Category: Trade Security

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.

When the United States imposes economic sanctions on a foreign country or lists a person or entity on a watch-list, there are significant policy reasons for such an action. Becoming familiar with the policy reasons can help in putting together a fulsome trade security compliance program. Humanitarian exceptions are a part of just about every economic sanctions program. And while the general licensing guidelines may not appear as rigorous, they can be. There is a great deal that can go wrong and legally expose you or your company.

Policymakers make every reasonable effort to mitigate the impact of sanctions on humanitarian assistance. Food and medicine are two of the more common exceptions of every economic sanctions program. These and other related exceptions are designed to keep vital assistance flowing to the general population of a country without providing economic support to the target government.

In some cases, under these humanitarian exceptions, a company may not need to apply for U.S. Government authorization (this is called a general authorization). However, there are many variations in the regulatory guidelines depending on the target of the sanctions, the statutory authority mandating the sanctions, the nature of the transaction and items to be provided, with accompanying record-keeping requirements that must be followed. In addition, U.S. persons must also comply with other federal regulatory rules such as anti-corruption as well as export control laws and regulations.

The Treasury Department, Office of Foreign Assets Control (OFAC) is the primary agency in charge of enforcing the various economic sanctions programs currently on the books. Is it as easy as opening these regulations and following the rules? It should be. However, these rules are based on a series of statutory and public policy aims and interpretation can be challenging to an unseasoned exporter.

When a company exports food, medicine, and medical equipment to Iran, it should have in place a compliance program to ensure that it addressing the many regulations that will cover these transactions. You need to know your customer and ensure these individuals or companies are not a banned entity listed on the Specially Designated Nationals list.  Even foreign subsidiaries of U.S. parent companies can be subject to severe penalties and other enforcement actions for violating U.S. sanctions.

While the Executive Branch agencies are the lead for these matters, it helps to understand the “hows” and “whys” of Congressional oversight for these sanctions programs to prevent running afoul of Congressional intent, particularly if you conduct any business with U.S. Government agencies. The oversight Committees pay close attention to how these laws are enforced. Your compliance program will be a lot more complete if you do so. And, if you or your company ever become the target of a Congressional investigation, you’ll be better prepared to deal with these inquiries.

If you would like to learn more about the Iran sanctions program, start with this OFAC Overview or search our website for previous postings on these issues. Please contact us for specific questions related to your company or proposed transactions. 

In addition, the OFAC announcement states that “[t]he settlement amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, App. A:

1. Brasseler’s conduct demonstrated reckless disregard for U.S. sanctions requirements; 
2. Brasseler’s conduct involved a pattern of concealment whereby the company masked the identities of its Iranian customers; 
3. management level staff at Brasseler were involved with, and/or were aware of, both the reckless conduct and the fact that the goods or services were destined for Iran; 
4. Brasseler did not have a compliance program in place at the time of these alleged violations;
5. The exports at issue likely would have been licensed by OFAC under existing licensing policy; 
6. Brasseler has not been the subject of prior OFAC enforcement action; 
7. Brasseler cooperated with OFAC, including by agreeing to toll the statute of limitations.