Guilt by association: Anti-corruption risks presented by third-party intermediaries

Planning ahead is the most effective way for a company to neutralize these risks and avoid potential problems

The textbook example of a Foreign Corrupt Practices Act (FCPA) violation involves a company employee directly giving a bribe to a foreign official. But in many, if not most, of the FCPA cases prosecuted today, a third-party intermediary such as an in-country agent or consultant is the party who made the improper payment. In these cases, the company that engaged the third party’s services cannot plead ignorance and escape FCPA liability: The statutory text makes clear that a company violates the Act if it gives a payment to a third party and is “aware” that the third party will, or is “substantially certain” to, use that payment to bribe a foreign official. Caution should therefore be the watchword for any company operating through an intermediary in a foreign country.

The recently-announced $108 million FCPA settlement between Hewlett-Packard (HP), the Justice Department, and the SEC was a timely reminder of the risks a company runs when it does business in a foreign jurisdiction through a third party. The government’s case against HP included charges that HP Mexico — an HP subsidiary — hired a third-party consultant with close ties to Pemex, the Mexican state-owned petroleum company, to help HP secure a $6 million contract through improper means. According to the Justice Department, HP used a “channel partner” to funnel a $1.41 million commission to the consultant, who then paid $125,000 of that money to a Pemex employee.

Contributing Author

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Marcus Christian

Marcus Christian is a Washington, D.C.-based partner in Mayer Brown LLP’s Litigation & Dispute Resolution and White Collar Defense & Compliance practices. Previously, he was...

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Contributing Author

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Matthew Waring

Matthew Waring is a Washington, D.C.-based associate in Mayer Brown’s Litigation & Dispute Resolution practice.

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