The FCPA will turn fifty in a few years, giving rise to the inevitable host of celebrations and retrospectives. But we don’t need to wait until then for an overview of the past. With hundreds of enforcement actions since the law became effective in December 1977—some of them famous and extensively scrutinized, others rarely discussed—there is a lot we can still learn. At the same time, certain older cases once considered groundbreaking may now appear at best quaint, at worst irrelevant.
At the outset, we ought to have some idea what we’re looking for—the kind of value we might hope to find. There are at least three ways an FCPA case may—or may not—be considered interesting.
First, a case can be read as precedent. Most business-bribery matters are, of course, resolved by settlement rather than litigation, so binding appellate decisions are rare. But the stated reasons for a given case’s pursuit can tell us a lot: the activities found problematic, the precautions deemed inadequate, the penalties considered appropriate: all vital information for designing an effective compliance program or addressing an unfortunate lapse.
These facts are typically what’s laid out in settlement documents, but they may not reveal much about what really went wrong within an organization. We need a second level of analysis, more along the lines of a case study. Who were the main players? What kind of advantage were they trying to gain? How did the company’s structure and practices facilitate the scheme—or hinder it? What about the government connection: when it arose, how the parties knew each other, whether it reflected a broader pattern of official behavior. These details may or may not be legally relevant, but a more complete narrative can allow for deeper comparison to other business situations.
There’s one more aspect to these cases we might examine. The FCPA wasn’t enacted in a vacuum, and its enforcement isn’t detached from history. The economic and political conditions in which transnational business bribery occurs are varied and evolving. Understanding them can give us a valuable perspective on the significance of our own circumstances. While a detailed treatise is beyond the scope of a series of short blog posts, a close reading can uncover salient and evocative details that can help situate our own compliance efforts. Let’s dive in and see what’s there.
This post is part of "The FCPA Files" series, examining key enforcement cases under the Foreign Corrupt Practices Act and the lessons they offer for modern compliance. |
It is a good strategy to remind your internal client groups from time to time where to find company policies and why they exist in the first place. One policy that deserves the spotlight is your Conflicts of Interest (COI) policy because it requests employees to disclose details about their personal activities, relationships, and investments. Employees deserve an up-front explanation about why the company cares about conflicts. Your explanation will help build trust that encourages employees to disclose potential COI. It is not enough to simply say, as your COI policy likely does, that an employee’s personal interests should not conflict with the company’s interests and how to report potential COI situations. To help employees understand why the company cares about understanding and resolving COI, consider using these talking points and examples:
Objective Decision-Making: Employees with COI may make biased decisions influenced by their personal motivations that could harm the company’s business or waste resources. For example, an employee who owns a stake in, or has a relative employed by a vendor company, may be inclined to direct business to that vendor, even if it is not the most cost-effective choice for the employee’s company.
Company Reputation: COI can lead to decisions that prioritize personal gain over the company's welfare and could harm the company's reputation and integrity. There is a slippery slope from COI to fraud. Companies which rely on their reputation for integrity as a selling point to clients – such as accounting, law, consulting and other services industries – can be particularly damaged by employee self-dealing that is publicly exposed.
Legal Concerns: Certain COI may violate laws or regulations, leading to legal consequences, fines, or sanctions. By identifying conflicts early, a company can take steps to mitigate risks and ensure compliance with applicable regulations. As an example, consider “insider trading” in which an employee with access to material non-public information about a company – perhaps your company or a business partner – uses that information to trade stocks for a profit. In that situation, the employee is using confidential information for his personal gain rather than in the best interest of the firm or its clients. Insider trading violates securities laws and can result in fines, criminal charges, and even imprisonment for the wrongdoer(s) as well as litigation and reputational damage to the company.
IP Leakage: Employees in tech and creative industries with COI can damage the IP portfolio of their employer. For example, employees can be so enthusiastic about their usual work – such as coding, building tools, designing meta environments, etc. – that they engage in similar work outside of office hours, alone or with others, putting the company’s intellectual property at risk if used. Losing IP in this fashion is like letting the genie out of the bottle; there is no getting it back in.
Transparency Builds Trust: Disclosing and addressing COI promotes transparency, fostering trust among employees and stakeholders. When conflicts are managed appropriately, it demonstrates a commitment both by employees and the company to ethical practices and accountability. Addressing COI helps establish a culture of fairness and integrity, where employees are encouraged to act in the company’s best interests. This contributes to higher morale and a more cohesive workplace since employees feel confident that their colleagues are operating ethically.
Compliance officers have at least 3 opportunities to broadly communicate these ‘whys’ of the COI policy to employees on a regularized basis: (i) within online courses and in-person training about COI; (ii) on the first page or two of your company’s COI Policy; and (iii) in the introduction to any COI questionnaires your team requires new employees or existing employees to complete.
Your Human Resources team also can act as a communications partner. It is likely that HR already helps your Compliance team to surface and resolve COI. Fully deputize HR by offering training so they feel confident to explain to employees why resolving COI is important to the company and to help maintain a culture that is built upon employees’ mutual trust and respect.
General Counsel
It suffices to have attended half a dozen conferences on compliance and anti-corruption to hear two corporate mantras: the necessity of the tone from the top, and the importance of role models…
Naturally, I do not intend to totally deny either of these but there are, in my view, flaws and dangers in relying on them too heavily.
The «tone at the top » already contains an inherent ambiguity. Indeed the issue at stake is not the "tone at” but the "action from” the top. Moreover, to suggest that the tone at the top is the single pillar of a culture of compliance entails a risk of deresponsibilisation in particular at the lower end of the spectrum of the chain of command. Most of the difficult cases that I have encountered in my practice came from the ground level and the frontline rather than from the top. And as we are talking about misleading messages let me note that a fish does not stink from its head…it stinks period. In fact any fishmonger will tell you that the first criteria for knowing how fresh is the fish is to look at it in its entirety.
This leads to the other mantra I often encountered in companies: the role model. A number of companies rely on this idea and identify internal or external figures as anti-corruption champions or ambassadors. According to the Cambridge Dictionary: “a person who someone admires and whose behavior they try to copy.” Here again let me note that someone can be admired for good or bad reasons, but more importantly a company that stakes too much on its role models may face disillusionment and cynicism if the role model fails.
Those two examples show the difficulty of anti-corruption messaging. In fact at a broader scale several studies indicates that “there is growing concern that anti-corruption awareness-raising efforts may be backfiring; instead of encouraging citizens to resist corruption, they may be nudging them to ‘go with the corrupt grain.’”*
Compliance should be everybody’s day-to-day business, often below the radar and not very exciting in terms of communication. It is certainly useful in any company to send short and catchy messages to focus the mind of all employees as long as it is clear to all that such short and catchy messages will never replace a solid and well articulated compliance program."
International Lawyer, Former Director for Legal Affairs, OECD