Emerging Litigation Podcast
Episode: The Long and Brawny Arm of the Foreign Corrupt Practices Act
Host: Tom Hagy
With guests: Mark Bini & Tom Suddath (Reed Smith)
Date: September 17, 2024

Episode Overview

This episode delves into the Foreign Corrupt Practices Act (FCPA) and its expanded reach in global anti-corruption enforcement, especially in light of the new Foreign Extortion Prevention Act (FEPA). Host Tom Hagy is joined by Reed Smith attorneys Mark Bini, a former federal and state prosecutor, and Tom Suddath, a former Assistant U.S. Attorney, to discuss what the FCPA prohibits, enforcement trends, international cooperation, implications of political changes, and practical compliance steps for companies.

Key Discussion Points & Insights

1. The FCPA: Purpose & Prohibitions

[05:35] - [09:19]

• Definition & Classic Scenario:

  • The FCPA prohibits U.S. individuals and entities from bribing foreign government officials to gain a business advantage.
  • “Maybe they pay a $50,000 bribe to a government official in a foreign country and then as a result... their company wins a lucrative contract. And the FCPA law, which is designed to prevent that sort of corruption, makes that a crime and punishable by up to five years in prison for each penalty... along with potential for financial fines.”
    — Mark Bini [05:56]

• Accounting Provisions:

  • Requires companies to maintain accurate books/records and adequate internal controls.
  • “It requires companies to maintain adequate controls to prevent bribery and also to accurately keep books and records. So in a very simple case, if you're paying something to a foreign government official, it has to be accurately recorded as such and not buried or hidden in some other way.”
    — Tom Suddath [08:27]

2. Enforcement Trends: Geography & Industry Focus

[09:19] - [13:16]

• Hot Spots:

  • Recent focus: Latin America, South America, following ongoing attention in Eastern Europe, Russia, and China.

• Industry Pattern:

  • DOJ learns an industry’s “bribe playbook” and shifts focus over time (recently pharma, medical devices, now spread across energy, mining, telecoms, insurance—any industry deeply involved with government officials).

• Cascade Effect:

  • Enforcement often “mines” corruption—when one case surfaces, it often leads to further scrutiny of competitors or adjacent industry players.

• “When DOJ gets their hooks into a certain area, they keep sort of exploiting the information... Once they get in an area, they really sort of look all around in.”
  — Mark Bini [11:21]

3. The Role of Cooperation, Whistleblowers, and the ‘Snitch’ System

[13:16] - [15:03]

• Insiders Fuel Investigations:

  • DOJ’s success often hinges on insiders—voluntary cooperators—revealing details that lead to broader inquiries.

• Corporate Cooperation:

  • DOJ will request lists of competitors during voluntary disclosures and use them to launch broader investigations.

• “One person's snitch is the other person's voluntary cooperator. And so... DOJ is big on voluntary cooperation, promoting voluntary cooperation.”
  — Tom Suddath [13:59]

4. Political Outlook: Will U.S. Enforcement Change After the Presidential Election?

[15:23] - [19:03]

• Consensus View:

  • Corruption is broadly recognized as detrimental to U.S. business interests—focus on enforcement likely continues regardless of administration.
  • “I don't think they're gonna... roll back because... it's also a really an apolitical issue... American businesses want to have a level playing field when they're doing business overseas.”
    — Tom Suddath [16:09]

• Subtle Differences:

  • Trump administration previously saw a slight slowdown, but cases persisted.
  • Harris, with her prosecutorial background, may increase focus.
  • Enforcement’s “lagging effect”: DOJ investments today yield results years down the line.

5. Carrots & Sticks: DOJ Incentives and the Rise of Whistleblowers

[19:19] - [21:55]

• Expansion of Incentives:

  • DOJ now offers substantial leniency—declinations (no criminal prosecution) and large penalty discounts—to companies that self-disclose and cooperate.
  • Financial rewards and protections for whistleblowers are being enhanced.

• “They've really robustly rolled that program out... to not just the area of corruption, but to other sort of white collar business interests. And they've also incentivized whistleblowing by rolling out a number of programs...”
  — Mark Bini [20:13]

6. Foreign Extortion Prevention Act (FEPA): Filling the Jurisdictional Gap

[21:55] - [24:41]

• What’s New:

  • FEPA, passed in late 2023, makes it a U.S. crime for a foreign official to solicit or receive a bribe from an American company.
  • Previously, U.S. law could not directly target the foreign officials who solicited bribes.

• Implications:

  • No prosecutions under FEPA yet, but it's seen as a potent new tool that will certainly be used.
  • Prosecutors previously used money laundering and travel act charges; FEPA offers a more direct approach.

• “If there's a foreign government official who has received or solicited a bribe from an American company, they can be charged with violating that statute.”
  — Mark Bini [22:34]

7. How Enforcement Works Across Borders

[23:27], [26:53] - [29:56]

• Process:

  • U.S. prosecutors may issue indictments, circulate Interpol red notices, and seek extradition.
  • Cooperation varies by country; treaties and financial incentives (sharing fines) drive participation.

• Example (Petrobras/Lava Jato):

  • U.S. and Brazilian prosecutors coordinated, with both benefiting financially and institutionally from enforcement.

• “In the FCPA area, we've seen tremendous cooperation between the United States and foreign governments. And so, for example, part of the success on the US Side in those prosecutions was because they were working very closely with their colleagues in Brazil...”
  — Mark Bini [27:21]

8. Prevention: What Can Companies Do?

[30:18] - [36:41]

• Main Strategies:

  • Employee & Third Party Training:
    • Particularly in local language, to ensure understanding of personal liability and U.S. law’s reach.
  • Oversight & Transparency (Third Parties):
    • Diligent oversight of agents, distributors, and other “middlemen” who often create FCPA exposure.
    • FCPA obligations should be explicit in contracts.
  • Robust Policies & Documentation:
    • To evidence compliance and mitigate liability in case of rogue actors.

• “There's nothing like the fear of jail to try to get somebody's focus upon doing the right thing.”
  — Tom Suddath [31:01]

• Diligence Spectrum:

  • Choosing third-party agents carefully is critical. Example: Hiring “lobbyistas” in Brazil was a red flag for prosecution.

• “...That US Company, when they hired a lobbyista, that was a sure sign they hired someone who was like infamous for paying bribes. If you hire an agent like that, you're going to get in trouble.”
  — Mark Bini [35:31]

Notable Quotes & Memorable Moments

• “One person's snitch is the other person's voluntary cooperator.”
  — Tom Suddath [13:59]

• “Corruption is bad for American business. And I think whoever is president... you're gonna see A significant rollback from that because... it's pro business and it really... has a corrosive effect.”
  — Tom Suddath [15:59]

• “When DOJ gets their hooks into a certain area, they keep sort of exploiting the information that they've developed.”
  — Mark Bini [11:21]

• “There's nothing like the fear of jail to try to get somebody's focus upon doing the right thing.”
  — Tom Suddath [31:01]

Timestamps for Important Segments

• [05:35] — FCPA background and classic prohibited conduct
• [08:01] — FCPA’s accounting and internal controls requirements
• [09:32] — Regions and industries at heightened risk
• [13:16] — How DOJ “mines” corruption, expanding investigations
• [15:36] — Political administration impact on enforcement
• [19:19] — New DOJ cooperation incentives, whistleblower trends
• [21:55] — Introduction and analysis of FEPA
• [26:53] — Practicalities and mechanisms of cross-border enforcement
• [30:18] — Preventative measures companies can take
• [35:31] — Risks of hiring notorious “lobbyistas”/third parties

Conclusion

This episode provides a comprehensive, insider’s view into FCPA enforcement and its evolution—especially the expanding use of incentives for cooperation, the anticipated application of the Foreign Extortion Prevention Act, and the crucial importance of proactive compliance. Mark Bini and Tom Suddath’s commentary blends practical insight with memorable anecdotes, clarifying why anti-corruption risk management is essential for all internationally active companies.