When Enough Is Not Enough: Two Court Rulings Complicate Corporate Compliance Efforts

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In the shadow of billion dollar settlements, exhaustive and expensive internal investigations, costly shareholder derivative suits, and the constant need to stay competitive in a global marketplace, companies in recent years have spent significant resources developing detailed and complex compliance programs to mitigate potential risks associated with the kaleidoscope of United States and foreign laws. But, as if the compliance challenges facing companies were not already difficult, two recent court decisions could make the task even more daunting. In United States v. Kellogg Brown & Root, Inc.1 and Asadi v. G.E. Energy, LLC,2 the U.S. Court of Appeals for the Fifth Circuit has arguably made it tougher for companies to avoid government scrutiny and potential liability, despite robust compliance. While the issues decided in the two cases are very different, both present potentially significant compliance challenges for companies in every industry sector.

Kellogg Brown & Root, Inc. The first case involved the federal Anti-Kickback Act (“AKA”) 41 U.S.C. §§ 51-58 [now codified at 41 U.S.C. §§ 8701-07], and a contract between Kellogg Brown & Root, Inc. (“KBR”) and the U.S. Army to provide logistics services in Iraq, Afghanistan, and Kuwait. A criminal investigation revealed that KBR employees accepted kickbacks in the form of meals, event tickets, golf outings, etc., in exchange for favorable treatment on certain subcontracts on the KBR projects. Two of the KBR employees who received the gifts pled guilty to federal criminal charges brought under the AKA’s criminal provisions.

Originally published in the Legal Backgrounder - Vol. 28 No. on 16 October 11, 2013.

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Topics:  Anti-Kickback Statute, Compliance, Corporate Counsel, Internal Investigations, Settlement

Published In: General Business Updates, Criminal Law Updates, International Trade Updates

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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