DOJ Targets FCPA and Anti-Trust Violations Jointly

On October 5, 2011, the U.S. Department of Justice (“DOJ”) and Bridgestone Corporation (“Bridgestone”) filed a plea agreement in U.S. District Court in which Bridgestone admitted to violating the Sherman Antitrust Act (15 U.S.C. § 1) (“Sherman Act”) and the Foreign Corrupt Practices Act (18 U.S.C. § 371) (“FCPA”). Under the terms of the resolution, Bridgestone agreed to (i) plead guilty to violating the Sherman Act and the antibribery provisions of the FCPA, (ii) implement a comprehensive FCPA compliance program, and (iii) cooperate fully in the DOJ’s ongoing investigations of antitrust and FCPA violations resulting from the manufacture and sale of marine hose. Under the agreement, Bridgestone will pay a criminal fine of $28 million. In exchange, the DOJ agreed not to bring further charges against Bridgestone or its affiliates for acts taken before the date of the agreement in furtherance of the charged crimes.[1]

 Background

Bridgestone's business involves, among other things, the manufacture and sale of diversified products, including marine hose, which is used to transfer oil between tankers and storage facilities/buoys. According to the plea agreement, Bridgestone diversified products officers, along with officers and employees of its International Engineered Products Department (“IEPD”), violated the Sherman Act by participating in a conspiracy to rig bids, fix prices, and allocate market shares for sales of marine hose in the United States and elsewhere.

According to the plea agreement, IEPD, in tandem with Bridgestone's regional subsidiary, Bridgestone Industrial Products of America, Inc. (“BIPA”), also committed FCPA violations. Specifically, between January 1999 and May 2007, Bridgestone authorized payments of more than $2 million through BIPA's local sales agents to foreign government officials in Latin America. BIPA paid the bribes to secure contracts for sales of industrial products, including marine hose. The payments, which employees of BIPA and IEPD attempted to conceal, resulted in profits to Bridgestone and BIPA of approximately $17 million.

 Analysis

 This is not the first case in which the DOJ has pursued a company for violating both the FCPA and other U.S. laws. For example, in 2010, Innospec Inc. pleaded guilty to violating the FCPA by paying bribes to the Iraqi Ministry of Oil and to committing wire fraud by paying kickbacks to the former Iraqi government under the U.N. oil for food program. Innospec simultaneously admitted that sales of chemicals to Cuban power plants violated the U.S. embargo against Cuba.

 Also in 2010, the DOJ investigated BAE Systems plc (“BAE”) for, among other offenses, making false statements regarding its implementation of policies and procedures to comply with the FCPA. BAE also failed to make required disclosures in connection with applications for arms export licenses as required by the Arms Export Control Act and the International Traffic in Arms Regulations.

 The Bridgestone settlement, then, fits within a pattern of cases in which the DOJ has investigated and prosecuted violations of the FCPA along with violations of other U.S. laws. As the DOJ continues to aggressively prosecute the FCPA, we think such multi-tiered enforcement actions are likely to become more common.

 At the same time, Bridgestone may be something of an outlier in that the case revealed corporate conduct that was purportedly both corrupt and anti-competitive. Although it is not surprising that a company that violates the FCPA may commit other legal violations, it is perhaps more surprising when the accompanying violations involve competitor cooperation.

 While the Bridgestone settlement is notable, we think future multi-tiered investigations will tend to resemble earlier cases in which FCPA violations and violations of sanctions, export, and other international trade regulations are prosecuted together. For example, we frequently find that weakness in a company's FCPA compliance processes is indicative of weakness in processes related to export or sanctions compliance. In addition, courtesy of BAE, Innospec, and other matters, the DOJ is working more closely with its counterparts in the Departments of Commerce and Treasury on matters involving trade violations.

 We think this trend is likely to continue. With the government aggressively enforcing the FCPA and developing its sophistication about other trade regulations, companies must do the same by educating employees about compliance “red flags” related to the FCPA and other trade issues. Making relevant personnel aware of issues and the resources available to address issues is both cost-efficient and an effective way to protect against costly violations.

[1] To date, the U.S. Securities and Exchange Commission, which is responsible for enforcing the FCPA's books and records and internal controls provisions, has yet to initiate proceedings against Bridgestone. Given that the DOJ and SEC often act in concert on FCPA investigations and resolution of those settlements, it seems possible the SEC is not intending to take enforcement action against Bridgestone in this matter.