The long arm of the law
In the UK, we are all aware of the Bribery Act and its implications but we often forget about the US Foreign Corrupt Practices Act (FCPA). The FCPA prohibits the payment of bribes to assist in obtaining or retaining business and is enforceable worldwide. The Act extends to companies with offices outside of the USA and can apply to prohibited conduct anywhere in the world. The recent reported case of Embraer Executive Jets highlights the reach that the US Department of Justice has in enforcing the FCPA.
The Embraer case centres on Colin Steven, former Vice President of Sales and Marketing. In 2009, Mr Steven was negotiating with the national oil company of Saudi Arabia on the sales of 3 pre-owned aircraft. Mr Steven devised a deal whereby a foreign official would arrange for Embraer to win a contract for the sale of three new aircraft, valued at approximately $93 million, in return for a $1.5m payment. Mr Steven arranged for the bribe to be transferred via a South African company owned by his personal friends, for which he also received a proportion of the money. The deal was investigated by the Department of Justice and in October 2016 a deferred prosecution agreement was executed between the Department and Embraer, under which Embraer agreed to pay a $107 million penalty.
In December, Colin Steven also pleaded guilty to several crimes including violating the FCPA, wire fraud, conspiracy to commit wire fraud, money laundering, conspiracy to commit money laundering and making a false statement. He has yet to be sentenced.
In addition to the above case, there have recently been a number of other high profile investigations by the US Securities and Exchange Commission (SEC) and the Department of Justice, including:
- Telia – The Sweden-based telecommunications provider agreed to pay $965 million in a global settlement to resolve violations of the FCPA to win business in Uzbekistan.
- Halliburton – The oilfield services company agreed to pay $29.2 million to settle charges related to payments made to a local company in Angola in the course of winning lucrative oilfield services contracts. A former vice president also agreed to pay a $75,000 penalty.
Cadbury Limited/Mondelez International - The global snacking business agreed to pay a $13 million penalty for FCPA violations occurring after Mondelez (then Kraft Foods Inc.) acquired Cadbury and its subsidiaries, including one in India for illicit payments made to obtain government licenses and approvals for a chocolate factory in Baddi.
- GlaxoSmithKline – The UK pharmaceutical company agreed to pay a $20 million penalty to settle charges that it violated the FCPA when its China-based subsidiaries engaged in pay-to-prescribe schemes to increase sales.
As demonstrated above, the SEC is sending strong messages of deterrence to companies and individuals who might otherwise see bribery as a way of maximizing their commercial advantage, especially in countries where it is commonplace. Of course, companies cannot engage in bribery without the actions of culpable individuals and the SEC is also committed to holding individuals accountable.
Published: 15 Jan 2018