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Foreign bribery probes spread as firms start ratting on each other

Steve LeVine

If you are a technology executive exploring the world’s frontiers, now is not the time to bribe your way into a deal. The same goes for health-care and energy companies. These three industries are currently the prime targets of US foreign bribery investigators, who ensnare one company and then persuade it to inform on rivals or partners.

More than half of the 90 currently known investigations under the US Foreign Corrupt Practices Act (FCPA) are in the technology, health, energy and metals industries, according to a list compiled by the FCPA Blog. The largest group is basic industries—oil, metals and chemicals—in which there are open investigations of 21 companies, including Italy’s Eni, France’s Total, and US-based Marathon Oil. Probes are open against 16 technology companies, including Hewlett-Packard, Oracle, Qualcomm and Sony; and 15 health-care companies, including pharmaceutical giants Bristol-Myers Squibb, GlaxoSmithKline and Merck.

Companies typically will face joint US bribery investigations by both the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), since usually they are publicly listed. Richard Cassin, a Singapore-based expert on US foreign bribery law who founded the FCPA Blog, told me that the tendency of the investigation of one company to spread through an industry is a new “contagion effect.”

The DOJ and SEC learn about industry-wide practices from one company—either through subpoenas or self disclosure. Some companies talk about their peers to earn cooperation credit with prosecutors. They may even name competitors whose practices may be questionable and provide evidence against them. The federal investigation then spreads and may cover the entire industry. This tactic, first seen with anti-trust enforcement, is the most important new trend in FCPA enforcement.

The most prominent recent example of the contagion involved Panalpina, a Swiss oil and gas logistics firm that admitted paying at least $27 million in bribes to clear customs in Angola, Azerbaijan, Brazil, Kazakhstan, Nigeria, Russia and Turkmenistan. From there, the case ensnares six more companies including Shell and Transocean. In all, the seven companies paid $236.5 million to settle with US officials.

In an email exchange, Cassin said that energy companies dominate FCPA investigations because of the nature of the business. “In nearly everything they do overseas, energy companies are dealing directly or indirectly with governments,” he said. “Some of those regimes are deeply corrupt, with leaders who expect bribes. So the FCPA risks multiply.”

The next most prominent industry on the FCPA list is entertainment—major film studios including DreamWorks Animation, NBCUniversal Media, Viacom and Walt Disney are under investigation. The cases appear to be related to a US investigation of allegedly improper payments in China by film studios.

The FCPA has enormous potential impact even on companies not based in the US because large firms tend to intersect in one way or another with the United States. For example, South Africa-based Net 1 UEPS Technologies, an electronic-payments technology company, is under investigation for payments to win a contract with the South African government, because it trades on the Nasdaq.

Companies known to be under bribery investigation

Archer-Daniels-Midland Company
Deere & CompanyConsumer goods
Beam Inc.
Central European Distribution
Kraft Foods
Owens-Illinois Group
Smith & Wesson
Embraer SABanking, finance
Barclays plc
Diebold Incorporated
Dun & Bradstreet Corporation
Goldman Sachs Group
DreamWorks Animation
NBCUniversal Media
Las Vegas Sands
Viacom (Paramount Pictures)
Time Warner Inc
Walt Disney Company
Wynn Resorts LimitedHealth care
AstraZeneca Baxter International
Bio-Rad Laboratories
Bristol-Myers Squibb
Bruker Corporation
Fresenius Medical Care
Sciclone Pharmaceuticals
Stryker Corporation
Teva Pharmaceutical Industries Limited
Zimmer Holdings
Allied Defense Group
Analogic Corp.
Protective Products of America
Raytheon CompanyEnergy, chemicals, metals and power
3M Company
Alcoa Inc
Alstom SA
Baker Hughes Incorporated (BJ Services)
BHP Billiton Ltd
Cobalt International Energy Inc
Eni SpA
Expro International Group
Furmanite Corp.
Halliburton Keyuan Petrochemicals
Koch Industries
Kosmos Energy
LyondellBasell Industries
Marathon Oil
Nabors Industries
Parker Drilling Company
STR Holdings
Walters Power International
Weatherford InternationalTech
Harris Corporation
Koninklijke Philips Electronics
Motorola Solutions
Net 1 UEPS Technologies
Sensata Technologies Holding
SL Industries
Tata Communications
Turkcell Iletisim Hizmetleri

Source: FCPA Blog

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