A federal court in Washington, D.C. has declared a mistrial in what the government had touted as the largest prosecution of individuals to date under the Foreign Corrupt Practices Act (FCPA) and the first built on undercover evidence. Four men were the first to go to trial after 22 were arrested and charged in a 2010 FBI sting operation centered on the tiny nation of Gabon, in west central Africa (U.S. v. Goncalves et al., case number 1:09-cr-00335, U.S. District Court for the District of Columbia).
The government's cooperator was a man previously charged with a separate, unrelated FCPA violation. In the sting, an FBI agent posed as a Gabonese official and solicited bribes from U.S. companies hoping to sell guns and National Guard supplies to Gabon, which gained independence from France in 1960.
At trial, prosecutors introduced undercover videotape of the defendants allegedly conspiring to pay $1.5 million in "commissions" to the FBI agent they believed to be a foreign official in exchange for $15 million in contracts. No representatives of Gabon participated in the sting. After more than six weeks of evidence and a week of deliberations, 12 jurors could not agree unanimously that the defendants willfully violated the law. Before the jury received the case, the judge dismissed a conspiracy count, finding that there is no jurisdiction where a U.S. citizen commits no act within the United States. A mailing from Gabon to the United States was not sufficient.
More than 150 FBI agents and London police officers fanned out across multiple states to build the case, only to come up short. This disappointing outing for the Department of Justice (DOJ) may cool the trend of prosecuting individuals under the FCPA, and not just because the government doesn't like to lose. Individuals whose freedom is at stake may have a greater interest in litigating the uncharted waters of foreign bribery law. The law that these cases create can be advantageous to corporations faced with pressure to negotiate a settlement rather than bet the company by challenging the government's interpretation of complex, but untested, statutory provisions.
The FCPA carries stiff criminal sentences and civil penalties. The DOJ enforces the criminal bribery provisions, while the Securities and Exchange Commission (SEC) enforces the books and records provisions. Investigations are coordinated, both between DOJ and SEC and with other countries, and can lead to shareholder suits.
What can we learn from this case? First, today’s rogue employee or sales rep may be tomorrow’s informant. Keep FCPA policies, training and risk assessments up to date. And when something just doesn’t sound right, take a closer look. FCPA’s bribery provisions apply to everyone, not just publicly traded companies.