Deferred Prosecution

Prior to 2004, all companies that were charged with criminal violations of the Foreign Corrupt Practices Act, which forbids the bribery of foreign officials by U.S. companies, had to enter guilty pleas or go to trial.^[1] That has changed however. The US Department of Justice has created new policies which have allowed at least three companies to defer prosecution or enter into nonprosecution agreements.^[2]

The change in policy comes amidst increased governmental interest in corporate fraud in the wake of the Enron collapse, which led to changes in the Federal Sentencing Guidelines and the passage of the Sarbanes-Oxley Act.^[3] However, the policy is inconsistently applied, and companies are wary of cooperating with investigations when they aren’t sure what will happen to them.^[4]

Thus far, the three companies which have escaped FCPA prosecution are:

• Micrus Corp., a medical supply company based in Mountain View, California, which paid foreign doctors to use its medical devices;
• Mansanto Co., an agricultural products corporation based in St. Louis, Missouri, which caused an Indonesian official to be bribed in an attempt to have an environmental decree repealed; and
• InVision Technologies Corp., a maker of explosive-detection scanners based in Newark, California, which attempted to bribe foreign officials to buy its scanners.^[5]

The deals included payment of fines and penalties, and implementation of compliance experts.^[6]

Other companies, however, have not been so fortunate. Houston-based American Rice Inc. saw two of its executives sent to prison after being convicted of authorizing payments to Haitian customs officials to reduce import taxes.^[7] San Diego-based Titan Corp. pleaded guilty to a criminal charge for making a $3.5 million payment to a sales agent in Benin to assist its subsidiaries.^[8]

Foreign Corrupt Practices
Attempting to bribe foreign officials is a transnational crime, and the relevant statute here is 15 U.S.C. 78dd-1. Section 78dd-1 makes it illegal for a company in certain situations to use the mails or other means of interstate commerce to offer money to any foreign official for the purpose of

• influencing that official’s acts or decisions,^[9] or gaining an improper advantage;^[10] or
• inducing the official to use his influence to benefit the American company.^[11]

Violations of 15 U.S.C. § 78dd-1 can result in fines of up to $5 million, imprisonment for up to 20 years, or both.^[12] If someone other than a natural person commits a violation, the punishment can be a fine of up to $25 million.^[13]

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[1] Leonard Post, Deferrals on Rise in Foreign Bribery, Nat. L. J., Aug. 15, 2005, at 1, 18, available here. (subscription required)
[2] Id. at 18.
[3] Id.
[4] Id.
[5] Id.
[6] Id.
[7] Id.
[8] Id.
[9] 15 U.S.C. § 78dd-1(a)(1)(A)(i).
[10] Id. § 78dd-1(a)(1)(A)(iii).
[11] Id. § 78dd-1(a)(1)(B).
[12] Id. § 78ff(a).
[13] Id.