Fifteen years ago, there was a “pause” in FCPA enforcement.
No, not pursuant to an Executive Order, but as a practical matter.
According to the Department of Justice, BAE served as the “prime contractor to the U.K. government following the conclusion of a Formal Understanding between the U.K. and the Kingdom of Saudi Arabia (“KSA”)” in which BAE sold to the U.K. government, which then in turn sold to the Saudi government several Tornado and Hawk aircraft, “along with other military hardware, training and services.” The DOJ referred to these frequent arrangements as the “KSA Fighter Deals.”
In connection these deals, the DOJ alleged that “BAE provided substantial benefits to one KSA public official, who was in a position of influence regarding the KSA Fighter Deals (the “KSA Official”), and to the KSA Official’s associates.” The DOJ alleged that BAE “provided these benefits through various payment mechanisms both in the territorial jurisdiction of the U.S. and elsewhere.”
The DOJ further alleged that BAE “provided support services to [the] KSA Official while in the territory of the U.S.” and that these benefits “included the purchase of travel and accommodations, security services, real estate, automobiles and personal items.” The DOJ alleged that over $5 million in invoices for benefits provided to the KSA Official were submitted by just one BAE employee during a one year period.
The DOJ further alleged that BAE “used intermediaries and shell entities to conceal payments to certain advisers who were assisting in the solicitation, promotion and otherwise endeavoring to secure the conclusion or maintenance of the KSA Fighter Deals.”
Specifically, the DOJ alleged that “in connection with the KSA Fighter Deals, BAE agreed to transfer sums totaling more than £10,000,00 and more than $9,000,000 to a bank account in Switzerland controlled by an intermediary. BAE was aware that there was a high probability that the intermediary would transfer part of these payments to the KSA Official.”
BAE was charged with non-FCPA criminal offenses and resolved the matter.
However, enforcement of the FCPA was “paused.”
Why?
The resolution documents are quite obvious.
BAE was a major defense contractor and charging BAE with FCPA offenses raised national security issues – both in the U.S. and European countries as well.
As stated in the DOJ’s Sentencing Memorandum.
– “Europen Union Directive 2004/18/EC, which has recently been enacted in all EU countries through implementing legislation, provides that companies convicted of corruption offenses shall (emphasis in original) be mandatorily excluded from government contracts.”
– “BAES’s business is primarily from government contracts, including with several EU customers.”
– “Mandatory exclusion under EU debarment regulations is unlikely in light of the [actual charges … to] which BAES is pleading. Discretionary debarment will presumably be considered and determined by various suspension and debarment officials.”
– “The Department will communicate with U.S. debarment and regulatory authorities, and relevant foreign authorities, if requested to do so, regarding the nature of the offense of which BAES has been convicted, the conduct engaged in by BAES, its remediation efforts, and the facts relevant to an assessment of whether BAES is presently a responsible government contractor.”
