Monthly Archive for February, 2010

The FCPA vs the Bribery Bill: US multinationals can’t just focus on the FCPA

Published on 17/02/2010. Closed Tags: , , .

There is a collective focus on anti-corruption measures being taken across the world. The [US] FCPA enforcement actions have significantly increased over the past few years and we don’t see them letting up. As the much anticipated UK Bribery Bill is due to become law in May 2010, we expect to see a rise of enforcement actions stem from this. As is the case with the FCPA, the Bribery Bill will significantly impact the way in which companies with a nexus to the UK conduct their international business. It is important to note, however, that the Bribery Bill does not mirror the provisions of the FCPA and is actually considerably more robust.

We have come across a very useful article by Thomas Fox – “Proposed UK Bribery Bill: Its Implications and Contrasts to the FCPA,” (find it here) that sets out the differences between the Bribery Bill and the FCPA. The Bribery Bill simplifies the law on corruption and makes the UK compliant with its international obligations under the OECD. The Bribery Bill is significantly broader than the FCPA – it has stricter scrutiny and enhanced criminal penalties. The article continues to summarize the major differences between the Bribery Bill and the FCPA:

  • The FCPA focuses on anti-corruption of foreign governmental officials where the Bribery Bill covers non-governmental officials (i.e., private citizens). The Bribery Bill makes any bribery illegal; not just bribing (or attempt thereof) a foreign governmental official.
  • The FCPA has a facilitation payments defense where the Bribery Bill does not. Under the Bribery Bill, certain types of corporate hospitality are prohibited if they are “intended to subvert the duties of good faith or impartiality that the recipient owes his or her employer”.
  • The FCPA has no strict liability either written directly into the statute or interpreted by judicial review. The Bribery Bill creates a new strict liability of corporate offense for the failure of a corporate official to prevent bribery.
  • The FCPA has criminal penalties of 5 years per offense. The Bribery Bill has penalties of up to 10 years per offense.

Although there are important differences between the FCPA and the Bribery Bill, what will be equally important is how the regulators will handle enforcement, as well as settlement for offenses. As the article points out, the Bribery Bill is significantly stronger than the FCPA. US companies with UK offices (or who employ UK citizens) will be responsible for complying with not only the FCPA, but the Bribery Bill as well. To this, these US companies will have to revise their FCPA compliance programs to take into account the Bribery Bill provisions. If this anti-corruption legislation trend continues, internationally operating companies will have to account for every applicable anti-corruption provision to ensure they are conducting their business in accordance with all the laws, not just those in their home country.

BAE Investigation – ends not with a bang but a whimper

Published on 11/02/2010. Closed Tags: , , , , .

A lot has been written about the recent settlements by BAE with the SFO and the DoJ. What is clear from the press (and the share price), is there is a general perception that BAE did well – we would suggest more, they did extraordinarily well – specifically:

  • No individual prosecutions in the UK and the US (to be confirmed).  Let’s put this in the context of some of the recent successful prosecutions in the US where the headline allegations in terms of amounts and importance seem minor in comparison (e.g. the Greens and Bourke). Or look at Siemens where the old board is being prosecuted both by the company and by the Munich prosecutor (with 2 convictions already obtained).
  • To state the obvious, the settlements provide clear evidence that the DoJ had the real leverage  – see quantum as well as the scope and tone of the two settlements (quantum ratio of 90 (DoJ) : 10 (SFO) – cf. Siemens where the split was 60 (DoJ) : 40 (Munich Prosecutor)
  • Round numbers – the plea agreement and statement of facts are not yet public.  But it will be interesting to see the underlying logic behind the $400 million headline fine. Typically these fines are based on the ‘gain’ resulting from the illicit action(s). This explains why settlements tend not to be round numbers. Also in the context of the volume of business BAE obtained further to the alleged bribes – this seems pretty modest.  According to the Guardian newspaper, Al-Yamanah over 20 years brought BAE revenue of £43 billion with commissions of £600 million.  More here. 
  • No admission of bribery or corruption, so no debarrment from public contracts under the EU regulations.  The SFO prosecution was based only on a s221 Companies Act 1985 offence of failing to keep reasonably accurate accounting records (in common with their previous prosecution ‘successes’).  
  • We note that the DoJ and SFO have settled – will the SEC enter into the fray? Seems unlikely but we note that BAE is listed on the NYSE.
  • No monitorship? There are rumours that a monitor will be imposed on the company –  given the severity of the allegations and the extent of BAE’s dealings with Governments around the world, we would be surprised if one were not.

Presumably the relative modest settlement and the economic impact on the share price, also undermines the economics of potential US securities class actions. Public contrition apart, Dick Olver must have been very pleased.