5 Ways to be Found Indirectly Liable Under the FCPA Reply

Overseas business risksIn more ways than one, companies and individuals are being held responsible under the Foreign Corrupt Practices Act for the improper activities of their business associates.  Looking at real-life scenarios, here are five examples of how defendants have been held indirectly liable under the FCPA:

  • Third-party Liability.  Perhaps the most common form of indirect liability under the FCPA stems from the use of third-party agents and intermediaries.  Whether it’s a consulting firm located on the Isle of Man or a government go-between in Yemen, companies need to be aware of how intermediaries conduct business on their behalf.  The FCPA makes no distinction between bribes that are paid directly to a government official or indirectly through a third-party.
  • Parent-Subsidiary Liability.  In 2009, United Industrial Corporation (UCI), a Maryland corporation, was held liable for bribes authorized by its wholly-owned subsidiary ACL Technologies (ACL) to government officials in Egypt.  In penalizing UCI, the SEC noted that the parent company routinely identified the President of ACL as a member of UCI’s senior management, indicating the degree of control it possessed over its subsidiary’s activities was enough to transfer the liability up the corporate chain
  • Successor Liability.  In 2003, Pfizer Inc. acquired Pharmacia Corporation, another multinational pharmaceutical company.  Last year, Pfizer wound up liable for Pharmacia’s previous bribes before the merger, in part because the DOJ and the SEC did not like the nature and depth of Pfizer’s pre-acquisition, FCPA due diligence.  The DOJ also noted that Pfizer did not implement a post-acquisition, anti-corruption compliance program quickly enough.
  • Co-Conspirator Liability.  Under U.S. law, a company planning to violate the FCPA can be held liable for any reasonably foreseeable crime committed by a co-conspirator.  We saw this theory in action when the Japanese company JGC Corp. was held liable for conspiring to violate the FCPA even though the company had never even stepped foot inside the United States.  The DOJ noted that it was enough that the company acted in concert with other companies headquartered here.
  • Investor Liability.  In 1997, Frederic “Ricky” Bourke, co-founder of a luxury handbag and accessory company, met with his friend and neighbor, Viktor Kozeny in Aspen, Colorado, to discuss a potential investment in Kozeny’s attempt to privatize a state-owned Azerbaijani oil company.   Bourke had heard of Kozeny’s reputation as the “Pirate of Prague” and also knew that the investment would involve paying off Azerbaijani government officials, but neither of those facts stopped him from putting large sums of money into the deal.  Twelve years later, on July 10, 2009, a jury found Bourke guilty of conspiracy to violate the FCPA, and a judge later sentenced him to one year and one day in federal prison.

The bottom line is that it is important to conduct due diligence on partners and agents, and to pay attention to the anti-bribery compliance programs of those with whom you choose to conduct business.

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