Last month, I was honored to attend a press conference and speak with Robert F. Kennedy’s daughter, Kerry Kennedy, founder of the Robert F. Kennedy Center for Human Rights. The press conference centered on Mrs. Kennedy’s recent tour of the toxic drilling sites in the Amazon province of Sucumbios in Ecuador in connection with the ongoing Chevron litigation. I have written several posts on the subject here and here.
One of the issues raised at the conference with Mrs. Kennedy concerned the scandal involving Chevron’s alleged bribery of a foreign official. You can read about the scandal in the Wall Street Journal article, To Combat Overseas Bribery, Authorities Make It Personal and in the New York Times article, Ecuador Oil Pollution Case Only Grows Murkier.
As reported in these articles, Ecuador`s Attorney General, Washington Pesantez, called on the U.S. Department of Justice to investigate Chevron for possible violations of the Foreign Corrupt Practices Act (FCPA).
The timing for Chevron could not be worse. Only several months ago, Robert Khuzami, director of the Enforcement Division of the Securities and Exchange Commission, announced the creation of a specialized unit dedicated to the enforcement of the FCPA.. According to Director Khuzami:
the new unit will focus on new and proactive approaches to identifying violations of the Foreign Corrupt Practices Act, which prohibits U.S. companies from bribing foreign officials for government contracts and other business".
There has been an enormous surge in FCPA and anti-corruption enforcement by U.S. and foreign governments all around the world. That surge has resulted in unprecedented risk for U.S. companies operating overseas. As the risks keep spreading to more and more industries, no U.S. enterprise can even remotely afford the consequences of non-compliance.
Is your business completely ready to tackle these risks?
The following four guidelines may help to minimize risk exposure and maximize the cost-effectiveness of FCPA compliance programs.
- Determine Where the Greatest Risks Lie–Degrees of risk vary for each business segment. If your company’s main dealings with government officials are with regulators, you will have different compliance challenges than if you are marketing goods or services to government buyers, just as you may have different challenges if you operate overseas through joint ventures as opposed to local representatives.
- Start at the Top–Management teams that are committed to creating a strong compliance culture are much better at transmitting compliance goals throughout the whole enterprise. Does your company’s compliance culture start at the top?
- Identify Red Flags–If employees who see a red flag know to stop and ask for guidance, many if not most FCPA issues can be avoided. Lawyers and compliance personnel can make the legal judgments, advise on what may and may not be done, and indicate where lines need to be drawn.
- Minimize the Use of Third Parties– Corporations can significantly reduce their FCPA risk by eliminating or minimizing their use of third party consultants and agents over whom they have less than full control, particularly those who are paid commissions, success fees, or bonuses. To the extent a corporation can eliminate or avoid its reliance on third parties, it can, by definition, reduce its FCPA risk profile.
The current economic downturn and the accompanying uncertainties about job security may increase the usual pressures on managers to “make their numbers.” These pressures may tempt those responsible for foreign sales and deals to operate close to the line, or even cross the line, in their efforts to secure new business. The guidelines outlined above will serve to offset some of the risks inherent in operating overseas while still allowing managers to "make their numbers."
Does your company have a FCPA compliance program in place?
Trend to Watch: Look for a Significant Increase in the Number of Companies Instituting FCPA-related Compliance Programs.