Is FCPA Enforcement Under Siege?

Enforcement of the Foreign Corrupt Practices Act (FCPA) seems to be under siege from a number of different directions.

We wrote last month about the FCPA convictions of Lindsey Manufacturing and two of its executives in U.S. District Court in Los Angeles. Since then, however, Judge Howard Matz, presiding over the case, has asked for briefing on possible prosecutorial misconduct. This was a very closely watched FCPA case, marking the first-ever jury verdict against a corporation in an FCPA prosecution. But the verdict is now in serious difficulty. The trial judge said in open court, “There are a lot of troubling things that have gone on here.”

The defense claimed that the prosecution had failed to turn over the grand jury testimony of an FBI agent who testified in the case. The Jencks Act requires the government to turn over prior testimony by witnesses in a criminal trial. The Department of Justice’s brief is due on August 1, 2011. See the interesting and detailed discussion in the “FCPA Professor” blog regarding the Lindsey case.

In another closely watched case involving the same statute, on July 7, 2011, U.S. District Court Judge Richard Leon of the District of Columbia declared a mistrial after jurors weren’t able to reach a verdict in a case that involved allegations of a corrupt deal to sell $15 million in supplies to the defense minister of Gabon. Four defendants had gone to trial, the first to do so out of 22 who were indicted.

The case, which didn’t actually involve anyone from Gabon, was a “sting” case in which the defendants were led by federal agents to believe that that African nation’s foreign minister wanted to receive bribes. It was the first large-scale undercover operation mounted by federal agents that involved the FCPA. In this trial, defense counsel focused on alleged misconduct by the FBI during the investigation. An FBI agent had posed as the Gabonese official. The Justice Department says it will retry the case.

Finally, The Washington Post reported on July 24, 2011, that business leaders are trying to get the FCPA amended to “clarify” it because the law as it stands now is bad for business. One of the major concerns is exemplified by a decision by Judge Matz in the Lindsey case that a bribe given to an employee of a state-owned utility company is a bribe of a “foreign official” and is punishable under the FCPA. Rep. F James Sensenbrenner (R-Wis.), the chairman of the House Judiciary Committee, told the Post reporter that he plans to introduce a bill to amend the FCPA to help businesses.

Companies doing business abroad may take heart from these developments. But the government is very good at learning from its mistakes. Prosecutors, all the way up to the highest levels of the Department of Justice, say they will continue to make FCPA enforcement a priority. And amendment of the statute is a long way off. So our advice remains: stay as far away from a foreign bribery situation as possible. Train your employees to recognize a problem and report it to the highest levels of the company. And use common sense.

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