• Money, It’s A Crime
  • May 18, 2017 | Author: Michael J. Fellerman
  • Law Firm: Shulman, Rogers, Gandal, Pordy & Ecker, P.A. - Potomac Office
  • U.S. civil and criminal authorities have been particularly aggressive in investigating and prosecuting potential violations of the Foreign Corrupt Practices Act. There are few areas of corporate and securities law in which the SEC and the Department of Justice have been more unified. This coordinated approach has resulted in record fines against corporations and criminal prosecutions of individuals. And, because such investigations are complex and, almost by definition, multi-national, the associated expense, distraction, and opportunity costs represent an additional penalty, even in situations where the investigation fails to uncover substantial wrong-doing.

    The “pro-business” and “de-regulatory” philosophy advanced by the new U.S. administration has caused some commentators to suggest that there may be some pull-back in this aggressive approach. Anti-corruption compliance programs need to be multi-dimensional, detailed and expansive, and carry significant costs. U.S. companies, some argue, could be more competitive were this burden reduced.

    We are optimistic that governmental authorities may approach FCPA enforcement without quite the edge that they have demonstrated in the past. We do not recommend, however, that any such regulatory pull-back change fundamentally the approach that companies and individual corporate directors, officers and employees apply to anti-corruption issues. There are several reasons:

    (1) Vigorous anti-corruption programs are becoming a global standard

    The world has changed. Investors recognize that corruption is a transaction cost and that corporations that minimize such costs may, in fact, have a competitive advantage. As capital formation has globalized, governments in the developing world have gravitated towards more rigorous anti-corruption efforts. Thus, the U.S., U.K. and E.U. approach to anti-corruption compliance has become at least an aspirational standard for the governments of many developing countries. A pull-back by U.S. authorities, therefore, may not provide much assurance for companies doing business in these countries.

    (2) Anti-corruption programs reflect sound business practices

    Modern business is information-intensive. Sound business decisions require that the right information gets to the right decision maker in a timely manner. Well-designed information systems also are essential to anti-corruption programs. The FCPA originated with the insight that companies that are making corrupt payments to foreign officials do not maintain accounts labeled “bribery fund,” so that those corporations’ books and records must be misstated. A company that maintains appropriate controls over its assets and disbursements already has in place the structure of a sound anti-corruption program.

    (3) Tone at the Top

    “Tone at the Top” may sound like a simplistic concept, but regulators take it seriously. Strong corporate managers ensure that the organizations that they supervise reflect their priorities. Managers should prioritize ethical standards as sound business. If they do so, they create an environment in which anti-corruption processes are simply an aspect of a healthy, profitable enterprise.

    (4) Training is essential

    Anti-corruption procedures are not self-enacting. Corporations must train their employees on these procedures. Most well-run corporations have effective training programs in place. As in other areas described above, such corporations already have the mechanisms necessary to support their anti-corruption programs.

    In sum, the greatest motivation for a corporation to design and implement an effective anti-corruption program is that doing so reflects - and builds upon - sound business practices. Corporations may welcome regulatory pull-back in this area, but the best run corporations will remain vigilant.