Doj And Fbi Go Undercover To Ensnare Twenty-two Executives In Foreign Bribery Scheme-00-6169

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According to a DOJ press release, twenty-two executives and employees of various law enforcement product companies, including Smith & Wesson, were indicted for conspiring to violate and violating the Foreign Corrupt Practices Act ("FCPA"), and conspiring to commit money laundering based on interactions with federal agents posing as foreign ministers of an African country. The undercover "sting" investigation, which resulted in the execution of 14 search warrants in half a dozen states across the country, is unprecedented in size and scope and is considered to be the largest single investigation and prosecution of individuals in the history of FCPA enforcement.

As Assistant Attorney General Lanny A. Breuer noted in unsealing the grand jury indictments, it represents a significant new strategy for investigating those suspected of foreign bribery: "This ongoing investigation is the first large-scale use of undercover law enforcement techniques to uncover FCPA violations and the largest action ever undertaken by the Justice Department against individuals for FCPA violations. From now on, would-be FCPA violators should ...
... stop and ponder whether the person they are trying to bribe might really be a federal agent."

The DOJ's announcement also has real implications for corporations and their executives:

The DOJ continues to prioritize prosecutions of individuals because of the perception that such cases have greater deterrent effects: In fact, the twenty-two individuals involved in this investigation nearly matches the total number of individuals (23) who were indicted or pled guilty to FCPA-related charges in 2009. The DOJ's continued emphasis on personal criminal liability means that officers and executives should fully appreciate the level of personal risk arising from the company's foreign business transactions. Effective compliance policies and operations are needed to keep responsible executives informed and directors assured that systems and controls to both avoid and detect corruption schemes are in place.

US enforcement authorities are dedicating more time and resources to FCPA investigations: According to Assistant Attorney General Breuer, the DOJ now has more than 140 open investigations, many of which do not arise from voluntary disclosures, but rather are the result of proactive investigations. Where a prosecution arises from a DOJ-initiated investigation, rather than from self-reporting, one can expect that the DOJ will be less flexible at the negotiation table and expect a greater return on their "investment" in prosecuting and settling cases. In light of that, corporations need to self-monitor and test compliance policies and structures to ensure that they adequately prevent and detect potential violations of US anti-bribery laws.

Know your business partners: While we do not yet know all the facts surrounding each individual's role in the alleged conspiracy, the recently announced indictments serve as a reminder that businesses need to know who they are dealing with by performing background checks and conducting other appropriate due diligence on potential business partners to avoid the reputational damage and collateral prosecution that may result from a business partner's misconduct.

"Didn't know" won't sell: The ever-greater attention to corrupt payment schemes by both US and non-US enforcement authorities, coupled with the availability to prosecutors of the "conscious avoidance" theory of criminal knowledge, suggests that businesses and their executives can expect authorities to be more demanding of affirmative responses to any indications of corrupt business practices, and more hostile to claims of lack of knowledge where such indications are shown to have existed.

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