Ethics Programs, Ethics Hotlines, and FCPA Penalties
Organizations with business operations throughout the world must be vigilant to ensure that local practices do not conflict with FCPA restrictions. More, these organizations must be concerned with the former business practices of companies they have acquired. Despite due diligence, and even with strong compliance programs in place, no set of policies and procedures can detect and prevent all bribery all of the time.
Laws in some countries recognize this by granting a “compliance defense”. For example, the United Kingdom’s Bribery Act of 2010 contains language stating that a commercial organization has a defense against allegations of failure to prevent bribery if it “had in place adequate procedures designed to prevent persons associated with [the organization] from undertaking such conduct.” (U.K., 2010)
There is no “compliance defense” under the FCPA. However both the DOJ and the SEC can take into account the existence of effective compliance programs in determining how to proceed in a case. (FCPA Professor, 2013)
Consider the August 2012 announcement concerning Pfizer, Inc. Its subsidiary Pfizer H.C.P. agreed to pay $15 million to resolve a DOJ investigation of FCPA violations that occurred between 1997 and 2006.
This is a substantial penalty, but it was mitigated by Pfizer’s voluntary disclosure to the DOJ and SEC, its “extraordinary cooperation” in the investigation, and the “substantial and continuing improvements” it made to its [already strong] anti-corruption compliance procedures. Instead of paying a fine of between $22.8 million and $45.6 million plus additional terms, the penalty was, as stated above, reduced to $15 million. In addition, Pfizer agreed to continue implementing rigorous internal controls, policies and procedures. (USA v. Pfizer H.C.P., 2012)
Those internal controls, policies, and procedures, as spelled out in the agreement, include many features of a strong compliance program:
- A senior corporate executive to serve as Chief Compliance and Risk Officer;
- Heads of Compliance for each business unit;
- An “Executive Compliance Committee” chaired by the CEO;
- Appropriate gifts, hospitality, and travel policies and procedures in each jurisdiction;
- Sufficient and significant resources directed to international compliance functions;
- Mechanisms for making and handling related reports and complaints, to include reasonable access to an anonymous toll-free hotline as well as to an anonymous electronic complaint form, where anonymous reporting is legally admissible;
- Prompt review and response to FCPA and corruption issues; and
- Risk assessments and proactive reviews.
Despite best efforts, violations can occur. The DOJ and the SEC pursue FCPA cases vigorously, but, they will take into account the presence of a strong and actively enforced ethics and compliance program, especially one that addresses bribery.
Ethical Advocate can help you establish and maintain an ethics hotline and meet other FCPA best practices. Please contact us.
Ethical Advocate has addressed the complex Foreign Corrupt Practices Act (FCPA) before. See “Compliance Program More than Pays for Itself” and “Ethics Hotlines and the Foreign Corrupt Practices Act”.
U.K. Bribery Act 2010. http://www.legislation.gov.uk/ukpga/2010/23/contents
“Items of Interest from GSK”, FCPA Professor, July 25, 2013. http://www.fcpaprofessor.com/page/9
United States of America v. Pfizer H.C.P. Corporation, Deferred Prosecution Agreement, August 7, 2012. http://www.justice.gov/criminal/fraud/fcpa/cases/pfizer/2012-08-07-pfizer-dpa.pdf