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Entries in Bangladesh (51)


The FCPA Isn't Fun And Games

Mark Mendelsohn -- the Justice Department official responsible for criminal prosecutions under the Foreign Corrupt Practices Act -- has left no doubt that the government is targeting individuals. Here's what he told an audience at an American Bar Association panel discussion in Washington, D.C. last week:

The number of individual prosecutions has risen – and that’s not an accident. That is quite intentional on the part of the Department. It is our view that to have a credible deterrent effect, people have to go to jail. People have to be prosecuted where appropriate. This is a federal crime. This is not fun and games.
Mendelsohn is the Deputy Chief of the Fraud Section at the DOJ's Criminal Division. He was quoted in the Sept. 16, 2008 edition of the Corporate Crime Reporter.

How much is enforcement increasing? During the past five years, the DOJ has investigated more overseas public bribery cases than in the prior 20 years. In 2007, the DOJ launched 16 prosecutions, double the number from 2006. What about 2008? There are 84 FCPA investigations pending. Press reports indicate the DOJ has a dozen prosecutors assigned to FCPA cases. They're supported by a team of FBI agents willing to use wire-taps and other surveillance techniques to catch offenders.

Executives still weighing the chances of getting caught should listen to this: "Problems in a faraway country," Medelsohn said, "are more likely to be learned by us – sitting here in Washington – than ever before. People in Bangladesh can e-mail me directly with an allegation that a company in Bangladesh is paying bribes to a government official there. Information about our work is now known around the world. The media is paying a great deal of attention to corruption issues. There is a lot more English language media reporting around the world. It’s more difficult to hide. . . .”

Mendelsohn also said new ways to resolve cases -- including non-prosecution agreements, deferred prosecution agreements, and corporate compliance monitors -- are tools that give companies an incentive to investigate, self-disclose and take corrective actions on their own. He didn't say so, but companies trying to settle with the DOJ are likely to cough up individuals responsible for the illegal behavior.

And hiding evidence abroad probably won't work. “Another factor," Mendelsohn said, "is that we have been increasingly effective in gathering evidence overseas through treaties as well as informal arrangements with law enforcement in other countries. That has made our work easier. Foreign law enforcement authorities are beginning to investigate and prosecute their own cases. That has had a positive effect on our efforts.”

Thanks to the excellent Corporate Crime Reporter for this and other recent stories about FCPA enforcement.



Heads I'm Corrupt, Tails You're Poor

The FCPA matters because public corruption and poverty walk hand-in-hand. The point is illustrated too well by conditions in Bangladesh, a perennial basket case in the world economy. Here are some facts:

  • Bangladesh ranked 162nd on Transparency International's 2007 Corruption Perception Index. It was tied with Cambodia, the Central African Republic, Papua New Guinea, Turkmenistan and Venezuela.
  • This week the country's Anti-Corruption Commission said several of its own members have been taking bribes. "We have decided to take action against 28 of our officials after an internal monitoring and surveillance has found them seeking or taking bribes and breaking service rules such as secretly buying properties," a spokesman said.
  • With more than 150,000,000 people, Bangladesh is the world's seventh most populous country. Yet its per capita GDP of just $1,374 ranks 148th, with about half the population living below the poverty line.
  • A World Bank Country Director in Bangladesh, Frederick T. Temple, described the impact of public corruption this way: The poor suffer from corruption in many ways. Their access to services, such as public health and education, is reduced when drugs and textbooks are stolen from public facilities and sold privately and when doctors and teachers have high rates of absenteeism from their public jobs and sell their services privately. Corruption invariably channels public resources to the rich – the poor lack the funds to bribe or pay for the private provision of services that are supposed to be provided for free as public services. Almost everybody suffers from corruption, but the poor suffer more.
  • Transparency International's 2005 household survey found that in public hospitals, 26.4% of patients had to pay bribes to doctors for receiving medical treatment; 37.5% who had surgery and 57% who had an X-ray had to pay bribes.
  • Dealing with the police was worse. More than 90% of households who lodged police reports had to pay bribes and 80% who needed any type of clearance certificate had to pay bribes. Things weren't much better in court, where 71% of the accused and 66% of plaintiffs had to pay bribes.
  • Of the households who took a loan from a public bank, the average waiting time was 108 days. For their loans, 61% had to pay bribes.
  • A report from Bangladesh cited by the U.N. found that a cattle trader had to pay extortion money at eight different places along the way to the market, both to the police and organized criminals - which added as much as 20% to the selling price.
  • Red tape -- public corruption's awful twin -- is legendary. The Bangladesh News recently reported that despite enormous demand, there's gridlock in the development of compressed natural gas delivery. "It often takes several years to launch a CNG refueling station as the government offices concerned miserably lack coordination," the report said. Over 100 applications are tied up. Approval is needed from at least nine departments and agencies, and aggrieved entrepreneurs said within one agency alone a file has "to pass through 64 tables," providing lots of opportunities for bureaucrats to extract bribes.


Textron's FCPA Violations Caused by Fifth Tier French Subsidiaries

Textron Inc., without admitting or denying books and records and internal controls allegations, consented to the entry of a final judgment with the SEC permanently enjoining it from future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, ordering it to disgorge $2,284,579 in profits, plus $450,461.68 in pre-judgment interest, and to pay a civil penalty of $800,000. Textron will also pay a $1,150,000 fine pursuant to a non-prosecution agreement with the DOJ.

The SEC complaint alleges that from approximately 2001 through 2003, two of Textron's fifth tier French subsidiaries that it acquired in 1998 and 1999 authorized and made approximately $650,539 in kickback payments in connection with its sale of humanitarian goods to Iraq under the U.N. Oil for Food Program. The complaint also alleges that Textron's subsidiaries made illicit payments of $114,995 to obtain thirty-six contracts in the United Arab Emirates, Bangladesh, Indonesia, Egypt, and India from 2001 to 2005.

View the SEC’s Litigation Release Here.

View the SEC’s Complaint Here.

View the DOJ's Press Release Here.

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