Penalties get tougher for FCPA violations.

• Author: Shaheen, Fred
• Position: ETHICS CORNER

In an increasingly global business climate, most government contractors cross paths with the Foreign Corrupt Practices Act. FCPA's anti-bribery provisions criminalize any payment or offer of anything of value to a foreign official, political party official, candidate for public office or any intermediary for the purpose of obtaining or retaining business. The FCPA also bars issuers from misrepresenting payments on their books and records and thus, potentially concealing bribes.

Recent high profile FCPA enforcement actions demonstrate both increased concentration on enforcement and punishment of unethical behavior. Penalties for violators are increasing.

The most recent Department of Justice and Securities and Exchange Commission enforcement actions provide insight into the government's views regarding FCPA compliance and best practices. Compliance costs are increasing, but these recent penalties demonstrate the enormous business and financial risks of non-compliance.

Recent enforcement actions underscore the government's zero-tolerance policy. In March, Titan Corporation pied guilty to a three-count information stemming from improper payments made by a foreign sales agent to a Benin government official. Titan was required to pay the largest FCPA penalty ever ($28.4 million), including disgorgement of profits stemming from the illicit payments, and Lockheed Martin declined to acquire Titan due to the FCPA violations discovered during the due diligence.

In published settlement documents explaining the harsh penalties, DOJ and SEC highlighted Titan's lack of any formal company-wide FCPA policy or procedures and its failure to train or monitor foreign agents. The DOJ-Titan Agreement says:

"In its 23 years of existence prior to 2004, Titan has never had a FCPA compliance program or procedures. Titan's only related 'policy' is a statement in Titan Corporation's Code of Ethics, which all Titan employees were required to sign annually, stating 'employees must be fully familiar with and strictly adhere to such provisions as the Foreign Corrupt Practices Act.' Titan did not enforce that policy nor did it provide its employees with any information concerning the FCPA." DOJ also required Titan to retain an independent consultant to assist in instituting a strict compliance program and internal controls to prevent future FCPA violations--an increasingly common settlement requirement.

In January, Monsanto Company agreed to pay a monetary penalty of $1...