Not long ago, it took multimillion-dollar payments delivered by corporations to lofty government officials to get the attention of the Department of Justice.
The Foreign Corrupt Practices Act, enacted in 1977, but not taken very seriously until just a few years ago, seemed to have a simple checklist of what would trigger prosecutions: Large precontract payment? Check. Offshore, numbered account? Check. Vast contract award? Check -- and prosecute.
These days, however, the government's treatment of bribery is far more complicated, and the stakes for companies are higher.
A bribe needn't even succeed to wreak havoc with a company's reputation. In 2005, Monsanto settled with the Justice Department and the Securities and Exchange Commission -- the two agencies that jointly administer the FCPA -- for $1.5 million after a senior Monsanto executive responsible for the Asia Pacific region tried but failed to bribe an overseas official with $50,000.
The once-celebrated custom of corporate hospitality and seasonal gift-giving is no longer neutral ground. In 2004, when Titan ran into trouble in Benin and ABB did the same in Nigeria, jewelry loomed large in the media accounts and pleadings. Lucent disclosed in 2003 that it was under investigation, in part, for gifts and travel provided to government officials in Saudi Arabia; last December, the company agreed to pay $2.5 million in criminal and civil penalties to resolve FCPA charges related to trips provided to Chinese government officials. Bearing Point has also disclosed an investigation into gifts and travel provided to government officials in China.
Once thought to be safe from the same level of scrutiny, payments to charities are not immune. Schering Plough's $76,000 contribution to a legitimate charity -- the favorite of a senior Polish official -- resulted in a $500,000 fine in June 2004 when the company failed to account for the payment as the bribe that it was deemed to be.
Self-defense is no excuse, even in notoriously dangerous markets. Chiquita agreed to pay a $25 million fine last year after admitting to making payments to a Colombian paramilitary group (and recognized terrorist organization) in response to threats to the company's business interests in that country.
Shady middlemen have long had a place of honor in the bribe-paying community, and that certainly holds true today. What surprises executives, however, is that self-starting bagmen willing to pay bribes out of their own profit without consulting the company can get management into just as much trouble.
InVision settled with the Justice Department in December 2004 for possible inappropriate payments by its distributors after the department concluded that employees at the company were probably aware of payments by the distributor.
Indeed, the company a company keeps can be of great importance in this area. After the Justice Department's 2007 investigation into Panalpina's freight-forwarding and logistics services in Nigeria churned up the names of a dozen other companies, the government expanded its investigation to ensure no one was left out.
Although the FCPA clearly addresses bribes paid indirectly as well as directly, there has long been an assumption that at some point a payment was foreign enough, distant enough, remote enough not to be imputed back to headquarters. Dow Chemical learned otherwise last year when they agreed to pay $325,000 to atone for modest payments provided by their fifth-tier subsidiary in India, in some cases 11 years earlier.
Surprising to some is that these cases aren't really over when they're over. After Norway-based Statoil settled bribery allegations in that country with a $3 million payment to the Norwegian authorities in 2004, the Justice Department and the SEC stepped forward with a combined demand for another $21 million. The Justice Department agreed that the Norwegian fine already paid could be counted toward its own penalty.
Employees are no longer gambling with company resources and reputation alone. The Justice Department has shown enthusiasm for enforcement actions against individuals, some of whom are offered up as part of the company's settlement negotiations. Steven Head, the former CEO of Titan Africa, pleaded guilty in June 2006 to his role in that company's payments in Benin and was sentenced to six months in prison and a $5,000 fine. David Pillor agreed to pay a $65,000 fine for his role in the InVision matter. Yaw Osei Amoako was sentenced last year to 18 months in prison for his role in a telecommunications bribery scheme in Africa.
It seems that no bribe is too small to earn the attention of the department. Although Baker Hughes' 2007 troubles -- attributable to a reported $5.2 million in inappropriate payments -- made the headlines, Richard John Novak pleaded guilty in March 2006 to paying less than $70,000 over two years to Liberian embassy officials with the hope that they would lend credibility to his "diploma mill." Faheem Mousa Salam found himself under the bright lights last year; he was sentenced to three years' imprisonment after pleading guilty to making payments totaling $60,000 to "encourage" Iraqi police to buy his armored vests.
Individuals who believe they have nothing to fear because they aren't U.S. citizens and reside outside of the United States could learn from Christian Sapsizian's experience. A former Alcatel executive and French citizen, Sapsizian was arrested in December 2006 by U.S. officials who boarded his plane when it touched down briefly in Miami en route from Panama to Paris. Sapsizian pleaded guilty last year to charges of conspiracy and violating the FCPA and now faces up to 10 years in prison, a $250,000 fine, and $330,000 in forfeiture.
ON THE PROWL
Furtive transactions in dark, smoky restaurants seem to have fallen by the wayside of late. What hasn't changed much in recent years, however, is the confessional impulse that seems to propel companies that uncover bribery.
Like the earliest days of the FCPA when more than 400 companies came forward to confess their bribing ways, voluntary disclosures continue to be the Justice Department's greatest source of new enforcement actions. Individuals understandably fight tooth and nail if their liberty is on the line, but most companies simply nod their consent to whatever the Justice Department or SEC offers them. The risk of fighting these cases, the management distraction they entail, and the fear of seeing the corporate logo next to headlines alleging bribery are too great.
The Justice Department is on the prowl and they're staffing up. To support them, the FBI formed a dedicated team of special agents last year to work all FCPA cases out of their Washington field office.
The number of enforcement actions seems to increase every year. Together, the Justice Department and the SEC brought an average of just one or two cases each year for the first 20 years of the law. More recently, however, there has been a surge of enforcement actions, with 55 reported investigations in the last two years alone.
Fines are up, too. The previous record of almost $25 million held by Lockheed Martin since 1994 was swept away first by Titan's $28.5 million fine in 2005 and then by Baker Hughes' $44 million fine last year.
If every company doing business internationally looks closely enough, they will hear a story about someone, somewhere making an inappropriate payment on its behalf.
Every company should work vigilantly to prevent these payments, whether in the guise of gifts, charitable contributions, grease payments, or what is occasionally -- and condescendingly -- referred to as "corporate tipping."
Companies should not assume, however, that finding the payment, firing the employee and fixing the problem will diminish the government's interest in rigorous enforcement. That simple FCPA checklist of the past is long gone, and companies should brace for the new reality.
Alexandra A. Wrage is the president of TRACE International, a nonprofit membership association devoted to anti-bribery compliance support.