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The Top Five FCPA Cases: Bribery in Bulk

April 6, 2012 — There was a time not so long ago when paying foreign officials to smooth the way through legal proceedings or to win a contract was all standard practice. No one paid much attention. The Watergate scandal in 1973 brought the issue of corporate bribery to the forefront as the SEC and the Justice Department investigated Nixon’s illegal campaign contributions and found that hundreds of American companies maintained bribery slush funds to win favor with various public officials.

Not long after, in 1977, Congress enacted the Foreign Corrupt Practices Act (FCPA) to prohibit U.S. corporations, as well as some foreign corporations operating in the United States, from paying bribes to foreign officials to gain a business advantage. While bribery of foreign officials has been illegal since 1977, it didn’t change the practice for some companies.

And now, the top five tales of corporate bribery:

Kellogg Brown & Root
Now known as KBR, Inc., Kellogg Brown & Root is one of the world’s largest engineering and construction firms. It has been attached to large U.S. military contracts. The Justice Department charged Kellogg Brown & Root with FCPA violations, including payment of hundreds of millions of dollars to Nigerian officials in order to win a construction contract to build a natural gas plant. After pleading guilty, KBR paid fines of $402 million. The company had to pay an additional $177 million to the Securities & Exchange Commission.

Siemens AG
Siemens AG is a German engineering firm, but the FCPA applies to it as well because the company does business onshore in the United States. In trying to win a contract to make Argentinean identity cards, Siemens was accused of paying over $100 million in bribes to foreign officials, including payment of about $16 million directly to the president of Argentina. The Argentinean contract was worth approximately $1 billion to Siemens AG. Siemens AG settled with the Justice Department and paid a total of $1.6 billion in fines in the United States and Germany. Several former employees and contractors are still facing charges related to the Argentinean bribery scheme.

BAE Systems
BAE Systems, a British aerospace company, came under investigation because of a deal between Britain and Saudi Arabia to provide fighter jets. Over time, the investigation grew to include BAE Systems business dealings in Chile, South Africa, Tanzania, Romania, the Czech Republic and Qatar. BAE Systems was accused of using a go-between company to get money to foreign officials. British authorities initiated an investigation into BAE Systems’ dealings in 1989, but they dropped the investigation because of alleged national security concerns. The U.S. Justice Department took up the investigation in 2007. BAE Systems settled with the Justice Department and paid a $400 million fine.

Kerry Khan and Michael Alexander
In October 2011, Kerry Khan and Michael Alexander, two U.S. Army Corps of Engineers employees were accused of taking more than $20 million in kickbacks. The two employees were accused of accepting bribes in exchange for lucrative government contracts. They were also accused of inflating invoices to the government and then skimming the difference. They remain in jail pending trial. If convicted, the maximum sentences range from 25 to 40 years in prison.

Alcatel-Lucent SA
The telephone company Alcatel-Lucent SA admitted to making illegal payments in Africa and South America. It settled with the Justice Department in 2010, agreeing to pay approximately $137 million. The SEC received $45 million of that total. The investigation arose from a complicated series of financial transfers between shell companies and payments to consultants. These complex transactions provided a smokescreen and facilitated payments to foreign officials.

Bribery is not a new problem. There’s nothing new under the sun. But given the sophistication of investigations and the new tools available to authorities, it is more likely than ever that bribery will be found out.

Waters & Kraus is a national firm with highly skilled lawyers practicing qui tam litigation in four offices, including Dallas, Los Angeles, San Francisco, and Baltimore. Our attorneys have decades of experience successfully representing whistleblowers in a variety of fraud cases. Contact us or call our attorneys at 800.226.9880 to learn more about our practice and how we can assist.

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