The FCPA “Limits The Universe” Of Business Opportunities
It is always interesting when the Foreign Corrupt Practice Act is mentioned during investor conference calls. The comments tend to be off-the-cuff (not scripted as much FCPA content is) which make them great.
For instance, during a recent investor call an executive from CF Industries Holdings (an Illinois based manufacturer and distributor of agricultural fertilizers with a largely North American footprint) was asked by an investor:
“What are the next stages of capital deployment, especially as the market is now relatively more stable? Do you still feel industry consolidation is necessary? And just generally, what do you see as your own potential role in the process? And should we limit our thinking to North America?”
The company’s President, CEO and Director responded:
The Charitable Donation That Did Not Occur
After the introductory comments in italics, the remainder of this post is from Corporate Counsel at a well-known U.S. based publicly traded company.
Do Foreign Corrupt Practices Act enforcement actions based on foreign charitable donations (such as Schering-Plough, Nu Skin Enterprises and several others that include such allegations) represent a net positive or net negative?
The FCPA Guidance contains the unobjectionable statement that companies “cannot use the pretense of charitable contributions as a way to funnel bribes to government officials.” However, seldom are the circumstances as black and white as the government portrays and query whether business organizations, because of this guidance and because of the above enforcement actions involving charitable donations, have become excessively risk averse and have stopped contributing to humanitarian causes or otherwise pulled back from supporting communities or institutions in need. According to the below guest post, the answer is yes and query whether the world is a better place because of this.
Is This An FCPA Success Or Failure?
In a recent investor conference call, Darren Jamison (President, CEO & Director of California-based Capstone Turbine Corporation) was asked about the status of an Ecuador deal – described as a “large megawatt opportunity” for the company.
Jamison stated:
“That deal has been put on hold for now. There’s another wave of corruption that unfortunately hit the Ecuadorian government. We’re hopeful that once things settle down, new folks will be put in place that, that opportunity will come back. But right now, I’d say that, that opportunity is on hold. And I will say that Capstone takes Foreign Corrupt Practices Act, or FCPA, very seriously. And we do have a zero-tolerance policy. So we do get into areas where there is potential corruption or graft, we have to separate ourselves from those opportunities.”
The question is posed: does this represent an FCPA success or failure? Who wins from Capstone Turbine’s decision? Who loses?
Issues To Consider From The Key Energy Enforcement Action
This prior post summarized the recent Foreign Corrupt Practices Act enforcement action against Key Energy Services. This post continues the analysis by highlighting additional issues to consider.
Pre-Enforcement Action Professional Fees and Expenses
As highlighted in “FCPA Ripples,” settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement in this new era.
According to Key Energy’s 10-K filed in February 2015, the company had “legal expenses related to the FCPA investigation of $41.1 million.” Key Energy’s 10-K filed in February 2016 did not mention a specific figure, but merely stated that there “lower expenses related to our FCPA investigations compared to the prior year.”
When A Company Pleads Guilty, But Individual Criminal Charges Fail
Occasionally, a post gets stuck in the pipeline, passed over by current events.
This is one such post, yet the substantive issues remains relevant.
This February 2016 Wall Street Journal article stated – regarding the government’s effort to find individuals criminally responsible for BP’s 2010 oil spill and how individuals criminally charged were found not guilty:
“the outcome of individual cases means BP is in the odd position of having pleaded guilty to crimes tied to charges against its employees that were dismissed by courts.”
As highlighted in this post, this is not exactly an odd position. Indeed, it occurs with some frequency in the Foreign Corrupt Practices Act context.