Friday Roundup
Survey says, an editorial, I’ll second that, and spot-on. It’s all here in the Friday roundup.
Survey Says
The recently issued Kroll / Compliance Week Anti-Bribery and Corruption Benchmarking Report was based on responses from “nearly 300 executives” and “participants hailed from all manner of industry.”
Survey findings of note.
“Was the FCPA Guidance any help? Nearly 53 percent rated the guidance as “a good read, but it didn’t tell me anything new.” Another 23.5 percent deemed it very helpful, 18.8 percent didn’t know, and 4.6 percent said the guidance actually left them more confused.”
Regarding third parties:
- “The average respondent reports that his/her company conducts business with more than 3,500 third parties”
- “Most companies (79 percent) will drop a potential third party even upon rumor of bribery without any hard proof”
- “47 percent of all respondents said they conduct no anti-corruption training with their third parties at all”
Financial Times Editorial on Bribery Act
I was pleased to speak to the Financial Times in connection with its recent Bribery Act editorial. It stated in full as follows.
Government Needs to Clarify Application of Bribery Act
Britain was once considered a laggard in the international battle against corruption. The Bribery Act, which came into force in 2011, was the first overhaul of anti-corruption laws in almost a century. Two years on, the government wants to review it. This is sensible, as new legislation can have unintended consequences. But any review should not result in a weaker law. That would only allow greater scope for graft.
The government is responding to complaints from small and medium-sized businesses that the costs of compliance are too high. In particular, they are worried about the ban on facilitation payments, small amounts paid to officials to expedite services such as visas or customs checks. Businesses argue that Britain holds its companies to a higher standard than other countries – particularly the US, where such payments are not banned. They say this puts them at a disadvantage.
These concerns are understandable, but exaggerated. Facilitation payments have always been illegal in the UK. Yet conflicting signals from the authorities have sown confusion. Moreover, the absence of case law leaves companies in the dark as to how the law will be applied and what defence is valid. This has created a climate in which companies easily fall prey to firms peddling overly-prescriptive and costly advice on compliance.
More can and should be done to clarify the circumstances under which a company will be pursued. This will help to counter the scaremongering that has led some businesses to pass up export opportunities. To be fair, the guidelines already allow some flexibility for smaller businesses. They are not expected to use the same procedures as big multinationals. When choosing an agent to open a new market, for example, it might be sufficient to verify business references, conduct an internet search and refer to the local chamber of commerce or UK embassy, as long as the anti-corruption policy is widely enough disseminated. The government’s duty is to ensure resources are sufficient to meet such requests.
Authorities must also be consistent. Businesses will not respond to demands that breaches be reported if they fear they will be prosecuted for any and all transgressions.
British companies have other competitive advantages to win business with than bribery. Graft is an evil that blights developing economies and the companies which resort to it. The Bribery Act does not need changing. It just needs supporting.
I’ll Second That
Earlier this week in a Wall Street Journal editorial titled “Mum’s the Word About SEC Defeats” Russ Ryan (Partner, King & Spalding and former Assistant Director of the SEC Enforcement Division) stated as follows. “Like other federal agencies, the SEC has long been good at publicizing its initial accusations of wrongdoing – which is fair enough – but not so good at letting the public know when those accusations turn out to be unfounded or an overreach.” As Ryan rightly noted, in this internet age, “SEC publicity is permanent and widely dispersed. The regulator’s accusations can persist indefinitely among the top search-engine results for the names of those accused.”
I’ll second that and have previousy written about the same dynamics Ryan highlights under the heading “Writer’s Cramp at the DOJ.” See prior posts here and here.
Spot On
Colleen Conry (Ropes Gray) stated as follows in a recent Law360 interview.
Q: What aspects of your practice area are in need of reform and why?
A: The government’s attempts to hold foreign companies accountable for having compliance programs that are on par with those we see at companies that are headquartered in the United States are challenging. Foreign companies often lack notice of that expectation and as a result suffer the consequences. Over time, I hope the government will at least consider as one factor the compliance standards that are the norm in the country in which the foreign entity operates.
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A good weekend to all.
Friday Roundup
Boondoggle specifics, another DOJ enforcement official to FCPA Inc., scrutiny alert, across the pond, and for the reading stack. It’s all here in the Friday roundup.
Wal-Mart’s FCPA Expenses
Previous posts (here) and (here) have calculated Wal-Mart’s per working day FCPA related professional fees and expenses.
No wonder Wal-Mart’s first quarter professional fees and expenses equal approximately $1.16 million per working day. According to this recent article in India’s Economic Times, concerning just the India portion of Wal-Mart’s investigation:
“So far Greenberg Traurig and KPMG have spent 26,000 hours on consulting and shaping anti-corruption compliance programme for Bharti Walmart, which operates 20 Best Price Modern Wholesale stores in various cities in India. This work has included developing and implementing procedures and providing training to over 1,800 senior business and store level associates in India,” a Bharti Walmart spokesperson said in an e-mail response to ET. “For the past several months, the company has also been using Greenberg Traurig and KPMG to perform due diligence on third party service providers in India.” Currently there are about 20 Greenberg Traurig attorneys stationed in India working on Bharti Walmart’s compliance programme, the spokesperson said.”
Relevant to FCPA investigative expenses, this FCPA Inc. participant marketing pitch caught my eye. Is it really necessary to analyze millions of documents in an FCPA review? Also, since when did FCPA investigations focus on “proving a negative that [the company] did not bribe foreign officials?”
Suleiman to FCPA Inc.
As noted in this recent post, earlier this month Daniel Suleiman (DOJ Deputy Chief of Staff for the Criminal Division) stated in a speech that the DOJ’s FCPA enforcement efforts “are as active today … as we have ever been.”
Earlier this week, Covington & Burling announced (here) that Suleiman would be joining his former boss Lanny Breuer (see here for the prior post concerning Breuer’s jump to FCPA Inc.) at Covington. Suleiman thus becomes the latest in a long-line of former DOJ or SEC FCPA enforcement attorneys to depart for FCPA Inc. The firm stated, in pertinent part, as follows.
“Mr. Suleiman joins the firm’s Washington office as special counsel where he is expected to focus on defending individuals and corporations facing white collar criminal charges, Foreign Corrupt Practices Act investigations and congressional inquiries. […] In his Justice Department role, Mr. Suleiman helped oversee about 600 lawyers and 1,000 employees, and managed an annual budget of approximately $600 million. He provided advice on a wide range of federal law enforcement priorities, with particular focus on Foreign Corrupt Practices Act and financial fraud enforcement.”
In his speech earlier this month, Suleiman rightly observed an issue I have long pointed out that, among other things, warrants a five-year bar on DOJ FCPA enforcement attorneys from providing private sector FCPA services. Suleiman stated as follows. “It is Justice Department policy that no FCPA prosecution can be brought without authorization from the Criminal Division, which distinguishes FCPA prosecutions from most other kinds of federal criminal cases.”
Scrutiny Alert
According to this report by the Organized Crime and Corruption Reporting project, the SEC “has opened an investigation into Swedish multinational Ericsson’s business practices in Romania. The investigation is related to allegations made by a former Ericsson employee that the company used an approved slush-fund to pay off Romanian officials and decision makers to win contracts.”
Ericsson has ADR shares listed on NASDAQ in the United States.
Across the Pond
From thebriberyact.com, a useful of summary (here) of recent remarks by U.K. Serious Fraud Office Director David Green.
Staying in the U.K., a useful summary (here) by Eversheds of the “third conviction for an individual under the Bribery Act 2010.” The case concerns a Chinese national studying in the U.K. who attempted to bribe his professor for a passing grade. As noted in the Eversheds summary, “the UK has yet to see prosecution of a corporate under the [Bribery] Act, so companies are still awaiting judicial interpretation the corporate offence under [section] 7 of the Bribery Act and the Ministry of Justice’s Guidance on ‘adequate procedures’”. [Note the U.K. Bribery Act has domestic bribery provisions as well as “FCPA-like” foreign bribery provisions. The three individual Bribery Act convictions have all been domestic bribery prosecutions].
Reading Stack
Trace International recently released (here) its third annual Global Enforcement Report. The report provides an updated summary of international anti-bribery enforcement trends based on the cases and investigations tracked in the TRACE Compendium, TRACE’s public, online database of transnational corruption cases.
Sound advice from Tim Peterson (a former SEC enforcement attorney) and Robertson Park (a former DOJ enforcement attorney) in this article in Inside Counsel regarding voluntary disclosures.
“Not all potential [FCPA] problems, however, are appropriate for disclosure. After investigation, allegations of misconduct may not result in a determination that illicit activity has occurred. Problematic payments may not be sufficiently material to amount to an FCPA violation (though companies should be aware of different standards for liability under other jurisdictions’ anti-corruption laws; for example, the U.K. Bribery Act of 2010). Prematurely attracting the government’s attention may, as a practical matter, shift the burden to the company to prove the absence of a corruption problem. Enforcement officials may feel the need as a matter of basic human nature to seek some type of resolution to a case where they have invested significant time and effort. Companies need to weigh the potential benefits of cooperation against the significant costs of initiating a potentially unwarranted government investigation.”
From Compliance Week, a useful summary (here) of recent remarks by Chuck Duross (DOJ FCPA Unit Chief) and Kara Brockmeyer (SEC FCPA Unit Chief).
*****
A good weekend to all.
U.K. Deferred Prosecution Agreements Expected In Early 2014 – A Work In Progress
Today’s post is from Robert Amaee (Covington & Burling). Amaee is the United Kingdom Expert for FCPA Professor.
*****
The UK Crime and Courts Bill, which contained the implementing legislation for Deferred Prosecution Agreements (“DPAs”), received Royal Assent on 25 April 2013. The legislation will enable the UK Serious Fraud Office and the Crown Prosecution Service (the “Prosecutors”) to enter into DPAs with organisations — most likely from early 2014 — to deal with a specified list of economic crimes, including bribery, fraud and money laundering.
The move by the UK government to introduce implementing legislation for DPAs reflected an acknowledgement expressed in the UK Ministry of Justice’s May 2012 consultation paper on DPAs that: (1) there was little incentive for companies to self-report due to uncertainty over where that process would lead and (2) the options available to the Prosecutors for tackling economic crime were unduly limited.
The Prosecutors will welcome the addition of DPAs to their armory and the likelihood of there being a greater number of global settlements in multi-jurisdictional cases involving economic crime. There are, however, a number of factors peculiar to the UK version of DPAs that organisation will need to examine before a decision is taken to self-report instances of suspected wrongdoing or to enter into DPA negotiations with the Prosecutor.
The Process
The newly-enacted legislation contemplates that – following the commencement of an investigation into suspected economic crime – the Prosecutor may decide to enter into DPA negotiations with an organisation. Once the Prosecutor and organisation have formulated an agreed statement of facts concerning the alleged offence, which may or may not include admissions, that statement will be presented in private to a Crown Court judge. Details of the alleged offending, a draft indictment, the agreed – or contemplated – conditions to be included in the DPA and a list of any issues that have not yet been resolved also will be provided to the judge at the preliminary hearing.
At the conclusion of the preliminary hearing, the judge will be asked by the Prosecutor to declare that resolving the matter by means of a DPA is in the interests of justice and that the proposed terms of the DPA are fair, reasonable and proportionate. The judge could decide that certain steps must be taken, or further lines of inquiry pursued, before he/she will consider issuing the declaration at the subsequent preliminary hearing or hearings.
Following the preliminary hearing(s), agreement of the terms of the proposed DPA between the Prosecutor and organisation and the resolution of any outstanding issues, the Prosecutor and organisation will return to the Crown Court for a final hearing in private. The purpose of that hearing is for the Prosecutor to seek the judge’s approval of the DPA and its terms. If the DPA is approved, the Prosecutor must publish details of the DPA and the declarations made and reasons provided by the judge at the preliminary and final hearings.
In the event of an alleged breach of the DPA by an organisation, the Prosecutor can make an application to the Crown Court. In such circumstances, if the judge finds – on the balance of probabilities – that the organisation has breached the DPA, he/she can either: (1) ask the Prosecutor and organisation to agree to a proposal for remedying the breach or (2) terminate the DPA. Once the DPA has expired – assuming that the organisation has complied with the terms of the DPA – the Prosecutor is unable to bring criminal proceedings against the organisation for the same offence(s) unless it can be shown that the organisation knew – or ought to have known – that it provided inaccurate, misleading or incomplete information to the Prosecutor.
It is expected that the Director of the SFO and the Director of Public Prosecutions shortly will issue a draft Code for Prosecutors that will contain further detail on the DPA process, including guidance on the principles to be applied by the Prosecutor when deciding whether a DPA is the appropriate means of resolving a particular case and the disclosure obligations of Prosecutors. In addition, the UK Sentencing Council is expected to produce guidance on corporate criminal fines, including for those offences eligible for resolution by means of a DPA.
A Work in Progress
While the UK approach toward DPAs builds upon the US system, there are a number of noteworthy factors unique to the UK system. One such factor is the significant role played by the judiciary. In contrast to the US, the UK DPA process mandates a notable degree of oversight and involvement by the judiciary from an early stage in negotiations through to the handling of any alleged breaches of a DPA.
The level of judicial involvement built into the UK system is intended to enshrine transparency in the DPA process and takes the ultimate outcome of a DPA negotiation out of the hands of the Prosecutor. An inevitable consequence of this judicial involvement is the introduction of additional uncertainty into the DPA process. It is not difficult to conceive of negotiations that have taken a number of months to reach the Crown Court being greatly protracted or even terminated by a judge who takes the view that what has been proposed is not fair, just or reasonable or that it is not in the interest of justice to pursue discussions. By that stage discussions may be at an advanced stage and the Prosecutor will have amassed case materials provided by the organisation in the course of the negotiations. While the Prosecutor, in most cases, will not be able to rely either on the fact that it conducted DPA negotiations with the organisation, or on any draft DPA in future criminal proceedings, he/she is entitled to rely on evidence obtained from investigations pursued as a result of anything said in any unsigned statement of facts or in the draft DPA. Any pre-existing material provided by the organisation during the DPA process also could become admissible in subsequent proceedings.
Another factor worthy of consideration is the nature of the admissions that may have to be made by an organisation to secure a DPA. In particular, it is unclear whether the Prosecutor is likely to need to insist — as a condition of agreeing to a DPA — on an admission of the involvement of a “controlling mind” of the organisation in the alleged wrongdoing or, in the appropriate case, the lack of adequacy of an organisation’s anti-bribery systems and controls.
In order to attribute criminal liability to an organisation for offences requiring mens rea, a UK prosecutor needs to prove that the offender was a directing mind and will of the organisation. This ‘identification principle’ requires that the acts and state of mind of those who represent the directing mind and will be imputed to the organisation. The UK courts have restricted the application of this principle to the actions of ‘controlling officers’ of the organisation, namely the Board of Directors, the Managing Director and senior officers who carry out functions of management and speak and act as the organisation. The Prosecutors have found this test to impose a high barrier to corporate prosecutions, meaning that many cases against organisations do not proceed as sufficient evidence cannot be amassed by the Prosecutor to implicate a controlling mind of that organisation.
It may be that the soon to be issued Code for Prosecutors will address this topics but, at this stage, a question mark remains over whether a Prosecutor can be satisfied with agreeing to a statement of facts or admissions that fall short of implicating a controlling mind of the organisation. If an organisation seeking to resolve matters by way of a DPA is required to provide documentation or make admissions in relation to the role of a particular senior officer and his or her involvement in any wrongdoing during the early DPA negotiations with the Prosecutor, the organisation could be left at a disadvantage in the event that there is a derailment of the negotiations and a subsequent prosecution of the organisation.
It remains to be seen whether concerns about the level of uncertainty inherent in the UK DPA process or about any admissions that may have to be made will be justified and sufficient to deter organisations from reporting instances of possible wrongdoing and seeking to enter into discussions with the Prosecutor. Experience with DPAs in the US would tend to suggest that, irrespective of the legal arguments that could be deployed, the prospect of a settlement may well prove attractive enough for many organisations to prompt them to explore the UK DPA process in the hope of avoiding a drawn-out and uncertain court battle and the associated business disruption and reputational damage.
Friday Roundup
Additional individual defendant added to Alstom-related enforcement action, a mere $110,000 per working day, a focus on international philanthropy, scrutiny alerts, and for the reading stack. It’s all here in the Friday roundup.
Additional Alstom-Related Charges
This prior post highlighted the recently unsealed criminal charges against Frederic Pierucci (a current Alstom employee) and David Rothschild (a former Alstom employee) concerning alleged conduct in connection with the Tarahan coal-fired steam power plant project in Indonesia. The post highlighted several other individuals generically referred to in the charging documents.
Earlier this week, the DOJ announced (here) that William Pomponi (a former executive of Alstom Power Inc., a Connecticut-based subsidiary of Alstom) was charged for his alleged participation in the same scheme. Pomponi, previously identified as “Employee A,” is now described as “a Vice President of Regional Sales” at Alstom Power Inc. and “was one of the people responsible for approving the actions of, and authorizing payments to, Consultants A and B, knowing that a portion of the payments [to the consultants] was intended for Indonesian officials in exchange for their influence and assistance in awarding the Tarahan Project …”.
Like the original Pierucci indictment, all of the alleged overt acts in the superseding indictment against Pomponi allegedly occured between 2002 and 2004, although the information does allege wire transfers from Alstom Power Inc.’s bank account to the bank account of Consultant A until 2009.
Like Pierucci, Pomponi is also charged with one count of conspiracy to violate the FCPA, four substantive counts of FCPA anti-bribery violations, money laundering conspiracy and four substantive counts of money laundering.
Kudos to the DOJ for including a link to the charging document in the release. This used to be DOJ’s practice, but when its new site launched a few years ago, it stopped doing this. Let’s hope this is a new practice!
Avon’s FCPA Expenses
Nearly five years ago – in June 2008 – Avon launched an internal investigation concerning FCPA compliance in China and other countries. In many respects, the most notable aspect of Avon’s FCPA scrutiny has been its pre-enforcement action professional and expenses – approaching $350 million (see here for instance).
In its most recent quarterly filing, Avon stated as follows. “Professional and related fees associated with the FCPA investigations and compliance reviews … amounted to approximately $7 during the three months ended March 31, 2013.”
Headlines read “Avon FCPA Costs Down to $7 Million for Q1” and “Avon Slows Spending on Bribery Probe.”
Both accurate headlines, but it is amazing to note nevertheless that – five years into Avon’s FCPA scrutiny – the company is still spending approximately $110,000 per working day on its FCPA issues. (See this prior post concerning Wal-Mart’s pre-enforcement action professional fees and expenses and asking “does it really need to cost this much?”).
International Philanthropy
FCPA material pops up in a variety of places. Such as this article in www.wealthmanagement.com concerning the perils of global giving. With two FCPA enforcement actions (Schering-Plough and Eli Lilly) based, in whole or in part, on donations made to a Polish castle foundation and with Wynn Resorts under FCPA scrutiny for a donation to the University of Macau (see here), FCPA scrutiny based on international charitable giving is no mere hypothetical.
Scrutiny Alerts
Scrutiny alerts concerning IBM, ADM, Total, and ENRC.
IBM
This recent post highlighted a ProPublica report regarding the relationship between various tech companies including H-P, IBM and Oracle with a ”senior technology officer for Poland’s national police and, later, the nation’s Interior Ministry, [who] set the terms for hundreds of millions of dollars in technology contracts and decided which ones should be awarded without competitive bidding.”
In a recent quarterly filing, IBM disclosed as follows.
“In early 2012, IBM notified the SEC of an investigation by the Polish Central Anti-Corruption Bureau involving allegations of illegal activity by a former IBM Poland employee in connection with sales to the Polish government. IBM is cooperating with the SEC and Polish authorities in this matter. In April 2013, IBM learned that the U.S. Department of Justice (DOJ) is also investigating allegations related to the Poland matter, as well as allegations relating to transactions in Argentina, Bangladesh and Ukraine. The DOJ is also seeking information regarding the company’s global FCPA compliance program and its public sector business. The company is cooperating with the DOJ in this matter.”
In 2011, IBM resolved an FCPA enforcement action concerning alleged conduct in South Korea and China. (See here). The settlement is still pending the approval of Judge Richard Leon (D.D.C.). In 2000, IBM resolved an FCPA enforcement action concerning alleged conduct in Argentina. (See here).
ADM
Archer Daniels Midland Company recently stated as follows in this release.
“ADM is in discussions with the U.S. Department of Justice and the U.S. Securities and Exchange Commission regarding a previously disclosed FCPA matter dating back to 2008 and earlier, and expects a resolution sometime this year. Based upon recent discussions, ADM believes it is appropriate to establish a provision of $25 million ($0.04 per share) to cover the potential assessments that may be imposed by these government agencies.”
Total
France-based Total recently stated as follows (here) concerning its long-running FCPA scrutiny concerning business conduct in Iran.
“In 2003, the United States Securities and Exchange Commission (SEC) followed by the Department of Justice (DoJ) issued a formal order directing an investigation in connection with the pursuit of business in Iran by certain oil companies including, among others, TOTAL. The inquiry concerns an agreement concluded by the Company with consultants concerning gas fields in Iran and aims to verify whether certain payments made under this agreement would have benefited Iranian officials in violation of the Foreign Corrupt Practices Act (FCPA) and the Company’s accounting obligations. The Company fully cooperates with these investigations. Since 2010, the Company has been in discussions with U.S. authorities (DoJ and SEC) to consider, as it is often the case in these kinds of proceedings, an out-of-court settlement, which would terminate the investigation in exchange for TOTAL respecting a number of obligations, including the payment of a fine and civil compensation, without admission of guilt. U.S. authorities have proposed draft agreements that could be accepted by TOTAL. Consequently, and although discussions have not yet been finalized, a provision of $398 million, unchanged since its booking as of June 30, 2012 and reflecting the best estimate of potential costs associated with the resolution of these proceedings, remains booked in the Group’s consolidated financial statements as of March 31, 2013. In this same affair, TOTAL and its Chief Executive Officer, President of the Middle East at the time of the facts, have been placed under formal investigation, following a judicial inquiry initiated in France in 2006. At this point, the Company considers that the resolution of these cases is not expected to have a significant impact on the Group’s financial situation or consequences on its future planned operations.”
A $398 million FCPA enforcement action would be the third-highest of all-time.
ENRC
Last week the U.K. Serious Fraud Office announced here as follows.
“The Director of the SFO has accepted [Eurasian Natural Resources Corp.] ENRC Plc. for criminal investigation. The focus of the investigation will be allegations of fraud, bribery and corruption relating to the activities of the company or its subsidiaries in Kazakhstan and Africa.”
In a statement, the U.K. company, stated as follows.
“The Board of Directors (the ‘Board’) of Eurasian Natural Resources Corporation PLC (‘ENRC’ or, together with its subsidiaries, the ‘Group’) today notes that the SFO has moved to a formal investigation. ENRC confirms that it is assisting and cooperating fully with the SFO. ENRC is committed to a full and transparent investigation of its procedures and conduct.
ENRC has ADRs listed with the SEC and thus could also be subject to the FCPA.
This recent article in the Wall Street Journal states as follows.
“U.K.-listed Eurasian Natural Resources Corp. PLC said … allegations of wrongdoing over minerals sales conducted through a Russian network of agents were thoroughly investigated and dismissed” in 2007.
Reading Stack
Tom Fox (FCPA Compliance and Ethics Blog) has penned a new book – “Best Practices Under the FCPA and Bribery Act: How to Create a First Class Compliance Program.” I was pleased to contribute the foreword to the book and noted that Tom’s “use of real events as learning devices to demonstrate compliance best practices make [the] book an engaging and informative read.”
Inside the NY Times Wal-Mart investigation (here) from the perspective of the Mexican journalist who assisted in the investigative reporting.
The U.K.’s Growing Pains
A recent post at thebriberyact.com highlighted a recent U.K. House of Lords select committee report (here) on small and medium size enterprises. The objective of the committee was “to consider the Government’s assistance and promotion of the export of products and services by Small and Medium Sized Enterprises and to make recommendations.”
A section of the report concerns the Bribery Act, and as detailed below, the committee recommends that “the Act should be the subject of post legislative scrutiny by a Parliamentary select committee.”
Chapter 10 of the report states, in full, as follows (emphasis in original).
Introduction
10.1. The Bribery Act 2010 came into force in July 2011. Its purpose was to modernise domestic and foreign offences of bribery. Its enactment led to a flurry of concern that SMEs would be particularly harshly affected. Mr Simon of UKTI agreed that the Act had “provoked a bit of anxiety” and said that “it is possible that [the UK] have lost some business”
10.2. It was not surprising, therefore, that whilst several witnesses recognised it as having enhanced the reputation of the UK in terms of business ethical standards, some expressed concern that the Act had given rise to uncertainty and put the UK at a trading disadvantage. Deltex Medical Ltd, for example, said: “The Bribery Act is a concern because it creates an imbalance with other markets. We support appropriate measures to uphold industry best practice and ethical business practices. However, the terms of the Bribery Act itself potentially restrict trading opportunities—for example in countries such as China and Brazil that do not conform to the same code of practice as the UK. In our experience, we have had to pay to review potential overseas distributors in China. Many Directors of SMEs are rightly concerned about being able to expand export markets whilst conforming to the Bribery Act.”
10.3. He went on: “BRIC countries especially raise challenging questions around the Bribery Act. My fellow directors and I have concerns over how we operate correctly under the Bribery Act within those countries. We have taken legal advice. We have made changes to our contracts. All of those areas have ways of trading that are different from those that we have in the UK, and different standards. It is difficult for any company to go in and follow the recommendations.”
10.4. Tony Shepherd of Alderley plc expressed his views robustly: “The existing Act is virtually impossible to operate as far as a UK company is concerned. You cannot really take someone out to dinner without committing a crime. I am very strongly in favour of trying to eliminate bribery, but to have a situation where we are subject to a law that is much more severe than anywhere else in the world is not good.”
10.5. ADS also recognised the value of the Act but asked for “clearer guidance … on its practical application and its implications, particularly the responsibility on SMEs for local ‘agents’. They also thought it “essential that the UK pursues a global level playing field in bribery rules so UK companies are not disadvantaged”. LMK Thermosafe Ltd. similarly understood the purpose of the Act but said that adhering to the Act restricted their ability to sell successfully and, as a result of Act, they preferred to “work in markets where honesty is appreciated”. Mr. Ehmann of the IoD described the Bribery Act as a “counterproductive” measure that has “held us back”. It had had, he said, “a significant impact” on his members, especially for those trading with BRIC countries and developing economies.
Current Government action
10.6. The Government explained to us what action they had taken to help SMEs to understand the implications of the Bribery Act 2010. The Ministry of Justice has published guidance on the Act and has run a programme of awareness-raising, prioritising UK industrial sectors most exposed to corruption risks. There is an online Business Anti-Corruption Portal which is specially targeted at SMEs and provides a comprehensive and practical business tool to help them avoid and fight corruption, with specific advice on 62 countries. Commercial Awareness training for FCO staff aims to equip them with the knowledge and skills to be able to provide suitable support to businesses, including advice on this issue. Mr. Simon referred also to an initiative being considered by UKTI, “a potential signposting opportunity to people who can give specific guidance to companies as to how directors can take appropriate levels of care to ensure they do not infringe the Bribery Act”. He suggested that the “most dangerous thing” was not “the legislation per se” but a “lack of confidence”
10.7. As with intellectual property issues, we exhort the Government to make efforts to promote the international harmonisation of standards, and also to raise awareness amongst SMEs about the application of the Bribery Act 2010 and explain exactly how it will be applied in practice.
10.8. Mr Simon suggested that “there is a desire that the Bribery Act be tested by the Crown Prosecution Service, because then the community as a whole will have a better sense of where it stands”. We do not agree. It is not satisfactory to wait for elaborate court cases to define the actual workings of the Bribery Act 2010 in case law.
10.9. Whilst we acknowledge the importance of the example of high ethical standards being set by the UK, application of the Bribery Act 2010 has been met with confusion and uncertainty. We recommend, therefore, that, at the earliest opportunity, the Act should be the subject of post legislative scrutiny by a Parliamentary select committee.
To be sure, the report and its recommendation represent U.K. growing pains. But let’s not forget, here in the U.S. we too had growing pains concerning the young FCPA.
As detailed in prior posts here and here, the ink was hardly dry on the FCPA when concerns were raised that the law was harmful to U.S. business.
There was much activity on this issue in the early 1980′s and among other things:
(i) the Carter administration (Carter signed the FCPA into law in December 1977) “sent a hefty 250-page report to Congress on the various ways the U.S. discourages exporters” – one example – “the provisions of the 1977 Foreign Corrupt Practices Act, which have never been clearly spelled out by the Justice Department;”
(ii) the GAO released a report in 1981 detailing how the FCPA “is riddled with complicating ambiguities and shortcomings;”
(iii) President Reagan’s “transition team on the workings of the Securities and Exchange Commission […] recommended decriminalization of bribery; and
(iv) John Fedders, named in 1981 to be the SEC’s Director of Enforcement to replace Stanley Sporkin who left to become general counsel at the CIA, stated during a news conference that he “pledged to enforce, with discretion, the Foreign Corrupt Practices Act, which he criticized as being ambiguous.”
Our FCPA growing pains lasted until 1988 when the FCPA was amended in significant ways and, to a certain extent, the growing pains have not fully disappeared even as the FCPA has matured into an “adult” statute.
In short, the U.K’s growing pains are understandable and to be expected.