In the case, Faheem Mousa Salam, a naturalized U.S. citizen living in Livonia, Michigan, was arrested at Dulles International Airport upon returning from Iraq. The DOJ charged Salam, an employee of defense and telecommunications contractor Titan Corp. who worked in Baghdad with offering a $60,000 bribe to a senior Iraqi police official. Salam allegedly bribed the official to ease Titan’s purchase of armored vests and sophisticated map printers.
Recent evidence also suggests that the consequences of FCPA misdeeds are becoming more onerous. The largest combined criminal/civil FCPA-related penalty, for instance, was levied against Titan last month. On March 1, Titan pleaded guilty to bribery and agreed to pay a $13-million criminal fine to DOJ, as well as $15.4 million in disgorgement and prejudgment interest in a parallel civil case filed by the Securities and Exchange Commission.
To conceal improper payments the company made to a commercial agent doing business in the African country of Benin, Titan solicited false invoices. At Titan’s request, the commercial agent, who claimed to have close ties to President Mathieu Kerekou, submitted false invoices to the U.S. company totaling over $2 million, according to DOJ documents. The agent used the payments to influence a presidential election in Benin, where Titan had built and was operating a wireless telephone network,
Between January 2001 and May 2001, Titan paid the funds asked for in the invoices, and the agent donated the money he collected to Kerekou’s re-election campaign. After the election, Benin officials agreed to quadruple Titan’s management fee, according to published reports at the time. (Kerekou, who won the election, wasn’t implicated in the scandal.)
To understand where the SEC is said, corporations should study a number of recent cases closely, Karpati said. He mentioned Diagnostic Products case settled last year, noting that Chinese subsidiaries will be a likely target for commission probes. In the case, employees at a subsidiary of the medical equipment company in China made a total of $1.6 million in bribes to doctors and lab officials employed in Chinese government hospitals.
Citing the Titan Benin case, Karpati also warned against making “payment without accountability.” Further, he cautioned U.S. companies against hiding behind distributors or commercial agents who make bribes, mentioning the GE InVision case as an example.
In December 2004, GE InVision, a maker of explosive-detection devices, entered into a non-prosecution settlement agreement and paid $1.9 million in penalties to the DOJ and SEC. The agencies charged that the company’s sales agents and distributors made improper payments to government officials to secure or retain business in Thailand, China, and the Philippines.
Karpati also said that a claim of ignorance by headquarters managers isn’t an adequate defense if improper payments are submitted by foreign subsidiaries. That’s what happened in the 2005 Monsanto Co. case, which cost the agribusiness giant $1.5 million in fines, he said. Monsanto voluntarily disclosed that a local company officer authorized a $50,000 bribe to an Indonesian official to help avoid regulatory and administrative burdens associated with conducting an environmental study.
What’s more, claiming that a bribe constitutes an immaterial amount of money won’t get companies off the hook. Indeed, between 1998 and 2003, the U.S. and foreign subsidiaries of the $22-billion conglomerate ABB Ltd. made over $1.1 million worth of “illicit payments” to government officials in Nigeria, Angola, and Kazakhstan to capture or retain business. Although, the bribes were immaterial relative to the company’s sales volume, the company was still found to have broken the law. The misdeed cost ABB $10.5 million.
Even payouts classified as charitable won’t escape SEC penalties if they violate the FCPA. Schering Plough Corp. discovered that when a Polish subsidiary of the company donated $76,000 to the Chudow Castle Foundation, allegedly to induce the foundation’s director to buy pharmaceutical products from the company. Schering Plough paid $500,000 in civil penalties to settle with the SEC.