Forensics Journal - Stevenson University 2015 | Page 40

STEVENSON UNIVERSITY

of actual knowledge or ignorance of bribery remains a poor defense
as Congress has stated that just the “high probability” of a bribe
occurring is sufficient to hold the business accountable for the
actions of the third party (U.S. Department of Justice A Resource
Guide to FCPA).

controls over bribery and corruption risk. More recent cases have
indicated increased cooperation between the US, UK, Australia
and Canada, since the establishment of the International Foreign
Bribery Task Force in May 2013 (IFBT). This type of international
cooperation will increase as more countries begin to enforce their
anti-bribery laws.

Unlike the UK Bribery Act, the FCPA contains an exception for
payments to facilitate or expedite services so as “to further routine
government action” (U.S. Department of Justice A Resource Guide
to the FCPA). These exceptions address non–discretionary acts e.g.,
processing paperwork or expediting government documents. The
FCPA does not provide a monetary limit on payments, however
the size of the payment is often a factor in determining the corrupt
intent to influence a non-routine government action. Such proposed
transactions or facilitation payments should undergo legal review
and determination by qualified counsel prior to actual payment.
Companies are also subject to legal action should their activities
violate the host country’s laws regarding transaction or facilitation
payments.

Industry sweeps appear to be increasing. An industry sweep occurs
when the government expands an investigation of one entity into
others in the same industry. For example pharmaceutical and medical
device companies including Johnson & Johnson and Novartis recently
disclosed bribery and kickback violations. The financial services
industry, including Deutsche Bank and Citi Group have also had
several investigations pertaining to their dealings with sovereign
wealth funds. Companies in the technology industries (IBM,
Converse Technology and Maxwell Technologies) also disclosed
settlements for FCPA related issues in recent years.
Both the DOJ and SEC have focused on Successor Liability issues.
These are enforcement actions against companies for FCPA violations
occurring before or after mergers or acquisitions. When a company
merges with, or acquires another company, the successor company
assumes most of the predecessor’s liability in criminal and civil
actions to include FCPA violations.

FCPA ENFORCEMENT TRENDS
On April 14, 2014, the DOJ unsealed an indictment regarding two
broker-dealer executives who were charged with FCPA violations
in connection with the payment of bribes to a representative of a
state-owned Venezuelan bank. The CEO and Managing Partner
of Direct Access Partners, in coordination with other third parties,
including the wife of the CEO, conducted a bribery scheme where
millions of dollars were paid to a bank official so she would direct
bank business to the firm. The two executives garnered over $60
million in commissions, transferred their gains to offshore bank
accounts to evade detection and taxes, and returned a percentage
to the bank official.

Armor Holdings Inc. paid $16 million to the SEC and DOJ to
settle FCPA violations disclosed prior to being acquired by BAE
Systems Incorporated (Alfaro). The differed–prosecution agreement
noted that the government agreed to settle due to Armor Holding
Inc.’s transparency and cooperation with the government as well
as its implementation of extensive remedial efforts throughout the
acquisition process (Alfaro, 2013).
Diageo PLC also paid the SEC and DOJ $16 million to settle
FCPA charges relating to improper payments made to government
officials in Asia (Alfaro). The SEC disclosed deficiencies in the
FCPA compliance program of Diageo which allowed violations
to go undetected as Diageo expanded through multiple mergers
and acquisitions. The SEC concluded Diageo PLC was aware
of the deficiencies in controls but ignored them until the corrupt
payments were uncovered, after the transfer of ownership occurred
(Alfaro, 2013).

The Direct Access Partners case illustrated the DOJ’s methodology
when pursuing FCPA violations. These include: 1) using full range
of laws and federal statutes applicable to the case, e.g., FCPA, travel
act, money laundering; 2) coordination efforts in a transnational
environment; 3) indicting top tier leadership. The assistant attorney
general in this case stated “…we will aggressively pursue individual
executives, all the way up the corporate ladder, when they try to
bribe their way ahead of the competition” (Alfaro, 2013). This case
is just one of many cases that DOJ and SEC have brought against
individuals for FCPA violations.

The SEC and DOJ encourage US companies to conduct pre–
acquisition due diligence. Due diligence evaluates internal policies,
procedures and controls before acquisition. Poor accounting and
poor internal controls may signal a less valuable commodity; disclose
corrupt business practices i.e., bribery which can be resolved prior
to the acquisition, and identify business and geographical risks to
be offset during the post-acquisition and subsequent integration
corporate compliance and internal controls.

The trend of transnational law enforcement agency cooperation
and coordination to enforce FCPA was noteworthy in the AON
case. In December 2011, the US settled FCPA charges against
AON, two years after the UK Financial Services Authority (FSA)
had investigated the UK subsidiary and found that the UK
subsidiary was bribing government officials in Costa Rica. Heavy
fines and penalties were levied by the US government for poor
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