US graft probes of foreign groups on the rise
Friday, 13 July 2007
Brooke Mastersin
AN increasing number of non-US consumer products companies are getting into trouble with the US Department of Justice for bribing overseas government officials, according to a study by Kroll, an international corporate security firm.
US anti-corruption officials have, in the past, focused on oil companies and defence contractors but their probes are increasingly taking in technology, telecommunications and medical products groups, Kroll found in a survey of the period from 2000 to 2006.
The 1977 Foreign Corrupt Practices Act bans any company that does business in the US from bribing government officials anywhere in the world, and more and more cases now involve groups based outside the US, said Brian Stapleton, who heads Kroll's investigative group for Europe, the Middle East and Africa.
"The balance is shifting to overseas firms," he said.
The oil-rich economies of Nigeria and Indonesia were the top two sites for bribery violations but the emerging economies of China, India and Brazil were next on the list, Kroll found.
US officials have, in the past, had trouble obtaining co-operation from China when investigating bribery allegations there. But they had been able to get past that problem recently because more companies were conducting internal investigations and turning the evidence over to US officials, attorneys said.
Timothy Dickinson, a partner with the law firm Paul Hastings, said the Kroll study reflected the cases his firm was handling. He predicted that businesses in China would account for an increasing share of the violations. "Companies outside the normal countries and the normal sectors, like defence, now have risk," he said.
Companies are particularly at risk when they have recently bought subsidiaries in areas of the world where bribery is endemic.
"We find ourselves interviewing middle to senior local managers where there have been allegations of corruption and they say, 'Yes, of course we did that and everybody knew it. That's how business gets done'," Mr Stapleton said.
Senior management at the headquarters know overseas bribery is illegal but "the message does not get down" to all branches.
The number of reported FCPA investigations has shot up dramatically in the past couple of years and a number of Europe's best known companies have had to acknowledge that they are being probed by the Department of Justice or the US Securities and Exchange Commission, or both.
BAE Systems, Siemens and Total, the French oil company, are all under investigation. US authorities have also recently extracted record settlements from Vetco Gray and Baker Hughes, both oil services companies.
According to Kroll, energy sector groups account for 17 of 77 reported FCPA investigations, followed by technology companies (including defence contractors) at 11, and telecoms and pharmaceutical companies at nine probes each.
Telecoms groups face potential trouble because government licences are critical to success. "Telecoms has to be considered a high risk sector," said Lucinda Low, a partner with Steptoe and Johnson, who conducts FCPA cases.
She said pharmaceutical companies similarly must deal regularly with government regulators and with local doctors, who count as foreign officials for bribery purposes, because they work in state laboratories
Under syndication arrangement
with FE
AN increasing number of non-US consumer products companies are getting into trouble with the US Department of Justice for bribing overseas government officials, according to a study by Kroll, an international corporate security firm.
US anti-corruption officials have, in the past, focused on oil companies and defence contractors but their probes are increasingly taking in technology, telecommunications and medical products groups, Kroll found in a survey of the period from 2000 to 2006.
The 1977 Foreign Corrupt Practices Act bans any company that does business in the US from bribing government officials anywhere in the world, and more and more cases now involve groups based outside the US, said Brian Stapleton, who heads Kroll's investigative group for Europe, the Middle East and Africa.
"The balance is shifting to overseas firms," he said.
The oil-rich economies of Nigeria and Indonesia were the top two sites for bribery violations but the emerging economies of China, India and Brazil were next on the list, Kroll found.
US officials have, in the past, had trouble obtaining co-operation from China when investigating bribery allegations there. But they had been able to get past that problem recently because more companies were conducting internal investigations and turning the evidence over to US officials, attorneys said.
Timothy Dickinson, a partner with the law firm Paul Hastings, said the Kroll study reflected the cases his firm was handling. He predicted that businesses in China would account for an increasing share of the violations. "Companies outside the normal countries and the normal sectors, like defence, now have risk," he said.
Companies are particularly at risk when they have recently bought subsidiaries in areas of the world where bribery is endemic.
"We find ourselves interviewing middle to senior local managers where there have been allegations of corruption and they say, 'Yes, of course we did that and everybody knew it. That's how business gets done'," Mr Stapleton said.
Senior management at the headquarters know overseas bribery is illegal but "the message does not get down" to all branches.
The number of reported FCPA investigations has shot up dramatically in the past couple of years and a number of Europe's best known companies have had to acknowledge that they are being probed by the Department of Justice or the US Securities and Exchange Commission, or both.
BAE Systems, Siemens and Total, the French oil company, are all under investigation. US authorities have also recently extracted record settlements from Vetco Gray and Baker Hughes, both oil services companies.
According to Kroll, energy sector groups account for 17 of 77 reported FCPA investigations, followed by technology companies (including defence contractors) at 11, and telecoms and pharmaceutical companies at nine probes each.
Telecoms groups face potential trouble because government licences are critical to success. "Telecoms has to be considered a high risk sector," said Lucinda Low, a partner with Steptoe and Johnson, who conducts FCPA cases.
She said pharmaceutical companies similarly must deal regularly with government regulators and with local doctors, who count as foreign officials for bribery purposes, because they work in state laboratories
Under syndication arrangement
with FE