Foreign Corrupt Practices Act Ripples

Abstract

An obvious reason to comply with the Foreign Corrupt Practices Act (“FCPA”) is that non-compliance can expose a company to a criminal or civil FCPA enforcement action by the Department of Justice (“DOJ”) and/or the Securities and Exchange Commission (“SEC”). However, this Article highlights that settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement in this new era.

By coining a new term of art - the “three buckets” of FCPA financial exposure - and through various case studies and examples, this Article demonstrates how FCPA scrutiny and enforcement can impact a company’s business operations and strategy in a variety of ways from: pre and post-enforcement action professional fees and expenses; to market capitalization; to cost of capital; to merger and acquisition activity; to impeding or distracting a company from achieving other business objectives; to private shareholder litigation; to offensive use of the FCPA by a competitor or adversary to achieve a business objective or to further advance a litigating position.

This Article thus shifts the FCPA conversation away from a purely legal issue to its more proper designation as a general business issue that needs to be on the radar screen of business managers operating in the global marketplace. By highlighting the many ripples of FCPA scrutiny and enforcement, it is hoped that more business managers can view the importance of FCPA compliance more holistically and not merely through the narrow lens of actual enforcement actions.

Keywords: FCPA, Foreign Corrupt Practices Act