Foreign Corrupt Practices Act enforcement actions have had many origins.
As explored in this prior post, 2012 corporate enforcement actions originated from the following sources: voluntary disclosures; disclosures following industry sweeps; and foreign law enforcement investigations. Other origins of FCPA enforcement actions have been whistleblower or competitor complaints, media reporting - all of which may prompt enforcement agency inquiries – and sting operations, as in the Africa Sting case (although, contrary to popular misperception this was not the first instance of a sting operation being used in an FCPA case – see here for the prior post).
FCPA enforcement actions can also originate in other interesting and unique ways. The 2001-2002 enforcement action against David Kay and Douglas Murphy is an instructive example.
Kay was a Vice President of American Rice Inc., (“ARI”) and Murphy was the President and a Director of ARI. The conduct at issue involved payments to Haitian officials in connection with the importation of rice and an effort to lower customs duties on the product. The conduct lead to a DOJ enforcement action (see here) and an SEC component (see here) against the indivduals. The DOJ enforcement action is well-known by FCPA followers given the litigation that ensued both at the trial court and appellate court levels. (See here for previous posts concerning U.S. v. Kay).
Less well-known, but equally interesting, is the origins of the enforcement action. As explained in the Fifth Circuit’s opinion (513 F.3d 432):
“In 1999 [American Rice, Inc. - Kay and Murphy's employer] retained a prominent Houston law firm to represent it in a civil suit. Preparing for this suit, the lawyers asked Kay for background information on ARI’s rice business in Haiti. Kay volunteered that he had taken the actions [i.e., made or authorized payments to Haitian customs officials], explaining that doing so was part of doing business in Haiti. Those lawyers informed ARI’s directors. The directors self-reported these activities to government regulators. The SEC launched an investigation into ARI, Murphy, and Kay. Murphy and Kay were eventually indicted …”
In short, one of the more notable FCPA cases originated from deposition preparation in a civil case.
The Kay and Murphy prosecution is also notable given that ARI, despite the positions of the Kay and Murphy, was never the subject of an FCPA enforcement action – DOJ or SEC. The Kay and Murphy prosecutions occurred before non-prosecution and deferred prosecution agreements were introduced to the FCPA context in 2004 and if the Kay and Murphy prosecutions occurred today, ARI would almost certainly be part of the overall enforcement action.