Foreign Corrupt Practices Act Enforcement Grows
May 10, 2016
The Foreign Corrupt Practices Act (FCPA) is an important U.S. federal law in efforts to fight corruption and bribery across the globe.
Under the FCPA, payments of bribes to foreign officials for the purpose of obtaining or retaining business are prohibited. In addition to the anti-bribery provisions, the FCPA also focuses on accounting transparency, particularly with regards to book and record-keeping.
The FCPA has broad applications to publicly traded companies as well as their officers, board members, and agents.
Renewed Interest in Enforcing the FCPA
Recently, there has been renewed interest in enforcement of the Foreign Corrupt Practices Act with regards to life science companies, especially those involving the healthcare, pharmaceutical, and medical device industry sectors. In February 2016, Kara Brockmeyer, chief of the FCPA Unit of the Securities Exchange Commission, stated that the SEC would be prioritizing pharma investigations. Some takeaways to note for healthcare and pharma companies include:
- More aggressive FCPA action in relation to anti-kickback statutes by the Department of Justice and the SEC
- Broader identification of FCPA risks, including those applicable to research organizations and providers, not just pharm-manufacturers
- Continued regulation of prescription-level and doctor-level issues
- Awareness of bribery and transparency issues with regards to merger & acquisitions (M&A) and consolidation processes
Regulation of M&A Activity
The issue of mergers and acquisitions will be critical for FCPA regulation in 2016. In 2015, we saw a monumental amount of consolidation and M&A being recorded. For instance, Kaiser Permanente announced a deal to acquire Group Health Cooperative based in Seattle, which would add about 509,000 members to Kaiser’s reach. Anytime there is such a major acquisition occurring, key players need to be diligent in ensuring transparency throughout the process.
This year, we expect to see a similar amount of activity, if not more with regards to healthcare mergers and acquisitions. Notable already is WellStar Health System’s $575 million purchase of five of Tenet Healthcare Corporation’s hospitals, which occurred just last March 2016. With these types of major acquisitions and sales, issues such as compliance and due diligence become extremely important.
Other FCPA-Related News
The focus on health care and the life sciences is part of an overall effort by the DOJ and SEC to enhance FCPA enforcement. For example, the DOJ’s Fraud Section of the Criminal Division recently released an Enforcement Plan and Guidance. The “Plan” is designed to enhance the DOJ’s ability to prosecute FCPA violations through a three-pronged approach, utilizing:
- Substantial increases in law enforcement resources
- An increase in cooperation with foreign jurisdictions
- Implementation of a “Pilot Program” extending cooperation credit to companies that meet specified standards for disclosure and other factors
The Enforcement Plan and Guidance is expected to yield significant results in the area of data privacy law. Thus, we expect to see more concerted efforts toward enforcement of the Foreign Corrupt Practices Act.
Finally, enforcement for FCPA violations will continue to revolve around sanctions, which can be significant. Sanctions can include disgorgement of illegal gains, civil penalties, and more specific measures, such as mandatory oversight by an independent consultant. These are important especially when it comes to deterring pharma and healthcare fraud and corruption.
If you have any questions or any important information regarding a possible FCPA claim, contact us today at KTMC. Our team has in-depth experience dealing with fraud, abuse, and misconduct issues worldwide. We are also highly dedicated to achieving influential reforms to help prevent future violations of laws.