Don’t Forget Commercial Bribery: New Laws and Convictions Highlight an Often Overlooked Risk
This is the kind of bribery prohibited by the FCPA and featured in headline-grabbing FCPA settlements. It is increasingly apparent, however, that the FCPA is not the only bribery statute companies need to consider. The risks of commercial bribery are significant as well, as highlighted last month by a pair of M&A-related convictions and the passage of strict new anti-bribery legislation in Ireland.
In the M&A case, the CEO of a mail-order pharmacy, Philidor Rx Services, paid a $9.7 million bribe to an executive of another company, Valeant, that was bidding to take it over. In exchange for the bribe, the Valeant executive allegedly helped Philidor in the merger negotiations (against his own company) and continued helping Philidor after the purchase by, for example, resisting his own company’s efforts to collect certain payments from Philidor. While such conduct does not violate the FCPA’s anti-bribery provisions, both executives were convicted under the US Travel Act, which is one of the principal laws used to prosecute commercial bribery in the United States. The two executives were also convicted of wire fraud and conspiracy to commit money laundering.
Ireland’s new law likewise criminalizes both the giving and receiving of bribes in the private and public sectors. This law, which was enacted by Ireland’s President last week, contains a number of particularly tough provisions, including a rule that certain donations “shall be presumed to have been given and received corruptly” if they were not returned or disclosed. It also contains a corporate offense similar to the UK Bribery Act’s in which, if an employee is found guilty of bribery, the only defense listed for the corporation is to “prove that it took all reasonable steps and exercised all due diligence to avoid the commission of the offence.” Fines are apparently unlimited.
The Valeant case and the new Irish law underscore the risk of incoming or “passive” bribery in addition to outgoing bribery which is sometimes better understood. US law is relatively uncommon in that one statute prohibits outgoing foreign official bribery (the FCPA) while a number of other laws can be used to prosecute both incoming and outgoing commercial bribery, including the Travel Act, and others. Outside the US, it is common to find all kinds of bribery (incoming and outgoing, commercial and governmental) prohibited in a comprehensive bribery statute or legislative scheme.
Ireland is just the latest in a string of countries to modernize and strengthen their anti-bribery legislation. Governments around the world are pursuing well-publicized corruption crackdowns as well, including in China, Saudi Arabia, Vietnam, and many other locations. There is no reason to believe that this global wave of anti-corruption sentiment will end any time soon.
Companies should therefore review their anti-bribery policies and training materials to ensure that they adequately cover not only foreign official bribery under the FCPA, but also commercial bribery, both incoming and outgoing, in the US and internationally.