Winter Olympics in Russia Set Stage for FCPA Scrutiny

by Saul Ewing Arnstein & Lehr LLP
Contact

With the conclusion of the 2012 Summer Olympics in London, the world’s eyes will soon turn to Sochi, the Black Sea resort city in Russia, which will host the 2014 Winter Olympics. In addition to serving as the backdrop for the usual feats of athletic prowess and national pride, the Sochi games may also be fertile ground for prosecutions under the United States’ Foreign Corrupt Practices Act (FCPA). The U.S. government’s actions in this setting will serve as a signal to any company doing business abroad that it must be proactive in ensuring compliance with the FCPA.

The FCPA is a federal statute that criminalizes the action of giving or offering anything of value to improperly influence foreign officials in order to further a business interest. Passed in 1976, while the United States was still processing the fallout from the Watergate scandal, it was the first statute on record in any nation to criminalize bribing foreign officials. FCPA prosecutions have increased in the past decade. In 2004, the Department of Justice charged two individuals with FCPA violations and collected roughly $11 million in fines. In 2009 and 2010 combined, 50 individuals were charged with FCPA violations, and the government collected just under $2 billion in fines. Assistant Attorney General Lanny Breuer of the Criminal Division also noted last November that in 2011 the Department went to trial on more FCPA cases than ever before, and also secured the longest prison sentence – 15 years – ever imposed under the FCPA.

In addition, the Department of Justice has signaled its intention to focus its attention on corruption in Russia. In March of 2011, Assistant Attorney General Breuer spoke at an anti-corruption summit in Moscow and touted the FCPA’s effect on U.S. companies doing business in Russia. He stated, “the FCPA is a strong enforcement mechanism, and we are not shy about using it. Indeed, the threat of liability under the FCPA is itself a powerful tool, particularly for those from whom Russian officials seek bribes. . . To the extent that an individual doing business in Russia understands that he or she may be prosecuted under the FCPA for bribing a Russian official, the Act provides a strong incentive for him or her to play by the rules, and a good reason for refusing not to.”

Two factors, in particular, indicate that the Sochi Olympics will be on federal prosecutors’ radar screens between now and 2014. First, the infrastructure required to make Sochi ready to host the Games is massive and costly. Although any Olympic host city must spend a great deal on venues, transportation, and the like, Sochi must undertake more construction than other recent hosts. Prior to its Olympic bid, the city was better-known as a summer resort; for example, until 2009, its proposed ski slopes were covered in forest. The estimated cost of construction has exploded to over $35 billion, far beyond the $11 billion that was initially budgeted. U.S.-based multinational companies have won, or are angling to win, contracts for these projects. For example, GE has already provided turbines that will provide electrical power at the Sochi Olympic sites, and a spokesperson for Dow Chemical has announced that Dow has won contracts for work at every single competition venue being constructed there.

The second factor that will lead to scrutiny of companies doing business associated with the Sochi Olympics is Russia’s pervasive atmosphere of corruption. Russia has consistently ranked low on well-respected international surveys of corruption, such as the Transparency International Corruption Perceptions Index, on which it ranked 143rd out of 182 countries in 2011. There have also been allegations of corruption specifically related to the infrastructure projects being undertaken for the 2014 Games. Expatriate Russian businessman Valery Morozov has accused Vladimir Leshchevsky, a government official, of taking bribes to award Sochi construction projects, even detailing a bribe he says he paid to Leshchevsky. One article a Russian news wire published about the preparations for the games was entitled, “Corruption Making Sochi Olympics Most Expensive in History.”

Russia itself recognizes its corruption problem, and in May of 2011, passed legislation similar to the FCPA, criminalizing the actions of offering and accepting bribes. This legislation applies to foreign entities doing business in Russia, so an individual who runs afoul of the FCPA due to bribery in Russia may also be in violation of Russian law. Earlier this year, Russia also joined the Organization for Economic Cooperation and Development (OECD) anti-bribery convention, which was a condition for Russia to join the OECD itself. Even if the Russian legislation proves effective in decreasing corruption, though, Russian attitudes and practices will surely be slow to change.

Companies seeking to do business in Russia during the run-up to the Sochi Olympics would be well-served to review their FCPA compliance regimes, and strengthen them if necessary. A recent case involving financial services firm Morgan Stanley provides a powerful example of how useful a good compliance program can be. From 2004 to 2007, Morgan Stanley managing director Garth Peterson allegedly provided improper payments to a Chinese official in Shanghai. In April of this year, the Department of Justice and Securities and Exchange Commission charged him criminally and civilly for that conduct, but neither agency charged Morgan Stanley with any wrongdoing. The likely reason that Morgan Stanley avoided liability was that it had a robust anti-bribery compliance program, with numerous “reminders” about company policy and applicable laws on the issue. The company also conducted a thorough investigation when Peterson’s conduct was brought to its attention, and fired Peterson in 2008.

Although a limited number of companies will be taking part in the preparations for the Olympics, any company doing business abroad must take steps to ensure its compliance with the FCPA. Creating and actively enforcing an anti-bribery compliance program along the lines of Morgan Stanley’s can help companies avoid FCPA liability whether they are helping set the stage for the next Olympics or conducting business in any corner of the globe.

Written by:

Saul Ewing Arnstein & Lehr LLP
Contact
more
less

Saul Ewing Arnstein & Lehr LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.