Meet the Newest Industry: FCPA Investigations

on August 07, 2014

I recently read an article on the Foreign Corrupt Practices act has become an industry unto itself, and I couldn’t agree more. With the exorbitant rising costs of FCPA investigations (which we’ve written about before), the FCPA is a bona-fide industry- and one that is alive and well at that.

Yet, as the “FCPA Professor” points out, case law related to FCPA is limited.  One could also reasonably argue that concrete guidance from the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC) is limited.  In my opinion, one of the reasons “FCPA Inc” has come into being is this lack of case law and guidance.  I agree with Thomas Kase when he describes FCPA enforcement, through Deferred Prosecution Agreements (DPA) and Non-Prosecution Agreements (NPA) is very similar to the plea bargain nature of criminal prosecution for other crimes.  The expense, time, and penalties associated with full prosecution of FCPA cases are far greater than the fines and expenses associated with accepting the “plea bargain.”

If the objective of FCPA enforcement were to prevent companies from bribing foreign officials to win business, the DOJ and SEC would focus a lot of attention on concrete guidelines for ensuring compliance with the law.  They would encourage approaches to compliance that would help companies interested in complying and punish companies determined to be guilty of violating the law.  The DOJ and SEC would emphasize both preventive and detective measures focused on ensuring compliance and managing costs.

The challenge with FCPA enforcement as it exists today is, as Kase describes, the “speed trap” cash cow.  FCPA enforcement plays to public interest in punishing bad corporate actors.  While it’s easy for the DOJ and SEC to play the “white hat” role in FCPA enforcement, there seems to be little incentive for helping companies understand what they can specifically do to maintain compliance with the law and stay clear of large FCPA liabilities.

But FCPA enforcement is too profitable for both the government who prosecutes it (through big fines as outlined by Kase) and “FCPA Inc.” who manages it. “FCPA Inc.” has pounced on case law ambiguity and lawyers, consultants, and auditors have leveraged the ambiguity into a large, booming, business.  But it doesn’t have to be this way. The reality is that there are many things companies can do with existing controls and reporting systems to monitor and ensure compliance with the law.  There are many additional software solutions that can be leveraged to help companies maintain compliance.  Learn more about our Insight that we’ve built specifically for FCPA.