Every so often it is interesting to go back into the archives and this post rewinds back ten years ago to July 2011.
Enjoy the trip down memory lane.
The Foreign Corrupt Practices Act is of course no laughing matter. Yet if an FCPA joke book is ever written there is surely to be an entry about the approximate $16 million FCPA enforcement action brought by the SEC against Diageo. In short, it involved Indian and Korean military officials, a Thai lobbyist, and a Korean Customs official, who while on a purely recreational side-trip to Budapest, stopped in a bar, nibbled on some rice cakes, downed a Guinness and talked about product labeling, excise taxes, and transfer pricing. In the words of the SEC: “Over more than six years, Diageo, through its subsidiaries, paid over $2.7 million to various government officials in India, Thailand, and South Korea in separate efforts to obtain lucrative sales and tax benefits.”
As highlighted here, Armor Holdings resolved an approximate $16 million DOJ/SEC FCPA enforcement action. As stated by the SEC: “[C]ertain agents of Armor Holdings participated in a bribery scheme in which corrupt payments were authorized to be made to an official of the United Nations (“U.N.”), for the purpose of obtaining and retaining U.N. business. Armor Holdings generated more than $7.1 million in improper revenues, and realized over $1.5 million in improper profits, through the award of U.N. body armor contracts to its subsidiary during this period. [A]nother Armor Holdings subsidiary employed an accounting practice that disguised in its books and records approximately $4,371,278 in commissions paid to intermediaries who brokered the sale of goods to foreign governments. By virtue of this conduct, Armor Holdings violated the anti-bribery, books and records, and internal controls provisions of the FCPA and the Exchange Act.”
Ten years ago this month, the FCPA was literally all over the news as News Corp. become the subject of FCPA scrutiny as reports suggested – in connection with the company’s phone intercept scandal – that “up to five [U.K. police] officers were paid between them a total of at least £100,000 in cash from the News of the World. See here for the prior post which goes in-depth – in a Q&A format – regarding potential FCPA implications. At the time, it was likely the most intense worldwide media coverage of the FCPA in its history.
As highlighted in this prior post, the editorial page of the Wall Street Journal (published by Dow Jones – an entity owned by News Corp) went on the offensive and stated:
“The political mob has been quick to call for a criminal probe into whether News Corp. executives violated the U.S. Foreign Corrupt Practices Act with payments to British security or government officials in return for information used in news stories. Attorney General Eric Holder quickly obliged last week, without so much as a fare-thee-well to the First Amendment.”
“The foreign-bribery law has historically been enforced against companies attempting to obtain or retain government business. But U.S. officials have been attempting to extend their enforcement to include any payments that have nothing to do with foreign government procurement. This includes a case against a company that paid Haitian customs officials to let its goods pass through its notoriously inefficient docks, and the drug company Schering-Plough for contributions to a charitable foundation in Poland.”
“Applying this standard to British tabloids could turn payments made as part of traditional news-gathering into criminal acts. The Wall Street Journal doesn’t pay sources for information, but the practice is common elsewhere in the press, including in the U.S.”
This post countered that bribery is not a first amendment issue, but discussed how News Corp.’s FCPA scrutiny did shine a much needed light on the FCPA’s modern era and this post linked to a podcast that contained an in-depth discussion of News Corp.’s scrutiny.
As highlighted in this prior post, News Corp.’s FCPA scrutiny followed a typical path. However, in the end there never was an FCPA enforcement action against News Corp.