Anti-Corruption: Think Globally, (Clean Up Your) Act Locally

On the corrupt-practices front, the buzz in recent weeks has been all about News Corp's phone-hacking and police-bribery scandal. It has been alleged that journalists for News of the World, a British tabloid owned by News Corp, paid bribes of up to £30,000 (nearly $50,000 in U.S. dollars) to individual police officers in London in exchange for confidential information about celebrities, members of the Royal Family and others.

 

Those involved won't face charges of violating the new UK Bribery Act, as that law took effect July 1, 2011, well after the alleged misconduct occurred. While UK enforcement authorities may move ahead with a prosecution based on the prior UK anti-corruption laws, the more interesting question is whether News Corp will face an enforcement action under the U.S. Foreign Corrupt Practices Act (FCPA), as well.

 

While the alleged bribery occurred in the UK, News Corp is a U.S. corporation. The FCPA extends to acts of companies incorporated in the U.S., even if those acts take place entirely outside of the U.S. (In fact, most FCPA enforcement actions focus on extraterritorial conduct.) Specifically, the anti-bribery provisions of the FCPA prohibit payments to "foreign officials" in order to "obtain or retain business." London police officers are "foreign officials" under the FCPA. And while FCPA enforcement actions historically have focused on "obtaining or retaining business" with foreign governments, a number of recent FCPA actions have been brought on the basis of corrupt payments to "obtain or retain business" in a more general sense. For example, in U.S. v. Kay, 359 F.3d 738 (5th Cir. 2004), a U.S. appellate court concluded that payments to a foreign official to lower taxes and custom duties could assist the payer in obtaining or retaining business by giving the payer an unfair advantage over competitors. By the same reasoning, the U.S. could bring an enforcement action against News Corp on the ground that the payments helped it "obtain or retain business" by giving it an unfair advantage over its competitors.

 

The specter of multiple enforcement actions in different jurisdictions for the same alleged acts should send a chill down the spines of compliance officers in every organization with global operations. It's critical, of course, that organizations train their employees to recognize and avoid corrupt practices. News Corp's predicament makes clear that this training should also send the message that corrupt acts in one jurisdiction may trigger serious consequences in other jurisdictions, as well.