Recently, the Office of the U.S. Trade Representative released the text of the United States – Mexico – Canada agreement (USMCA). The extensive agreement has a specific chapter (chapter 27) titled anticorruption and this post offers a few observations regarding the agreement compared to the Foreign Corrupt Practices Act specifically as it relates to “foreign official” issues and the express facilitation payments exception.
A guest post today from Owen Hawkes, a partner in KPMG’s forensic practice in Singapore.
Professor Koehler’s recent post “When A Government Customer Does Not Pay” examines FCPA enforcement actions where payments were made to foreign officials to expedite the receipt of liabilities from governments.
The post brought to mind a recording quoted in the media coverage of PT MAXpower Group (“MAXpower”), an Indonesian-based gas-fired power plant operator, which was alleged to have made corrupt payments to officials in Indonesia. The quote, from a recording of a meeting of Directors in 2015, reads:
The government of Canada announced on October 30 that the exception allowing for facilitation payments under the Corruption of Foreign Public Officials Act (CFPOA) will be eliminated effective October 31, 2017.
The CFPOA was amended in 2013 to strengthen Canada’s international corruption law. Among other things, the 2013 amendments introduced nationality jurisdiction, thus making Canadian companies and citizens liable for corruption anywhere in the world, increased penalties for bribery from a maximum of 5 years imprisonment to 14 years and created a new books and records offence. These and other amendments came into force on June 19, 2013.
[This post is part of a periodic series regarding “old” FCPA enforcement actions]
In 2004, the SEC brought this administrative cease and desist order against BJ Services (a Houston-based oil field services, products, and equipment company). The conduct at issue focused on the company’s Argentina subsidiary and its relationships with customs officials. As stated in the SEC’s order, there was no indication that anyone employed by BJ Services approved many of the alleged improper payments and the SEC further acknowledged that the improper payments were made in violation of BJ Services’ existing policies prohibiting payments of the kind made to the customs official.
Other interesting aspects of the enforcement include the following: (i) certain of the improper payments were facilitated by the Argentina subsidiary issuing checks “in the name of a lower’level” employee who then “cashed the checks and provided the proceeds to the customs official”; (ii) the SEC seemed to acknowledge that certain of the payments were facilitation payments under the FCPA, but nevertheless improperly booked, and thus still actionable.
Lennox International is involved in the heating, air conditioning, and refrigeration markets.
The question needs to be asked: what made the company so hot as to recently disclose to the DOJ and SEC an investigation into a $475 payment in Russia to release a shipment of goods being held by customs officials?
The disclosure is arguably one of the most absurd FCPA disclosures ever.
There is of course no legal obligation to voluntarily disclose, something even the DOJ acknowledges in its April 2016 FCPA Pilot Program. But then again, returning to an issue first highlighted in this 2009, voluntary disclosure is the fuel that feeds FCPA enforcement and is extremely lucrative for FCPA Inc. Indeed, who can forget the words of the former DOJ Fraud Section Chief in this Wall Street Journal article “if you get two of these [FCPA investigations] a year as a partner, you’re pretty much set.”
Lennox’s decision to disclose was presumably a business decision made by the board of directors or audit committee based on the advise of FCPA counsel. If FCPA counsel did indeed advise company leaders to disclose, that advise needs to be seriously questioned.