Examples of Actions under the FCPA: Siemens and Daimler
To this day the largest investigation under the FCPA was the case of the German concern Siemens. It was accused of paying bribes in various countries in the total amount of 1.3 billion euros during the period from 1999 through 2006. In particular, instances were revealed of the concern's complicity in corruption in Iraq during the implementation of the UN "Oil for Food" program, as well as in such countries as Venezuela, Bangladesh, Argentina, France, Nigeria, Turkey, Italy, China, Israel, Vietnam, Russia and Mexico.
In late 2008 the U.S. Department of Justice and the U.S. Securities and Exchange Commission fined the German concern 800 million dollars for giving bribes throughout the world. In addition, Siemens was obligated to provide an independent auditor with access to its documentation. It must be noted that even with an amicable settlement and multimillion dollar compensations, non-American companies subject to legal action under the FCPA are monitored for several years by an appointed independent auditor, usually an American lawyer or judge. This is yet another kind of leverage the U.S. can use on a foreign company.
The top managers of Siemens were subject to penalties as well. In August 2008 a verdict was pronounced against the first guilty party, a former director of the concern who was responsible for sales of medical equipment. He was given a suspended sentence of two years in prison and a fine of 108,000 euros. There was no direct proof of his guilt; the defendant confessed on his own. Two former Siemens chairmen of the board, Heinrich von Pierer and Klaus Kleinfeld, denied knowing about the illegal payments. The board members were dismissed, a total of eight people. Each of them had to partially compensate the concern's losses (penalties of 0.5 to 4 million euros).
The scandal surrounding the German automotive concern Daimler, initiated by the U.S. Department of Justice under the FCPA, was no less sensational. According to the American Justice Department, the concern created an entire system for bribing officials in 22 countries in order to obtain profitable contracts. The total amount of bribes in the period of 1998-2008 was assessed at 51 million dollars. In order to avoid court proceedings, Daimler agreed to pay the American government a fine of 185 million dollars on an out-of-court basis. Corporate monitoring of a comprehensive program for Daimler, particularly in regard to its compliance with the FCPA over the next three years, was entrusted to an American judge. The court also required the concern to take a number of other measures. First, Daimler was to bring all of its branches into compliance with governing law and the company code. Second, it was decided that the appointment of local directors and other Daimler branch employees should be made exclusively by the decision of and with the knowledge of the leadership of the company's central office. Third, the concern was required to implement an expanded international training program for Daimler employees, including regular conferences, seminars and trainings, as well as information exchange. Fourth, Daimler was required to create a special department for supervising compliance with anticorruption legislation.
The U.S. Doctrine of "Minimum Contacts". Americanophobia
It is worth noting that many foreign companies were "snagged" by the American authorities on the basis that the companies were listed on the New York Stock Exchange. A number of nonresident companies reacted to the increased application of the FCPA by deciding to leave the American securities market. For example, in May 2010 Daimler announced its intention to remove its securities from the New York Stock Exchange. Daimler financial director Bodo Uebber explained that this step was aimed at lowering administrative expenses and simplifying reporting. Only a small part of the concern's stock, approximately 5% of the total amount (the main venue where its securities are traded is still the stock market in Frankfurt-am-Main), is listed in New York. The main reason for leaving the NYSE is apparently the fact that subsequently there is no need to report to the U.S. Securities and Exchange Commission.
In April 2010 another German concern, Deutsche Telekom, also decided to stop listing its securities on the New York Stock Exchange. And in February 2011 the public prosecutor's office in Stuttgart started an investigation on Deutsche Telekom and Volkswagen. The investigators suspect their former managers, who were in charge of football sponsorship, of corruption. It looks like Deutsche Telekom took preventative measures so as not to pay fines to the U.S. authorities as well.
It goes without saying that many European companies are trying to get rid of American stockholders. After all, if the share of American individuals and legal entities in the company exceeds 10% of the capital, that company must bear full liability under the FCPA. European banks are no less cautious with regard to their clients. If they are Americans, they may be refused the right to open an account. Of course, in this case the European bank may be wary of falling under the effect of another American law, FATCA (the Foreign Account Tax Compliance Act). This is a law on the taxing of foreign accounts which was passed in 2010 and has all the marks of an extraterritorial act. In essence, the American Internal Revenue Service plans to turn all banks outside the U.S. into its tax agents and punish non-American banks if they don't carry out their agent functions properly. A non-American bank can end up in a situation where it must bear joint liability if an American client does not pay taxes to the U.S. Treasury. And at the same time it can end up in an unpleasant situation connected with corruption under the FCPA.
Legal experts call this the doctrine of minimum contacts. Its essence is that even the most insignificant contact of a non-American company with a U.S. legal entity or individual can lead to the non-American company acquiring the status of a person of the United States. This is not yet a U.S. legal entity or individual, but it is already an entity which bears legal responsibility under American laws, such as FATCA or FCPA.
The FCPA: The Role of American Intelligence
The main organizations responsible for enforcing the FCPA are the U.S. Department of Justice and the Securities and Exchange Commission. A condition for the successful implementation of the FCPA is the receipt by the abovementioned organizations of information confirming that bribery of foreign officials by American citizens and companies or nonresidents which are directly or indirectly related to American business and the U.S. has taken place. Or at least the receipt of information arousing suspicion that corrupt relations have taken place. Or else information that the intention to engage in corrupt relations has taken place (the FCPA punishes intentions as well!). Even the investigation of the German concern Siemens showed that sometimes there is clearly not enough direct evidence to accuse someone of corruption. In part the U.S. tried to solve this problem in the beginning of this century, when the U.S. Department of Commerce announced the opening of an Internet hotline so that any private person or company could report corruption and FCPA violations. After the most recent financial crisis in the U.S. the Dodd-Frank law was passed (signed by the president of the U.S. in 2010, came into force in 2011). Its full name is the Wall Street Reform and Consumer Protection Act. This law is very extensive (over 2300 pages of text).We will examine only one innovation implemented in it: the institution of financial whistleblowing. The law provides the employees of companies, both American companies and those non-American companies which have the status of a person of the United States, the opportunity to report violations of American laws to various U.S. organizations and agencies (the Internal Revenue Service, the Securities and Exchange Commission, the Department of the Treasury, the Department of Justice, etc.) This includes violations of the FCPA. If the violation is confirmed and the violating company is fined, the volunteer informer has the right to receive an average of 10 to 30% of the amount of the fine as a reward.
Obviously, in order for the FCPA to function effectively, all of the above is necessary, but not sufficient. It is necessary to obtain information using special tools and methods. To put it simply, intelligence agencies must be involved. From almost the very beginning of the law's operation, the Federal Bureau of Investigations (FBI) has been involved in its implementation, and a special division responsible for the FCPA was even created. However, from time to time other U.S. intelligence agencies are mentioned in the media in connection with the FCPA: the CIA, the NSA, the Office of Intelligence and Analysis of the U.S. Department of the Treasury and others.
When the Cold War ended and American intelligence agencies were left, as it were, with nothing to do, there arose the threat of their staffs and budgets being scaled down. However, intelligence lobbyists were able to get their activities redefined in the new conditions. The main area of their activities outside the U.S. is now economic intelligence, and the highest priority task within economic intelligence is the collection of information about instances of corruption which are considered to be violations of the FCPA and a threat to U.S. interests in the world. For example, the CIA and other American intelligence agencies participated in the preparation of a report from the U.S. Department of Commerce on corruption outside the U.S. which was presented to Congress in 1995. This report was a request that American intelligence agencies receive a mandate to conduct reconnaissance on the topic of the FCPA in the U.S. and abroad.
The scandal surrounding the revelations of Edward Snowden have made the question of why American intelligence was so active in Europe, more pointed. Without claiming to have a full answer, one can still assert that it is, in addition to everything else, in order to detect violations of American laws which are extraterritorial in nature. Information on such violations is needed by the ruling elite of the U.S. in order to establish effective economic and political control over Europe and the world…