Page 49 - U.S. FOREIGN CORRUPT PRACTICES ACT

A Resource Guide to the U.S. Foreign Corrupt Practices Act. Second Edition.

force; the degree of regulation; the extent of its company made payments totaling approximately
government interaction; and the degree to which $1.36 billion through various mechanisms, including
it has operations in countries with a high risk of $805.5 million as bribes and $554.5 million for
corruption. Just as a company’s internal accounting unknown purposes. 233 The company was charged
controls are tailored to its operations, its compliance with internal controls and books and records

program needs to be tailored to the risks specific to violations, along with anti-bribery violations, and
its operations. Businesses whose operations expose paid over $1.6 billion to resolve the case with
them to a high risk of corruption will necessarily authorities in the United States and Germany. 234
devise and employ different compliance programs The types of internal control failures identified
than businesses that have a lesser exposure to in the above example exist in many other cases
corruption, just as a financial services company where companies were charged with internal

would be expected to devise and employ different controls violations. 235 A 2010 case against a
internal accounting controls than a manufacturer. multinational automobile manufacturer involved
bribery that occurred over a long period of time in
multiple countries. 236 In that case, the company
Companies with ineffective internal controls used dozens of ledger accounts, known internally

often face risks of embezzlement and self- as “internal third party accounts,” to maintain credit
dealing by employees, commercial bribery, balances for the benefit of government officials. 237
export control problems, and violations of other The accounts were funded through several bogus
U.S. and local laws. pricing mechanisms, such as “price surcharges,”
“price inclusions,” or excessive commissions. 238

The company also used artificial discounts or
A 2008 case against a German manufacturer
rebates on sales contracts to generate the money
of industrial and consumer products illustrates a
to pay the bribes. 239 The bribes also were made
systemic internal controls problem involving bribery
through phony sales intermediaries and corrupt
that was unprecedented in scale and geographic
business partners, as well as through the use of
reach.
cash desks. 240 Sales executives would obtain cash
From 2001 to 2007, the company created
from the company in amounts as high as hundreds
elaborate payment schemes—including slush funds,
of thousands of dollars, enabling the company to
off the-books accounts, and systematic payments
obscure the purpose and recipients of the money
to business consultants and other intermediaries—
paid to government officials. 241 In addition to
to facilitate bribery. Payments were made in ways
bribery charges, the company was charged with
that obscured their purpose and the ultimate
internal controls and books and records violations.
recipients of the money. In some cases, employees
Good internal accounting controls can prevent
obtained large amounts of cash from cash desks
not only FCPA violations, but also other illegal or
and then transported the cash in suitcases across
unethical conduct by the company, its subsidiaries,
international borders. Authorizations for some
and its employees. DOJ and SEC have repeatedly
payments were placed on sticky notes and later
brought FCPA cases that also involved other
removed to avoid any permanent record. The
types of misconduct, such as financial fraud, 242

41