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Complying with the FCPA in Emerging Markets After SOX

By Michael E. Clark

One of the current top priorities of the Department of Justice ('DOJ') and SEC is enforcing the Foreign Corrupt Practices Act (FCPA or the 'Act'). The FCPA was enacted in 1977 after over 400 publicly traded U.S. corporations admitted to the SEC that, collectively, they had made over $300 million in illegal or questionable payments to foreign government officials, politicians, and political parties. The Act was amended in 1998, and its reach was further expanded to correspond with the 'OECD Convention on Combating Bribery of Foreign Public Officials in International Business Trans- actions' adopted by 30 OECD members and five additional countries. After the enactment of Sarbanes-Oxley ('SOX') in 2002, disclosures of FCPA violations increased dramatically. 'In 2004, the SEC and DOJ brought the largest number of FCPA enforcement actions ever and have imposed record level fines accompanied by an unprecedented variety of additional criminal and civil sanctions.' Aaron G. Murphy, The Migratory Patterns of Business in the Global Village, 2 N.Y.U. J. L. & Bus. 229, 256 (2005).

The recent settlement of parallel FCPA actions in the Southern District of Texas against Baker Hughes, Inc., a major oilfield service company, and its wholly owned subsidiary Baker Hughes Services International Inc. (collectively 'Baker Hughes'), underscores the importance of complying with the FCPA's provisions in emerging markets. Over $4 million in bribes was paid to a consulting firm that was Baker Hughes' agent for a major oil field services contract. Baker Hughes knew that its agent would transfer funds to an official with the state-owned oil company of Kazakhstan, a country with enormous oil reserves. To resolve the actions, Baker Hughes paid $44 million in combined fines and penalties ' the largest sanction ever imposed in an FCPA case.

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