The FCPA In 2011: Five Answers And A Looming Question

Author:Mr Thaddeus McBride and Mark L Jensen
Profession:Sheppard Mullin Richter & Hampton

The Department of Justice has been warning the Life Sciences industries - pharmaceutical and medical device companies - of its intent to focus "on the application of the Foreign Corrupt Practices Act" ("FCPA") on the pharmaceutical and related industries. (Lanny Breuer, Assistant U.S. Attorney for the Criminal Division, November 12, 2009). The FCPA prohibits, among other things, the actual or attempted bribery of foreign government officials in order to assist in obtaining or retaining business. Potentially violative payments include cash, gifts, charitable donations, travel, meals, entertainment, grants, speaking fees, honoraria, and consultant arrangements. The FCPA does not contain a materiality threshold as to the size of the payment to the government official or the amount of business obtained. While there are some safe harbors for payments to foreign officials, these exceptions are narrowly construed and apply only rarely. There are many situations where these issues can arise for Life Sciences companies in foreign countries.

Because of this focus, Life Sciences companies need to be aware of how the DOJ is enforcing the FCPA. The following blog article, from our Global Trade Law blog, should be reviewed with this in mind.

There were several noteworthy developments related to the Foreign Corrupt Practices Act (FCPA) in 2011. For the first year in recent memory, however, the most significant developments were not simply huge monetary settlements (although there were those, too). Instead, the key developments of 2011 provide new guidance on how the U.S. Department of Justice (DOJ) and – notably – the courts view enforcement under the statute. While we have a more nuanced view of the FCPA after 2011, we are also left with a substantial question about the future of the law.

Background. 2011 began with the U.S. government seemingly marching on toward continued significant FCPA prosecutions. The dramatic group settlement in November 2010 by Panalpina and several of its customers for alleged bribes paid in Nigeria and elsewhere forcefully capped 2010, and underscored the ability of the DOJ and the U.S. Securities and Exchange Commission (SEC) to investigate and settle cases against a cross-section of industry. April 2011 provided another example of cross-industry reach, when JGC Corporation paid a $218.8 million criminal penalty to the DOJ to settle charges related to alleged bribes to obtain contracts to build liquefied natural gas facilities on Bonny Island, Nigeria. JGC Corp. was the fourth company to enter into a settlement related to the Bonny Island venture yet paid the smallest penalty of the four.

In January 2012, however, the future of the FCPA appears quite different. It is true that, according to public information, the U.S. government continues to prosecute dozens of FCPA cases against individuals...

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