Legal News

Law Students, Looking for a Niche? It?s Fun to Work on the FCPA

By Dan Slater

The Foreign Corrupt Practices Act is huge right now. In a recent report, the tireless D&O Diary author Kevin LaCroix writes that the 30-year-old law is “going through a 21st Century revival.” And on Monday, Gibson Dunn put out the “2008 Mid-Year FCPA Update,” which begins: “The frenetic pace of [FCPA] enforcement set in 2007 has carried through the first half of 2008. Mid-year prosecutions are up — substantially so — from last year’s record-setting totals.”

What accounts for this latest legal rage? According to LaCroix (pictured), Sarbox’s requirement that senior execs scrutinize corporate controls is leading to an up-tick in self-reporting of FCPA violations. Also, the DOJ and SEC are beginning to target specific industries — namely, the medical device industry in Europe, companies participating in the U.N. Iraq Oil for Food Program and technology companies. The authorities, according to LaCroix, are also targeting companies “doing business in countries where bribery is believed to be part of the local business culture.” Businesses doing work in Nigeria and China have drawn scrutiny.

But the most novel development in FCPA action doesn’t directly involve the FCPA. For shareholders of companies that get stung in these investigations, there’s no private right of action under the this act. Instead, shareholders are bringing securities class-actions and derivative suits against directors and officers of the offending companies.

The Gibson Dunn memo calls activity in this class of FCPA follow-on litigation an “outburst,” adding that “our recurring advice to clients and friends has been to expect and prepare for tag-along civil litigation when a new governmental FCPA investigation becomes public.” (For more FCPA news, check out Richard Cassin’s FCPA blog.)

As examples in this follow-on litigation, LaCroix cites Willbros’ $10.5 million settlement of a class action suit after the company, which is an independent contractor for the oil and gas industry, restated results and upped its reserve to cover potential FCPA-related penalties. As for shareholder derivative suits based on allegations of overseas public bribery, he cites Alcoa, which currently faces allegations — made by the government of Bahrain — that for years it overcharged a government-owned aluminum company there by paying off a government official. Calls to Willbros and Alcoa were not immediately returned.

These kinds of cases, says LaCroix, illustrate how leading plaintiffs’ securities lawyers are leaping in, signaling that more such suits are on the way.

Full post as published by Law Blog - WSJ.com on July 09, 2008 (boomark / email).