Over the past 15 months the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) has made clear through three Foreign Corrupt Practices Act (FCPA) enforcement actions and speeches, their priorities in investigations, remediations and best practices compliance programs. Every compliance professional should study each of these enforcement actions closely for the lessons learned and direct communications from the DOJ. They should guide not simply your actions should you find yourself in an investigation but also how you should think about the priorities.

The three FCPA enforcement actions are ABB from December 2022; Albemarle from November 2023 and SAP from January 2024. Taken together they point a clear path for the company which finds itself in an investigation, using extensive remediation to avoid a monitor and insight for the compliance professional into what the DOJ expects in a best practices compliance program on an ongoing basis.

Over a series of blog posts, I will lay out what I believe are the Top Ten lessons from these enforcement actions for compliance professionals who find themselves in an enforcement action. Today we continue  with Number 7, Change in Sales Model. This is one of the more intriguing insights from these enforcement actions as changing a sales model has not been previously called out the DOJ in prior commentary, iterations of the Evaluations of Corporate Compliance Programs, either edition of the FCPA Resource Guide or in speeches. However, it is so self-evident a change you might wonder why it has not been called out previously. One reason may be that while it would seem to be a simple change; it is not particularly an easy one. Therefore many companies may have been reluctant to try and do so.

Albemarle

Albemarle changed its approach to sales and their sales teams. Obviously, it was corrupt third-party agents which brought the company to such FCPA grief. Many of the quotes in the NPA and Order make it clear that Albemarle executives had an aversion to paying bribes but had greater moral flexibility when a third-party agent was involved. This led to the company moving away from third-party agents to a direct sales force.

 SAP

On the external sales side, SAP eliminated its third-party sales commission model globally, and prohibiting all sales commissions for public sector contracts in high-risk markets and enhanced compliance monitoring and audit programs,  including the creation of a well-resourced team devoted to audits of third-party partners and suppliers. On the internal side, SAP adjusted internal compensation incentives to align with compliance objectives and reduce corruption risk.

Gunvor S.A.

The Gunvor FCPA enforcement action was announced in early March. According to the DOJ Press Release, the company has “pleaded guilty and will pay over $661 million to resolve an investigation by the U.S. Justice Department into violations of the Foreign Corrupt Practices Act (FCPA).” I have not included it in this discussion up to this point. However the DOJ specifically noted that Gunvor had done away with its “eliminating the use of third-party business origination agents”. While this is not a complete change in its sales model, it certainly is a significant part of such an action. It also demonstrates that a company can partly change its overall sales model and sales method in a manner which will draw favor from the DOJ.

Moving to a direct sales force does have its own risks which must be managed but those risks can certainly be managed with an appropriate risk management strategy, monitoring of the strategy and improvement; those risks can be managed. Yet there is another reason, and more importantly a significant business reason to move towards a direct sales business model. Every time you have third-party agent or anyone else between you and your customer, you risk losing that customer because your organization does not have a direct relationship with the customer. By having a direct sales business model, your organization will have a direct relationship with your customer and therefor the ability to develop it further.

If your organization finds itself in such a FCPA investigation, you should look at your sales model to determine the risks in maintaining it. If you model is fully commission-based or highly commission-dependent, you may well want to consider moving to a direct sales model to help remediate and manage your risks more effectively.

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