FCPA Not Limited to Large Organizations

Several recent reports highlight the fact that Foreign Corrupt Practices Act (FCPA) enforcement does not apply solely to large organizations. One example is Smith & Wesson’s recent $2 million settlement with the U.S. Securities and Exchange Commission in relation to the company’s conduct in Turkey, Nepal and Bangladesh from 2007 to 2010. Smith & Wesson neither admitted nor denied wrongdoing.

In addition, the FBI arrested a lobbyist hired by mining group BSG Resources after a sting operation. The man—a French national—pleaded guilty to reduced charges of obstruction of justice. News reports indicate BSG was never accused of wrongdoing; acting on his own, the contractor attempted to bribe a witness to flee or destroy documents. This incident highlights the importance of knowing your contractors and monitoring their activities.

Finally, the ex-CEO of Lufthansa’s BizJet unit was the third executive officer to plead guilty in a scheme to bribe Mexican and Panamanian officials to secure aviation service contracts. Former VPs of sales and marketing and finance had previously pleaded guilty. A fourth executive is still under indictment but is believed to be living outside the United States. BizJet’s cooperation and remediation in the investigation likely led to a reduced penalty but did not save the organization from the substantial costs of remediation or monetary penalties levied by the Department of Justice.

A strong program of controls to mitigate potential FCPA violations before they occur is a necessity for any organization—large or small—with international operations. Being aware of past schemes that resulted in FCPA violations and paying close attention to consulting contracts, facilitation payments, government fees and other common labels for payments that are actually bribes to foreign officials is important. Scanning vendors, payees and consultants for lists of politically exposed persons and international organizations that may indicate a higher risk of potential FCPA violations also can help reduce risk.

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BKD Forensics – who has written posts on BKD Forensics.


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