Ignoring suspicious business deals abroad can be costly

Federal prosecutors have recently conducted a number of high-profile investigations and prosecutions under the Foreign Corrupt Practices Act (FCPA) (15 U.S.C. §§ 78dd-1 et seq.), which prohibits U.S. companies from bribing foreign officials to obtain or retain business.
Some examples include the following three cases:
In October 2006, a Norwegian energy company listed on the New York Stock Exchange acknowledged responsibility for more than $5 million in bribes paid by a consulting company to an Iranian official.
In exchange for the bribes, the official helped the energy company secure a contract to develop portions of an Iranian oil field. Under a deferred prosecution agreement, the company paid penalties and disgorgement totaling $18 million (after an offset), and agreed to the appointment of an independent compliance consultant.
In March 2005, a San Diego-based military intelligence and communications company pleaded guilty to charges that it paid $2 million in bribes, via a consultant, to the president of Benin’s re-election campaign in an effort to secure and maintain the rights to build and operate a wireless telephone network in Benin. Pursuant to the plea, the communications company paid a $13-million fine and an additional $15.4 million in disgorgement and prejudgment interest.
In January 2005, a St. Louis-based agricultural concern accepted responsibility for a $50,000 bribe paid by a consulting firm to an Indonesian government official to repeal an unfavorable regulation. As part of a deferred prosecution agreement, the company agreed to implement compliance measures, cooperate with civil and criminal investigations, and pay a penalty of $1 million.

Statutory basis
The FCPA prohibits U.S. companies from directly paying or offering “anything of value” to foreign officials to obtain or retain business. The FCPA also bans companies from paying or offering anything of value to “any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised … to any foreign official.” (15 U.S.C. §§ 78dd-1(a)(3)).
The cases outlined above represent instances where companies violated the FCPA’s “second prong” by paying money to a consultant while “knowing” that the money would be paid to foreign officials.
While a company with actual knowledge of bribes is undoubtedly guilty of an FCPA violation, a company that fails to investigate a suspicious transaction might be equally culpable.
Under the FCPA, a company “knows” of the existence of a bribe if it is “aware of a high probability of the existence of such circumstance, unless [it] actually believes that such circumstance does not exist.” (15 U.S.C. §§ 78dd-1(f)(2)(B)).
This standard, which goes by a variety of names, including “conscious avoidance,” “willful blindness,” and “deliberate ignorance,” applies in situations where a defendant “is presented with facts that put him on notice that criminal activity is probably afoot,” and fails to investigate. Unites States v. King, 351 F.3d 859, 867 (8th Cir. 2003).
Whether a company has remained willfully blind to violations of the law is a fact-specific inquiry.

‘Willful blindness’
The following might satisfy the willful blindness standard: A company’s failure to investigate unusual successes, “too good to be true” agreements; concerns raised by employees or auditors; suspicious documents; the use of code words; activity outside the usual scope of business; or inadequate or unsatisfactory explanations of suspicious activity.
For example, the 3rd Circuit recently concluded that a business owner either knew or was willfully blind to his company’s involvement in sales to Cuba, prohibited under the Trading with the Enemy Act, where (i) sales to Cuba constituted a significant percentage of the business’s total sales; (ii) the business used “Caribbean” as a code word for Cuba; and (iii) the owner was active in the business’s daily affairs, worked closely with employees already implicated in the scheme, fired auditors who raised questions about the Cuban sales, and consistently failed to follow up on suspicious references to “the Caribbean” in documents. United States v. Brodie, 403 F.3d 123, 158 (3d Cir. 2005).
Companies cannot avoid FCPA concerns by turning a blind eye to the activities of consultants or other intermediaries abroad.
The best course for eliminating FCPA concerns is to implement and enforce a comprehensive FCPA compliance program. Any FCPA compliance program should include: