United States: You're The Man—Government Targets Individuals In FCPA Cases

The government has increasingly focused its FCPA enforcement firepower on individuals. On August 31, a Russian official living in Maryland pled guilty to conspiracy to commit money laundering in connection with arranging $2 million in corrupt payments intended to influence the award of Russian nuclear energy contracts. Similarly, the SEC recently settled charges with a former executive of SAP SE, alleging he bribed Panamanian officials to procure sales of software licenses. Earlier this summer, the DOJ accepted the guilty pleas of two former executives of Lois Berger International, who admitted to violating the FCPA by facilitating payments intended to bribe foreign officials to award construction management contracts to the company in India, Indonesia and Vietnam. The SEC also sanctioned two former employees of Oregon-based defense contractor FLIR Systems Inc. for bribing Saudi officials in an effort to secure a government contract to provide thermal binoculars. The SEC found the employees took Saudi government officials on a lavish 20-day world tour with stops in Casablanca, Paris, Dubai, Beirut, and New York City.

The trend of targeting individuals is expected to continue. U.S. Deputy Attorney General Sally Yates recently issued guidance to federal prosecutors prioritizing the prosecution of individuals engaged in corporate misconduct. The memorandum specifies that corporations must provide all relevant facts relating to all individuals responsible for the alleged wrongdoing in order to qualify for any cooperation credit. The memorandum also directs prosecutors to focus on individual misconduct from the inception of the investigation, and provides that no corporation should protect individuals from liability absent extraordinary circumstances. Moreover, the memorandum instructs DOJ criminal prosecutors to work with civil DOJ attorneys to help bring civil charges against individuals where sufficient evidence of criminal wrongdoing is not found.

Of course, despite the increased emphasis on individuals, the government also continues to bring FCPA charges against corporations. BNY Mellon recently paid $14.8 million to settle SEC charges alleging the company improperly provided student internships to family members of foreign officials affiliated with a Middle Eastern sovereign wealth fund. Notably, the SEC took the position that the internships met the "anything of value" requirement even though one of the interns was unpaid. The SEC also recently announced Mead Johnson Nutrition Company paid $12 million to settle charges that its Chinese subsidiary made payments to improperly influence health care professionals at government-owned hospitals to recommend the company's infant formula to new or expectant parents.

But on the good news front, over the last several years, the DOJ and SEC have demonstrated willingness to credit companies for having strong FCPA compliance programs when determining what penalties to levy against them. For example, the SEC cited Goodyear Tire and Rubber Company's prompt remedial efforts in the form of drastic improvements to its compliance program as a reason for imposing a lighter penalty than it otherwise may have.

The Bottom Line:The best offense is a good defense. As we have counseled for some time, companies doing business overseas should invest in developing robust compliance systems tailored to the risks particular to the markets where they operate. Companies should keep careful records of their efforts, so that should the government come calling, they can demonstrate a culture of compliance.  This will not only ensure that employees know the rules, it will help companies lessen penalties or avoid liability altogether.

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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