Why Non-U.S. Companies Dominate FCPA Prosecutions & Why They Need to be Extra Careful

Of the top ten FCPA enforcement actions, only two involve U.S.-based firms – KBR and Alcoa.  Instead, non-U.S. companies have dominated the headlines for FCPA prosecutions, with Alstom, a French company, recently reaching a settlement with the U.S. Department of Justice for $772 million.

This is the highest fine ever levied by U.S. authorities in an FCPA case.  A larger fine was levied in the settlement of the Siemens bribery case (about US1.5 billion), but about half of that fine was imposed by German authorities.

Some of the reasons that non-US companies are so prevalent in FCPA prosecutions have been covered by the FCPA blog, the New York Times and can be summarized as follows:

  1. Less effective anti-bribery compliance programs. According to the general counsel of Siemens (which holds the record for the largest corruption related case settlement) as reported in the New York Times article, European companies have only recently become aware that the law applied to them. In our experience, Asian companies know even less about the FCPA and its potential application to them.  Many of the top ten settlements involved events that took place a decade ago, before companies, especially foreign ones, were fully aware of the broad jurisdictional scope of the FCPA and had developed anti-bribery compliance programs.
  2. Bribery seen as a cost of doing business. There is still a culture in many non-U.S. companies that they have to resort to bribery to get business in certain jurisdictions.  Bribery is simply a “cost of doing business”.  This is not an uncommon attitude in this part of the world.
  3. More “smoking guns”.  By thinking little of anti-bribery compliance, non-US companies have left more “smoking guns”, such as explicit emails, phony consulting agreements, doctored invoices, trails of money transfers, travel records, and meeting notes.  U.S. companies are familiar with the robust discovery permitted in U.S. civil litigation.  But in countries such as Thailand very little discovery is permitted or conducted.  Consequently, in many of the top settlements, the behaviour was obvious, and the cases fairly clear-cut.
  4. Less self-reporting and cooperation.  U.S. companies are quick to self report potential overseas bribery and start cooperating with the DOJ, whereas non-U.S. companies may believe a battle with the DOJ will create leverage for a favorable settlement.
  5. Weak anti-bribery laws or enforcement records in home country.  Companies that run afoul of the FCPA are often based in countries with weak anti-bribery laws or enforcement records.  France has three companies in the top ten and, rightly or wrongly, is regarded has having a weak anti-bribery enforcement record. The United States law is much tougher and broader in scope than anti-corruption laws in many other countries. Typically, laws to root out corporate bribery elsewhere in the world apply only to top corporate officials, not to all employees, as the United States law does. Senior executive knowledge or involvement in bribery more common.
  6. Senior executive knowledge or involvement in bribery cases is more common among non-US companies. Large scale bribery and kickback schemes that involve senior executive knowledge or participation are more likely to come to the attention of the DOJ, such as occurred in the Alstom, and Siemens cases.
  7. DOJ leveling the playing field by going after non-US companies. American executives have long complained that they are at a disadvantage when competing for overseas business against bribe-paying foreign competitors. We have heard this directly when speaking at FCPA seminars here in Thailand and elsewhere. According to the New York Times article, DOJ officials say that by prosecuting foreign companies, they are seeking to level the playing field.

Given the DOJ’s increasingly aggressive campaign to enforce anti-corruption laws beyond U.S. borders, non-U.S. companies will need to give greater attention to their anti-bribery compliance programs, stop viewing bribery as a cost of doing business, and be more open to the idea of cooperating with the DOJ at the outset of an investigation.