The global market has continually created new business opportunities for U.S. companies of every size.
However, with these opportunities come risks and challenges associated with cultural, social and ethical business practices, as well as a myriad of local and international laws and stringent regulations. The U.S. Department of Justice’s (DOJ) increased use of the Foreign Corrupt Practices Act (FCPA) has placed a bright beacon on multinational corporations and underscored the risks and challenges they now face in the global marketplace.
The FCPA was enacted by Congress in 1977, after the Securities and Exchange Commission (SEC) discovered during investigations conducted in the mid 1970s, the prevalent use of cash slush funds and, according to the DOJ, over 400 U.S. corporations admitted to paying in excess of $300 million in illegal bribes and campaign contributions to foreign officials. The original intent and purpose of the FCPA was and remains to curb the widespread bribery of foreign officials.
The most recognized provisions of the FCPA make it unlawful for domestic concerns, certain foreign issuers of securities and issuers required to file periodic reports to the SEC to make bribe payments to foreign officials for the purpose of obtaining or retaining business. Just as important to the anti-bribery provisions are the FCPA requirements that mandate companies whose securities are listed in the U.S. to keep proper accounting records and create and maintain a system of internal controls.
Justifiably, much has been stated and written about the recent FCPA enforcement actions taken by the DOJ and the SEC. In a July 2007 article entitled, The FCPA Enforcement Explosion Continues: Nine Enforcement Actions in 2007 and Approximately 100 Active Investigations, Gibson, Dunn and Crutcher, LLP presented statistics supporting what might be considered an exponential growth when they chronicled FCPA enforcement activity during the period of 2003 to 2007. Specifically, DOJ and SEC FCPA actions increased from two in 2003 to 15 in 2006 and through the middle of 2007 there were nine new actions initiated. Through various sources, the firm also identified approximately 100 other companies that had opened internal FCPA investigations in 2007.
The spike in FCPA enforcement activity and sanctions, according to a December 2005 Inside Counsel Magazine article by Michael T. Burr, is attributed in great part to the confluence of the government’s increased focus on corporate accounting and governance practices post-Enron and Sarbanes-Oxley, tighter cross-border dealings dictated by the anti-money laundering provisions of the U.S. Patriot Act and U.S. Commerce and State departments’ export control regulations. It was further stated in the article that as a result of the broader regulatory mandates and increased resources at the DOJ, SEC and Commerce Department and the tougher due diligence and disclosure mandates companies now face, pressure is rising to squeeze any hint of impropriety out of international business dealings.