The second half of 2008 and first weeks of 2009 have proven to
be another groundbreaking period for the enforcement of the U.S.
Foreign Corrupt Practices Act ("FCPA"). Although the
breakneck pace of announced FCPA settlements and prosecutions has
ebbed slightly since September 2008, the sheer size of certain
settlements and their attendant implications may well alter the way
corporations, particularly multinational corporations, structure
their anti-corruption compliance programs.
The long-awaited December 2008 settlement with Siemens AG
resulted in over US$1.6 billion in combined penalties (taking into
account a previous settlement with German regulators), far
exceeding all previous FCPA-related sanctions. The more recent U.S.
enforcement activity, including the US$579 million penalty in
February 2009, confirms that the outsized corporate penalties
obtained in the Siemens settlement were not necessarily an
A number of lessons, implications and themes emerged from the
recent settlements and resolved actions, of which corporations
operating in today's enforcement environment should be aware,
as highlighted below.
Argentina and Venezuela
Importance of Foreign Investigations and Expansive
Jurisdictional Reach. The Siemens settlement confirms the U.S.
government's expansive jurisdictional view as to the
applicability of the FCPA, and clearly indicates that foreign
regulatory investigations and prosecutions can serve as the basis
for investigations by U.S. regulators.
In connection with the U.S. settlements, Siemens and three of
its subsidiaries – including Siemens Argentina and
Siemens Venezuela – incurred total fines of US$800
million. Siemens Venezuela was charged by the U.S. Department of
Justice with conspiracy to violate the FCPA's anti-bribery and
books-and-records provisions, while Siemens Argentina was charged
only with conspiracy to violate the FCPA's books-and-records
The Siemens prosecutorial documents repeatedly emphasized that
non-U.S. corruption investigations and prosecutions constitute
significant red flags that the corporation may have violated the
FCPA. Although the documents applicable to the Siemens subsidiaries
detail some connections between the alleged improper conduct and
the United States, regulators (in what they deem to be appropriate
circumstances) will look carefully for any hooks to establish U.S.
jurisdiction over perceived violations of the FCPA.
Improper Payments to Foreign Officials and Broad Reading of
"Foreign Official." Recent cases demonstrate that
U.S. federal prosecutors continue to construe the term
"foreign official" to include even relatively low-level
employees of state agencies, state-owned companies and other
In January 2009, the former director of worldwide factory sales
for Control Companies, Inc., pleaded guilty to three counts of
violating the FCPA in connection with an alleged scheme of improper
payments to foreign officials. Control Companies is a
California-based corporation that manufactures and sells industrial
service valves for use in nuclear, oil and gas, and power
generation facilities, including to many state-owned companies
This employee also allegedly facilitated and promoted the use
of "friends in camp" at the corporation's customers,
and caused agents and employees of Control Companies to make
illegal payments of over US$1 million to employees of state-owned
Hughes Hubbard's FCPA experts have prepared a detailed
FCPA/Anti-Corruption memorandum with an analysis of certain
critical lessons and a description of FCPA settlements from 2007 to
early 2009 in reverse chronological order, which may be accessed
Marc Weinstein, our partner who is the Contributing Editor on
FCPA and other Anti-Corruption matters for the online edition of
Latin Lawyer magazine, will be speaking on this topic at
our 3rd annual seminar described below.
To register for our seminar or for more information about our
FCPA practice in Latin America, please click on the banner below or
contact Eduardo Vidal
in our New York office.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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