companies should be aware of the risks involved in engag

companies should be aware of the risks involved in engag- ing third-party agents or intermediaries. The fact that a bribe is paid by a third party does not eliminate the poten- tial for criminal or civil FCPA liability.?! For instance, a four-company joint venture used two agents—a British lawyer and a Japanese trading company—to bribe Nigerian government officials in order to win a series of liquefied natural gas construc- tion projects.” Together, the four multi-national cor- porations and the Japanese trading company paid a combined $1.7 billion in civil and criminal sanctions for their decade-long bribery scheme. In addition, the subsidiary of one of the companies pleaded guilty and a number of individuals, including the British lawyer and the former CEO of one of the companies’ subsidiaries, received significant prison terms. Similarly, a medical device manufacturer entered into a deferred prosecution agreement as the result of corrupt payments it authorized its local Chinese distributor to pay to Chinese officials.’ Another company, a manufacturer of specialty chemicals, committed multiple FCPA viola- tions through its agents in Iraq: a Canadian national and the Canadian’s companies. Among other acts, the Canadian national paid and promised to pay more than $1.5 million in bribes to officials of the Iraqi Ministry of Oil to secure sales ofa fuel additive. Both the company and the Canadian national pleaded guilty to criminal charges and. resolved civil enforcement actions by SEC. In another case, the US. subsidiary of a Swiss freight forwarding company was charged with paying bribes on behalf of its customers in several countries.' Although the US. subsidiary was not an issuer under the FCPA, it was an “agent” of several USS. issuers and was thus charged directly with violating the FCPA. Charges against the freight for- warding company and seven of its customers resulted in over $236.5 million in sanctions.!** Because Congress anticipated the use of third-party agents in bribery schemes—for example, to avoid actual knowledge of a bribe—it defined the term “knowing” in a way that prevents individuals and businesses from avoiding liability by putting “any person” between themselves and The FCPA: Anti-Bribery Provisions the foreign officials.'®” Under the FCPA, a person’s state of mind is “knowing” with respect to conduct, a circumstance, ora result if the person: * is aware that [he] is engaging in such conduct, that such circumstance exists, or that such result is substantially certain to occur; or e hasa firm belief that such circumstance exists or that such result is substantially certain to occur.’ Thus, a person has the requisite knowledge when he is aware of a high probability of the existence of such circum- stance, unless the person actually believes that such circum- stance does not exist.” As Congress made clear, it meant to impose liability not only on those with actual knowledge of wrongdoing, but also on those who purposefully avoid actual knowledge: [T]he so-called “head-in-the-sand” problem—vari- ously described in the pertinent authorities as “con- » « scious disregard,” “willful blindness” or “deliberate ignorance”—should be covered so that management officials could not take refuge from the Act’s prohi- bitions by their unwarranted obliviousness to any action (or inaction), language or other “signaling de- vice” that should reasonably alert them of the “high probability” of an FCPA violation.!° Common red flags associated with third parties include: ® excessive commissions to third-party agents or consultants; e unreasonably large discounts to third-party distributors; e third-party “consulting agreements” that include only vaguely described services; e the third-party consultant is in a different line of business than that for which it has been engaged; e the third party is related to or closely associated with the foreign official; HOUSE_OVERSIGHT_022524