FCPA Famous Cases
The Foreign Corrupt Practices Act is responsible for regulating the way U.S. businesses function in terms of financial handlings with foreign officials. The anti-bribery amendment prohibits any American corporation, company, business, or individual or foreign entity that trades on the U.S. stock market to bribe a foreign official in order to secure favored business standing or to achieve a certain business or political outcome. Forbidden bribery may not be exclusively monetary in nature, but can include the promise of anything of value, whether directly or indirectly.
In 1977, when the FCPA was first established, the United States Senate declared, “Corporate bribery is bad business. In our free market system it is basic that the sale of products should take place on the basis of price, quality, and service. Corporate bribery is fundamentally destructive of this basic tenet.”
A number of famous foreign bribery cases have been brought to light in recent years as the overseeing authorities, the Department of Justice (DOJ) and the Securities Exchange Commission (SEC), crack down on unethical foreign financial exchanges. In order to allow more strict enforcement of the FCPA, in 2010 the SEC developed a specialized unit within its enforcement division to focus on foreign bribes made by U.S. companies
This enforcement has brought a number of well-known U.S. and international companies under the gun, so to speak. Although not a vast number of such cases are prosecuted, those that are tend to involve large sums of money and are often spotlighted heavily in the media.
FCPA Famous Cases
A number of high profile cases have gained notoriety for costly penalties against companies found in violation of the FCPA. These companies include:
- Siemens Aktiengeselschaft
- BAE Systems
- Total S.A.
In each of these cases, the companies pled guilty to violating the FCPA and paid out hundreds of millions of dollars as a result of their financial misconduct. Learn more about FCPA enforcement.
Siemens AG FCPA Case
Munich, Germany-based industrial and consumer product manufacturer, Siemens AG, pled guilty not only to bribery but to violating accounting provisions, as well. In December 2008, Siemens AG reached a settlement in the amount of $800 million, agreeing to pay $350 million to the SEC in disgorgement and $450 million to the U.S. Department of Justice in criminal fines. Additionally, the company was responsible for a fine in excess of $5.5 million to the Office of the Prosecutor General in Munich.
According to the Director of the SEC’s Division of Enforcement, Linda Chatman Thomsen, the scale of Siemens’ nearly $1.5 billion in foreign bribery was unprecedented, reaching government officials from Africa, America, Asia, Europe, and the Middle East. It was also found that in addition to more than 4,200 payments to bribe government officials worldwide in exchange for business to Siemens, the company made more than 1,000 other payments totaling nearly $400 million to third parties for embezzlement and other illicit and unethical purposes.
KBR and Halliburton FCPA Case
In 2008, the SEC, with the help of the U.S. Department of Justice Fraud Division, the Federal Bureau of Investigation (FBI), and foreign authorities in Africa, America, Asia, and Europe, found substantial evidence of FCPA violations by KBR, Inc., and Halliburton Co. An investigation revealed that for more than a decade KBR subsidiary Kellogg Brown & Root LLC bribed government officials in Nigeria in order to secure construction contracts. The investigation also uncovered violations of books, records, and internal controls by KBR and Halliburton.
The case against KBR and Halliburton indicates that through the use of Japanese and United Kingdom-based agents, payments totaling nearly $200 million were made to both high- and low-ranking Nigerian government officials in order to obtain engineering, procurement, and construction (EPC) contracts. The payout for KBR and Halliburton was tallied at more than $6 billion in construction contracts.
KBR and Halliburton agreed to pay nearly $200 million in disgorgement to settle charges by the SEC, and Kellogg Brown & Root was responsible for more than $400 million to settle the criminal charges by the U.S. DOJ.
BAE Systems FCPA Case
One of the biggest criminal fines since the U.S. Department of Justice began to strictly enforce ethical international business practices was paid out by BAE Systems PLC in 2010. BAE Systems was charged with a number of FCPA and other violations, including falsification of the company’s FCPA compliance program, impairing and impeding U.S. lawful function in order to defraud the nation, and violations of the Arms Export Control Act (AECA), and International Traffic in Arms Regulations (ITAR).
In pleading guilty to the charges brought forth by the U.S.DOJ, BAE Systems was required to pay a criminal fine in the amount of $400 million.
Total S.A. FCPA Case
Total S.A. is an oil and gas company based in France whose securities are publicly traded on the New York Stock Exchange (NYSE), thus placing it under the jurisdiction of the SEC and U.S. DOJ for violations of the FCPA regulations. When it came to light that Total made illicit payments to an Iranian government official through his intermediaries, the New York Regional SEC Office’s Enforcement Division stepped in to investigate with the assistance of the Department of Justice Criminal Division Fraud Section, the French regulatory authorities, and the SEC Enforcement Division’s FCPA Unit.
Total S.A. was found to have paid more than $60 million to an Iranian official’s intermediaries under the guise of various consulting services and “legitimate business expenses” in exchange for the official’s use of influence to help the company obtain approval from the National Iranian Oil Company (NIOC) for contracts to develop prime Iranian oil and gas fields.
The company gained more than $150 million through this illicit bribery, according to the SEC, and therefore, as penalty, Total is now required to pay disgorgement of $153 million in illegal profit. Total is also responsible for hiring an independent compliance consultant to analyze and summarize the company’s FCPA compliance. Additionally, Total S.A. has agreed to pay nearly $250 million as part of a deferred prosecution agreement in criminal proceedings.
Running afoul of the U.S. Foreign Corrupt Practices Act can lead to multi-million dollar losses for any company who violates the anti-bribery provisions or the accounting provisions of the act. Major corporations in all fields of business have been penalized in civil and criminal judgments. Ralph Lauren, Oracle, Eli Lilly, Pfizer, and Tyco, are but a few of the companies who have been charged with FCPA violations and paid millions of dollars in settlements. Investigations into violations of the act are conducted by specialized agents with the SEC’s FCPA fraud unit. For help with FCPA compliance and representation in criminal action for fraud, bribery, or money laundering, corporations and executives are urged to retain a lawyer familiar with the provisions of the FCPA and skilled at handling such cases.