Last weekend I had the pleasure to participate in Arab Weekend at Harvard Law School. Specifically, I was on a panel titled “Anti-Corruption Initiatives in the Arab World” organized and moderated by Andrew Boutros (in his personal capacity – he is also a DOJ prosecutor in Chicago – and as co-chair of the ABA’s Global Anti-Corruption Task Force).
The panel was well attended and other panelists were Shahir Guindi (Managing Partner of the Montreal office of Osler, Hoskin & Harcourt LLP), Mohamed Arafa (Assistant Professor of Criminal Law and Criminal Justice at Alexandria University Faculty of Law Egypt and an Adjunct Professor at Indiana University Robert McKinney School of Law) and Warda Henning (Program Management Officer at the United Nations Office on Drugs and Crime).
My remarks focused on FCPA enforcement in the Arab World (the general definition of which is 22 Arabic-speaking countries in the Greater Middle East and North Africa).
In preparing my remarks, I relied in part on the handy FCPA Map and reviewed all corporate FCPA enforcement actions since 2006 involving, in whole or in part, conduct in the Arab World.
The following FCPA enforcement actions fit the description: Pride International, Daimler, Tyco International, United Industrial Corp., Textron, Aon, York International, Latin Node, Control Components, Pfizer / Wyeth, Ingersoll-Rand and Innospec. (For original source documents concerning these actions see either the DOJ’s FCPA website and/or the SEC’s FCPA website. As readers likely know, there have been approximately 15 Iraq Oil for Food enforcement actions, but such actions did not generally allege violations of the FCPA’s anti-bribery provisions. Thus, Iraq Oil for Food actions were analyzed only to the extent such actions included additional allegations concerning anti-bribery violations in Iraq (such as Ingersoll-Rand and Innospec).
Arab World FCPA enforcement actions involved conduct in: Libya, Egypt, Yemen, Mauritania, Syria, United Arab Emirates, Saudi Arabia and Iraq. The absence of FCPA enforcement activity in the majority of Arab World countries obviously does not mean the absence of corruption in those countries. Rather, to state the obvious, for there to be an FCPA enforcement action, a company subject to the FCPA’s jurisdiction needs to do business in a country and there is less international business activity in certain Arab World countries such as Djibouti, Somalia, Sudan compared to, for instance, Eygpt, UAE, and Saudi Arabia.
The goal in analyzing Arab World FCPA enforcement activity was to identify any trends or common patterns.
While I would have liked to dazzle the Harvard audience with a profound analysis, the simple truth (subject to the one common thread discussed below) is that companies became subject to FCPA enforcement actions based on business conduct in the Arab World for many of the same diverse reasons companies become the subject of FCPA enforcement actions elsewhere.
For instance, the “foreign officials” alleged in Arab World FCPA enforcement actions included: traditional government officials (such as defense officials and various ministers), various regulatory officials (tax, customs, etc.), lots of employees of alleged state-owned or state-controlled enterprises), and yes even the enforcement theory that individuals employed by the healthcare system are “foreign officials.”
Like most FCPA enforcement actions, the majority of the improper payments in Arab World FCPA enforcement actions were made through various third parties or local sponsors often required under local law.
The types of alleged improper payments also fit within the wide range of payments typically the focus of FCPA enforcement activity including: excessive travel and entertainment; payments to ensure that a competitor’s product failed a government inspection; payments in connection with various infrastructure projects to influence purchasing decisions or product specifications; and payments in connection with various customs, licenses or permitting issues.
The only common thread discerned from Arab World FCPA enforcement actions is that with the exception of a few Iraq Oil for Food actions and the United Industrial Corp. action, all other FCPA enforcement actions were not uniquely Arab World actions. Rather, the Arab World conduct was just one some small slice of a broader FCPA enforcement action. In other words, the company at issue (for instance Daimler, Tyco, Pfizer, etc.) became the subject of FCPA scrutiny for something else and in connection with the common “where else” question the company conducted a broader review of FCPA compliance in a number of countries.