The flight from Panama had just landed at Miami International Airport last December when Christian Sapsizian, a French citizen, got an abrupt surprise. Instead of catching his next flight home to Paris, the 60-year-old former Alcatel executive was arrested.
His company-a Paris-based telecommunications firm-had little to do with the United States, but money he used to bribe Costa Rican officials for a government contract there had flowed through an American bank, giving the Justice Department reason enough to intervene.
A decade ago, Sapsizian might have had little to worry about. But in recent years, federal prosecutors have begun cracking down on companies and their executives for bribing officials overseas. The numbers are still modest, but they're growing. Using a 1977 law, the Foreign Corrupt Practices Act, the feds have prosecuted four times the number of foreign bribery cases in the past five years as in the preceding five-including the first indictment under the law of a sitting congressman, Democratic Rep. William Jefferson of Louisiana, who is charged with bribing a firm in Nigeria. And prosecutors have increasingly slapped charges not just on U.S. companies and citizens but on foreign firms and foreign citizens like Sapsizian as well. The growth has come in large part because of a law that has transformed business practices, a shift that the Justice Department is now trying to capitalize on.
That law is the Sarbanes-Oxley Act of 2002, which increased reporting requirements for public companies and put the liability for their veracity directly on top executives. The new requirements led many firms to beef up internal investigation units and gave businesses more incentive to disclose wrongdoing to federal investigators. "Companies are less willing to take the risk that a violation they learned of won't be discovered," says Matt Morley, a Washington, D.C.-based lawyer who defends companies in bribery cases.
That was the calculus made by Schnitzer Steel Industries Inc., which told the government in 2004 that its subsidiary had paid $200,000 in bribes to foreign officials in China and South Korea to win more than $100 million in business. The Justice Department allowed the subsidiary to plead guilty and promised not to prosecute further if the firm stayed clean. Schnitzer, based in Portland, Ore., did pay a $7.7 million civil fine to the Securities and Exchange Commission and agreed to an outside compliance monitor.
Other developments have bolstered the federal efforts. New international treaties have helped cross-border law enforcement cooperation, and 1998 revisions to the FCPA extended jurisdiction to any foreign company or individual doing business in the United States. A recent spate of mergers and acquisitions has also forced more companies to scrutinize their books more closely for illicit activity. Over the past year, for the first time, the Justice Department devoted three full-time attorneys and a dozen others part time specifically to bribery cases and assigned a four-person FBI squad as well. And companies have reported 55 ongoing investigations. "What we want to do is level the playing field for business to play by the rules," Alice Fisher, who heads the Justice Department's criminal division, told U.S. News.
But not everyone is so sanguine. Some companies fear that the rising penalties in such cases-including a record $44 million fine in one involving energy firm Baker Hughes Inc.-make self-disclosure less desirable, especially if the violation would be difficult for investigators to discover otherwise. What's more, worldwide enforcement is spotty; although members of the Organization for Economic Cooperation and Development, which includes most major industrialized countries, began enacting antibribery measures in 1998, few countries have launched many prosecutions. "There needs to be much stronger enforcement," says former State Department official Alan Larson, chairman of the board of Transparency International USA, a group that tracks bribery worldwide. Targeting foreign companies and individuals like Sapsizian may be one way to push other countries, especially as globalization extends the reach of U.S. law.
Not everyone buys the deterrent theory, whether stateside or global. "When you do something with one company, it doesn't stop the practice; it just requires other companies to be more careful," says Roy Kahn, the lawyer for Sapsizian (who pleaded guilty). But prosecutors disagree, and they believe the newfound help from the business community is making a difference. "One voluntary disclosure by one company could lead to several investigations of companies in the same industry in the same area," says William Jacobson, assistant chief of the Justice Department's fraud section. "Things sort of increase exponentially." At least, that's what the feds are banking on.
- 208 Regulation