On Permits …
The root cause of many Foreign Corrupt Practices Act enforcement actions is a foreign law or regulation that forces a company (through an employee or agent) into a relationship with a “foreign official.”
This root cause analysis is often fairly straightforward: the foreign law or regulation often creates bureaucracy; bureaucracy creates points of contact with foreign officials; points of contact with foreign officials create discretion; discretion creates the opportunity for a foreign official to misuse their position by making bribe demands.
This analysis is not meant to excuse or condone the conduct at issue, but rather to understand how and why there was a “point of contact” with a foreign official in the first place.
Shelf Space
Shelf space at a grocery store or other retail store is probably not something one thinks much about.
Until one does.
A recent article in the Wall Street Journal titled “Grocers Get Picky on Shelf Space for Suppliers” highlights how the “contest for supermarket and grocery shelf space is heating up as brands … vie for a shrinking number of spots in the aisles.”
In A Highly Unusual Development, DOJ Brings A $19.6 Million Enforcement Action Against Beam Approximately 2.5 Years After The SEC’s Related Action
DOJ and SEC Foreign Corrupt Practices Act enforcement actions against issuers based on the same core conduct are relatively common. However, such actions are nearly always coordinated and announced on the same day.
In a highly unusual (although not unprecedented) development, the DOJ announced yesterday a $19.6 million FCPA enforcement action against Beam Suntory Inc. based on the same core conduct in India at issue in the SEC’s July 2018 FCPA enforcement action against the company (see here).
Another unusual aspect of the Beam DOJ action was the DOJ’s position that the company did not voluntarily disclose. In contrast, in the 2018 SEC enforcement action the SEC said that the company voluntarily disclosed.
200,000 Permits And Approvals Each Year To Do Business
Why do Foreign Corrupt Practices Act enforcement actions happen?
Often times – as highlighted numerous times on these pages – the root cause of an FCPA enforcement action is a foreign law or regulation that results in a real point of contact between a real company’s employees or agents and a real “foreign official.”
Regulatory burdens (ranging from customs procedures, licensing and certification requirements, foreign government procurement policies, etc.) create bureaucracy, bureaucracy creates interactions with foreign officials, and the more interactions with foreign officials, the greater the FCPA risk will be. It really is not that complex of a formula.
Issues To Consider From The Beam Enforcement Action
This post highlighted the SEC’s recent $8.2 million FCPA enforcement action against Beam Inc. (now known as Beam Suntory Inc.) concerning conduct in India. This post continues the analysis by highlighting additional issues to consider.
Time Line
As highlighted in this prior post, Beam was under FCPA scrutiny since late 2012. Thus from start to finish, its FCPA scrutiny lasted approximately 6 years.