The Foreign Corrupt Practices Act makes it illegal for any U.S. company to bribe foreign officials. The law can apply to a company’s agent or contractors in another country, even if executives in the U.S. were unaware of the bribes.
GlobalAtlanta submitted a list of questions on the FCPA to Joe Whitley, a partner at law firm Greenberg Traurig LLP. Mr. Whitley was formerly U.S. attorney for the northern and middle districts of Georgia and the first general counsel for the U.S. Department of Homeland Security.
Mr. Whitley will co-host a seminar on the FCPA Sept. 2 at the State Bar of Georgia headquarters, 104 Marietta St., in downtown Atlanta. For more information, click here.
GlobalAtlanta: It looks like several recent rulings stem from the investigations made into the United Nations Oil for Food Program. Was this program particularly abused and do you think that the enforcements related to these cases will have a long term deterrent effect, or will they primarily be viewed as aberrational given the context in which they occurred?
Joe Whitley: The Oil for Food program was filled with good intentions, but there were a number of abuses that occurred in the form of bribes and gratuities being paid to gain access to business. Some of the bribes violated the FCPA. The prosecutions that occurred had an immediate deterrent impact and will not be viewed as ineffective if the enforcement efforts continue. The size of the fines and penalties got everyone’s attention.
GlobalAtlanta: The James Giffen case seems pretty interesting because it involves punishment of an individual in addition to a corporation. Apparently there is some debate as to whether it is best to prosecute individuals or corporations to stem ingrained overseas business practices. What do you think?
Mr. Whitley: The prosecution of individuals is seen as useful in the government’s effort to reduce violations of the FCPA. The head of the Criminal Division, Assistant Attorney General Lanny Breuer has made individual prosecutions a priority of the Obama administration.
GlobalAtlanta: Would you comment on Transparency International‘s most recent report. (I read the review on the FCPA blog.) I couldn’t help but notice that Canada, Japan and France are not being particularly aggressive on their enforcement of an international agreement to curb corrupt practices. Why would these countries not act more aggressively? The report also seems pretty hopeless about China, India and Russia ever becoming consistent enforcers. Is the U.S. really in a position that it can exert leadership in this area?
Mr. Whitley: The FCPA was enacted into U.S. law in 1977. The rest of the world is still catching up to the U.S. approach to preventing and prosecuting bribery in the international marketplace. Transparency International’s report is useful in evaluating the playing field around the world in terms of ethical business practices. The U.S. is exerting its leadership by coordinating with other countries to pursue wrongdoing in international markets. The recent case against Siemens resulting in fines, penalties and disgorgement totaling over a billion dollars is an example of effective cooperation between many countries in pursing illegal conduct.
GlobalAtlanta: Does disregarding the Foreign Corrupt Practices Act, in fact, actually pay off when doing business internationally, even if you do get caught?
Mr. Whitley: The benefits of cooperating with the government are not always measurable under the FCPA. In the event a corporation discovers a breach of the FCPA there is no “leniency policy” in place at the Department of Justice or the SEC which guarantees a cooperating corporation a certain outcome in terms of fines, penalties, disgorgement or other sanctions. As a consequence, there may quite possibly be some companies today that are conducting an assessment of whether they want to voluntarily disclose misconduct or simply make adjustments internally to prevent repeat misconduct. I would caution against this type of thinking given the many negative consequences of criminal investigations and prosecutions.
GlobalAtlanta: Can U.S. companies compete internationally when their competitors don’t comply with international agreements?
Mr. Whitley: The playing field around the world for U.S. companies that are FCPA compliant is not level. Doubtless, U.S. companies lose a good bit of market share in the countries that are listed as “at risk” by Transparency International. Nonetheless, the economic costs of being caught for breaking the law far outweigh the benefit of operating outside of the law.
GlobalAtlanta: We have seen how miserably the SEC failed in terms of nailing financial Ponzi schemes. Are these international cases just beyond its capabilities?
Mr. Whitley: I believe that the SEC is going to be more effective in ferreting out FCPA activity in concert with DOJ in the days and weeks and months ahead.
GlobalAtlanta: Do you think that the Internet and increased awareness of the legal consequences of not adhering to the Foreign Corrupt Practices Act, will have any impact at all in getting U.S. corporations to comply?
Mr. Whitley: The Internet has made possible more training programs and reduced the costs of employee education. FCPA compliance at U.S. corporations should be more effective than ever before thanks in part to the Internet.
GlobalAtlanta: How aggressive should the U.S. be in pursuing enforcement and why?
Mr. Whitley: The U.S. today is much more aggressive then ever before in pursuing FCPA misconduct. The number of prosecutions has grown geometrically. In my view, the aggression level is just about right given the statistical enforcement accomplishments of recent years. The SEC by itself continues to be very active in numerous investigations and increasingly in conjunction with the DOJ. Other voluntary disclosures are often made to both agencies simultaneously. There are significant incentives to cooperate with both agencies.
However, I suggest that there be an even greater premium put on voluntary disclosure by the DOJ and SEC that rewards corporations that find, disclose and fix FCPA problems. These corporations should be assured by a formal written policy of reduced fines, penalties and sanctions. I believe the business community would take advantage of this gesture and in turn, this would reduce the need for more costly enforcement efforts.