As Connecticut works to increase overseas sales by smaller businesses, an attorney with one of the state”™s biggest corporations advises caution for exporters coming under the jurisdiction of the Foreign Corrupt Practices Act.
If still largely a threat to the largest companies, small businesses are not immune to the underlying legal tenets that make up FCPA ”“ and could be particularly susceptible to in-country sales agents offering to help neophyte exporters expand their business in a country.
“FCPA compliance has become a top priority for all U.S.-based multinationals,” said Mark Nielsen, associate general counsel and chief compliance officer for Danbury-based Praxair Inc. “The enforcement authorities have become much more aggressive over the last seven or eight years, hitting companies with huge fines. There is also the threat of major reputational harm, government monitors and huge organizational disruption.”
A one-time aide to Mitt Romney when the presidential candidate was governor of Massachusetts, Nielsen is a former state senator and candidate for Congress.
For his part, Nielsen said it can take him weeks to get up to speed on the legal landscape facing Praxair when it enters a new overseas market. The topic is sensitive enough today that Praxair made FCPA compliance one of the main topics of its recent global leadership conference in San Antonio.
FCPA continues to dominate headlines, including the continuing reverberations from some $1.7 billion in penalties that have been levied against Kellogg Brown & Root and other companies over bribes paid to Nigerian officials to get energy contracts. In all, the law firm Gibson Dunn & Crutcher counted 23 legal actions by the Department of Justice last year, coming off 2010 when it completed 48 prosecutions.
In recent years, federal prosecutors have prowled Fairfield County for violators as well. In 2009, Greenwich resident Frederic A. Bourke Jr. received a year-plus prison term and was ordered to pay $1 million after a judge ruled he attempted to bribe Azerbaijan officials to rig bids for an oil company. The following year, Fairfield-based General Electric Co. agreed to pay $23 million to settle SEC charges it anted up $3.6 million in kickbacks to win Iraq contracts for medical and water purification equipment. And in 2011, Diageo PLC paid more than $16 million as part of an FCPA investigation, with the British spirits company having its U.S. headquarters in Norwalk.
“The tactics used by prosecutors are constantly changing,” Nielsen said. “Increasingly, they are indicting individual executives as well as the companies for which they work. Also, the whistleblower provisions of the new Dodd-Frank law are expected to trigger a significant uptick in enforcement actions. The main theme over the past 10 years has been one of very aggressive enforcement.”
That is occurring even as Connecticut gets more aggressive in pushing smaller businesses to embrace overseas markets. If finding customers is job one, legal compliance is at the top of the checklist as well.
Business people learning the ropes in a new geography are not always as careful as they need to be in terms of screening agents and representatives, Nielsen said. There are plenty of sources to turn for help, from U.S. State Department embassies and the U.S. Department of Commerce to companies like Thomson Reuters, which offers background checks on potential trade agents and partners through its World Check service.
“You have to do a lot of work to make sure the people who are representing the company are the people you want representing the company,” he said. “A company lawyer never wants to hear a questionable practice being justified on the grounds that ”˜this is the way things are always done here.”™Â That”™s a red flag.”
