Article by Latin America Practice

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 anomaly.
  • 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 provisions.
  • 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.

Brazil

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 state-controlled entities.

  • 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 worldwide.
  • 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 and state-controlled

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 here.

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.