Monday, August 2, 2010

FCPA Debarment Bill Takes Step Forward ... Related Bill Also Introduced

Last week, the House Committee on Oversight and Government Reform "favorably forwarded several pieces of good government legislation" to the House of Representatives. (see here).

One bill taking the next step is H.R. 5366 - the "Overseas Contractor Reform Act."

As I discussed in this May post when H.R. 5366 was introduced, the bill states that "any person found to be in violation of the Foreign Corrupt Practices Act of 1977 shall be proposed for debarment from any contract or grant awarded by the Federal Government within 30 days after a final judgment of such violation."

In the prior post (here) I noted that the bill is a step in the right direction, but pointed out several shortcomings and said that the bill, if enacted, could become a "toothless tiger" because it assumes all FCPA enforcement actions are resolved through judicial proceedings and it assumes all FCPA enforcement actions are resolved with charges that actually fit the facts.

As noted in this release from the bill's sponsor, Representative Peter Welch (D-VT), the bill was drafted "in response to an ongoing investigation into whether Xe Services – formerly known as Blackwater Worldwide – bribed Iraqi officials following a 2007 Baghdad shooting that left 17 Iraqis dead." (See here for more).

Yet if enacted the bill could, if drafted with an understanding of how FCPA actions are resolved, have far-reaching implications as several major government suppliers have recently resolved FCPA enforcement actions (whether anti-bribery or books or records and internal controls) or are currently under investigation for potential FCPA violations.

For video footage of H.R. 5366's passage by the House Committee (see here - the first video).


H.R. 5366 is not the only FCPA-related bill to keep on your radar screen.

On July 22nd, Representative Raymond Green (D-TX) (here) introduced H.R. 5837 (see here).

The bill states that an "Executive Agency" "may not enter into a contract for the procurement of goods or services with any person or entity unless that person or entity has certified that the person or entity, and each of its officers, employees, and agents, have not violated [the FCPA's anti-bribery provisions] or any comparable law of any other country." Further, under the bill, an "Executive Agency" "may not allow any contractor awarded a contract by the agency to enter into a subcontract (at any tier) under the contract with any person or entity that has not made the certification ..."

My critique of this well-intentioned bill is the same as H.R. 5366.

Most FCPA enforcement actions are settled through non-prosecution or deferred prosecution agreements. Thus, if a company settles an FCPA enforcement through such a vehicle, the company likely will not be found to have "violated" the FCPA making H.R. 5837 a "toothless tiger."

Further, the bill assumes that facts implicating the FCPA's anti-bribery provisions are actually resolved with FCPA anti-bribery charges. As demonstrated by the all too frequent "bribery, yet no bribery" FCPA enforcement actions, that is simply not the case as companies are frequently allowed to settle egregious instances of bribery without being charged with anti-bribery violations.

So great is the facade of FCPA enforcement in many cases that H.R. 5366 and H.R. 5837, if enacted as currently drafted, are unlikely to have any effect.

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