FCPA violations of both the anti-bribery provisions and the books and records requirements can result in criminal and civil liability for companies and their individual officers, directors, employees, and agents. Fines imposed on individuals may not be paid by their employers or principals.
Companies face fines of up to $2 million in criminal fines per violation of the anti-bribery provisions. They can also be subject to other penalties, including civil fines, debarment from government business, or loss of export privileges. Individuals risk significant criminal and civil fines – up to $100,000 per violation – as well as imprisonment for up to five years per count for criminal violations. For both companies and individuals, the sanctions can potentially be much higher, up to twice the benefit improperly obtained or loss caused.
The accounting requirements carry criminal penalties of up to $25 million for public companies and $5 million and 20 years in prison for individuals per violation. Significant civil fines also exist for accounting and recordkeeping violations – up to $150,000 for individuals and $750,000 for corporations per violation. (These penalties can result in large civil fines, since each false report constitutes a violation.) Note that the criminal penalties can only result from “willful” acts, while no such intent requirement is required for civil penalties. As with anti-bribery penalties, the books and records sanctions can reach up to twice the benefit improperly obtained or loss caused, which can lead to megafines.
FCPA violations can lead to other significant consequences, such as:
- Disgorgement of profits: Settlements of FCPA violations frequently require multi-million dollar payments reflecting the disgorgement of profits that resulted from the improper payment.
- Obligation to retain external monitor: Non-prosecution agreements and deferred prosecutions agreements sometimes require companies to retain external monitors tasked with overseeing compliance with the terms of the agreement and monitoring the company’s compliance program. Such monitors often have intrusive access to the companies’ operations and can be very expensive.
- Suspension and debarment: FCPA violations can result in debarment of companies or individuals from participation in the U.S. securities industries or from doing business with the federal government. They can also result in the loss of certain export privileges.
- Expensive legal fees and related costs: FCPA violations often lead to time-consuming and expensive investigations – such costs frequently exceed seven-figures.
- Shareholder derivative lawsuits: Shareholder litigation based on corporate behavior related to FCPA violations is becoming commonplace.
- Sanctions in other countries: Oftentimes conduct that violates the FCPA will also constitute a violation of local law in the country in which it takes place. It may also result in sanctions by Multilateral Development Banks (FCPAméricas has discussed The World Bank’s sanctions program here and here). In these ways, companies and individuals can be subject to multiple sanctions in different jurisdictions.
- Negative impact on mergers and acquisition transactions: FCPA-related issues identified during pre-closing due diligence can make a deal collapse. In some instances, multi-billion dollar transactions did not close because issues were uncovered that target companies could not resolve.
The Statute of Limitations
As a general proposition, criminal and civil enforcement actions under the FCPA must be commenced within five years after the offence is committed.
This period may be extended in some cases. For example, the statute of limitations does not apply to fugitives. The DOJ can obtain a three-year suspension of limitations to obtain evidence located in a foreign country. Both the SEC and DOJ also typically obtain agreements from companies being investigated to extend this period. In addition, prosecutors often file conspiracy charges together with FCPA charges as the limitation period for the conspiracy begins to run with the last overt act in furtherance of the conspiracy, such as an act of concealment. This often allows the prosecutor to reach conduct that took place more than five years before.
What types of companies are being targeted?
While enforcement against high-profile companies captures much public attention, enforcement officials also target small and medium-sized companies. Enforcement actions are also brought against both U.S. and foreign companies. To date most of the largest FCPA cases (by monetary penalty amount) have involved non-U.S. companies. Some perspectives of FCPA enforcement officials are overviewed here.
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