Sometimes The U.S. Government May Be The Root Cause Of FCPA Issues
As discussed in this recent Wall Street Journal article:
“The Biden administration is pushing hard for American businesses to invest in Africa despite the obstacles they face there, more than a decade after China began expanding its economic and political ties with countries across the continent.
Vice President Kamala Harris pledged [recently] in Ghana’s seaside capital to “double down” on efforts to bring billions of dollars in investments to Africa, a continent that many Western investors still view as high risk. Ms. Harris is the highest ranking in a string of top White House and Biden administration officials to travel through Africa this year, promising to unlock American investment as both the U.S. and China look to tap into the continent’s vast natural resources.
But U.S. and other Western investors often cite corruption, poor infrastructure and still rampant poverty, all of which preclude easily operating across dozens of countries that all have their own rules and market peculiarities.”
The above example is the latest example (see here, here and here for prior posts) of the U.S. government encouraging investment in a country – because it advances the U.S. government’s current foreign policy interests – while knowing full well that the country has corruption problems that could expose U.S. companies to FCPA issues.
Here Is My Comment
Recently, the International Law Association (ILA) requested comments on its paper which addresses the following “three fundamental questions: How did the fight against corruption progress in the last fifteen years; what are the chief barriers to fighting corruption today; and, how to overcome them and take the fight to the next level.”
Here is my comment.
Government – through law enforcement – can’t enforce its way out of the bribery problem. Rather, trade barriers and distortions are often the root causes of bribery and a reduction in bribery will not be achieved without a reduction in trade barriers and distortions.
Issues To Consider From The ABB Enforcement Action
This recent post highlighted the net $147.5 million Foreign Corrupt Practices Act enforcement action against ABB concerning conduct in South Africa. In resolving the matter, ABB became the first company to resolve three separate FCPA enforcement actions. (See here).
This post highlights additional issues to consider from the enforcement action.
Timeline
As highlighted in this prior post, in early 2017 it was reported that “ABB said it was cooperating with anti-fraud authorities in the United States and Britain and had reported past dealings with Monaco-based engineering and construction group Unaoil, including alleged improper payments to third parties.” This probe was seemingly dropped in mid-2020 (see here).
ABB Becomes The First Company To Resolve THREE FCPA Enforcement Actions
The first time ABB resolved a Foreign Corrupt Practices Act enforcement action was in 2004 concerning conduct in Nigeria, Angola and Kazakhstan.
The second time ABB resolved an FCPA enforcement action was in 2010 concerning conduct in Mexico as well as in connection with the Iraqi U.N. Oil for Food program.
Since 2017 (see here for the prior post), ABB has been under additional FCPA scrutiny and last Friday ABB became the first company to resolve an FCPA enforcement action for a third time. The latest enforcement action concerned conduct in South Africa and the net FCPA settlement amount was $147.5 million (a DOJ component of net $72.5 million and an SEC component of net $75 million).
Issues To Consider From The Herbalife Enforcement Action
This prior post went in-depth into the recent $123 million Foreign Corrupt Practices Act enforcement action against Herbalife and this post highlights additional issues to consider.
Timeline
As highlighted in this post, Herbalife disclosed its FCPA scrutiny in early 2017. Thus, from start to finish, its scrutiny lasted more than 3.5 years. I’ve said it many times, and will continue saying it until the cows come home, if the DOJ/SEC wants their FCPA enforcement programs to be viewed as credible and effective they must resolve instances of FCPA scrutiny much quicker.
This is particularly true in the Herbalife matter given that the conduct focused on a single country as well as the following language from the enforcement agencies.