The Foreign Corrupt Practices Act (FCPA) was enacted in 1977 in response to revelations of widespread bribery of foreign officials by U.S. companies in order to win business.[2] FCPA enforcement actions by the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), which share enforcement authority for the FCPA, have increased in recent years. For example, while the SEC’s website lists a total of 15 enforcement actions between 1978 and 2000, it lists 15 enforcement actions in 2011 alone.[3] The DOJ lists four enforcement actions in all of 2002; four DOJ enforcement actions were announced or filed in January 2014 alone. Ongoing investigations have been reported or disclosed by large companies from across the spectrum, including large drug manufacturers, computer companies, media firms, and retailers, among others.
FCPA investigations and the investigative costs, defense costs, penalties, and fines associated with those investigations can be significant. For example, since 2008, Avon Products, Inc. has spent about $340 million in legal and related costs in connection with an investigation alleging that Avon violated the FCPA by paying or giving improper gifts to government officials in China and other countries.[4] In January 2014, Alcoa World Alumina LLC announced that it had agreed to plead guilty and pay $223 million in criminal fines and forfeitures to resolve charges that it paid bribes to a government official in the Kingdom of Bahrain. Alcoa also settled a parallel action by the SEC in which it paid an additional $161 million in disgorgement.[5]
Given the increased enforcement of the FCPA and the duration and cost of investigations and related litigation, it is important that counsel for insurers and insureds are familiar with the law and the insurance coverage issues that may be implicated by FCPA investigations and related litigation.