The FCPA-related news just keeps coming -- faster and faster. Even before last week's head-spinning mega bust, there was enough news from the past month to keep us busy till summer. The hard part has been keeping it all straight.
So let's take some quiet time to gather our thoughts about what's happened over the past 30 days:
1. Oh Crikey! In late December, the D.C. federal appeals court affirmed the dismissal of a shareholder derivative suit against some current and former directors and executives of U.K.-based BAE Systems PLC. The complaint alleged BAE's payment of more than $2 billion in bribes and kickbacks to Prince Bandar Bin Sultan of Saudi Arabia. The suit claimed the defendants breached their fiduciary duties and wasted corporate assets.
The U.S. federal courts applied English law to the case. A fossilized 1843 case they unearthed called Foss v. Harbottle, 2 Hare 461, 67 E.R. 189 said "the company, not a shareholder, is the proper plaintiff in a suit seeking redress for wrongs allegedly committed against the company."
The appeals court saw no reason to create an exception to promote the U.S. public policy of protecting shareholders and the company itself from law-breaking directors and executives. It gave the BAE directors even more comfort by noting that under English law, paying bribes isn't necessarily an ultra vires act “beyond the corporate capacity of a company.”
Our take: Even in civil courts, shouldn't directors of foreign companies that do business in and from the U.S. be held to the same standards as U.S.-company directors?
2. Others have said so what. But we thought this was a nifty piece of news: A U.S. company with no securities traded on an exchange but that files periodic reports with the Securities and Exchange Commission disclosed an internal investigation into possible Foreign Corrupt Practices Act violations and said it had self-disclosed to the SEC and DOJ.
Tampa-based PBSJ Corporation is a "domestic concern" subject to the anti-bribery provisions. It has no publicly traded securities but because it has so many shareholders -- about 4,000 mainly current and former employees -- it files periodic reports with the SEC. That makes it an "issuer" subject to the books and records and internal controls provisions. We think it's the first "issuer" without shares traded on an exchange to announce an FCPA investigation self-reported to the feds.
OK, it's not momentous. But we're amazed that apparently fresh FCPA enforcement scenarios are still popping up more than 30 years after the law's enactment.
3. Your money or your HR director. The SEC kicked off the FCPA-enforcement year with civil books and records and internal controls charges against Texas-based oil and gas services firm NATCO Group Inc. The company was hit with a $65,000 civil penalty because its subsidiary, TEST Automation & Controls, Inc., "created and accepted false documents while paying extorted immigration fines and obtaining immigration visas in the Republic of Kazakhstan."
Extorted is the important word.
Companies and expat employees regularly face demands for cash from foreign police, bureaucrats and regulators that are backed by threats. The case is a reminder that extorted payments may not violate the FCPA's antibribery provisions but can be the basis for accounting offenses if not accurately recorded.
Our take: Although technically correct, the SEC looked petty dinging Natco for $65K. A warning letter about the accounting lapses (with some sympathy for the extortion) would have been fine.
4. Directors 2, Plaintiffs 0. In dismissing a shareholder deriviative suit that alleged Dow Chemical's directors failed to prevent bribery in Kuwait, a Delaware chancery court said Dow's corporate compliance program was evidence the board had met its fiduciary duty of supervision.
Tucked in a footnote, the court's important message said: "Plaintiffs cannot simultaneously argue that the Dow board 'utterly failed' to meet its oversight duties yet had 'corporate governance procedures' in place without alleging that the board deliberately failed to monitor its ethics policy or its internal procedures."
Our take: Spot-on decisions like this are what make the Delaware chancery court so respected.
5, 6, 7 And that brings us to . . . last week's FCPA mega bust. Which was immediately followed by a one-count criminal information against "Individual 1" from the mega-bust indictments -- revealed to be Richard T. Bistrong. For a nice account of his first court appearance in D.C. on Friday, take a look at this dispatch from Christopher Matthews at Main Justice.
And let's not forget last week's indictment of the Thai official and her daughter who allegedly took bribes from Gerald and Patricia Green. Juthamas Siriwan, the ex-governor of the Tourism Authority of Thailand, becomes one of the few foreign officials charged in the U.S. for a corruption-related offense. As for the Greens, their sentencing on FCPA and related charges was postponed last week until March 11.
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Not long ago, it would have taken a year or more to rack up this much FCPA-type action. That makes us wonder what the rest of 2010 will look like. It's going to be a wild ride.