Foreign Corrupt Practice Act (FCPA) enforcements so far in 2022 total $112.3 million in settlements with three companies: South Korea’s KT Corporation, Stericycle, Inc. headquartered in Illinois, and in June, Luxembourg steel pipe manufacturer Tenaris. Stericycle numbers climbed to over $82 million in combination with settling parallel criminal and civil charges to the US and Brazil authorities.
In the second quarter of 2022, the settlements total is slightly under half that of 2021, where FCPA enforcement action payments and settlements totaled $282 million. The numbers are still low compared to the rise in previous years. Merrick Garland, the attorney general, under Biden has promised more forceful actions, but resolutions are still slow in coming.
A new settlement requirement that has been added is the controversial certifications. In May 2022, Glencore’s FCPA resolution required in the plea agreement that the company’s CEO and CCO certify at the end of term of the appointed compliance monitor that the company’s compliance program is “reasonably designed” to detect and prevent violations of the FCPA and other anti-corruption laws, a requirement that is subject to some interpretation. There are no quantifiable goal posts for what is a reasonable design of a compliance program.
If later acts of malfeasance are found, the CCO could be held to criminal charges for making false statements and obstruction of federal law, both of which carry prison sentences of up to five years and 20 years, respectively. This is a further indication that executives will be more likely to be held accountable for egregious FCPA violations.
The Goodwin report on FCPA trends and developments notes that the Department of Justice (DOJ) is seeking to use money laundering theories to charge foreign officials, not themselves subject to the FCPA, with charges to target the recipient of bribes as well as the initiator.
The report further notes that the DOJ is also aiming at noteworthy number of “FCPA-related” charges, such as tax violations, Travel Act violations, money laundering, mail and wire fraud, and false statements “in addition to, or sometimes instead of, FCPA charges.
It is more important than ever for companies to initiate measures to ensure a robust compliance program, including due diligence investigations on third parties, to protect their company before an incident occurs.
These are basic guidelines. Additional penalties include: injunctions, forfeiture of associated profits, forfeiture of assets, and suspension (or in some instances banning) from doing business with the government. Unlisted costs are loss to reputation, effects on company and staff performance, and future revenue.
Added to this there are proposed new Certification requirements for C-suite executives, particularly the CCO on completion of monitorship that the company’s compliance program in “reasonably designed” to detect and prevent violations of the FCPA and other anti-corruption laws.
This is not the first time Tenaris has been implicated in a corruption scheme. In 2011, the company agreed to pay $5.4 million in prejudgment interest, and civil penalties to resolve allegations of violations of the Securities Exchange Act of 1934. They also agreed to pay a $3.5 million criminal penalty in a Non-Prosecution Agreement.
The importance of a business having a vigorous and strong compliance program is something that cannot be over emphasized.
A strong compliance and risk management program includes integrating internal risk management and due diligence practices. This includes: regular due diligence investigations designed to detect hidden and undisclosed information, not readily available in standard background checks, on board members and executives, along with requirements to have due diligence investigations done on business partners, contractors, and supply chains. Due diligence investigations, executive background checks, should always be exercised prior to any M&A proceedings.
The key to creating the most effective risk mitigation program and having the most reliable and accurate due diligence reports is to partner with an global-spanning investigative firm specializing in these areas. They can provide not just the findings, but advise on how to interpret and use that information.
All businesses should adopt pro-active measures in partnership with a risk management firm whose expertise includes corporate due diligence investigations on both executive and business partners.
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