On January 19, the Federal Bureau of Investigation (FBI) reported that it had completed a sting operation resulting in the indictment of 22 executives and employees of the military and law enforcement products industry for alleged foreign bribery in violation of the Foreign Corrupt Practices Act (FCPA). The sting operation featured undercover agents who posed as "sales agents" of the defense minister of a country in Africa, who demanded a 20% "commission" from the defendants in exchange for a $15 million deal to arm the country's presidential guard. The defendants were told that half of the "commission" would be paid directly to the country's minister of defense. Twenty-one of the defendants were arrested in Las Vegas on the eve of the annual Shooting, Hunting, Outdoor Trade (SHOT) Show and Conference, a huge firearms and munitions industry gathering.
According to an Assistant U.S. Attorney involved in the investigation, the sting operation marks the first large-scale undercover investigation to uncover FCPA violations. He noted that one primary goal of the sting was to deter future FCPA violations, and that "[f]rom now on, would-be FCPA violators should stop and ponder whether the person they are trying to bribe might really be a federal agent." The sweeping scope of the sting operation suggests that the FBI and Department of Justice are newly committed "to aggressively investigate and prosecute those who try to advance their businesses through foreign bribery," according to another U.S. Attorney.
In general, the FCPA criminalizes payments to foreign officials that are intended to induce the recipient to misuse his official position to establish or maintain business opportunities, or to create an unfair competitive advantage in a competition for business. A narrow exception of permissible payments exists for payments to facilitate or expedite the performance of routine governmental actions where the government or official already has an obligation to perform a function or duty. The FCPA includes examples of facilitating payments, including payments made to facilitate obtaining permits, licenses or other official documents, processing governmental papers (such as visas and work orders), loading and unloading cargo, and others. The FCPA also includes an affirmative defense in cases where the payment is permitted by the written laws of the foreign country.
The Government's interest in ferreting out corruption and potential FCPA violations should be of particular concern for contractors who operate in countries where typical local business practices frequently involve payments to facilitate operations, protection or administrative procedures. The line between prohibited FCPA "bribes" and permissible "grease payments" can be thin and gray, but the latter may be prevalent in regions where the United States has a growing presence. Accordingly, contractors should consult closely with counsel to assess whether payments required to be made to, or demanded by, foreign officials are for legitimate, legal purposes and will clearly satisfy stringent requirements for the narrow exceptions to the FCPA.
Otherwise, contractors may find themselves pondering with greater frequency whether the person to whom they are making questionable or "facilitation" payments is really a federal agent.