Anti-Corruption Laws May Feed on the Food and Beverage Industry

Travel Act

The Travel Act makes it a crime to engage in any interstate or foreign travel or to use any mail or facility in foreign or interstate travel with the intent to “carry on” or “facilitate” any “unlawful activity.” Further, “unlawful activity” is defined to include organized-crime activity and “bribery… in violation of the law of the State in which committed or of the United States.” Under the Travel Act, the crime is not the bribe itself but the international travel, wire transfer, or phone call utilized to execute the bribe. The Travel Act only applies if state or federal law would make the bribe illegal. Assessing this is usually a straightforward process because the bribe may often be a violation of the FCPA.

U.K. Bribery Act

Enacted on July 1, 2011, the U.K. Bribery Act deems it illegal to bribe any person, to accept a bribe, or, for commercial organizations, to fail to prevent bribery. The act applies to all companies registered in the U.K., companies that have any part of their operations in the U.K., or those that employ citizens of the U.K. Penalties include unlimited fines for companies and imprisonment for up to 10 years for individuals.

Dodd-Frank Act Whistleblower Incentives

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) established a whistleblower program that requires the SEC to pay an incentive for information about securities violations. If the lead materializes into an investigation and fines, it can be like winning the lottery for the whistleblower.

This is a real and significant risk for companies, and both the number of reports and the quality of complaints is increasing. Since the whistleblower provision of the Dodd-Frank Act was implemented, the SEC files allegations of FCPA offenses every day.

When violations are recorded, FCPA enforcement agencies seek other companies that may look or act in a similar way. In addition, organizations sometimes receive reduced judgments for voluntary disclosure of possible misconduct and cooperating with regulators on related investigations of competitors and their clients. In recent years, enforcement agencies have conducted industry sweeps, investigating entire industries for possible cause following allegations of wrongdoing by one or several other competitors.

In late July 2012, Reuters reported that U.S. enforcement agencies were considering launching a wide-ranging examination of the retail industry for FCPA violations after Walmart and other retailers came forth with their own potential offenses. A bribery scandal at Walmart’s operations in Mexico is the subject of investigations by the DOJ and SEC.

An FCPA probe is mentioned in The Wall Street Journal nearly every week. For public companies, the enforcement actions play out in the press, but private companies are just as likely to come under regulatory review.

Industry Cases

In 2011, Tyson Foods, Inc., the world’s largest beef, pork, and chicken processor, resolved criminal and civil FCPA charges stemming from the alleged bribery of Mexican government veterinarians by Tyson’s wholly owned Mexican subsidiary.

Tyson de Mexico allegedly made $90,000 in illicit payments to two Mexican state-employed veterinarians who certified Tyson de Mexico’s products for export. The alleged payments were initially disguised on the company payroll as “salaries” paid to the wives of the veterinarians.

To resolve the civil charges, Tyson agreed to disgorge to the SEC $1.2 million in ill-gotten profits and prejudgment interest. The company resolved its criminal charges through a two-year deferred prosecution agreement, pursuant to which Tyson agreed to pay a $4 million criminal penalty. Tyson also agreed to report to the DOJ semi-annually concerning its compliance program. When announcing the settlement, Assistant Attorney General Lanny Breuer noted Tyson’s voluntary disclosure of the misconduct, cooperation with regulators, and remedial measures.