This FCPA Blog post discusses “family businesses — those retaining significant founding-family ownership or management participation or both” and the Foreign Corrupt Practices Act and how family businesses are “grossly under-represented among convicted FCPA violators.”
According to the FCPA Blog “just eight of … 273 [FCPA enforcement actions] involved family businesses. They are Walmart, Louis Berger International, Tyson Foods, Samsung Heavy Industries, Sargeant Marine Inc., JBS S.A., Omega Advisors, Inc., and Anheuser-Busch InBev. That’s just 2.93 percent of all corporate FCPA defendants. That means family businesses have been at least 20 times less likely to be prosecuted for FCPA offenses than non-family businesses.”
The term “family business” of course is not a bright line concept and few would perhaps term Walmart or Tyson Foods (companies with family origins yet currently its top ten shareholders are institutional investors) “family businesses.”
Nevertheless, the FCPA Blog significantly underestimates the number of “family businesses’ that have resolved FCPA enforcement actions.
Again, recognizing that the term “family business” is not a bright line concept, the following companies (not mentioned by the FCPA Blog) have all resolved FCPA enforcement actions and likely fit the term “family business.”
- Kenny International
- Sam Wallace Co.
- Crawford Enterprises
- C.E. Miller Corp.
- F.G. Mason Engineering
- Young & Rubicam
- Vitusa Corp.
- Metcalf & Eddy
- Nexus Technologies
- Och-Ziff
- CDM Smith
In addition to the above, the numerous Haiti Teleco related enforcement actions generally involved individuals associated with small, single owner companies, as have many of the FCPA enforcement actions in recent years concerning business conduct in Venezeula. In these numerous enforcement actions, the DOJ has generally charged individuals (rather than corporate entities) – largely a distinction without a meaningful difference for purposes of this issue.
In addition, although ultimately dismissed, the DOJ’s failed Africa Sting enforcement actions largely involved individuals associated with several, small privately held companies.
Even if FCPA enforcement actions against “family businesses” lag FCPA enforcement actions against non-family businesses, there is an obvious reason for this.
Most “family businesses” tend to be private companies (“domestic concerns” in FCPA speak) and thus only subject to one prong of the FCPA (the anti-bribery provisions) and not the FCPA’s other prongs (the books and records and internal controls provisions).
Indeed, in the FCPA’s modern era, a meaningful percentage of enforcement actions against issuers are “only” books and records and internal controls cases and this enforcement option is simply not available to law enforcement when a “domestic concern” is under FCPA scrutiny.
