The Long and Brawny Arm of the Foreign Corrupt Practices Act with Mark Bini and Tom Suddath

Summary

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

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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.

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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]

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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]

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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

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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.

Transcript

[A]

Welcome to the Emerging Litigation Podcast. This is a group project driven by HB Litigation, now part of Critical Legal Content and Velex companies Fastcase and lawstreet Media. I'm your host, Tom Hagee, longtime Litigation News editor and publisher and current litigation enthusiast. If you wish to reach me, please check the appropriate links in the show Notes. This podcast is also a companion to the Journal of Emerging Issues in Litigation, for which I serve as Editor in Chief. Published by Fast Case Full Court Press. And now, here's today's episode. If you like what you hear, please give us a rating. The long and brawny arm of the Foreign Corrupt Practices Act. Who came up with that title? That may have to change that one. The United nations and the World Economic Forum calculates that the cost of corporate Corruption globally is $5 trillion a year. That's 5% of the world's 2022 GDP. Corruption can hamper economic growth by discouraging investment, increasing transaction costs. It can distort market competition. It could perpetuate poverty by diverting resources away from essential services and benefiting the wealthy and powerful. Nothing wrong with the wealthy and powerful, you know. Unless there is. It could undermine democratic institutions and erode public trust in governments. Can you imagine? It can hinder sustainable development by diverting resources away from essential infrastructure and social services.

[B]

Yeah.

[A]

The Foreign Corrupt Practices act, or the fcpa, the government's leading weapon in this global war on corporate crime, has far reaching implications for companies engaged in, of course, international business. For those who violate it, the consequences or the consequences can be severe. And with the recent addition of its little brother, the or sister. I don't want to, you know, I don't want to pick. And with the recent addition of the Foreign Extortion Extortion Prevention act, or fepa, the federal government has even more to work with now. In 2018, Brazilian state owned oil and gas company trading as Petrobras found out the hard way about the long arm of the fcpa. Petrobras or Petrobras? Petrobras. I'm not saying it right. Petrobras. I'm going to call it the company. It was involved in a massive corruption scandal. It was undercovered by Operation Car Wash. And that was the name of the investigation launched in 2014. I think naming those investigations must be the most fun part of them of investigating a company. It uncovered a complex web of bribery, money laundering and kickbacks. All fun things involving politicians, executives and contractors. In 2018, the SEC charged Petrobras with misleading US investors by way of false financial statements that concealed their schemes in which senior executives conspired with the company's largest contractors and suppliers to inflate the cost of Petrobras infrastructure projects. Get this. The executives shared portions of their billions in kickbacks with politicians who helped them get their high level positions. That's a quid pro quo. I believe. Petrobras falsely reported that the payments were to either acquire new assets or improve existing assets. The result was a $2.5 billion overstatement of assets. The company ended up paying $1.8 billion in penalties. That's about all I know about the FCPA. But fortunately I had two people to talk to recently about it. Two attorneys with Reed Smith who practice in the firm's global regulatory enforcement group. They are Mark Benny and Tom Sudoff. Mark is a former federal and state prosecutor in New York. He's led multiple multi year cross border investigations of corporations and individuals. He's got particular experience in investigations involving potential FCPA violations. As prosecutor, he worked closely and in parallel with many domestic and foreign law enforcement agencies and regulators, including the United Kingdom's Financial Conduct Authority and Brazil's Ministerio Publico Federal. Tom Sudath is a former assistant U.S. attorney in the criminal division of the U.S. attorney's office in Philadelphia. He has extensive experience conducting international and domestic internal investigations and frequently counsels companies on compliance and voluntary disclosure issues related to the fcpa. He's handled FCPA and other internal investigations in many countries, including Russia, Poland, Turkey, Greece, Hungary, the Czech Republic, Mexico and Colombia. What have you done lately? For that matter? What have I done? Mark and Tom answered questions around the purpose and prohibitions of the FCPA and how it's enforced, the impact on future enforcement, if any, based on the outcome of the presidential election. You know, that's, that's coming up. Those of you who don't read the news, the purposes and prohibitions of the new Foreign Extortion Prevention act, trends in whistleblowing, corporate cooperation, international cooperation, steps companies can take to stay out of the soup, and more. Because there's always more. Thanks to Mark and Tom of Reed Smith for sharing their insights based on decades of experience in this area of the law. I hope you enjoy it.

[C]

Okay, we're going to jump right in. Let's start off with some basics for the uninitiated. What is the FCPA and can you tell me some of the things that it prohibits and what's going on with enforcement of the act? Mark, you want to take that one first?

[D]

Sure. So the foreign Corrupt Practices ACT, or the FCPA, is a 1977 law passed by Congress which prohibits U.S. individuals or entities like companies from paying bribes to foreign government officials in order to win a business advantage. So the classic sort of FCPA scenario would be an American company, a US Company, or a US Individual, rather a citizen or someone who lives here who pays a bribe to a government official in a foreign country and then that person's company wins a contract, for example. So maybe they pay a $50,000 bribe to a government official in a foreign country and then as a result of that, 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 or each, each instance of it, along with potential for financial fines. And oftentimes when there's an FCPA prosecution in the United States, it is going to involve both individuals who may be held accountable, perhaps executives at a company, but also the company itself. If the company has in an egregious case, the company itself may be required or may decide based on the evidence to actually plead guilty with the Department of Justice or enter into a deferred prosecution agreement. As a result. This has become a very big area for enforcement because the fines for the companies in particular, besides that individuals can go to prison and face significant sentences. The penalties that are assessed to companies can be hundreds of millions of dollars or in some instances even billions of dollars for violation of the Foreign Corrupt Practices Act.

[C]

That's whopping. Tom, did you want to add anything to that?

[B]

A lot of attention is on the FCPA anti bribery provisions. The FCPA also has accounting provisions. So it, it requires the companies keep proper books and records, accurate books and records, and also requires them to maintain appropriate internal controls to try to prevent corruption. And so the, the anti bribery provisions that Mark was focusing upon is those are criminal provisions that are enforced by the Department of Justice and typically the FBI. The accounting provisions of the, of the FCPA are, they're, they're regulated by the sec, and like the criminal provisions, there's also substantial financial penalties associated with those. So basically 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.

[C]

Well, Thomson's, I've got you going here. Let's. What about industries or regions of the world where there might be more Activity, FCPA activity or enforcement.

[B]

So I think what we're seeing now is a lot of focus upon Latin America, South America. There has traditionally been a lot of attention in Eastern Europe, in Russia, in China. But it, over the last few years, there's really been a focus on a lot of prosecutions coming out of business relationships in South America and Latin America. And as far as the industries, DOJ and the sec, they learn an industry and they learn. So that, let's say they focus upon several years ago was the pharmaceutical, medical device industry. They'll focus on that. They'll sort of learn how bribes are paid. And then as they move from one company, they'll then move to another company. So they, they tend to focus upon industries for periods of time. So I, I would say maybe eight, nine years ago, it was really medical device, it was pharma. But now it's a pretty wide variety. There's energy, mining, telecommunications, oil and commodities, insurance. It's a pretty wide variety of cases. Basically, if the industry has relationships, significant relationships with government officials, you know, that, that, that heightens the risk for the FCPA and for the government to look into the relationships with government officials.

[C]

Mark, did you want to add anything to that?

[D]

Yeah, I think that's. Tom Sonath had explained it so well. One thing that I would just add is I think it's also a matter of when DOJ gets their hooks into a certain area, they keep sort of exploiting the information that they've developed. So, for example, when I was a federal prosecutor in the Eastern District of New York, I often worked together with Main Justice. There's a group at Main justice inside the Fraud section that has specific responsibility over these FCPA cases. And so I partnered with them on a number of investigations. And one started with a US Company that ultimately pled guilty to paying bribes in Brazil out of the Lava Jato scandal that happened in Brazil. And they also admitted to that company it's public information, otherwise I wouldn't be able to talk about it. Sure. But they ended up also pleading guilty to paying bribes in other jurisdictions, including Venezuela. And so oftentimes you'll see DOJ has a case like that, and they developed a lot of information in working on that case, and then it may give them additional leads about other companies in that sector. And so I think a lot of times, you know, I think Tom is exactly right that you see DOJ sort of changing their focus. I think it's also part that they get in there, they learn about that industry. Maybe they have encountered an individual who is involved in paying bribes on behalf of one American company, and it turns out, oh, no, that person's also paying bribes for a second or a third company. And so I think that explains why you really see doj. Once they get in an area, they really sort of look all around in.

[C]

Sounds like corruption mining.

[D]

Yeah. The criticism of DOJ is sometimes that it's a snitch system in that there's oftentimes people who. Individuals who turn around and cooperate with the government and sort of snitch, as it's called on others. But of course, that's the great success of the Department of Justice in that they get those insiders and it allows them to really find a lot of things that perhaps they wouldn't be able to find. And just with a smart FBI agent and now putting those together, they often will. Will look and find other areas of criminality.

[B]

One person's snitch is the other person's voluntary cooperator. And so I, you know, the DOJ is. Is big on voluntary cooperation, promoting voluntary cooperation. But to Mark's point, oftentimes when somebody goes in and voluntarily cooperates and basically self discloses about wrongdoing that may be going on within their company, typically what you'll see is the government DOJ will ask, okay, who are your competitors in this region? Give us a list of those competitors. And then they'll. DOJ will follow up with letters or some type of inquiry to those competitors, asking them about their relationships with certain government officials. Officials or certain government ministries. So there is. Yeah, they use it to. They take the cooperation that one company gives them, and then they look to see whether or not there are similar schemes going on with other companies within the same either region or maybe elsewhere, and that they're doing business.

[C]

I remember years ago writing some story about this where one big company was getting investigated and really was in. In a lot of trouble. And I think I might have asked a question like, oh, I bet you're. I bet the competitors are happy about that. And it was. No, no, no. They might see themselves as being next.

[B]

Oftentimes they're next.

[C]

Just jump into the next question. This is forecasting. If you. If you could. Do you think it's going to matter who becomes president? Whether it's. Whether it's a Harris or a Trump administration?

[B]

Tom? I think it will. You know, it can matter around the edges. I think, though, that corruption is bad for American business. And I think whoever is president, I don't think they're gonna. You're gonna see A significant rollback from that because it's, it often it's also a really an apolitical issue. You know, it doesn't lean left, doesn't lean right. It's, you know, it's pro business and it really corruption. When you look at its effect upon economies, it really does have a corrosive effect. So I think, you know, under, when President Trump was in office, there was a bit of a decline. He had been critical before he got into office about the fcpa. There was a bit of a decline, but then he, you know, the pace picked up. There's been a significant investment over the years in FCPA resources. I think, you know, should Vice President Harris be elected? She's a prosecutor, and I think she's, you know, she's not. She's embracing the fact that her, you know, background includes being a California attorney general. So I think under, under either whether it's President Trump or President Harris, I think what we're going to see is still a continued focus upon this by doj, because there's not a, you know, it's not an issue that's a sort of third rail issue for businesses. I think American businesses want to have a level, level playing field when they're doing business overseas.

[D]

I think that's right. And I think that, you know, what's kind of interesting is when you think about corporate enforcement, you have to look a few years back because it's like the investments. DOJ sort of plants the seeds now, but it's going to take several years for the, for those crops to grow and for us to see on the other side the results of those investigations. So I don't think, while I do agree that Tom's, you know, exactly right, that under President Harris, I do think you might see, frankly, even a little bit more enforcement in this area under President Trump, I think that you would see continued enforcement. There's so many cases that we don't know of yet because perhaps there hasn't been. They haven't gotten to a point where they're making an arrest or filing charges, but they may well be getting there. So it's. These big investigations are complicated and they take a while to come to the surface. So I think you'll see them under either administration because there are so many ongoing cases right now in any event.

[C]

So this might be one issue where there won't be a dramatic difference, unlike some issues like environmental or education or whatever. So this is one that.

[B]

Will be.

[C]

Relatively stable, we'll say either way. Yeah, I would. It would Seem to me just in my own opinion, because Harris, Kamala Harris was a prosecutor and went after companies, went after corruption maybe, you know, it's kind of her, kind of her thing.

[A]

So.

[C]

Okay, well, it'll be. Well, we know it's going to be interesting no matter what. So Mark. Well, while I have you. Is that so what, what is new in this area? Are there new statutes or programs that our listeners should be aware of?

[D]

Absolutely. And Tom Sooth mentioned this and sort of previewed this before on talking about DOJ being interested in cooperation. And what we've seen in 2023 and 2024 is that DOJ is rolling out program after programming, trying to incentivize companies to come forward with revealing corporate misconduct where it's occurred and that they're ready to provide what we call sort of in the, in the defense bar and the regulatory, regulatory bar really carrots incentives for companies to do that. Where the FCPA Group unit in particular had started this quite some time ago where they were giving companies that decided to voluntarily self disclose, meaning cases that the FCPA unit was not aware of, where companies came in and said, hey, you know, we, we made a mistake, here's what happened, and told DOJ the facts. The Department of Justice would consider whether they would decide not to prosecute that company because even though crime had occurred involving that company, they'd actually self disclosed and they had a program designed to reduce. Remember how I was talking at the outset about how sometimes you have to pay hundreds of millions of dollars or even billions of dollars if you're a company that's found to have violated the FCPA? Well, they would potentially give huge discounts, 50% or more on that penalty to companies that self disclosed. They've really robustly rolled that program out across corporate America 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 to incentivize whistleblowers to be rewarded. Both corporate insiders who come forward who can potentially avoid prosecution if they reveal corporate misconduct, and by also financially rewarding whistleblowers, people who are not actually guilty of committing a crime, but who know of a crime at their company, who come forward and reveal it. There's now greater opportunities for them to be financially rewarded. The other area that we've seen in a real development in this area.

[C]

Is.

[D]

The Foreign Extortion Prevention act, which was passed the very end of 2023. And this is a statute the FCPA, of course, is a statute that says, hey, US companies and entities, you can't pay bribes. But it actually explicitly left out the foreign government officials. So if there was, for example, a government official in, I'm just going to say Brazil because I was talking about Lava Giotto before there was a foreign government official in Brazil who received a bribe that advantaged an American company, they could not be prosecuted under the fcpa. Well, the FEPA statute or the Foreign Extortion Prevention act was designed to fill that void. And it says 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. So we have not seen a prosecution under this statute yet. But I think it is another tool in the toolbox of federal prosecutors. And what we've seen over the years is that when you give federal prosecutors a new tool, they will use it. So I think it's only a matter of time before we see them taking advantage of that statute and some of their investigators investigations. And again, maybe one where there's investigations underway that haven't made their, their way to being public yet in involving that.

[C]

Statute, how do you enforce that? I mean, you know, we don't have jurisdiction over foreign leaders or officials.

[D]

Right?

[C]

I mean, so how do you do it? How do you, how do you collect or what do you do?

[D]

Well, this statute has now given you. You know, I remember when I was a federal prosecutor, I would just always go to my criminal code and I'd read the statute. And this statute really actually has given the US Prosecutors jurisdiction not for all bad acts by foreign government officials, but if they are, if that as I gave in that example. So, for example, an official related to Lava Giotto in Brazil had said to a U.S. corporate executive, like, hey, if you pay us $1 million, you're going to win this contract. That would be a violation of the statute and that would be actionable. So if that company turned around and went and told the doj, hey, you know, we just got approach and, and this individual, you know, asked for a bribe, solicited a bribe from us and said, otherwise we're not going to get it, well, they could potentially be charged with us.

[B]

It is, as Mark said, it's. This is an important new tool for federal prosecutors that they weren't without tools before, though, and they were prosecuting foreign officials before it just not under the FCPA that they would typically go after them for money laundering or travel act violations. I think this just gives them one more tool to use against government officials. I think to sort of expand on one of Mark's points there is, there's no question that DOJ is trying to put together, trying to incentivize corporate cooperation and voluntary self disclosure. They are, they're providing a lot of, as Mark said, carrots to do that. So for example, you can, if you go in, you volunteer, self disclose, you do everything that DOJ expects you to do as part of that. Then the, the, you know, there are significant benefits to corporation which include the possibility of a presumption of a declination, no criminal prosecution and substantially reduced fines for the cooperation. You're still going to be required to disgorge your ill gotten gains which can be considerable. But it's, you know, it's much better, it's much better result at the end of the day to either get a deferred prosecution or non prosecution than a criminal conviction, even if you have to end up disgorging ill gotten gains. But there's, there's no question the DOJ is really trying to provide more incentives to companies to, to self disclose which is, you know, is a, something that companies have to address. You know, at some point they just have to decide are we going to go in or not?

[C]

I'll just ask my question in the most naive way I can. I mean we can't just go put somebody in jail from Brazil, I mean or, or tap their bank account, right? I mean, doesn't the government of Brazil have to help enforce these things?

[A]

What am I missing?

[D]

Yeah, no, they'll get arrested and extradited. So, so you're right that in that, the country. So in that example, I feel bad to keep picking on Brazil. Brazil's a great place. They have had unfortunately in the past during la they really had a very serious corruption scandal with the state owned oil company. But in any event, in that instance, let's say the United States, the prosecutors indict this individual. In Brazil, they would then go after the indictment, they would typically go and circulate what's called a red notice with Interpol where they tell Interpol, all the countries that are in Interpol and participating, hey, we have an arrest warrant for this individual. If you see this individual, please arrest them and then extradite them to the United States. And so some countries do not, some countries refuse to extradite their citizens or every country treats it differently. But typically there's gonna be a treaty between the United States and that country and then the home country has to decide are we gonna Send this individual to the United States and they can challenge it. And that often has. I will say in the FCPA area, we've seen tremendous cooperation between the United States and foreign governments. And so, for example, Lavogiato, part of the success on the US Side in those prosecutions was because they were working very closely with their colleagues in Brazil, the Ministerio Publico Financierio mpf. And so the US Prosecutors and the Brazilian prosecutors were speaking and exchanging information. And so there was a lot of international cooperation in that case. And we've seen that now in other jurisdictions as well. I think that part of it is. So a lot of times what you'll see happen is, for example, Brazil may say, okay, we're going to deal with these people who are more Brazil focused and US Prosecutors, you concentrate on the US Companies but they both can have, they can have overlapping people or companies that they go after. I do think that part of the reason why we've seen a lot of countries cooperate with the United States is these fines can be very significant and go to the home countries. Oh, you know, for example, you might have out of Petrobras, out of Lava Jato. A lot of those fines were split between the United States and Brazil with Brazil getting the, you know, sometimes more of the proceeds than, than the United States that came from it. So there's, there's a financial reason for them to. And also because I, I think that a lot of countries are coming around to the viewpoint of the US that this is really corrosive for business to, to have all the, these bribes.

[C]

Well, that's what I was missing. Things like the treaties. They probably also appreciate, you know, the help to clean up their, to clean house and, and then the financial incentives. So going to our last one, Tom, we'll kick it over to you to get us started about what prevention measures can companies take.

[B]

There's probably two main things companies can do proactively to try to limit their exposure. I mean, you're not going to be able to wipe out all risk. What you try to do is you try to make sure that you have appropriate processes, training to try to minimize the risk. So the first thing I would suggest companies do is train employees, train third parties also on what the FCPA is, what the anti corruption law is, because again, we've been talking about the fcpa, but every country prohibits bribery. Sometimes the training that you can provide the employees in native language about what the FCPA is, that can be a big, big help because a lot of employees in foreign Countries don't really understand. How is it that if I do something wrong in my country, I'm going to get in trouble with the U.S. the answer is because the, the arms of the FCPA are very long and so they, they can go after them and go after individuals, which is, you know, something. We've also been seeing a lot more of going after individuals, not just companies. But I think when the people understand that they personally are at risk, you know, there's nothing like the fear of jail to try to get somebody's focus upon doing the right thing. The other part, Tom, I would say, is, you know, really provide oversight and transparency into the actions of third parties. And what I mean by third parties are sales agents, distributors, people who are acting on behalf of the company. Because the FCPA prohibits paying of bribes, either directly or indirectly. And the indirect part of the statute is what's used to go after the actions of a third party. So if you hire a sales agent and the sales agent is paying bribes on your behalf to somebody in order to get business, that sales agents has an FCPA issue. But because he is your agent, you, the company, you who have hired him, you know, also has exposure. I think if you look at the FCPA prosecutions over the last 10 years, certainly the majority of them involve problems of actions by third parties. It just, you know, but it's hard because in some countries in emerging economies, oftentimes there's not an established sales force. You don't have employees. So they set up relationships with third parties, distributors, sales agents, and you rely upon them, but you really need to train them, have transparency into what they're, what they're doing. And of course, you know, add FCPA provisions in the commercial contracts you have that provide that the counterparty agrees to follow the FCPA and the equivalent anti corruption statutes. What you're looking to do is try to establish guardrails. And so if there is a problem, the company has the ability to say, we had the processes in place. These were the actions of a rogue employee. That this was certainly counter to our culture, counter to our training.

[C]

Mark, did you want to add anything to that?

[D]

Yeah, I think Tom hit it exactly right. Because it's difficult to, for example, if you are working in the energy space, which is an area where unfortunately there's been a lot of prosecutions recently with respect to the SCPA and you're operating in a country that is considered high on the corruption index, where there's a lot of corruption, it's difficult when you hire an agent, it's very legitimate for a company. Let's say you're an American company and I was mentioning Lava Jato. You're, you want to bid on something for Petrobras and you don't speak Portuguese and you hire a local agent in Brazil because you're like, hey, I need somebody who speaks Portuguese, who understands how Petrobras state owned oil company works, who has relationships, who can help me get a meeting so that I can legitimately bid for this work. So there's all kinds of legitimate reasons why you would need that person in country. Um, but unfortunately we've seen a lot of instances where these third party agents, some of them just paid bribes. And if you have a company that did everything the right way and really did their diligence, and unfortunately they have an agent who paid a bribe in order to get the contract, well, that company might be able to then show Department of Justice that they had proper procedures. And this one got through. And as Tom said, that this was a rogue agent, if you will. While as on the other hand, a company that doesn't spend a lot of time looking at that, doesn't take that obligation seriously and was really sort of reckless with the agent, they may not be able to, and they may really be on the hook for everything that this agent did, even though they themselves didn't do it. And to draw on an example, that's also again, a public case. But that case that I mentioned that I worked on way back when, when I was with doj, I guess it's not that, that long ago, maybe five, five years or so ago now. But in that particular case, the US Company had hired somebody in Brazil who was a lobbyista. And lobbyista is Portuguese for lobbyist, except for there is no profession for lobbyists in Portugal. Excuse me, in Brazil. So that really means bribe payer. So 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. But there's a lot, you know, in between that, like the really obvious bribe payer and the legitimate agent, there's a lot of area in between where, where companies can get in trouble. So I think that Tom was so right. You really decides to have a great compliance policy. You really have to look at those third party agents closely because that's the area for greatest risk, particularly in some of these sectors that are in countries that have historically had some corruption problems.

[A]

All right, Tom and Mark, thank you.

[C]

Very much for talking with me about this today. It's a fascinating area.

[B]

Thank you, Tom.

[D]

Thanks.

[C]

That concludes this episode of the Emerging.

[A]

Litigation Podcast, a co production of HP Litigation, Critical Legal Content, Velec's Fastcase, and our friends at lawstreet Media. I'm Tom Hagee, your host. Which would explain why I'm talking. Please feel free to reach out to.

[C]

Me if you have ideas for a future episode.

[A]

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[C]

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