News Corp. Probe Puts Foreign Corrupt Practices Act in Renewed Spotlight
July 2011
IN THIS ISSUE
— FCPA and the Shadowy World of Information Gathering
— Is FCPA the Right Prosecutorial Tool for Phone Hacking? A Historical Analysis
GREETINGS!
Welcome to the July edition of our newsletter! In this issue, we’ll examine how the recently announced U.S. Justice Department probe of News Corp. may seek to apply Foreign Corrupt Practices Act (FCPA) criteria, and look at how some of the allegations may differ from other FCPA cases.
FCPA AND THE SHADOWY WORLD OF INFORMATION GATHERING
As the U.S. Justice Department announced that it would look into whether global media conglomerate News Corp. had hacked into telephones of victims of the September 11, 2001 terrorist attacks, FCPA regulations were brought into new relief. FCPA statutes, from a fraud examiner’s standpoint, typically come into play when a client, say a U.S. investment company., is seeking to do business abroad. The U.S. company needs to know all that they can about the company, its principals, their reputations and any past or ongoing controversy. How did this company grow? Did its leadership gain influence legitimately, or were favors traded to help the company grow? Did the company bid on the business it won, or were bribes and other means of “influence peddling” part of that process?
The current (and evolving) allegations against News Corp. seem to be a different manner of potential violation. While many police officers and private investigators in the United Kingdom have been implicated as helping the media conglomerate obtain voice mail messages and other phone records there, evidence has yet to surface that such conduct occurred regarding any of the U.S.-based companies. yet News Corp. is taking the nascent FCPA probe seriously, hiring Mark Mendelsohn, an attorney who until last year was in charge of prosecuting FCPA violations for the Justice Department.
IS FCPA THE RIGHT PROSECUTORIAL TOOL FOR PHONE HACKING? A HISTORICAL ANALYSIS
Enacted in 1977, the FCPA generally prohibits and punishes bribery to foreign officials by U.S. companies to obtain business in another country. “With the enactment of certain amendments in 1998, the anti-bribery provisions of the FCPA now also apply to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States,” a summary said.
Yet the provisions of the text itself, on their face, relate strictly to the affecting of government officials in making business decisions, not to the acquisition of information as part of that business process (which, to date, does not appear to have involved any U.S. government officials.) Neither the 1977 bill or the 1998 amendment address liability of foreign company officers for obtaining information on U.S. citizens (via payment to other, private U.S. citizens), as may be the case if such conduct is found to have occurred at News Corp. In fact, no case law could be found dealing with this specific set of circumstances, suggesting that FCPA may be less well-equipped to prosecute any illicit information gathering by payment than conventional bribery statutes applicable to transactions solely between private parties, with no alleged government official involvement.