Marketing the FCPA and the FCPA Risks Of, Well, Just About Everything

It is a common FCPA Inc. marketing device.

Pluck any FCPA-related item from the news and use that news as the hook to write about FCPA compliance services.  Profile any recent instance of FCPA scrutiny and use that scrutiny as the hook to write about a supposed new trend and how that new trend of course indicates the need for FCPA compliance services.RISK on red squares

It seems as if everything now-a-days is a “sobering reminder,” that there is constant speculation as to which industry “is going to be the next target,”  and that every company is warned to ask itself will it be prepared when the ”government knocks on the door.”

Previously on his Corruption, Crime & Compliance site (here) Michael Volkov observed as follows.

“The FCPA Paparazzi has done a great disservice to the business community.  Call it a complete lack of credibility.  Legal marketing has become confused in this day and age – marketing has now been turned into the “Fear Factor,” meaning that lawyers need to scare potential clients into hiring them.  That is flat-out wrong.   Each week, new client alerts, client warnings and other cries of impending disaster are transmitted through the Internet to businesses.  If I were a general counsel, I would have them on “auto delete.”  Talk about a waste of time and effort.”

A bit harsh and I don’t know that I would go that far, but marketing of the FCPA is indeed a topic worthy of exploration and this post profiles recent FCPA marketing activity.

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There was a recent FCPA enforcement action against bond traders Tomas Clarke and Alejandro Hurtado (see here for the prior post).

Why of course that was an “unprecedented FCPA wake-up call for U.S. broker dealers” and caused one law firm to ask “has the perfect FCPA storm finally arrived for U.S. financial markets?”  The law firm stated that “this case demonstrates that Wall Street is not immune to the concerns and risks of other industries and global companies, large and small” and that “this case may be the catalyst that jump-starts a government FCPA sweep of Wall Street that has been predicted since 2011, but not realized.”

The alert concluded as follows.

“In the event that there was previous uncertainty, U.S. financial markets are now on notice that the FCPA is an obligation and that the U.S. government has reason to ask more questions. It appears worthwhile for companies to be prepared and have their house in order to potentially avoid problems later. There is no excuse now for medium- to small-broker dealers, companies and funds to avoid looking into these matters, as it may end up being a worthwhile endeavor in the end.”

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Another law firm alert focused on the oil and gas industry and concluded as follows.

“Oil and gas companies operate in a dynamic anti-corruption risk landscape. Recent FCPA prosecutions and developments in related U.S. law have added to the burdens and potential traps facing the industry. Developments in foreign law signal additional evolutions in prosecution risk. Moreover, major changes in the oil and gas industry itself could expose businesses to local prosecution under anti-corruption laws in the states where they operate. Oil and gas firms are accordingly advised to develop comprehensive compliance programs specifically tailored to their unique business activities. History is a useful guide, but evolutions in law and the industry itself require careful assessment and regular updates.”

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Another law firm alert began as follows. “No industry is immune from corruption.”  It then used two examples of clean-energy companies in the news to launch into the following.   “These reports serve as a sobering reminder for companies of the risks and consequences of international corruption and of the importance of implementing compliance programs to reduce the risk that improper conduct will occur in the first instance.”

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A lawyer authored article stated “that the pharmaceutical and medical device industries remain subject to increased anticorruption scrutiny by regulators around the world, largely because of their business models.”

The article further stated as follows.

“The number of global enforcement actions and the size of fines and monetary settlements have increased exponentially in recent years. Coupled with the increasing potential for simultaneous liability under foreign anticorruption laws, companies are at greater risk for devastating financial and reputational consequences.”

“The pharmaceutical and medical device industries remain subject to elevated scrutiny. But as a result many industry players now have in place best-practices anticorruption compliance programs that are tailored to the now well-known and industry-specific risks. There’s no time like the present to make sure that your company’s compliance programs are among those rising to a higher standard.”

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Another law firm alert focused on Hollywood and the film industry.  It stated as follows.

“Companies and individuals across the entire film industry could be at risk and should react accordingly. This risk is not limited to major movie studios, as the FCPA applies to a broad range of entities and individuals. Indeed, the recent uptick in FCPA enforcement actions against individuals, including the convictions of two film executives [...], suggests that the Government may eventually seek FCPA charges against individuals involved in the alleged illegal activity as well as the companies. In addition to disgorgement, fines, and penalties faced by both individuals and companies, individuals can face lengthy prison sentences for violating the FCPA.”

“Companies can take various steps to ensure that they are prepared if and when the Government comes knocking on their door. While it is always advisable to have a robust and effective FCPA compliance program in place, it is even more important now for companies in the film industry to ensure that their compliance programs are up-to-date and being properly implemented so that they can gain credit if the Government launches an investigation. This is especially true for film companies with dealings in China, as these companies are on the SEC’s radar. To this end, film companies should consider a privileged review of their FCPA compliance programs by outside counsel to ensure that they include all the components that the Government deems necessary, including anti-corruption policies and procedures, training and communication, third-party due diligence, anti-corruption contract clauses, internal accounting controls, auditing of program effectiveness, and response to improper conduct and remedial action.”

“At-risk companies should also consider a privileged internal review by counsel to determine whether any FCPA issues exist and, if so, decide whether to disclose the issues to the Government. While companies can earn cooperation credit for self-disclosing potential violations, the question of whether and what to voluntarily disclose to the Government is a complex decision involving both risks and rewards for the company. Irrespective of whether a disclosure is made, however, launching a preemptive internal review will allow the company to stay ahead of the Government and be best prepared in the event that the Government initiates its own inquiry.”

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Another law firm alert focused on “financial institutions” and stated as follows.

“It is clear from U.S. regulators’ pronouncements and the increase in investigations involving financial institutions that U.S. enforcement authorities will continue to carefully scrutinize financial institutions to evaluate their compliance with the FCPA. Financial institutions are well-advised to devote resources to creating compliance programs designed to address anti-corruption risks, and to providing training to personnel to assure that compliance expectations are understood throughout the organization.”

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Another law firm alert was titled “Agribusiness: The Next Frontier for Enforcement of the Foreign Corrupt Practices Act?”

It began as follows.

“In recent years, the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have aggressively enforced the anti-bribery and accounting provisions of the Foreign Corrupt Practices Act (FCPA), targeting industries as wide-ranging as energy, health care and Hollywood. The results of these efforts have been staggering. With senior government officials indicating that robust enforcement of the FCPA will continue for the foreseeable future, the natural question to ask is: which industry could be the next target for FCPA regulators?  If recent events are any clue, it may be the agribusiness industry.  In light of this recent development, companies in the agribusiness industry may wish to consider taking some of the steps described below to minimize risks of running afoul of the FCPA or, in the alternative, to maximize their bargaining power when negotiating a settlement with DOJ and the SEC.  Given the risks discussed above and the possibility that the agribusiness industry could be a future target of the government’s continued commitment to aggressive enforcement of the FCPA, companies in this industry should consider taking proactive steps to minimize their potential liability, particularly if they have significant overseas business.

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The recent Griffiths Energy International Inc. enforcement action in Canada under Canada’s Corruption of Foreign Public Officials Act (see here for the prior post) was used to market FCPA compliance services as well.  A law firm alert stated as follows.

“[The enforcement action] certainly has compliance with the CFPOA at the forefront for those Canadian companies engaged in international business. Importantly, compliance should not end there, as many Canadian companies must also comply with the Foreign Corrupt Practices Act”

The alert concluded as follows.

“Given the use by Canadian companies of U.S. agents and partners in business and the number of Canadian companies listed on US exchanges, the potential for FCPA applicability is quite high. As a result, it is important for any Canadian company that is required to comply with the FCPA to consult with a lawyer who is familiar with the U. S. anti-corruption laws.”

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As noted in this recent post,  in-house counsel list the FCPA as the second most “specific regulatory area” seen as a threat.

But is the fear rational?

After all, in any given year there are 10-15 core corporate FCPA enforcement actions.  Compare these numbers to the universe of business organizations subject to the FCPA.

Further, as noted in this post, just three unique historical events served as the foundation for 35% of all corporate FCPA enforcement actions between 2007-2011 and resulted in 55% of settlement amounts during that period.