James F. Mahoney, Attorney

Trucking Attorney

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April 2012

Truckers and the Foreign Corrupt Practices Act

Also known as the law that's been heard around Bentonville

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The FCPA is a U.S. law that applies to all of us – regardless of whether you are in the sales and marketing department, the executive office suite, the finance and audit department, or the logistics department. This law covers a wide range of payments a company makes, or could make, either directly or indirectly, in doing business or seeking business in foreign markets. Your understanding of this law and how it may relate to your specific job function will best ensure that the company remains compliant with this law and is able to achieve its business objectives.

A few years ago Menlo Worldwide and Con-Way settled an FCPA enforcement action with the Securities and Exchange Commission by agreeing to the entry of a cease-and-desist order and payment of a $300,000 penalty; so did Panalpina World Transport. These occurrences suggest that all U.S. companies must maintain sufficient oversight and control of their shipping agents and their interactions with foreign customs officials.

Con-Way was charged with attempts to induce foreign officials to violate Customs regulations, or to settle Customs disputes and to reduce, or not enforce at all, legitimate fees for administrative violations.

The FCPA makes it unlawful to bribe or offer or promise anything of value to a foreign government official to obtain or retain business. A governmental official is broadly defined. It could be any public official, regardless of rank or position, and the act can be done directly or through intermediaries. A very slippery slope considering how low level administrators of all kinds “do business” in Mexico.

U.S. parent corporations may be held liable for the acts of foreign subsidiaries, of which Walmart de Mexico is poster child “A” wherein they allegedly authorized, directed, or controlled the activity in question. Also vulnerable are U.S. citizens or residents, who were employed by or acting on behalf of such foreign-incorporated subsidiaries.

The FCPA contains an explicit exception to the bribery prohibition for "facilitating payments" for "routine governmental action" and provides affirmative defenses which can be used to defend against alleged violations of the FCPA. But the “bribery” must be legal in the foreign country. Facilitating permits, licenses, or other official documents; processing governmental papers, such as visas and work orders; obtaining police protection, arranging mail pick-up and delivery; obtaining phone service or power and water supply, arranging the loading and unloading of cargo, or simply attempting to expedite the transition of perishable products or the scheduling of inspections associated with contract performance or the transit of goods across country are dangerous situations in which greasing palms may be all too common, yet they are still very much illegal.

Don’t allow the cowboys associated with your company to run wild facilitating deals. Sales, operations, etcetera.

Conduct that violates the anti-bribery provisions of the FCPA can also give rise to a private cause of action for treble damages under the Racketeer Influenced and Corrupt Organizations Act (RICO), or actions under other federal or state laws.

Your competitors can arrange to bring a RICO complaint if they can allege that your “bribery” led to you winning or keeping a contract.

If you don’t think the FCPA can reach your operations, you should sleep well. But know that the selection and retention of consultants, agents and other third parties can impose FCPA obligations regarding the current and future conduct of business partners. Compliance issues have been found in freight forwarders, manufacturers and engineering firms. Other than Menlo and Walmart, such firms as ABB, Accenture, Tyson Foods and Chiquita have been caught up in the trappings of the law. Tyson paid a $5M penalty for having two Mexican veterinarians certify the health of Tyson de Mexico birds.

The FCPA is not a strict liability statute, but there have been convictions based on conscious avoidance of knowledge of a “substantial probability” that money would be used by a third party to make bribes.