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The Use Of Fear In FCPA Inc. Marketing

Today is Halloween and the objective of the day is to scare and spook people.

Clearly business organizations competing in the global marketplace need to be cognizant of Foreign Corrupt Practices Act risk and react accordingly. Thus, a certain amount of angst about the FCPA (and other forms of legal exposure) is rational.

On the other hand, some (perhaps much) of the FCPA angst is an irrational response to the flood of information disseminated by FCPA Inc. participants who frequently, and with presumed business interests in mind, use fear in marketing to create various (unlikely) doomsday scenarios and this post highlights how fear-based marketing is common among certain FCPA Inc. participants.

For starters, this dynamic is really nothing new.

As highlighted in this 2008 Washington Post [1] article:

“Don’t think law firms aren’t playing off [the fear of FCPA liability] by aggressively marketing their services as investigators, risk mitigators and compliance counselors.”

An FCPA commentator observed [2], under the heading “scare the crap out of them” as follows.

“Our dirty little secret, if this could rightly be called that, is that we practitioners vastly overstate the risk that the FCPA brings to companies.  […]  The degree to which the industry that has popped up around the FCPA has an inherent interest in puffing up the underlying risk creates at the least an apparent bias. We all feed off it: risk equals fear equals action equals money for consultants, lawyers, compliance people (in the form of jobs, resources, and budgets), training suppliers, and everyone down the line. It’s not a flattering equation.”

Fear-based marketing is common among FCPA Inc. participants as demonstrated by the following industry ads.

“The life sciences ‘industry sweep’ is in full swing. Recent high-profile settlements by two large, multi-national pharmaceutical manufacturers for violations of the FCPA make on fact clear – this is only the beginning;”

“We are in a new era of corruption mitigation. Heralded by the increased enforcement of the [FCPA] … the noose of regulators has tightened;”

“The stakes are getting higher and failure to demonstrate a sound FCPA strategy could be disastrous to your organization;”

“FCPA enforcement actions can be ‘bet the company’ events with the huge potential for civil and criminal penalties”; and

“With FCPA enforcement on the rise, it’s never been more important to train your staff. [The enforcement agencies] are aggressively pursuing cases and recently settled with Siemens AG for an unprecedented $800 million”

The last example is indicative of a common marketing device of using the largest fine and penalty amount in FCPA history to portray a false reality.  The actual reality is that the Siemens enforcement action was a significant outlier and most FCPA enforcement actions are resolved for significantly lower amounts.

[3]

Another common FCPA Inc. marketing device, exposed in the article [4] ““A Common Language to Remedy Distorted FCPA Enforcement Statistics,” is to use creative and haphazard counting methods to make FCPA enforcement appear more robust than it actually is. (See here [5] for additional visual proof).

However, the FCPA is not nearly the boogeyman it is often portrayed to be. Yes, 2016 was a record breaking year in terms of FCPA enforcement, but in the FCPA’s modern era a typical year sees approximately 10-15 core corporate enforcement actions a year (See here [6]). Given that all forms of U.S. business organizations, over 1,000 foreign issuers, and (assuming certain jurisdictional elements are met) any foreign company can be subject to the FCPA, is 10-15 core corporate enforcement actions really that scary?

As highlighted in this previous post [7], another common FCPA Inc. marketing device is to highlight the FCPA risks of … well just about anything.

Previously on his Corruption, Crime & Compliance site (here [8]) Michael Volkov observed as follows.

“The FCPA Paparazzi has done a great disservice to the business community.  Call it a complete lack of credibility.  Legal marketing has become confused in this day and age – marketing has now been turned into the “Fear Factor,” meaning that lawyers need to scare potential clients into hiring them.  That is flat-out wrong.   Each week, new client alerts, client warnings and other cries of impending disaster are transmitted through the Internet to businesses.  If I were a general counsel, I would have them on “auto delete.”  Talk about a waste of time and effort.”

A bit harsh and I don’t know that I would go that far. Yet, in a twist of irony Volkov’s website thereafter published a post titled “Doing Business in China Should be “Scary. [9]” As most FCPA-fear based marketing pieces do, the post began with a current events hook (a recent FCPA enforcement action concerning business in China), contained the phrase a “perfect storm” and asserted that “companies should absolutely be scared of doing business in China.”

On this Halloween, allow yourself to be scared and spooked, it’s fun.

But don’t fall victim to much FCPA Inc. fear-based marketing and in this respect refreshing words were offered by an FCPA practitioner who stated:

“Over the past five years, the [FCPA] has solidified itself as an industry brimming with expert forums, company departments and substantial news coverage. Is this statute really the bear in the woods some say it is? […]  The existence of the FCPA industry (and professionals who are available to conduct internal investigations at a high price) does not mean that this reaction is what is always required. What is required first and foremost is reasonable judgment exercised by directors and professionals who seek both compliance and solutions—without assuming a bear is present at every turn.”

Pamela Marple, NACD Director Advisory, “The FCPA: A New Bear in the Woods?”

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