in a lot of trouble, and Ithink I might have asked the
question like, oh, I bet you're,but the competitors are happy
about that, and it was a no, no,no, they might see themselves
as being next.
Speaker 2 (15:21):
Oftentimes they're next.
Speaker 1 (15:23):
Just jump into the next question.
This is some forecasting, ifyou could Do.
You think it's going to matterwho becomes president, whether
it's a Harris or a Trumpadministration.
Trump administration.
Speaker 2 (15:36):
Tom, I think it will.
You know it can matter aroundthe edges.
I think, though, thatcorruption is bad for American
business and I think whoever'spresident I don't think they're
(15:56):
going to you're going to see asignificant rollback from that,
because it's often it's also areally an apolitical issue.
It doesn't lean left, doesn'tlean right, it's pro-business,
and it really corruption.
When you look at its effectupon economies, it really does
have a corrosive effect.
So I think you know, under whenPresident Trump was in office,
(16:20):
there was a bit of a decline.
He had been critical before hegot into office about the FCPA.
There was a bit of a decline,but then he you know the pace
picked up.
There's been a significantinvestment over the years in
FCPA resources.
I think you know, should VicePresident Harris be elected,
(17:01):
she's a prosecutor and I thinkshe's.
You know she's not she's.
What we're going to see isstill a continued focus upon
this by DOJ, because it's not anissue that's a sort of third
rail issue for businesses.
I think American businesseswant to have a level playing
field when they're doingbusiness overseas.
Speaker 3 (17:19):
I think that's right and I think that you know what's
kind of interesting is when youthink about corporate
enforcement, you have to look afew years back, because it's
like the investments, doj sortof plants, the seeds now, but
it's going to take several yearsfor the, for those crops to
grow and for us to see, on theother side, the, the, the
(17:42):
results of those investigations.
So I don't think while I doagree that Tom's exactly right
that under President Harris, Ido think you might see, frankly,
even a little bit moreenforcement in this area.
You might see, frankly, even alittle bit more enforcement in
this area Under President Trump.
I think that you would seecontinued enforcement.
(18:04):
There's so many cases that wedon't know of yet because
perhaps there hasn't been, theyhaven't gotten to a point where
they're making an arrest orfiling charges, but they may
well be getting there.
So it's it's a long.
These big investigations arecomplicated and they take a
while to come to the surface.
(18:25):
So I think you'll see themunder either administration,
because there are so manyongoing cases right now.
Speaker 1 (18:31):
in any event, so this might be one issue where there
won't be a dramatic difference,unlike some issues like
environmental or education orwhatever.
So this is one that will berelatively stable.
We'll say either way.
Yeah, it would seem to me, justin my own opinion, because
(18:56):
Harris, kamala Harris, was aprosecutor and went after
companies, went after corruption.
Maybe, you know, it's kind ofher, kind of her thing.
So, ok, well, it'll be what weknow.
It's going to be interesting,no matter what.
So, mark, well, while I haveyou, is that?
So what?
What is new in this area?
Are there new statutes orprograms that our listeners
(19:18):
should be aware of?
Speaker 3 (19:20):
Absolutely, and Tom sort of mentioned this and sort
of previewed this before.
On talking about DOJ beinginterested in cooperation, what
we've seen in 2023 and 2024 isthat DOJ is rolling out program
after program trying toincentivize companies to come
(19:42):
forward with revealing corporatemisconduct where it's occurred
and that they're ready toprovide what we call sort of in
the defense bar and theregulatory bar really carrots
incentives for companies to dothat.
Where the FCPA group unit inparticular had started this
(20:07):
quite some time ago, where theywere giving companies that
decided to voluntarilyself-disclose meaning cases that
the FCPA unit was not aware of,where companies came in and
said, hey, you know, we made amistake, here's what happened
and told DOJ the facts.
The Department of Justice wouldconsider whether they would
(20:29):
decide not to prosecute thatcompany because, even though a
crime had occurred involvingthat company, they'd actually
self-disclosed and they had aprogram designed to reduce.
Remember how I was talking atthe outset about how sometimes
you have to pay hundreds ofmillions of dollars or even
billions of dollars if you're acompany that's found to have
violated the FCPA.
(20:50):
Well, they would potentiallygive huge discounts 50% or more
on that penalty to companiesthat self-disclose.
They've really robustly rolledthat program out across
corporate America to not justthe area of corruption but to
other sort of white collarbusiness interests, and they've
(21:14):
also incentivized whistleblowingby rolling out a number of
programs to incentivizewhistleblowers to be rewarded
both corporate insiders who comeforward who can potentially
avoid prosecution if they revealcorporate misconduct by also
(21:40):
financially rewardingwhistleblowers people who are
not actually guilty ofcommitting a crime but who know
of a crime at their company whocome forward and reveal it,
there's now greateropportunities for them to be
financially rewarded.
The other area that we've seenin a real development in this
area is the Foreign ExtortionPrevention Act, which was passed
the very end of 2023.
(22:01):
And this is a statute.
The FCPA, of course, is astatute that says, hey, us
companies and entities, youcan't pay bribes.
But it actually explicitly leftout the foreign government
officials.
So if there was, for example, agovernment official in I'm just
going to say Brazil, because Iwas talking about Lava Jato
(22:22):
before there was a foreigngovernment official in Brazil
who received a bribe thatadvantaged an American company,
they could not be prosecutedunder the FCPA.
Well, the FIPA statute, or theForeign Extortion Prevention Act
, was designed to fill that voidand it says if there's a
foreign government official whohas received or solicited a
(22:45):
bribe from an American company,they can be charged with
violating that statute.
So we have not seen aprosecution under this statute
yet, but I think it is anothertool in the toolbox of federal
prosecutors, and what we've seenover the years is that when you
(23:08):
give federal prosecutors a newtool, they will use it.
So I think it's only a matterof time before we see them
taking advantage of that statuteand some of their
investigations and again, maybeone where there's investigations
underway that haven't madetheir way to being public yet
involving that statute.
Speaker 1 (23:28):
How do you enforce that?
I mean, you know, we don't havejurisdiction over foreign
leaders or officials, right?
I mean, so how do you do it?
How do you collect or what doyou do?
Speaker 3 (24:05):
Well this statute has now given you.
You know, I remember as afederalava Jato in Brazil had
said to a US corporate executive, like, hey, if you pay us a
million dollars, you're going towin this contract, that would
be a violation of the statuteand that would be actionable.
So if that company turnedaround and went and told the DOJ
(24:26):
, hey, we just got approachedand this individual asked for a
bribe, solicited a bribe from usand said otherwise, we're not
going to get it Well, they couldpotentially be charged with us.
Speaker 2 (24:41):
It is, as Mark said, this is an important new tool
for federal prosecutors.
That they weren't without toolsbefore, though and they were
prosecuting foreign officialsbefore, just not under the FCPA
that they would typically goafter them for money laundering
or travel act violations.
I think this just gives themone more tool to use against
(25:10):
government officials.
I think you know.
To sort of expand on one ofMark's points, there's no
question that DOJ is trying toincentivize corporate
cooperation and voluntaryself-disclosure.
They are providing a lot of asMark said carrots to do that.
So, for example, if you go in,you volunteer to self-disclose,
(25:31):
you do everything the DOJexpects you to do.
As part of that, then there aresignificant benefits to a
corporation, which include thepossibility of a presumption of
a declination, no criminalprosecution and substantially
reduced fines for thecorporation.
(25:53):
You're still going to berequired to disgorge your
ill-gotten gains, which can beconsiderable, but it's much
better.
It's a much better result, atthe end of the day, to either
get a deferred prosecution ornon-prosecution than a criminal
conviction, even if you have toend up disgorging ill-gotten
(26:15):
gains, but there's no questionthat DOJ is really trying to
provide more incentives tocompanies to self-disclose,
which is something thatcompanies have to address at
some point.
They just have to decide are wegoing to go in or not?
Speaker 1 (26:37):
I'll just ask my question in the most naive way I
can.
I mean, we can't just go putsomebody in jail from Brazil, I
mean, or tap their bank account,right?
I mean, doesn't the governmentof Brazil have to help enforce
these things?
What am I missing?
Speaker 3 (26:53):
Yeah, no, they'll get arrested and extradited.
So you're right that in thatthe country.
So in that example, I feel badto keep picking on Brazil.
Brazil's a great place.
They have had, unfortunately,in the past, during Lava Jato,
they really had a very seriouscorruption scandal with the
state-owned oil company scandalwith the state-owned oil company
(27:18):
.
But in any event, in thatinstance let's say the United
States the prosecutors indictthis individual in Brazil.
They would then go after theindictment, they would typically
go and circulate what's calleda red notice with Interpol,
where they tell Interpol, allthe countries that are in
Interpol and participating hey,we have an arrest warrant for
(27:39):
this individual.
If you see this individual,please arrest them and then
extradite them to the UnitedStates.
And so some countries do not,some countries refuse to
extradite their citizens or they.
Every country treats itdifferently, but typically
there's going to be a treatybetween the United States and
that country and then the homecountry has to decide are we
(28:00):
going to send this individual tothe United States and they can
challenge it, and that often has.
I will say, in the FCPA areawe've seen tremendous
cooperation between the UnitedStates and foreign governments
and so, for example, lava Jato,part of the success on the US
(28:24):
side in those prosecutions wasbecause they were working very
closely with their colleagues inBrazil, the Ministerio Público
Financiero, mpf and so the USprosecutors and the Brazilian
prosecutors were speaking andexchanging information and so
(28:47):
there was a lot of internationalcooperation in that case, and
we've seen that now in otherjurisdictions as well.
I think that part of it is so.
A lot of times what you'll seehappen is, for example, brazil
may say, ok, we're going to,we're going to deal with these
people who are more Brazilfocused, and US prosecutors, you
know you concentrate on the UScompanies, but they both can
(29:09):
have, they can have overlappingpeople or companies that they go
after.
I do think that part of thereason why we've seen a lot of
countries cooperate with theUnited States is these fines can
be very significant and go tothe home countries.
So, you know, for example, youmight have out of Petrobras, out
(29:31):
of Lava Jato.
A lot of those fines were splitbetween the United States and
Brazil, with Brazil getting, um,the you know, sometimes more of
the proceeds than than theUnited States that came from it.
So there's there's a financialreason for them to and also
because, um, I think that a lotof countries are coming around
to the viewpoint of the U?
(29:51):
S that this is really corrosivefor business.
To have all these bribes.
Speaker 1 (29:56):
So that's what I was missing Things like the treaties
.
They probably also appreciate,you know, the help to clean up
their clean house and then thefinancial incentives.
So going to our last one, tom,we'll kick it over to you to get
us started about what companies?
What prevention measures cancompanies take?
Speaker 2 (30:18):
There's probably two main things companies can do
proactively to try to limittheir exposure.
You're not going to be able towipe out all risk.
What you try to do is you tryto make sure that you have
appropriate processes, trainingto try to minimize the risk.
So the first thing I wouldsuggest companies do is train
(30:42):
employees, train third partiesalso, on what the FCPA is, what
the anti-corruption law is,because, again, we've been
talking about the FCPA but everycountry prohibits bribery.
Sometimes the training that youcan provide the employees in
native language about what theFCPA is, that can be a big, big
(31:05):
help, because a lot of employeesin foreign countries don't
really understand.
How is it that if I dosomething wrong in my country,
I'm going to get in trouble withthe US?
The answer is because the armsof the FCPA are very long and so
they can go after them and goafter individuals, which is
(31:26):
something we've also been seeinga lot more of going after
individuals, not just companies.
But I think when the peopleunderstand that they personally
are at risk, you know there'snothing like the fear of jail to
try to get somebody's focusupon doing the right thing.
The other part, tom, I wouldsay is you know, really provide
(31:48):
oversight and transparency intothe actions of third parties.
And what I mean by thirdparties are sales agents,
distributors, people who areacting on behalf of the company,
because the FCPA prohibitspaying of bribes either directly
or indirectly, and the indirectpart of the statute is what's
(32:10):
used to go after the actions ofa third party.
So if you hire a sales agentand the sales agent is paying
bribes on your behalf tosomebody in order to get
business, that sales agent hasan FCPA issue.
But because he is your agent,you, the company, you who have
(32:31):
hired him also has exposure.
I think if you look at the FCPAprosecutions over the last 10
years, certainly the majority ofthem involve problems of
actions by third parties.
But it's hard because in somecountries in emerging economies
oftentimes there's not anestablished sales force, you
(32:53):
don't have employees, so theyset up relationships with third
parties distributors, salesagents and you rely upon them.
But you really need to trainthem, have transparency into
what they're doing and, ofcourse, add FCPA provisions in
the commercial contracts.
You have that.
(33:13):
Provide that in the commercialcontracts.
You have that provide that thecounterparty agrees to follow
the FCPA and the equivalentanti-corruption statutes.
What you're looking to do istry to establish guardrails, and
so if there is a problem, thecompany has the ability to say
you know, we had the processesin place, these were the actions
(33:33):
of a rogue employee.
That this was certainly counterto our culture, counter to our
training.
Speaker 3 (33:54):
Mark, did you want?
Operating in a country that isconsidered high on the
corruption index, where there'sa lot of corruption?
It's difficult when you hire anagent.
It's very legitimate for acompany.
Let's say you're an Americancompany and I was mentioning
Lava Jato.
You want to bid on somethingfor Petrobras and you don't
(34:17):
speak Portuguese.
And you hire a local agent inBrazil because you're like hey,
I need somebody who speaksPortuguese, who understands how
Petrobras, a state-owned oilcompany, works, who has
relationships, who can help meget a meeting so that I can
legitimately bid for this work.
So there's all kinds oflegitimate reasons why you would
(34:38):
need that person in country,but unfortunately, we've seen a
lot of instances where thesethird party agents, some of them
, just paid bribes.
And if you have a company thatdid everything the right way and
really did their diligence, andunfortunately they have an
agent who paid a bribe in orderto get the contract, well, that
(35:00):
company might be able to thenshow Department of Justice that
they had proper procedures andthis one got through and, as Tom
said, that this was a rogueagent, if you will, while as, on
the other hand, a company thatdoesn't spend a lot of time, um,
looking at that doesn't takethat obligation seriously, um,
and was really sort of recklesswith the agent.
(35:21):
They may not be able to andthey may really be on the hook
for everything that this agentdid, even though they themselves
didn't do it.
And to draw on an example,that's also again a public case.
But that case that I mentionedthat I worked on way back when
when I was with a public case.
But that case that I mentioned,that I worked on way back when
when I was with DOJ.
I guess it's not that long ago,maybe five years or so ago now.
(35:42):
But in that particular case theUS company had hired somebody in
Brazil who was a lobbyista andlobbyista is Portuguese for
lobbyist except for there is noprofession for lobbyists in
Brazil, so that really meansbribe payer.
So that US company, when theyhired a lobbyista, that was a
(36:06):
sure sign they hired someone whowas infamous for paying bribes.
If you hire an agent like that,you're going to get in trouble.
But there's a lot, you know, inbetween that, like the really
obvious bribe payer and thelegitimate agent.
There's a lot of area inbetween where where companies
can get in trouble.
So I think that Tom was soright.
(36:26):
You really, besides, to have agreat compliance policy, you
really have to look at thosethird party agents closely,
because that's the area forgreatest risk.
Really have to look at thosethird party agents closely,
because that's the area forgreatest risk, particularly in
some of these sectors that arein countries that have
historically had some corruptionproblems.
Speaker 1 (36:42):
All right, Tom and Mark, thank you very much for
talking with me about this today.
It's a fascinating area.
Speaker 2 (36:46):
Thank you, Tom Thanks .
Speaker 1 (36:49):
That concludes this episode of the Emerging
Litigation Podcast, aco-production of HB Litigation,
Critical Legal Content, VLEX,Fast Case and our friends at
Lostry Media.
I'm Tom Hagee, your host, whichwould explain why I'm talking.
Please feel free to reach outto me if you have ideas for a
future episode and don'thesitate to share this with
(37:11):
clients, colleagues, friends,animals you may have left at
home, teenagers youirresponsibly left unsupervised,
and if you feel so moved,please give us a rating.
Those always help.
Thank you for listening.
Welcome to the Emerging Litigation Podcast.
This is a group project drivenby HB Litigation, now part of
Critical Legal Content and VLEXCompany's Fast Case and Law
Street Media.
I'm your host, tom Hagee,longtime litigation news editor
and publisher and currentlitigation enthusiast.
If you wish to reach me, pleasecheck the appropriate links in
(00:23):
the show notes.
This podcast is also acompanion to the Journal of
Emerging Issues and Litigation,for which I serve as
editor-in-chief, published byFastcase Full Court Press.
And now here's today's episode.
If you like what you hear,please give us a rating.
The long and brawny arm of theForeign Corrupt Practices Act.
(00:44):
Who came up with that title?
That may be.
I may have to change that one.
United Nations and the WorldEconomic Forum calculates that
the cost of corporate corruptionglobally is $5 trillion a year.
That's 5% of the world's 2022GDP.
Corruption can hamper economicgrowth by discouraging
investment, increasingtransaction costs.
(01:06):
It can distort marketcompetition.
It could perpetuate poverty bydiverting resources away from
essential services andbenefiting the wealthy and
powerful.
Nothing wrong with the wealthyand powerful you know.
Unless there is, it canundermine democratic
institutions and erode publictrust in governments.
Can you imagine?
It can hinder sustainabledevelopment by diverting
(01:26):
resources away from essentialinfrastructure and social
services.
Yeah, the Foreign CorruptPractices Act, or the FCPA, the
government's leading weapon inthis global war on corporate
crime, has far-reachingimplications for companies
engaged in, of course,international business.
For those who violate it, theconsequences or the consequences
(01:46):
can be severe.
And with the recent addition ofits little brother, the, or
sister, I don't want to.
You know, I don't want to pick.
And with the recent addition ofthe Foreign Extortion
Prevention Act, or FIPA, thefederal government has even more
to work with.
Now, In 2018, Brazilianstate-owned oil and gas company
trading as Petrobras, found outthe hard way about the long arm
(02:09):
of the FCPA Petrobras orPetrobras Petrobras, I'm not
saying it right, Petrobras, I'mgoing to call it the company.
It was involved in a massivecorruption scandal.
It was undercovered byOperation Car Wash and that was
the name of the investigationlaunched in 2014.
I think naming thoseinvestigations must be the most
(02:31):
fun part of them ofinvestigating a company.
It uncovered a complex web ofbribery, money laundering and
kickbacks all fun thingsinvolving politicians,
executives and contractors.
In 2018, the SEC chargedPetrobras with misleading US
investors by way of falsefinancial statements that
concealed their schemes, inwhich senior executives
(02:52):
conspired with the company'slargest contractors and
suppliers to inflate the cost ofPetrobras' infrastructure
projects.
Get this the executives sharedportions of their billions in
kickbacks with politicians whohelped them get their high-level
positions.
That's a quid pro quo, Ibelieve.
Petrobras falsely reported thatthe payments were to either
(03:13):
acquire new assets or improveexisting assets.
The result was a $2.5 billionoverstatement of assets.
The company ended up paying$1.8 billion in penalties.
That's about all I know aboutthe FCPA, but fortunately I had
two people to talk to recentlyabout it, Two attorneys with
Reed Smith who practice in thefirm's Global Regulatory
(03:35):
Enforcement Group.
They are Mark Binney and TomSudoff.
Mark is a former federal andstate prosecutor in New York.
He's led multiple multi-yearcross-border investigations of
corporations and individuals.
He's got particular experiencein investigations involving
potential FCPA violations.
As prosecutor, he workedclosely and in parallel with
(03:56):
many domestic and foreign lawenforcement agencies and
regulators, including the UnitedKingdom's Financial Conduct
Authority and Brazil'sMinisterio Público Federal.
Tom Suddath is a formerassistant US attorney in the
criminal division of the USAttorney's Office in
Philadelphia.
He has extensive experienceconducting international and
domestic internal investigationsand frequently counsels
(04:19):
companies on compliance andvoluntary disclosure issues
related to the FCPA.
He's handled FCPA and otherinternal investigations in many
countries, including Russia,Poland, Turkey, Greece, Hungary,
the Czech Republic, Mexico andColombia.
What have you done lately, Forthat matter?
What have I done?
Mark and Tom answered questionsaround the purpose and
(04:44):
prohibitions of the FCPA and howit's enforced, the impact on
future enforcement, if any,based on the outcome of the
presidential election you knowthat's coming up, those of you
who don't read the news thepurposes and prohibitions of the
new Foreign ExtortionPrevention Act, Trends in
whistleblowing, corporatecooperation, international
cooperation, Steps companies cantake to stay out of the soup,
(05:08):
and more, because there's alwaysmore.
Thanks to Mark and Tom of ReedSmith for sharing their insights
based on decades of experiencein this area of the law.
I hope you enjoy it.
Okay, we're going to jump rightin.
Let's start off with somebasics for the uninitiated.
What is the FCPA, and can youtell me some of the things that
(05:29):
it prohibits and what's going onwith enforcement of the act?
Mark, do you want to take thatone first?
Speaker 3 (05:35):
Sure.
So the Foreign Corrupt PracticesAct, or the FCPA, is a 1977 law
passed by Congress whichprohibits US individuals or
entities like companies frompaying bribes to foreign
government officials in order towin a business advantage.
(05:59):
So the classic sort of FCPAscenario would be an American
company, a US company or a USindividual rather a citizen or
someone who lives here who paysa bribe to a government official
in a foreign country and thenthat person's company wins a
(06:21):
contract, for example.
So maybe they pay a $50,000bribe to a government official
in a foreign country and then,as a result of that, their
company wins a lucrativecontract, and the FCPA law,
which is designed to preventthat sort of corruption, makes
(06:41):
that a crime and punishable byup to five years in prison for
each penalty or each instance ofit, along with potential for
financial fines.
And oftentimes, when there's anFCPA prosecution in the United
(07:03):
States there's an FCPAprosecution in the United States
, it is going to involve bothindividuals who may be held
(07:26):
accountable, perhaps executivesat the evidence to actually
plead guilty with the Departmentof Justice or enter into a
deferred prosecution agreement.
As a result, this has become avery big area for enforcement
because the fines for thecompanies in particular.
Besides that, individuals cango to prison and face
significant sentences.
The penalties that are assessedto companies can be hundreds of
(07:48):
millions of dollars or in someinstances, even billions of
dollars, for violation of theForeign Corrupt Practices Act.
Speaker 1 (07:58):
That's whopping, Tom.
Did you want to add anything tothat?
Speaker 2 (08:01):
A lot of attention is on the FCPA anti-bribery
provisions.
The FCPA also has accountingprovisions, so it requires that
companies keep proper books andrecords accurate books and
records and also requires themto maintain appropriate internal
controls to prevent corruption.
(08:24):
And so the anti-briberyprovisions that Mark was
focusing upon, those arecriminal provisions that are
enforced by the Department ofJustice and typically the FBI.
The accounting provisions ofthe FCPA they're regulated by
(08:45):
the SEC and, like the criminalprovisions, there's also
substantial financial penaltiesassociated with those.
So basically it requirescompanies to maintain adequate
controls to prevent bribery andalso to accurately keep books
and records.
So in a very simple case, ifyou're paying something to a
(09:10):
foreign government official, ithas to be accurately recorded as
such and not buried or hiddenin some other way.
Speaker 1 (09:19):
Well, Tom, since I've got you going here, what about
industries or regions of theworld where there may be more
activity, FCPA activity orenforcement?
Speaker 2 (09:32):
So I think what we're seeing now is a lot of focus
upon Latin America, southAmerica.
There has traditionally been alot of attention in Eastern
Europe, in Russia, in China, butover the last few years there's
really been a focus on a lot ofprosecutions coming out of
(09:54):
business relationships in SouthAmerica and Latin America.
And as far as the industries,doj and the SEC, they learn an
industry and they learn so that,let's say, they focus upon.
Several years ago was thepharmaceutical, medical device
(10:15):
industry.
They'll focus on that, they'lllearn how bribes are paid and
then, as they move from onecompany, they'll then move to
another company.
So they tend to focus uponindustries for periods of time.
So I would say maybe eight, nineyears ago it was really medical
(10:37):
device, it was pharma, but nowit's a pretty wide variety.
There's energy it's a prettywide variety.
There's energy, mining,telecommunications, oil and
commodities, insurance.
It's a pretty wide variety ofcases.
Basically, if the industry hasrelationships, significant
(11:00):
relationships with governmentofficials, that heightens the
risk for the FCPA and for thegovernment to look into the
relationships with governmentofficials.
Speaker 1 (11:15):
Mark, did you want to add anything to that?
Speaker 3 (11:17):
Yeah, I think that's Tom sort of had explained it so
well.
One thing that I would just addis I think it's also a matter
of when DOJ gets their hooksinto a certain area, they keep
sort of exploiting theinformation that they've
(11:37):
developed.
So, for example, when I was afederal prosecutor in the
Eastern District of New York, Ioften worked together with Maine
Justice.
There's a group at MaineJustice inside the fraud section
that has specificresponsibility over these FCPA
cases, and so I partnered withthem on a number of
(11:58):
investigations cases, and so Ipartnered with them on a number
of investigations, and onestarted with a US company that
ultimately pled guilty to payingbribes in Brazil out of the
Lava Jato scandal that happenedin Brazil, and they also
admitted to that company.
It's public, it's publicinformation otherwise I wouldn't
(12:18):
be able to talk about it, sure,but they ended up also pleading
guilty to paying bribes inother jurisdictions, including
Venezuela, and so oftentimesyou'll see, doj has a case like
that and they developed a lot ofinformation in working on that
case, and then it may give themadditional leads about other
(12:40):
companies in that sector.
And so I think, a lot of timesI think Tom is exactly right
that you see DOJ sort ofchanging their focus.
I think it's also part thatthey get in there.
They learn about that industry.
Maybe they have encountered anindividual who is involved in
paying bribes on behalf of oneAmerican company and it turns
(13:02):
out, oh no, that person's alsopaying bribes for a second or a
third company, and so I thinkthat explains why you really see
DOJ.
Once they get in an area, theyreally sort of look all around
in it.
Speaker 1 (13:16):
It sounds like corruption mining.
Speaker 3 (13:29):
Yeah, the criticism of DOJ is sometimes that it's a
snitch system.
It sounds like corruptionmining, as it's called on others
.
But of course that's the greatsuccess of the Department of
Justice in that they get thoseinsiders and it allows them to
really find a lot of things thatperhaps they wouldn't be able
to find just with a smart FBIagent.
(13:50):
And now putting those togetherthey often will look and find
other areas of criminality.
We'll look and find other areasof criminality.
Speaker 2 (13:59):
One person's snitch is the other person's voluntary
cooperator, and so you know DOJis big on voluntary cooperation,
promoting voluntary cooperation.
But to Mark's point, oftentimeswhen somebody goes in and
voluntarily cooperates andbasically self-discloses about
(14:20):
wrongdoing that may be going onwithin their company, typically
what you'll see is thegovernment DOJ will ask okay,
who are your competitors in thisregion?
Give us a list of thosecompetitors.
And then DOJ will follow upwith letters or some type of
inquiry to those competitors,asking them about their
(14:40):
relationships with certaingovernment officials or certain
government ministries.
So there is, yeah, they use itto.
They take the cooperation thatone company gives them and then
they look to see whether or notthere are similar schemes going
on with other companies withinthe same either region or maybe
(15:00):
elsewhere, and that they'redoing business.
Speaker 1 (15:03):
I remember years ago writing some story about this
where one big company wasgetting investigated and really
was in a lot of trouble, and Ithink I might have asked the
question like, oh, I bet you're,but the competitors are happy
about that, and it was a no, no,no, they might see themselves
as being next.
Speaker 2 (15:21):
Oftentimes they're next.
Speaker 1 (15:23):
Just jump into the next question.
This is some forecasting, ifyou could Do.
You think it's going to matterwho becomes president, whether
it's a Harris or a Trumpadministration.
Trump administration.
Speaker 2 (15:36):
Tom, I think it will.
You know it can matter aroundthe edges.
I think, though, thatcorruption is bad for American
business and I think whoever'spresident I don't think they're
(15:56):
going to you're going to see asignificant rollback from that,
because it's often it's also areally an apolitical issue.
It doesn't lean left, doesn'tlean right, it's pro-business,
and it really corruption.
When you look at its effectupon economies, it really does
have a corrosive effect.
So I think you know, under whenPresident Trump was in office,
(16:20):
there was a bit of a decline.
He had been critical before hegot into office about the FCPA.
There was a bit of a decline,but then he you know the pace
picked up.
There's been a significantinvestment over the years in
FCPA resources.
I think you know, should VicePresident Harris be elected,
(17:01):
she's a prosecutor and I thinkshe's.
You know she's not she's.
What we're going to see isstill a continued focus upon
this by DOJ, because it's not anissue that's a sort of third
rail issue for businesses.
I think American businesseswant to have a level playing
field when they're doingbusiness overseas.
Speaker 3 (17:19):
I think that's right and I think that you know what's
kind of interesting is when youthink about corporate
enforcement, you have to look afew years back, because it's
like the investments, doj sortof plants, the seeds now, but
it's going to take several yearsfor the, for those crops to
grow and for us to see, on theother side, the, the, the
(17:42):
results of those investigations.
So I don't think while I doagree that Tom's exactly right
that under President Harris, Ido think you might see, frankly,
even a little bit moreenforcement in this area.
You might see, frankly, even alittle bit more enforcement in
this area Under President Trump.
I think that you would seecontinued enforcement.
(18:04):
There's so many cases that wedon't know of yet because
perhaps there hasn't been, theyhaven't gotten to a point where
they're making an arrest orfiling charges, but they may
well be getting there.
So it's it's a long.
These big investigations arecomplicated and they take a
while to come to the surface.
(18:25):
So I think you'll see themunder either administration,
because there are so manyongoing cases right now.
Speaker 1 (18:31):
in any event, so this might be one issue where there
won't be a dramatic difference,unlike some issues like
environmental or education orwhatever.
So this is one that will berelatively stable.
We'll say either way.
Yeah, it would seem to me, justin my own opinion, because
(18:56):
Harris, kamala Harris, was aprosecutor and went after
companies, went after corruption.
Maybe, you know, it's kind ofher, kind of her thing.
So, ok, well, it'll be what weknow.
It's going to be interesting,no matter what.
So, mark, well, while I haveyou, is that?
So what?
What is new in this area?
Are there new statutes orprograms that our listeners
(19:18):
should be aware of?
Speaker 3 (19:20):
Absolutely, and Tom sort of mentioned this and sort
of previewed this before.
On talking about DOJ beinginterested in cooperation, what
we've seen in 2023 and 2024 isthat DOJ is rolling out program
after program trying toincentivize companies to come
(19:42):
forward with revealing corporatemisconduct where it's occurred
and that they're ready toprovide what we call sort of in
the defense bar and theregulatory bar really carrots
incentives for companies to dothat.
Where the FCPA group unit inparticular had started this
(20:07):
quite some time ago, where theywere giving companies that
decided to voluntarilyself-disclose meaning cases that
the FCPA unit was not aware of,where companies came in and
said, hey, you know, we made amistake, here's what happened
and told DOJ the facts.
The Department of Justice wouldconsider whether they would
(20:29):
decide not to prosecute thatcompany because, even though a
crime had occurred involvingthat company, they'd actually
self-disclosed and they had aprogram designed to reduce.
Remember how I was talking atthe outset about how sometimes
you have to pay hundreds ofmillions of dollars or even
billions of dollars if you're acompany that's found to have
violated the FCPA.
(20:50):
Well, they would potentiallygive huge discounts 50% or more
on that penalty to companiesthat self-disclose.
They've really robustly rolledthat program out across
corporate America to not justthe area of corruption but to
other sort of white collarbusiness interests, and they've
(21:14):
also incentivized whistleblowingby rolling out a number of
programs to incentivizewhistleblowers to be rewarded
both corporate insiders who comeforward who can potentially
avoid prosecution if they revealcorporate misconduct by also
(21:40):
financially rewardingwhistleblowers people who are
not actually guilty ofcommitting a crime but who know
of a crime at their company whocome forward and reveal it,
there's now greateropportunities for them to be
financially rewarded.
The other area that we've seenin a real development in this
area is the Foreign ExtortionPrevention Act, which was passed
the very end of 2023.
(22:01):
And this is a statute.
The FCPA, of course, is astatute that says, hey, us
companies and entities, youcan't pay bribes.
But it actually explicitly leftout the foreign government
officials.
So if there was, for example, agovernment official in I'm just
going to say Brazil, because Iwas talking about Lava Jato
(22:22):
before there was a foreigngovernment official in Brazil
who received a bribe thatadvantaged an American company,
they could not be prosecutedunder the FCPA.
Well, the FIPA statute, or theForeign Extortion Prevention Act
, was designed to fill that voidand it says if there's a
foreign government official whohas received or solicited a
(22:45):
bribe from an American company,they can be charged with
violating that statute.
So we have not seen aprosecution under this statute
yet, but I think it is anothertool in the toolbox of federal
prosecutors, and what we've seenover the years is that when you
(23:08):
give federal prosecutors a newtool, they will use it.
So I think it's only a matterof time before we see them
taking advantage of that statuteand some of their
investigations and again, maybeone where there's investigations
underway that haven't madetheir way to being public yet
involving that statute.
Speaker 1 (23:28):
How do you enforce that?
I mean, you know, we don't havejurisdiction over foreign
leaders or officials, right?
I mean, so how do you do it?
How do you collect or what doyou do?
Speaker 3 (24:05):
Well this statute has now given you.
You know, I remember as afederalava Jato in Brazil had
said to a US corporate executive, like, hey, if you pay us a
million dollars, you're going towin this contract, that would
be a violation of the statuteand that would be actionable.
So if that company turnedaround and went and told the DOJ
(24:26):
, hey, we just got approachedand this individual asked for a
bribe, solicited a bribe from usand said otherwise, we're not
going to get it Well, they couldpotentially be charged with us.
Speaker 2 (24:41):
It is, as Mark said, this is an important new tool
for federal prosecutors.
That they weren't without toolsbefore, though and they were
prosecuting foreign officialsbefore, just not under the FCPA
that they would typically goafter them for money laundering
or travel act violations.
I think this just gives themone more tool to use against
(25:10):
government officials.
I think you know.
To sort of expand on one ofMark's points, there's no
question that DOJ is trying toincentivize corporate
cooperation and voluntaryself-disclosure.
They are providing a lot of asMark said carrots to do that.
So, for example, if you go in,you volunteer to self-disclose,
(25:31):
you do everything the DOJexpects you to do.
As part of that, then there aresignificant benefits to a
corporation, which include thepossibility of a presumption of
a declination, no criminalprosecution and substantially
reduced fines for thecorporation.
(25:53):
You're still going to berequired to disgorge your
ill-gotten gains, which can beconsiderable, but it's much
better.
It's a much better result, atthe end of the day, to either
get a deferred prosecution ornon-prosecution than a criminal
conviction, even if you have toend up disgorging ill-gotten
(26:15):
gains, but there's no questionthat DOJ is really trying to
provide more incentives tocompanies to self-disclose,
which is something thatcompanies have to address at
some point.
They just have to decide are wegoing to go in or not?
Speaker 1 (26:37):
I'll just ask my question in the most naive way I
can.
I mean, we can't just go putsomebody in jail from Brazil, I
mean, or tap their bank account,right?
I mean, doesn't the governmentof Brazil have to help enforce
these things?
What am I missing?
Speaker 3 (26:53):
Yeah, no, they'll get arrested and extradited.
So you're right that in thatthe country.
So in that example, I feel badto keep picking on Brazil.
Brazil's a great place.
They have had, unfortunately,in the past, during Lava Jato,
they really had a very seriouscorruption scandal with the
state-owned oil company scandalwith the state-owned oil company
(27:18):
.
But in any event, in thatinstance let's say the United
States the prosecutors indictthis individual in Brazil.
They would then go after theindictment, they would typically
go and circulate what's calleda red notice with Interpol,
where they tell Interpol, allthe countries that are in
Interpol and participating hey,we have an arrest warrant for
(27:39):
this individual.
If you see this individual,please arrest them and then
extradite them to the UnitedStates.
And so some countries do not,some countries refuse to
extradite their citizens or they.
Every country treats itdifferently, but typically
there's going to be a treatybetween the United States and
that country and then the homecountry has to decide are we
(28:00):
going to send this individual tothe United States and they can
challenge it, and that often has.
I will say, in the FCPA areawe've seen tremendous
cooperation between the UnitedStates and foreign governments
and so, for example, lava Jato,part of the success on the US
(28:24):
side in those prosecutions wasbecause they were working very
closely with their colleagues inBrazil, the Ministerio Público
Financiero, mpf and so the USprosecutors and the Brazilian
prosecutors were speaking andexchanging information and so
(28:47):
there was a lot of internationalcooperation in that case, and
we've seen that now in otherjurisdictions as well.
I think that part of it is so.
A lot of times what you'll seehappen is, for example, brazil
may say, ok, we're going to,we're going to deal with these
people who are more Brazilfocused, and US prosecutors, you
know you concentrate on the UScompanies, but they both can
(29:09):
have, they can have overlappingpeople or companies that they go
after.
I do think that part of thereason why we've seen a lot of
countries cooperate with theUnited States is these fines can
be very significant and go tothe home countries.
So, you know, for example, youmight have out of Petrobras, out
(29:31):
of Lava Jato.
A lot of those fines were splitbetween the United States and
Brazil, with Brazil getting, um,the you know, sometimes more of
the proceeds than than theUnited States that came from it.
So there's there's a financialreason for them to and also
because, um, I think that a lotof countries are coming around
to the viewpoint of the U?
(29:51):
S that this is really corrosivefor business.
To have all these bribes.
Speaker 1 (29:56):
So that's what I was missing Things like the treaties
.
They probably also appreciate,you know, the help to clean up
their clean house and then thefinancial incentives.
So going to our last one, tom,we'll kick it over to you to get
us started about what companies?
What prevention measures cancompanies take?
Speaker 2 (30:18):
There's probably two main things companies can do
proactively to try to limittheir exposure.
You're not going to be able towipe out all risk.
What you try to do is you tryto make sure that you have
appropriate processes, trainingto try to minimize the risk.
So the first thing I wouldsuggest companies do is train
(30:42):
employees, train third partiesalso, on what the FCPA is, what
the anti-corruption law is,because, again, we've been
talking about the FCPA but everycountry prohibits bribery.
Sometimes the training that youcan provide the employees in
native language about what theFCPA is, that can be a big, big
(31:05):
help, because a lot of employeesin foreign countries don't
really understand.
How is it that if I dosomething wrong in my country,
I'm going to get in trouble withthe US?
The answer is because the armsof the FCPA are very long and so
they can go after them and goafter individuals, which is
(31:26):
something we've also been seeinga lot more of going after
individuals, not just companies.
But I think when the peopleunderstand that they personally
are at risk, you know there'snothing like the fear of jail to
try to get somebody's focusupon doing the right thing.
The other part, tom, I wouldsay is you know, really provide
(31:48):
oversight and transparency intothe actions of third parties.
And what I mean by thirdparties are sales agents,
distributors, people who areacting on behalf of the company,
because the FCPA prohibitspaying of bribes either directly
or indirectly, and the indirectpart of the statute is what's
(32:10):
used to go after the actions ofa third party.
So if you hire a sales agentand the sales agent is paying
bribes on your behalf tosomebody in order to get
business, that sales agent hasan FCPA issue.
But because he is your agent,you, the company, you who have
(32:31):
hired him also has exposure.
I think if you look at the FCPAprosecutions over the last 10
years, certainly the majority ofthem involve problems of
actions by third parties.
But it's hard because in somecountries in emerging economies
oftentimes there's not anestablished sales force, you
(32:53):
don't have employees, so theyset up relationships with third
parties distributors, salesagents and you rely upon them.
But you really need to trainthem, have transparency into
what they're doing and, ofcourse, add FCPA provisions in
the commercial contracts.
You have that.
(33:13):
Provide that in the commercialcontracts.
You have that provide that thecounterparty agrees to follow
the FCPA and the equivalentanti-corruption statutes.
What you're looking to do istry to establish guardrails, and
so if there is a problem, thecompany has the ability to say
you know, we had the processesin place, these were the actions
(33:33):
of a rogue employee.
That this was certainly counterto our culture, counter to our
training.
Speaker 3 (33:54):
Mark, did you want?
Operating in a country that isconsidered high on the
corruption index, where there'sa lot of corruption?
It's difficult when you hire anagent.
It's very legitimate for acompany.
Let's say you're an Americancompany and I was mentioning
Lava Jato.
You want to bid on somethingfor Petrobras and you don't
(34:17):
speak Portuguese.
And you hire a local agent inBrazil because you're like hey,
I need somebody who speaksPortuguese, who understands how
Petrobras, a state-owned oilcompany, works, who has
relationships, who can help meget a meeting so that I can
legitimately bid for this work.
So there's all kinds oflegitimate reasons why you would
(34:38):
need that person in country,but unfortunately, we've seen a
lot of instances where thesethird party agents, some of them
, just paid bribes.
And if you have a company thatdid everything the right way and
really did their diligence, andunfortunately they have an
agent who paid a bribe in orderto get the contract, well, that
(35:00):
company might be able to thenshow Department of Justice that
they had proper procedures andthis one got through and, as Tom
said, that this was a rogueagent, if you will, while as, on
the other hand, a company thatdoesn't spend a lot of time, um,
looking at that doesn't takethat obligation seriously, um,
and was really sort of recklesswith the agent.
(35:21):
They may not be able to andthey may really be on the hook
for everything that this agentdid, even though they themselves
didn't do it.
And to draw on an example,that's also again a public case.
But that case that I mentionedthat I worked on way back when
when I was with a public case.
But that case that I mentioned,that I worked on way back when
when I was with DOJ.
I guess it's not that long ago,maybe five years or so ago now.
(35:42):
But in that particular case theUS company had hired somebody in
Brazil who was a lobbyista andlobbyista is Portuguese for
lobbyist except for there is noprofession for lobbyists in
Brazil, so that really meansbribe payer.
So that US company, when theyhired a lobbyista, that was a
(36:06):
sure sign they hired someone whowas infamous for paying bribes.
If you hire an agent like that,you're going to get in trouble.
But there's a lot, you know, inbetween that, like the really
obvious bribe payer and thelegitimate agent.
There's a lot of area inbetween where where companies
can get in trouble.
So I think that Tom was soright.
(36:26):
You really, besides, to have agreat compliance policy, you
really have to look at thosethird party agents closely,
because that's the area forgreatest risk.
Really have to look at thosethird party agents closely,
because that's the area forgreatest risk, particularly in
some of these sectors that arein countries that have
historically had some corruptionproblems.
Speaker 1 (36:42):
All right, Tom and Mark, thank you very much for
talking with me about this today.
It's a fascinating area.
Speaker 2 (36:46):
Thank you, Tom Thanks .
Speaker 1 (36:49):
That concludes this episode of the Emerging
Litigation Podcast, aco-production of HB Litigation,
Critical Legal Content, VLEX,Fast Case and our friends at
Lostry Media.
I'm Tom Hagee, your host, whichwould explain why I'm talking.
Please feel free to reach outto me if you have ideas for a
future episode and don'thesitate to share this with
(37:11):
clients, colleagues, friends,animals you may have left at
home, teenagers youirresponsibly left unsupervised,
and if you feel so moved,please give us a rating.
Those always help.
Thank you for listening.
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