In the wake of its recently-announced Foreign Corrupt Practices Act (FCPA) pilot program, the Department of Justice (DOJ) advised last week that it will not prosecute two privately held companies that self-reported FCPA violations, though each company must disgorge the profits made from the bribery. The decisions are a tangible demonstration that the DOJ will stand by promises it made in its pilot program to decline to prosecute FCPA violations if companies self-report, fully cooperate with the government, and remediate offenses by taking disciplinary action against responsible employees and instituting more robust compliance.
In the first declination action involving a privately-owned Texas industrial supply and maintenance company, the company’s Chinese subsidiary provided Chinese government officials with cash and gifts, meals, and entertainment to influence the officials’ purchasing decisions. The Chinese subsidiary described these bribes in accounting records as “customer maintenance fees,” “customer cooperation fees,” and “cash to customer. Additionally, the U.S. company paid expenses for several employees of the Chinese subsidiary’s government customer for a 10-day sightseeing trip to the United States and Canada, even though only one half-day of the trip involved business-related activities. These expenses were paid despite the fact that the official worked for a government entity, the Chinese subsidiary had a sales bid pending before that entity, and the Chinese subsidiary had been advised that the proposed 10-day trip could violate the FCPA. The U.S. company spent approximately $60,000 related to these FCPA violations and disgorged profits of $335,342.
In the second declination action involving a privately-owned Texas company that manufactures, supplies, and services above-ground liquid storage tanks for the oil and gas industry, the company paid approximately $500,000 in bribes to government officials in Venezuela and China to influence those officials’ current and future purchasing decisions. The company disgorged in $2,719,412 in net profits.The DOJ cited the following factors to support their declination decisions:
- The companies’ timely, voluntary self-disclosure.
- The companies’ thorough and comprehensive global investigation of the matters.
- The companies’ full cooperation in this matter, including its provision of all known relevant facts about the individuals involved in or responsible for the misconduct, and its agreement to cooperate in ongoing investigations of other individuals.
- The companies’ agreement to disgorge to the DOJ all profits it made from the illegal conduct.
- The steps the companies had and are continuing to take to enhance its compliance program and its internal accounting controls.
- The companies’ full remediation, including terminating or taking disciplinary action against employees involved in the conduct.