There can be no doubt from recent events that prosecution of Foreign Corrupt Practices Act (“FCPA”) violations remains a top priority for the Department of Justice and Securities Exchange Commission. Indeed, these agencies continue to ramp up their efforts and utilize even more aggressive tactics to go after alleged violators of the FCPA, which prohibits bribing foreign government officials to obtain or retain business.
On January 19, 2010, the DOJ announced indictments of twenty-two executives and employees in the military and law enforcement products industry. This was dubbed by the DOJ as its largest single FCPA investigation and prosecution. Clearly, the government is no longer content to rely on whistleblowers, self-disclosures or other tips to drive enforcement of the FCPA. These indictments were obtained as a result of the DOJ’s first large-scale undercover FCPA sting operation and entailed the execution of 14 search warrants by 150 FBI agents in seven different states. Seven more search warrants were executed abroad in the United Kingdom by City of London police.
The indicted individuals are associated with a number of U.S. and U.K. companies, which have not been identified by prosecutors other than as in the business of military and law enforcement products, including sellers of small arms, body armor, ammunition and the like. The indictments allege that the defendants agreed to bribe a defense minister in an African country by paying commissions to an agent, who was supposedly working for the defense minister. The understanding was that the agent would split the commissions, giving half to the defense minister and kicking back the other half to the agent and an industry executive who helped broker the deal. In exchange, the defendants' respective companies were supposedly to receive two government contracts worth $15 million to supply law enforcement goods to the country’s Presidential guard. What defendants did not know was that the “agent” of the defense minister actually was a FBI special agent, there was no defense minister involved in the deal, and the industry executive was an informant.
The DOJ itself called this undercover probe a “turning point” that was intended to send a very clear message. In the words of Assistant Attorney General Lanny A. Breuer: “From now on, would-be FCPA violators should stop and ponder whether the person they are trying to bribe might really be a federal agent.”
In addition, it is apparent that the government is looking to put industries on their toes. There is every indication from the scope of these indictments that the DOJ is, and will continue to be, focused on the military, law enforcement and defense industries. In addition, the DOJ recently announced its intent to focus on FCPA enforcement in the pharmaceutical and health care industry and warned that other industry-wide probes would follow. Similarly, in her first speech as Unit Chief of the SEC’s new national specialized FCPA unit, Cheryl J. Scarboro emphasized that the SEC intends to be more proactive in its enforcement efforts, including through use of targeted sweeps and sector-wide investigations, both in the U.S. and with the cooperation of foreign regulators.
Accordingly, in this increasingly hostile regulatory climate, adherence to the FCPA through the implementation and maintenance of structured, top-down compliance programs is essential for any business that is operating abroad and engaging in business transactions with, or subject to the approval of, foreign governments.