|Thursday, 07 March 2013 00:00|
When senior company officials are politically active, or the company has matters pending before the U.S. Congress or federal agencies, your legal and public policy departments have to deal with a whole set of potential issues that other companies do not, at least not with the same intensity. Last week, several newspapers posted a story about the owner of the Las Vegas Sands corporation that is illustrative of what can happen when the law and public policy worlds collide; and also shows how a company should respond.
The story deals with a very potentially serious legal issue faced by companies that do business around the world, compliance with the Foreign Corrupt Practices Act, or FCPA for short. The Las Vegas Sands corporation reported in its annual shareholders report that that company personnel may have violated the books, records, and internal control provisions of this anti-corruption law.
The FCPA is an anti-bribery law that has been on the books since 1977. It has two general parts. The law made it illegal for U.S. persons to bribe foreign government officials or foreign political party members in order to secure business or other favors. The FCPA also requires companies to maintain corporate records of things such as "facilitating payments" and other legal costs of doing business such as entertainment expenses. This second part is called the books and records section.
If you just read the stories in the New York Times and the Wall Street Journal, you would think that the Las Vegas Sands corporation had engaged in some really awful and unchecked behavior involving, the corruption of foreign officials. And, if you follow the headlines alone, they are indeed very serious allegations. The New York Times piece especially took close aim at Mr. Arthur Sheldon, CEO of the Las Vegas Sands corporation.
Sheldon is a Republican and strong supporter of conservative causes. Whether fair or not, he is a frequent and favorite target of the media. What better way than to create bad publicity for him and his company than prominently featuring him in an article about his company and the corruption of foreign nationals? To the unseasoned eye, the story should have all of the elements of a Made for DC political scandal. For now though, it has fizzled. As it should.
All you really had to do was read the company's SEC filing. But who is going to do that except lawyers and policy wonks?
In a press release issued by the Las Vegas Sands corporation after the initial stories were published, the company stated:
"The company did not report any violations of the anti-bribery provisions of the FCPA and it said news reports stating otherwise, such as the headline in today's New York Times which described the matter by saying "Casino Says it Likely Cheated," are both inflammatory and defamatory. The company said it will vigorously defend itself against that type of uninformed and misleading reporting."
"In the company's 10-K disclosure filed with the Securities and Exchange Commission (SEC) last Friday it made no such statement and insists no violations of the anti-bribery provisions of the FCPA have occurred. Instead, the company said that in its preliminary findings the company's Audit Committee had advised that there were "likely violations" of the books and records and internal controls provisions (i.e. "accounting provisions") of the FCPA. A potential violation of the accounting provisions could range anywhere from a single transaction recorded incorrectly to other errors in the accounting records ..."
By all accounts, the company is following text book processes for dealing with these matters. There are many lessons here for companies with CEOs that have a high political profile, as well as for companies that do not. You need to get ahead of it as much as possible, at least in this town where Members of Congress, Congressional staff, and executive branch political appointees tend to have, at times, short attention spans.
The FCPA is a very serious law that can legally mire a company in years of compliance clean up. Allegations of violations can come from just about anywhere. A whistle blower. A disgruntled employee. A competitor. A contractor or vendor. Allegations of violations impact corporate reputation in the court of public opinion. No doubt that this recent story will generate many hours of defensive public policy and legal advocacy with folks in the executive branch and the U.S. Congress.
What if a false story or misconstruing story is pubslihed? What if we receive a phone call from a Congressional Committee or Member of Congress asking for cooperation on an FCPA matter? These and related questions are things that your compliance team should be focusing on. Your FCPA compliance manual should include a "what if" section. Why? Because I have seen Congressional and other investigations initiated in other areas with much less information than a news story.
In all likelihood there is not much beyond was done in this case that could have been done to prevent the New York Times and other news entities from running salacious-sounding headlines. Low on facts, high on political drama. However, and the Las Vegas Sands folks may have done this, you can get ahead of these stories by working with U.S. government officials to ensure that your cooperation is not misconstrued by decision-makers during the course of the investigation or after a story has hit the media.