Legal Alert: High Profile Allegations of FCPA Violations Require Compliance Assessment


[author: Kenneth Hannahs]

Executive Summary:  The United States Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) are aggressively pursuing allegations of violations of the Foreign Corrupt Practices Act (FCPA) against US and internationally headquartered entities and individuals. 

The FCPA prohibits any direct or indirect payment to a foreign government official for the purpose of influencing any act or decision in order to obtain or retain business.  Additionally, the FCPA may be violated by the inaccurate accounting and record keeping of such activities.  Any company (along with its subsidiaries and employees) with operations in the United States as well as operations outside the United States is subject to the FCPA.

Recent Activity:  The Department of Justice is actively pursuing 150 open FCPA investigations against entities and individuals.  This follows an increasingly active period of enforcement by the DOJ and the SEC over the past 5 years ranging from 46 in 2009 to a high of 90 in 2010.  All 11 of the top settlements under the FCPA have occurred since 2008.  Over 75% of these top settlements have been entered into with non-US headquartered entities with the highest single settlement amount ($800 million) paid in 2008.  Additionally, individuals are facing large fines and jail time (the highest being 15 years related to bribery in Haiti). 

Companies should also be aware that the whistleblower component of the Dodd-Frank Act provides that an individual who provides the SEC with original information about FCPA violations is entitled to 10-30% of the amount of recovery in a successful SEC enforcement action that results in sanctions of more than $1 million.

Compliance Assessment:  As part of its compliance program, every company should assess whether the FCPA is properly addressed.  All companies with international sales and operations should establish an FCPA compliance infrastructure based on the risk faced by the company. For example, a company selling to government agencies in Russia, where there is a high incidence of bribery, would need to implement a far more robust infrastructure than one that has international sales limited to commercial customers in Canada.  In all instances, the goals of preventing violations and reporting of violations to senior management are paramount. 

The Bottom Line:  The most important aspects of the compliance program are establishing the right corporate culture with active involvement and support from senior management and the board and ensuring that all employees, agents and partners are trained effectively.

About the Author:  Ken Hannahs joined Ford & Harrison on April 11, 2012, after holding senior in-house positions at large global companies (Turner Broadcasting, Scientific Atlanta and Cisco Systems) over the past 15 years.  Ken focused on large complex transactions across the globe that required frequent travel to Europe, the Middle East, Asia, Canada and South America.  Ken oversaw the establishment and operation of effective global compliance programs, including those affected by the FCPA.  For example, Ken has addressed agent and distributor due diligence processes, integrated large international acquisitions, investigated allegations and devised global training programs. 

If you have any questions regarding the FCPA or other issues impacting multinational corporations or if you would like assistance in developing and implementing a global compliance program, please feel free to contact Ken at, or the Ford & Harrison attorney with whom you usually work.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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