A CEO's Guide to FCPA Compliance

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  • A tone-at-the-top business culture with CEO leadership is a critical component of effective anti-corruption and anti-bribery policy implementation.
  • CEO leadership helps set an example for lower management and company personnel regarding adherence to company policies as well as general legal and ethical compliance.
  • CEOs are responsible to eliminate corruption and maintain an effective internal compliance program.
  • Core components of top-down Foreign Corrupt Practices Act (“FCPA”) compliance for CEOs include: knowing the relevant law regarding corruption, leading by example, maintaining a close working relationship with legal counsel, preserving relevant documents, being familiar with the provisions of the FCPA that are most susceptible to violation, relying on independent compliance experts and independent reviews, and overseeing due diligence reviews and audits with legal counsel.
  • CEOs should hire legal counsel who is experienced in FCPA compliance to develop and implement effective compliance programs for their companies.

FCPA Compliance is Essential

If you have questions regarding your company’s Foreign Corrupt Practices Act (“FCPA”) compliance policy or are worried about an impending federal investigation, you cannot afford to make uninformed decisions. Companies that lack adequate FCPA compliance policies are often targeted by federal authorities due to the increased risk and occurrences of bribery and corruption. Charges under the FCPA can result in significant civil and criminal penalties - including federal imprisonment – and damage to your company’s (and your personal) reputation. As a result, FCPA compliance is the crucial for establishing a business environment in which corruption is not tolerated.

CEOs Play a Critical Role in Implementing and Executing Their Companies’ FCPA Compliance Programs

Many CEOs underestimate the positive impact that they personally can have on their companies’ FCPA compliance efforts. However, a tone-at-the-top business culture punctuated with strong CEO leadership is critical to effectively implementing anti-corruption and anti-bribery policies and procedures on a company-wide scale.

Without effective leadership from the top, employees within the business are far less likely to feel motivated to work toward a common goal. Shortcuts will be taken to achieve short-term goals with minimal effort—especially if there is precedent for unethical or illegal behavior going unpunished.

“Effective CEO leadership sets an example for lower management and personnel regarding adherence to the company’s policies and procedures; and, in the area of FCPA compliance this is especially important. FCPA violations at all levels of the organization can have severe consequences, and failure to effectively implement an FCPA compliance program can itself lead to federal prosecution.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.

A FCPA Compliance Guide for CEOs

The Foreign Corrupt Practices Act is a massive piece of legislation that federal agents and prosecutors use to scrutinize businesses suspected of engaging in illicit behavior indicative of corruption and bribery. Collectively, prosecution under the FCPA has resulted in billions of dollars in fines, restitution, and disgorgement orders, and many company executives have been sentenced to lengthy prison terms for personally violating the FCPA’s anti-corruption and anti-bribery provisions.

Among many other roles, within the context of FCPA compliance, CEOs are tasked with ensuring that their companies have developed strong compliance programs that effectively guard against the risks of corruption and bribery. CEOs must also lead their companies’ efforts to weed out corruption, enforce a zero-tolerance policy for FCPA violations, and monitor the effectiveness of their companies’ compliance efforts in order to identify and remedy weaknesses.

In order to achieve these objectives, CEOs must have a clear understanding of how the FCPA applies to their company, and they must have an equally clear understanding of the role they play personally in establishing and maintaining a culture of compliance. With this in mind, some key aspects of FCPA compliance for CEOs include:

    • Know the relevant law.
      • CEOs must be knowledgeable about the relevant provisions of the FCPA in order to effectively lead their companies’ compliance efforts.
      • The FCPA was enacted in 1977. It has two main sections of import to CEOs: (1) its anti-bribery provisions, and (2) its accounting and recordkeeping provisions.
      • These provisions broadly prohibit bribery of foreign officials for the purpose of obtaining or retaining business, and they require companies to maintain adequate books, records, and internal controls in their accounting practices.
    • Understand the legislative purpose behind the FCPA.
      • The legislative purpose behind the enactment of the FCPA was to combat the increase in global corruption and put an immediate stop to the rising costs of corruption in the United States.
      • It was meant to restore the confidence, credit, and reputation of U.S. businesses and promote a healthy international business environment.
    • Be a leader.
      • CEOs need to take on a leadership role within their company with regard to establishing expectations for company-wide FCPA compliance.
      • Among other measures, this should include engaging in regular and frequent communications with management on compliance topics and means for improving the company’s compliance efforts.
    • Engage legal counsel to assist with FCPA compliance and defense.
      • Counsel should be retained to advise the company on all relevant and major transactions and to provide representation during internal and external investigations.
      • Internal investigations conducted by the company require the assistance of counsel for planning, organization, preservation of the attorney-client privilege, and responding to identified violations.
      • External federal investigations also require the assistance of counsel. If not privileged, the results of an internal investigation may be reviewed by federal authorities as part of their investigation.
      • Counsel can protect the interests of the company at every stage of the investigative process and should be actively sought by the company.
    • Preserve physical and electronic documents with FCPA compliance implications.
      • A federal investigation can be dangerous enough without the risk of facing contempt or obstruction of justice charges for destroying potential evidence.
      • It is therefore incumbent upon CEOs to make sure their companies preserve all pertinent documentation—whether in physical or electronic form.
    • Know the areas of the FCPA that are most susceptible to violation.
      • “Gift-giving” is the phrase within the FCPA that is perhaps the most susceptible to violations.
      • CEOs should be intricately familiar with the acceptable and unacceptable forms of gift-giving under the FCPA.
      • CEOs should also ensure that relevant company personnel are informed of what constitutes appropriate and acceptable gift-giving, such as ensuring that gift-giving is open and transparent, properly recorded, permitted under U.S. law and the law of the foreign country of the recipient, and that the gift is reflective of gratitude.
    • Be aware of the federal authorities that enforce the FCPA.
      • The U.S. Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) are jointly responsible for enforcing the FCPA.
      • The DOJ handles criminal prosecutions, while the SEC is charged with handling civil enforcement proceedings.
      • In appropriate circumstances, the Federal Bureau of Investigation (“FBI”) and the Commodity Futures Trading Commission (“CFTC”) will also get involved in FCPA investigations.
    • Discipline employees who engage in corruption and bribery and reward compliance.
      • CEOs should initiate internal investigations when instances of suspected bribery and corruption are identified.
      • Counsel should be retained to handle the investigation, evaluate the facts, report to upper management, and determine the appropriate response based on the conclusions reached following the investigation.
      • Individuals found to have committed violations of the FCPA should be disciplined accordingly.
      • CEO should also lead company efforts to incentivize compliance and reward individual compliance efforts.
      • CEOs should promote and be transparent regarding such procedures.
    • Utilize independent compliance experts and independent reviewers to assess the company’s compliance program.
      • A certified compliance expert should be a part of the company’s board. Independent reviewers should also be used to verify FCPA compliance.
      • These experts serve as “checks” on the company. Their duties are to review company compliance programs and help create a transparent and effective company-wide compliance policy.
    • Conduct due diligence reviews and audits on a periodic basis.
      • Due diligence reviews should be conducted periodically and should be mandatory before, during, and after major business events such as takeovers, mergers, and acquisitions.
      • FCPA audits should also be conducted regularly during major transactions in order to identify any instances of corruption or bribery, and to promptly respond to any issues identified.
    • Promote and encourage the self-reporting of FCPA violations.
      • Since the SEC and DOJ both encourage self-reporting and are more lenient towards companies that self-report, CEOs should encourage company personnel to disclose FCPA violations internally.
    • Know what is at stake.
      • CEOs should be knowledgeable regarding the penalties for failure to comply with the FCPA and for maintaining substandard compliance policies.
      • Federal investigations can result in criminal prosecutions, civil enforcement actions, and administrative proceedings.
      • Companies under federal investigation face the possibility of fines, restitution, and disgorgement orders for ill-gotten profits. The FCPA also imposes prison terms for individuals who engage in prohibited conduct.
      • FCPA violations can also lead to the loss of business contacts, loss of customers, inability to do business with the U.S. government (and other entities), and significant reputational harm.

Company CEOs Should Rely on the Advice of Experienced Federal Counsel with Regard to FCPA Compliance

FCPA compliance is essential for any company that does business with foreign entities. Federal investigations targeting FCPA violations can be time-consuming and costly—even if they do not lead to civil or criminal charges. CEOs who have questions or concerns about FCPC compliance should engage experienced federal counsel as soon as possible. An attorney who is experienced in FCPA compliance and defense will be able to assist your company with implementing an effective compliance policy that mitigates the risk of violations and fosters an ethical and principled corporate culture.

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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