Brazil has taken major steps to establish anti-corruption laws and has five major bribery investigations under way.
But few other Latin American countries have implemented similar laws or programs, a panel of international legal experts reported Friday.
“Brazil is a country we’re having some success with, and there are others that are more limited,” said Eric Bustillo, regional director of the Securities and Exchange Commission in Miami. “I think Mexico is beginning to take some steps, and Colombia little by little is taking small steps.”
However, Bustillo said he is hopeful that Latin American countries will soon realize it’s in their best interests to establish such protocols.
“Most countries are rapidly determining they have to pass their own anti-corruption laws,” he said. “We’re a global economy, and they will soon realize it will cost you in terms of foreign investment.”
Bustillo was part of a panel discussion on the U.S. Foreign Corrupt Practices Act in Latin America and how to implement anti-corruption programs in the region.
Jacqueline Becerra, a shareholder at Greenberg Traurig; Brian Dickerson, a partner with Roetzel & Andress; Daniel Medina, director of Grant Thornton’s forensics and valuation services practice; and Benjamin Greenberg, a Miami federal prosecutor, also participated in the discussion at the Cuban American Bar Association’s 2013 conference on the Legal Aspects of Doing Business in the Americas.
Some lawyers in the audience were somewhat surprised to discover foreign companies doing business deals outside the United States can be prosecuted under the FCPA if any nexus to this country exists. For example, Becerra said a French company bribing officials in Latin America may have had a bank account in Miami, which would put it at risk for prosecution.
“The link to the United States can be tenuous,” said Becerra, a former federal prosecutor. “I have a lot of clients who say the government must understand that in order to do business in Venezuela, this is what I have to do. I say, the government will not understand. In fact, they’ll say you should have known.”
One challenge for companies doing business in Latin America is third-party intermediaries offering to assist them in winning government cooperation, panelists said. Without doing due diligence on third parties, companies could place themselves at risk for prosecution.
Another pitfall is when bribes are disguised, Becerra said. In one case, she said a municipal official asked her client to make a donation to a charity.
“I said go back and do some due diligence,” she said. “It turned out the thing was a dummy NGO (nongovernmental organization). The deal fell apart quickly.”
Becerra also has seen companies offer trips to government officials who want to visit a factory before awarding a contract.
“The trade minister can’t go to Joe’s or on a shopping trip to Orlando,” she said. “I say, ‘If you can’t tell the minister where to eat, maybe he shouldn’t come.’ “
Christmas baskets hiding cash also can be a form of bribery, she said.
Becerra advises clients to thoroughly investigate companies before acquiring them, including doing forensic testing on any suspicious large payments to unidentified sources.
“The mergers and acquisition world is changing quite a bit,” she said. “I get called in a lot to do FCPA risk assessment.”
Medina said he was recently contracted to conduct due diligence for several companies acquiring Latin American companies. His investigations include exploring computer databases and determining whether outsourcing to third parties was done. However, he said data privacy laws have hindered his efforts.
When deciding whether to prosecute a company under the FCPA, investigators look at a company’s corporate compliance program and whether it is being emphasized by top executives, Bustillo said.
It must be tailored to an individual country and in that country’s language, Greenberg said.
“We look at the tone at the top,” Bustillo said. “If we see there’s not the right tone at the top, that will be a factor in our decision.”
The SEC gets FCPA tips from whistleblowers, informants and news media. However, a large number of companies—40 percent—self-report when they do audits and discover potential bribery issues. Self-reporting companies have a greater chance of avoiding prosecution, Bustillo said.
Such was the case with New York-based Ralph Lauren Corp., which reported when it found an employee violated bribery laws in Argentina. The company wound up pulling out of Argentina and paying a $1.6 million fine to the U.S. government, but it avoided both criminal and civil prosecution.
Greenberg said FCPA cases are on the rise internationally and often go hand-in-hand with money laundering crimes.
The Justice Department focuses on high-risk industries and regions, he said, noting prosecutors understand “someone is doing a deal differently in Somalia than in England. That’s just common sense.” The DOJ is not targeting Latin America, Greenberg added.
He encouraged companies and their attorneys to seek a Justice Department opinion if they have questions about potential FCPA violations. Although the opinion process is “tough” and requires a lot of information, it’s one of the few instances where someone can ascertain whether they will be breaking the law beforehand, he said.
“If you’re a drug dealer, you can’t call the DOJ and say, ‘Hey, I have a ton of cocaine here off the coast, yay or nay,’ ” he said with a laugh.