FCPAméricas Blog
Is the FCPA Working? Three Dispatches from Latin America
10.03.2011
In his August 12, 2011 article entitled “Recent Disclosures Raise Many FCPA Questions,” the FCPA Professor Mike Koehler asks whether increased FCPA enforcement has done anything to deter future violations. This question is timely, especially given that the FCPA is under fire by major organizations (such as the U.S. Chamber of Commerce) for the burdens it places on U.S. businesses.
The Professor’s query also raises a broader question—how can levels of corruption even be measured? In an attempt to measure corruption, Transparency International gathers expert assessments and opinion surveys for its Corruption Perceptions Index. The World Bank’s Worldwide Governance Indicators project measures corruption in a similar manner by combining the views of numerous enterprise, citizen, and expert survey respondents in industrial and developing countries. Ultimately, these methods rely on subjective criteria and are limited by the inherent difficulties of applying consistent measures across countries. Assessing levels of corruption is not easy to do.
As a practitioner who has lived, worked, and conducted corruption investigations throughout Latin America for several years, I have developed my own perspective on the question. Following are three examples of how I believe the FCPA is making an impact in the region.
Compliance Programs at Work (Mexico). While conducting an internal investigation in a coastal town in Mexico for a major U.S.-based energy company, I observed an interesting phenomenon. Many oil and oil services companies were conducting their Gulf of Mexico operations from this particular town. Yet it appeared that local officials in the town had largely stopped demanding bribes. Why? The foreign energy companies operating there were some of the first to be hit by a wave of FCPA enforcement. As a result, they had developed and implemented advanced compliance programs to prevent their employees from paying bribes. I was there to assist with one of these programs—FCPA attorneys regularly conduct internal investigations to identify and assess the facts when an allegation of a corrupt payment arises. I learned from the foreign workers that, because of their strict internal prohibition against entertaining bribe requests from local officials, the officials had simply stopped asking. At routine traffic stops, the local police did not even bother to demand money because, if they did, the employee would ask to be taken to the police station where he or she would request a receipt for the payment. Workers were aware of the rules regarding foreign bribery because they had been subjected to FCPA training repeatedly. They also knew the consequences of paying a bribe because they had seen colleagues lose their jobs after doing so. The companies’ compliance programs were working together to send a message to local officials, which resulted in diminished requests for bribes.
Foreign Proceedings Inspired by U.S. Proceedings (Honduras). In 2009, four executives from the Miami-based telecommunications company Latin Node Inc. pleaded guilty to FCPA violations in the U.S. District Court for the Southern District of Florida. The executives paid more than $500,000 in bribes to Honduran telecommunications officials to retain a valuable telecommunications contract. These U.S. prosecutions appear to have inspired the pursuit of justice in Honduras. According to the Honduran newspaper, La Prensa, investigators in Honduras have built their own “strong” case against the Hondurans involved in the scheme, encouraged by the U.S. proceedings. They have even requested that U.S. officials provide them with evidentiary assistance pursuant to the Article XIV mutual assistance provisions of the Inter-American Convention Against Corruption. Though Honduran courts have yet to begin official proceedings, action appears imminent. Perhaps as U.S. officials increase enforcement pressure, government officials in other parts of the region will be empowered to take action as well.
The FCPA as a Shield (Argentina). To a friend in Argentina—a U.S. citizen working as President of a major multinational corporation there—the FCPA serves as a shield. On several occasions, high-level Argentine officials have propositioned him for improper payments. When this happens, he stands behind the FCPA. He explains that making the payment would be illegal, would expose his company to significant liability, and would subject him to possible jail time. Given the history of high-level corruption cases in the country, my friend’s encounters are probably not unique. For example, the Siemens AG settlement dealt with multi-million dollar payments to high-level Argentine officials. The payments were made to win a state contract for the development of national identity cards valued at around $1 billion. In the “maletinazo” case, Argentine airport customs officials found $790,000 in the suitcase of a Venezuelan businessman with ties to the Venezuelan government purportedly headed to assist President Cristina Fernández’s presidential campaign. I remember when the IBM case broke because I was living in Argentina at the time. In that case, U.S. officials brought an FCPA action against IBM when its subsidiary paid $4.5 million through an agent to Banco de la Nación Argentina officials. The payment was made to obtain a $250 million systems integration contract. As Tom Fox noted in his article “How to do Business in a Pure Pay to Play Country,” one of the FCPA’s three policy goals as set out in the preamble to the original 1977 legislation was to place U.S. companies in a better position to resist demands to pay bribes in countries where such activity is common. The Argentina example supports the assertion that this policy goal is being achieved, as the FCPA continues to provide executives with the shield they need to resist corruption.
While it is certainly true that progress in the battle against corruption is difficult to measure, perspectives like these are helpful in understanding the impact of enforcement efforts, even those that are difficult to quantify.
The FCPAméricas blog is not intended to provide legal advice to its readers. The blog entries and posts include only the thoughts, ideas, and impressions of its authors and contributors, and should be considered general information only about the Americas, anti-corruption laws including the U.S. Foreign Corrupt Practices Act, issues related to anti-corruption compliance, and any other matters addressed. Nothing in this publication should be interpreted to constitute legal advice or services of any kind. Furthermore, information found on this blog should not be used as the basis for decisions or actions that may affect your business; instead, companies and businesspeople should seek legal counsel from qualified lawyers regarding anti-corruption laws or any other legal issue. The Editor and the contributors to this blog shall not be responsible for any losses incurred by a reader or a company as a result of information provided in this publication. The Editor, authors, and contributors give their permission to use and share any information posted on the FCPAméricas blog. For more information, please contact Info@MattesonEllisLaw.com.
© 2011 Matteson Ellis Law, PLLC
Post authored by Matteson Ellis, FCPAméricas Founder & Editor
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