FCPA: Top Ten Enforcement Actions for 2012

As we welcome in 2013, it is appropriate to reflect back on some of the things which have occurred over 2012 and in the Foreign Corrupt Practices Act (FCPA) enforcement world, it was quite a significant year. The Department of Justice (DOJ) and Securities and Exchange Commission (SEC) both have used enforcement actions to educate compliance professionals on several different aspects of the FCPA and FCPA compliance. This is my list of what I believe to be the most significant enforcement actions over the past year and the lessons which can be drawn from them.

1. Morgan Stanley - without a doubt the most significant enforcement action of 2012 was the Declination given to Morgan Stanley, when one of its Managing Directors, Garth Peterson, pled guilty to a FCPA violation. The DOJ Press release set out the detailed compliance program which Morgan Stanley had and the specific trainings, certifications and acknowledgements from Peterson all avowing he was in compliance with the FCPA.

Key Takeaway - if anyone ever doubted that the DOJ provides credit for a robust compliance program, this Declination made clear that the DOJ does so. The Press Release gives information on what steps you can take immediately to improve the quality of your FCPA compliance program.

2. Smith and Nephew - the first in several enforcement actions from 2012 that answered once and for all the issue of whether distributors in the sales chain are covered by the FCPA. Smith and Nephew used Isle of Mann domiciled distributors, receiving up to 40% discounts on the list price of the products, to sell medical devices into Greece.

Key Takeaway - once and for all time distributors are treated the same as agents, resellers, sales representatives and any other third parties in the sales chain.

Double Key Takeaway - do not use any foreign sales representatives, who are domiciled in the Isle of Mann, for work outside that country.

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