Once again, admissions in this year's annual SEC filings are attracting unwanted attention. Companies like United Parcel Service (“UPS”), instrument manufacturer FARO, multinational conglomerate Universal, and numerous others have disclosed violations of the Foreign Corrupt Practices Act (FCPA). The FCPA prohibits U.S. Companies--including their subsidiaries abroad--from offering inducements to foreign governments in order to improperly advantage. The intent to influence officials is often difficult to prove, but the FCPA includes strict financial reporting requirements for companies that file with the SEC as "issuers." Although violations triggered by financial reporting standards are more common, the Patriot Act has led to heightened scrutiny of non-issuers including small and closely-held businesses.
The United States Government aggressively investigates and punishes FCPA violations. Civil penalties may reach millions of dollars; criminal sentences for corporate officers and individual employees are harsh. In UPS' case the actions were committed by a company UPS acquired during the current reporting period. Universal Corporation's violations were committed by a foreign tobacco subsidiary, demonstrating the breadth of the FCPA's accounting provisions. While neither the FCPA nor Sarbanes-Oxley required the admissions, the companies hope that disclosure and cooperation will forestall, or at least minimize, penalties.
For advice about the application of the Foreign Corrupt Practices Act, please contact Gabriel Sanchez at csanchez@kmclaw.com or at 801.328.3600.