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Gunning for Global Graft

DoJ, SEC turn up the heat on briberies of foreign officials.
Kate O'Sullivan, CFO Magazine
September 1, 2008

Anyone trying to grease a few palms abroad, beware. The Department of Justice (DoJ) and the Securities and Exchange Commission are on track to file a record number of enforcement actions this year based on the Foreign Corrupt Practices Act (FCPA), which prohibits the bribing of foreign officials. At midyear, the regulators had filed a combined 16 cases accusing U.S. companies and their employees of illegal payments. That's 78 percent more than the number filed at the same point last year and surpasses full-year tallies for any year before 2007, according to a recent report from law firm Gibson, Dunn & Crutcher LLP.

Along with the number of cases, "the scope of what's considered to be in violation and the [size of] the monetary penalties have all increased," says Nancy Boswell, president of Transparency International USA, part of a global watchdog group that recently released a separate report on antibribery enforcement.

Ironically, some of the increased FCPA activity has been the result of companies self-reporting issues that emerged from their Sarbanes-Oxley audits. Regardless, the cases are costly to resolve. Willbros Group, an engineering and construction firm with its U.S. headquarters in Houston, agreed last May to pay $32.3 million to end SEC and DoJ investigations into its alleged bribes to officials in Nigeria and Ecuador. The company reported the suspected activity to regulators and has entered into a deferred-prosecution agreement under which all charges will be dropped in three years, provided the company pays the fines, engages an independent monitor, and adopts tougher compliance policies. Other countries, including Germany and France, have recently stepped up antibribery enforcement, notes Boswell. But the United States still leads the pack, by far, when it comes to the number of cases being investigated.


Recent FCPA Cases
Company
Status
Faro Technologies
$1.1 million criminal penalty; has deferred prosecution agreement (DPA)
AGA Medical
$2 million criminal penalty; has DPA
UTStarcom
Settled SEC investigation by agreeing to permanent injunction against future violations; DoJ investigation ongoing

Number of FCPA cases filed by U.S. regulators, by agency


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