FCPA: Distributors under the FCPA

If there was ever a question that distributors were covered under the Foreign Corrupt Practices Act (FCPA), in 2012, the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) made it emphatically clear that this class of entities in a company’s sales chain would be treated that same as any other sales agent, reseller or any other entity which sells a US company’s products outside the United States. While the terms agent, reseller and distributor have distinct definitions in the legal world, they no longer do for FCPA purposes.

The three enforcement actions which made clear that there were no distinctions between agents and distributors in 2012 were the Smith & Nephew, Inc., (S&N) Deferred Prosecution Agreement (DPA) for criminal FCPA violations, the Oracle SEC Complaint for books and records violations and the Eli Lilly and Company (Lilly) SEC Compliant for books and records violations. Each of these enforcement actions had different FCPA violations and they each revealed separate steps which a company should take to both prevent and detect FCPA violations in their company.

Smith & Nephew

On February 1, 2012, the DOJ announced that it entered into a DPA with Smith & Nephew, Inc., a medical equipment manufacturer, for violations of the FCPA. The violations revolved around Greek distributors of S&N who paid bribes to Greek doctors so that they would purchase and use S&N products ...

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