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The 'Catch 22′ Bust: Some Early Takeaways For FCPA Junkies

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  • The 'Catch 22′ Bust: Some Early Takeaways For FCPA Junkies



    One week ago today, the FBI swooped in on Las Vegas and arrested 21 executives on corruption charges. The executives were in Sin City for something called Shot Show — the Shooting, Hunting & Outdoor Trade Show. The event, founded 32 years ago for the firearms, munitions and shooting-related industry, is by invitation only. According to the FCPA blog, some of the luminaries scheduled to attend this year: Brock Lesnar, Chipper Jones and Steven Seagal.

    The FCPA blog describes the bust (and Shot Show) this way:
    The FCPA arrests were bound to receive maximum attention. They happened on the eve of the Shot Show’s opening; some defendants were from well-known exhibitors. According to the Shot Show website, around 1,400 journalists would have been there — flying in from all over the U.S. and beyond. The FCPA arrests gave them a special reward — hard news to send back home.

    Click here for a post we did on the bust Monday; here for our blog on the day of the sting.

    So what do we make of the sting? FCPA prosecutions have been on the rise for about a decade. But the FCPA community took more notice of this case than perhaps any that preceded it, partly because of the number of arrests, and partly given the nature of the investigation, which involved an elaborate sting operation.

    We caught up with some FCPA lawyers earlier this week. These are the takeaways from the conversations:

    The DOJ is serious — very serious — about foreign bribery and corruption. “This is the next natural step,” says Fried Frank’s Howard Goldstein. “An operation like this requires a devotion of resources above and beyond what we’ve seen before.”

    The FCPA ain’t just for companies anymore. Miller & Chevalier’s Homer Moyer says the case is perhaps the starkest example yet of the government targeting individuals, rather than companies, for alleged FCPA violations. “It used to be you’d go after the companies first, then follow up with individuals if the behavior was egregious,” says Moyer. “But the government is now targeting individuals, presumably so they can get some cooperation in building a case against larger entities.”

    The FCPA ain’t just for small companies anymore. Clifford Chance’s Wendy Wysong says that smaller companies are especially at risk. “Often, they don’t have the money to put into big compliance issues, yet they’ll be subject to same penalties,” she says. “It’s a concern.”

    Voluntary disclosure is nice, but . . . . Once upon a time, it seems, the government largely relied on whistleblowers to break news of foreign bribery and corruption. Nt anymore. “The era of law enforcement relying on self-disclosure is over,” says Barnes & Thornburg’s Pat Brady. “There’s a lot more of this to come. Once law enforcement has luck with an investigative technique going, they keep using it.”

    Part of the rationale for this, adds Will Barry of Richards Kibbe & Orbe, is that increasingly countries are tightening up on foreign bribery and corruption, increasingly coming into line with U.S. standards. So if the U.S. wants to get out in front on a case, it can’t sit back and wait.

    It’s all about compliance and due diligence. Miller & Chevalier’s Moyer says that in the early 1990s, if a company had an FCPA compliance program in place, it was ahead of the pack. “But the bar has risen over and over and over again, and it’s something that strong companies have to have,” says Moyer.

    Barry adds that “the first line of defense when the government comes calling is that you have a real robust compliance program in place.” Compliance is important, says Barry, because FCPA violations might not always be obvious.

    Barry says it can be especially complicated when dealing with foreign countries’ agents or intermediaries. “Let’s say you’re at a closing dinner,” he says, “your employees need to know if it’s okay to pick up the tab, whether it’s okay to exchange gifts. Those can be small things that are customary, but are easy to overlook.”

    FCPA compliance, meanwhile, has become increasingly important during the due diligence of, say, a proposed acquisition. “You and your outside counsel have to have access to people around the world,” says Moyer. “You’ve got to be able to sit down with [an acquiree's] coutnry manager in India or China and find out what they’re practices are.”





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