The US Department of Justice (DOJ) and Securities and Exchange Commission (SEC) are reported to be conducting Foreign Corrupt Practices Act (FCPA) investigations of several technology companies. This new industry “sweep” follows similar ones conducted by the DOJ and SEC of the oil services, pharmaceutical, and defense products industries as well as one now being conducted of the financial services industry by the SEC.

IBM, Maxwell Technologies, and software company Comverse Technology, Inc. recently entered into multimillion dollar settlements with the SEC and/or DOJ (To read the DOJ’s press releases on the settlements, please click here and here) to resolve claims that they had violated the FCPA by bribing government officials abroad. In addition, both Hewlett-Packard Co. and telecommunications firm Veraz Networks have recently disclosed FCPA-related governmental investigations.

Technology companies doing business internationally appear particularly susceptible to potential FCPA violations. Their business often requires regular interaction with government officials regarding such matters as regulatory approvals and selling directly to governments, government-sponsored enterprises, and/or government-related entities. In addition, many technology companies have experienced rapid growth and rely heavily on third-parties such as consultants, agents and/or distributors in doing business abroad.

Comprehensive and rigorous FCPA compliance policies and procedures are required in order to prevent and/or detect potential unlawful conduct. Such policies and procedures need to apply not only to the technology company itself, but to all third-parties—the individual consultants, agents and/or distributors working in the host country for the company. They must also incorporate well-documented and ongoing due diligence of such third-parties. Regular FCPA training for all employees and consultants, agents and/or distributors is also required.

For technology companies doing business internationally, the cost of implementing “state of the art” FCPA compliance pales in comparison to the potential costs of not having such systems in place. Here, the old saying that “the best defense is a good offense” rings true.

For further information regarding the FCPA, please contact the Arent Fox attorney with whom you work or a member of Arent Fox’s White Collar and Investigations Practice Group or International Trade Practice Group.

Mark Radke
radke.mark@arentfox.com
202.715.8431

Peter Unger
unger.peter@arentfox.com
202.857.6220