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Friday Roundup


More false information, scrutiny alert, points of contact, and ineffective communication. It’s all here in the Friday roundup.

More False Information

More false information from the FCPA Blog in this post which asserts that “anyone relying on the [FCPA’s facilitation] exception should be prepared to defend it — that is, the burden of proof is on the one asserting the exception as a defense to an FCPA violation.”

This is a false statement.

The issue of whether a defendant or the government (as a plaintiff) has the burden of pleading the inapplicability of the exception was litigated in SEC v. Jackson and Ruehlen. In a case of first impression, the judge held that the SEC “must bear the burden of negating the facilitating payments exception” and that the “exception is best understood as a threshold requirement to pleading that a defendant acted corruptly.”

On the eve of trial and facing the prospect of having to negate the exception and otherwise prove it case, the SEC approached the defendants to settle the matter on very favorable terms for the defendants. (See here)

Scrutiny Alert


The Sweden-based telecom company with shares trades on a U.S. exchange has been under FCPA scrutiny since 2013 (no that is not a typo) and recently disclosed:

“As previously disclosed, we have been voluntarily cooperating since 2013 with an investigation by the United States Securities and Exchange Commission (SEC) and, since 2015, with an investigation by the United States Department of Justice (DOJ) into Ericsson’s compliance with the U.S. Foreign Corrupt Practices Act (FCPA). We continue to cooperate with the SEC and the DOJ, and have recently begun settlement discussions. These discussions are in a very early stage and therefore we are not able to estimate their length. Further, as this is an ongoing legal matter we cannot provide any detail. However, based on the current status of the discussions it is our assessment that the resolution of these matters will result in material financial and other measures, the magnitude and impact of which cannot be reliably estimated or ascertained at this time.”

Points of Contact

As highlighted several times on these pages, the formula for why many Foreign Corrupt Practices Act enforcement actions occur is not very complex.

  • Trade barriers and distortions create 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.

The above is not meant to excuse the conduct at issue, only to put it in the proper perspective.

If points of contact with real human being “foreign officials” can be reduced perhaps bribery and corruption can be reduced. In furtherance of this goal, see here for an interesting article about a catalog of e-government services around the world.

Ineffective Communication

As highlighted in this recent post, a component of FCPA compliance is for a business organization to communicate its unique risks and its specific policies and procedures throughout its organization in a way that resonates with the intended audience. In short, effective communication is a key factor in minimizing risk under the FCPA and related laws.

Yet, the FCPA compliance policies of some business organizations fall short in this regard.

For instance, here is the Code of Business Conduct and Ethics of a Chinese energy company with shares traded on the NYSE which states in pertinent part:

“The U.S. Foreign Corrupt Practices Act (“FCPA”) prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. A violation of FCPA not only violates the Company’s policy but is also a civil or criminal offense under FCPA which the Company is subject to. No employee shall give or authorize directly or indirectly any illegal payments to government officials of any country.” (emphasis added).

Ask yourself: does the bold language effectively communicate to employees the U.S. government’s broad interpretation of the FCPA’s “foreign official” element?

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