THE MAGAZINE

Holding Individuals Accountable

By Teresa Anderson

In December 2011, eight former executives and agents of Siemens AG were indicted in an alleged scheme to bribe Argentinian officials to secure a government contract. Initially the only action against the company had been a fine of $449 million a few months earlier, but in announcing this follow-on indictment, Assistant Attorney General Lanny Breuer made it clear that the U.S. government’s actions would now go beyond fines. “This indictment reflects our commitment to holding individuals, as well as companies, accountable for violations of the FCPA [Foreign Corrupt Practices Act].”

“The government has been criticized for not charging individuals,” says Sulaksh R. Shah, a director in the FCPA and anticorruption practice with PricewaterhouseCoopers. The latest action was a response to such criticism. “The government is saying: Let this be a warning, companies will pay and individuals will be made accountable.”

Another notable fact in this case is that none of those charged were U.S. citizens. “The point is that even if you are not living in the United States, the government is going to come after you if you violate the FCPA,” Shah explains.

So long as an employee and the criminal conduct in question have sufficient ties to a U.S. company, that employee can be prosecuted by the United States. For example, Jeffrey Tesler, a former consultant with Houston-based Kellogg, Brown, and Root, was indicted last year on charges of violating the FCPA. Tesler, a life-long U.K. resident with dual British and Israeli citizenship, fought extradition to the United States for a year before a London court ruled that he could be extradited.

Once in the United States, Tesler agreed to forfeit $140 million, the largest individual forfeiture in an FCPA case. He also pled guilty to two counts of bribing Nigerian officials to obtain natural gas contracts. Tesler has yet to be sentenced, but could serve up to 10 years in prison. (After this issue went to press, Tesler was sentenced to 21 months in prison.)

As part of this enhanced enforcement effort, the government plans to release official guidance on the FCPA this year. However, companies should expect that this guidance will be more of a restatement of existing policy than a new rule. All that companies need to do is to heed current advice on how to avoid running afoul of the FCPA, says Shah.

The factors that separate a good compliance program from a great one include senior executive involvement, an emphasis on both unethical and illegal behavior, and a focused risk management plan.

“The chief compliance officer or ethics officer should be reporting to the CEO, the president, or even the board,” says compliance consultant Michael Scher.

In his 30-year career as in-house counsel for major corporations, Scher found that, this person often reports instead to the general counsel or marketing. This reporting function is critical because when faced with situations where there is a trade-off between being competitive and being ethical, lower level employees may have a tougher time making the right choice, but if they make the wrong choice, they jeopardize the entire company.

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