Court to World: Yes, FCPA Is Still Sweeping

Matt_Kelly.png

Compliance officers may have seen news of a recent federal appeals court decision that upheld an expansive view of Foreign Corrupt Practices Act enforcement

One said the ruling might be “the tip of the iceberg” that heralds more individuals challenging FCPA enforcement. 

We rarely get appellate court rulings on the scope of the FCPA, so the case spurred numerous headlines. One said the ruling might be “the tip of the iceberg” that heralds more individuals challenging FCPA enforcement. 

For corporate compliance officers running entire programs, however, the case is just more of the same blizzard you’ve been enduring for years – trying to find a steady path forward. 

The case itself, U.S. v. Ng Lap Seng, is straightforward. A Chinese national, David Ng, was a wealthy real estate developer in Macau. In the early 2010s he bribed two United Nations officials by giving them sham consulting contracts worth hundreds of thousands of dollars, in exchange for them trying to convince other U.N. officials to declare one of Ng’s convention centers the permanent home for a lucrative annual development conference. 

Eventually the scheme unraveled, and in 2017 a jury convicted Ng in federal district court of violating the FCPA. 

Ng appealed. He argued that any bribery prosecution must meet the high standards of an “official act” as spelled out in McDonnell v. U.S. — a U.S. Supreme Court ruling from 2016 that addresses cases of domestic bribery of U.S. government officials. Ng wanted that same standard to apply to FCPA cases involving bribery of foreign government officials.

Um, no. The 2nd Circuit Court of Appeals ruled against Ng on Aug. 9, noting that the text of the FCPA defines the quid pro quo of bribery much more expansively than other parts of U.S. law that address domestic bribery. Therefore, the narrow standards of McDonnell don’t apply for FCPA prosecution. 

That’s the legal part of this issue. So what does it mean for compliance officers, running actual compliance programs? 

Read More: "Congratulations, You Are a C Student": Hui Chen on Understanding DOJ Guidance

A Divergence of Standards

In one sense, the Ng case isn’t a big deal. No appellate court had said the McDonnell standard applies to FCPA enforcement previously, and that’s still true now. The expansive scope of the FCPA endures. 

On the other hand, the Ng case also affirms that the United States has one prosecution standard for domestic bribery and another for overseas bribery. If this case challenges compliance programs at all, it’s somewhere in that distinction. 

Essentially, the ruling establishes different thresholds of liability for acts of bribery depending on where the bribery recipient lives. Give a Rolex watch and designer clothes to a sitting U.S. governor so he or she will remember your company, and no violation has occurred. Do the same for the provincial governor of a foreign country, and you might be facing a felony FCPA charge.

Will your compliance program allow that difference to exist? 

Legally, your program could. Ethically, it’s a dissonant message: that an act of bribery is improper in some places but not others, depending solely on the lines of a map. 

In practice, the test would be simple: “Were you bribing somebody overseas? No? Then we’re fine.” Still, allowing that divergence can confuse employees and third parties: Why is the same act acceptable in one place but not in another? 

So you may want to revise policies, procedures, and training to clarify that distinction — or you might want to bury it. Lots of companies ban bribery – period – no matter where it happens or whom you’re bribing. It’s an ethically simple course of action and it meets all standards of the law. 

Meanwhile, Compliance Basics Endure

The other practical point about this ruling is that it preserves the Justice Department’s broad discretion in prosecuting individuals for FCPA misconduct. That freedom to prosecute individuals always means two points corporations: 

  • The department will continue to expect a company’s cooperation against those individuals, if the company wants to avoid its own charges
  • Those individuals could always cut a deal to save themselves, which might implicate your company or employees. 

Again, that was all true before the Ng decision and remains true now. From the corporate compliance officer’s perspective, nothing has changed except to make the status quo more cemented into practice. 

Read More: Supreme Court Rules on Whistleblower Protection Case: Don’t Lose Focus on What Really Drives External Reporting

Still, this is also a reminder about the importance of policies and protocols for investigation, document retention, and decisions on voluntary disclosure of FCPA issues the company discovers. 

At the least, a person affiliated with your company who is facing FCPA prosecution might decide to fight the case, and prosecutors will expect cooperation if your company wants to achieve its own favorable resolution. At worst, a person fearing prosecution might decide to flip for the feds first, jeopardizing your company’s own ability to win credit for self-disclosure.

In theory, another appellate court might some day decide that the McDonnell standard does apply to FCPA prosecution. In that case, the question would likely go to the Supreme Court for a final answer. 

That would be years away, if it ever happened at all. Meanwhile, here are now, corporate compliance officers — charged with implementing anti-bribery policies and procedures for large groups of people — face the same challenges they always have. The blizzard continues.

Download: Anti-Bribery and Corruption Risk Assessment Checklist


Chat with a solutions expert to learn how you can take your compliance program to the next level of maturity.


SFO Aims at Increasing Transparency with New Guidance, but Does It?

The Serious Fraud Office (SFO) has recently published new “Corporate Co-operation Guidance” with the intention of providing transparency into what organisations might expect when self-reporting. Whether the guidance actually achieves this purpose is still up for question and shall be explored further.

Previous/Next Article Chevron Icon of a previous/next arrow. Previous Post

The Normalization of Compliance: In Operations & Around the Globe

The surest sign an industry is maturing is when its practices become normalized. Compliance is currently experiencing this ascent. While normalization might sound inconsequential, in business it is anything but. Let's discuss. 

Next Post Previous/Next Article Chevron Icon of a previous/next arrow.

Comments

Email Signup