Last week, the Department of Justice (DOJ) announced the
resolution of an enforcement action under the Foreign Corrupt Practices Act
(FCPA) involving the Tulsa based company, BizJet. The company is in the
business of providing aircraft maintenance, repair and overhaul services (MRO)
to customers in the US and internationally. BizJet ran into FCPA trouble
regarding its Latin American operations, specifically in the countries of
Mexico and Panama. BizJet employees and executives were involved in multi-year
running bribery scheme which paid hundreds of thousands of dollars for these
MRO contracts. These payments were discussed at the highest levels of the
company, including the Board of Directors, and occurred from 2004 until 2010.
BizJet Bribery Box Score
The Deferred Prosecution Agreement (DPA) listed the
following instances of recorded bribery, a/k/a the "BizJet Bribery Box Score".
BizJet Executive or Employee Named
Payment Made To
Amount of Payment
Sales Manager A
Cell Phone and $10K
Executive B and C
Sales Manager A
Executive B, C and Sales Manager A
Mexican Federal Police Chief
Executive C and Sales Manager. A
Mexican Federal Police
The above bribes were characterized as "commission
payments" and "referral fees" on the company's books and records. Payments were
made from both international and company bank accounts here in the United States.
In other words, this was as clear a case of a pattern and practice of bribery,
authorized by the highest levels of the company, paid through US banks and
attempts to hide all of the above by mis-characterizing them in the company's
books and records.
Reduction in Monetary Fine
I set out these facts as listed in the DPA in some detail
to show the serious nature of enforcement action. However, the clear import
that I found in this is that a company can make a comeback in the face of very
bad facts. The calculation of the fine, based upon the factors set out in the
US Sentencing Guidelines, ranged between a low of $17.1MM to a high of $34.2MM.
The final agreed upon monetary penalty was $11.8MM. This is obviously a
significant reduction from the suggested low or high end, or as was noted by
Blog "BizJet's reduction was 30% off the bottom of the fine range, and
a whopping 65% off the top of the fine range."
How did BizJet achieve this reduction and avoid an
external monitor? As reported by the FCPA
Professor, the following were factors:
(a) following discovery of the FCPA violations during the
course of an internal audit of the implementation of enhanced compliance
related to third-party consultants, BizJet initiated an internal investigation
and voluntarily disclosed to the DOJ the misconduct ...;
(b) BizJet's cooperation has been extraordinary,
including conducting an extensive internal investigation, voluntarily making
U.S. and foreign employees available for interviews, and collecting, analyzing,
and organizing voluminous evidence and information for the DOJ;
(c) BizJet has engaged in extensive remediation,
including terminating the officers and employees responsible for the corrupt
payments, enhancing its due diligence protocol for third-party agents and
consultants, and instituting heightened review of proposals and other
transactional documents for all BizJet contracts;
(d) BizJet has committed to continue to enhance its
compliance program and internal controls, including ensuring that its
compliance program satisfies the minimum elements set forth in the" corporate
compliance program set forth in an attachment to the DPA; and
(e) "BizJet has agreed to continue to cooperate with the
DOJ in any ongoing investigation of the conduct of BizJet and its officers,
directors, employees, agents, and consultants relating to violations of the
Reports to the DOJ
As mentioned, the company avoided an external monitor.
However, it agreed that it would report "at no less that twelve-month intervals
during the three year term" [of the DPA] to the DOJ on "remediation and
implementation of the compliance program and internal controls, policies and
procedures" which were listed in Attachment C to the DPA (the DOJ guidelines
for a minimum best practices compliance program). The initial report was
required to be delivered one year from the date of the DPA and would also
include BizJet's proposals "reasonably designed to improve BizJet's internal
controls, policies and procedures for ensuring compliance with the FCPA and
other applicable anti-corruption laws."
Cooperation is the Key
Last week I attended the Ethisphere 2012 Global Ethics
Summit where Lanny Breuer closed the conference. He did not present a speech
but engaged in dialogue with Alex Brigham and took questions from the audience.
One of the clear points Breuer emphasized was that if companies will come to
the DOJ, make a voluntary disclosure and fully cooperate, it will pay
dividends. I believe that this is clearly the case in the BizJet matter. Here
you had a multi-year bribery scheme in place, not only approved at the highest
levels of the company but with active involvement from senior managers, yet the
final monetary penalty was almost 30% below even the lowest in the Sentencing
Guideline range. Clearly BizJet benefited through its cooperation with the DOJ
and that message should be made clear to any other company which might find
itself in such a "fine mess."
Visit the FCPA Compliance and Ethics Blog,
hosted by Thomas Fox, for more commentary on FCPA compliance, indemnities and
other forms of risk management for a worldwide energy practice, tax issues
faced by multi-national US companies, insurance coverage issues and protection
of trade secrets.
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© Thomas R. Fox, 2012
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