Continued FCPA enforcement sends clear message around the globe


The recent news that certain unnamed officials of the Thailand Tobacco Monopoly have been accused of accepting bribes of more than Bt62 million from two American tobacco companies serves once again to bring attention to the United States Foreign Corrupt Practices Act (FCPA), a powerful legal weapon that can be brought to bear from great distances and with potentially massive penal and financial ramifications.

If Thai businesses were not already aware of or familiar with the FCPA, events of the past few years should certainly cause them to seriously question how they would describe their FCPA compliance programme to investigators, as well as what steps they are taking to ensure compliance with Thai anticorruption legislation.

Less than a year ago, US citizens Gerald and Patricia Green were found guilty of conspiring to violate the FCPA and money laundering, having bribed Thai officials for the purposes of securing contracts relating to the Bangkok International Film Festival. The former Tourism Authority of Thailand governor, a Thai citizen who allegedly accepted bribes of US$1.8 million (Bt55.36 million) from the Greens, faces charges in the US of conspiracy, transporting funds to promote unlawful activity, and aiding and abetting - charges that carry stiff terms of imprisonment, fines and disgorgement of funds.

The Greens' case follows on the heels of the CTX 9000 airport security screening scandal in Thailand, in which a US company, InVision Technologies, agreed to settle potential criminal liability under the FCPA by paying a fine of $800,000 in penalties. InVision faced liability simply because it was aware of "a high probability" that its agents or distributors in Thailand had paid or offered to pay money to foreign officials or political parties in connection with transactions or proposed transactions for the sale of its airport screening equipment.

Such stringent enforcement of anticorruption laws by the US may seem out of place in Southeast Asia, but it is a reality which Thai entities doing business with US companies would do well to seriously consider.

The US Department of Justice (DOJ), which along with the US Securities and Exchange Commission (SEC) enforces the FCPA, has made it clear that the recent FCPA trend will continue to escalate. A DOJ official has been quoted as stating "enforcement of the FCPA is second only to fighting terrorism".

If Thai companies with US connections fail to take these indications seriously and ensure they have in place a strong FCPA compliance programme, they may do so at a very dear cost to themselves.

The FCPA basically contains two types of provisions: anti-bribery provisions prohibiting corrupt payments to foreign officials, political parties or candidates to assist in obtaining or retaining business or securing any improper advantage; and books and records provisions imposing obligations on all companies whose securities are registered in the US or which are required to file reports with the SEC.

The FCPA potentially applies to any individual, firm, officer, director, employee or agent of the firm, and any stockholder acting on behalf of the firm. Individuals and firms may also be penalised if they offer, authorise or assist someone else to violate the anti-bribery provisions, or if they conspire to violate those provisions.

US jurisdiction over corrupt payment to foreign officials depends upon whether the violator is an "issuer", ie a US or foreign company whose shares are registered with the US SEC and traded in the US; or a "domestic concern", ie any individual who is a citizen, natural or resident of the US or any corporation, partnership, joint venture etc which has its principal place of business in the US or which is organised under the laws of a US State, territory, possession or commonwealth. Both issuers and domestic concerns can be held liable under the FCPA for acts taken within the US and for any act in furtherance of a corrupt act outside the US.

Perhaps more importantly for Thai businesses, it should be noted that 1998 amendments to the FCPA expanded the law to provide US jurisdiction over foreign companies or persons if they cause, directly or through its agents, an act in furtherance of the corrupt payment to take place in the US. In other words, in certain instances, the FCPA provides jurisdiction to US courts over foreign entities and persons which maintain no place of business or domicile in the US.

Moreover, it should be noted that US parent corporations/joint-venture partners may be held liable for the acts of foreign subsidiaries/foreign joint-venture partners, including those in Thailand, where they authorised, directed, controlled or intentionally ignored the corrupt activity, or took acts in furtherance of a bribery scheme.

In such a scenario, Thai subsidiaries/joint-venture partners may be faced with the prospect of disrupted business as a result of US FCPA actions, as well as civil liability between it and its US counterpart, which could potentially trickle down to individuals such as directors and management by exposing them to liability under Thai law.

In light of the above, Thai companies must realise that anti-corruption compliance might not simply be a local matter - Thai companies, employees and agents doing business with, or acting for, US companies should be aware that their actions may fall within the scope of the FCPA and give rise to the risk that they could be subject to severe civil fines and criminal penalties imposed by the DOJ and/or SEC.

Sanctions under the FCPA include criminal penalties ranging from $100,000 to $2 million, as well as imprisonment for up to five years. However, these fines can be much higher, up to twice the benefit the defendant sought to obtain in making the corrupt payment.

Moreover, fines imposed on individuals cannot be paid by their employers or principals. Civil penalties include fixed fines, as well as flexible fines that reflect the pecuniary gain the defendant sought to make as a result of the violation.

Increasingly aggressive enforcement of the FCPA has led to startling penalties and settlements in recent years.

In 2009 and 2010, Technip SA and Kellogg Brown & Root LLC agreed to pay fines of $650 million to settle an FCPA violation involving the payment of bribes by a joint venture to Nigerian officials to win construction contracts worth more than $8 billion.

More recently, in April 2010, Charles Jumet was found guilty of FCPA violations, in making bribes of $200,000 to secure contracts from Panamanian officials.

His sentence? A staggering 87 months imprisonment.

The cost of FCPA violations involving a person or entity in Thailand goes beyond fines and imprisonment - often leading to a range of other liabilities and penalties, including one or more of the

following: appointment of an independent

compliance monitor, enforcement actions and lawsuits in Thailand and/or other localities, adverse publicity, costly and protracted internal investigations and debarment from lucrative government contracts.

Whilst the impact of the Thailand Tobacco Monopoly case on Thai concerns might take years to assess, it is certainly clear that Thai companies and even individuals can no longer choose to ignore the potential impact of the FCPA as a result of the DOJ and SEC's increasingly aggressive enforcement and broadening application of the law.

It is equally evident that a robust FCPA compliance programme is necessary for all Thai businesses operating as part of, or along with, US concerns. The cost of failing to do so could potentially be far outweighed by the consequences.

 

Wynn Pakdeejit is a partner, and timothy Breier a consultant, of Baker & McKenzie, an international law firm that assists clients in understanding the FCPA as well as applicable anticorruption laws in Thailand and elsewhere.


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