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FCPA Enforcement Focusing on Small and Mid-Sized Technology and Life Sciences Companies



While the Securities and Exchange Commission (SEC) and Department of Justice (DOJ) continue their vigilant enforcement of the Foreign Corrupt Practices Act (FCPA), it was the 2014 enforcement action against a firearms manufacturer1 and a 2015 indictment of the owner of a small Pennsylvania consulting company2 that have signaled how small and mid-sized companies are under heightened scrutiny for FCPA compliance.


Kara N. Brockmeyer, Chief of the FCPA Unit, commented in the February 2015 “Highlights from the SEC Speaks” that, going forward, the Unit will focus on small and medium-sized companies that venture into the international market3. Further supporting this trend is an article in the National Law Review4 which details the tripling of FBI resources dedicated to investigating FCPA violations at home and abroad through the creation of three new FCPA squads, based in Washington, D.C., New York, and Los Angeles. The squads will work with the SEC and FBI Legats overseas to investigate corruption violations worldwide.

The 2014 FCPA action against the firearms manufacturer demonstrates how costly lapses in anti-corruption/anti-bribery compliance can be for smaller companies.

In 2014, a mid-market firearms manufacturer settled a FCPA action with the SEC. Employees of the firm gifted firearms valued at $11,000 to Pakistani police officers and offered to (but did not ultimately) make payments to officials in other countries. The employee actions yielded approximately $108,000 of profit. The company agreed to settle for approximately $2 million in penalties and also incurred $2.3 million in professional fees related to the investigation. The cumulative penalties and investigation costs amounted to roughly 40 times the profit made by the company and 390 times the amount of the bribes.

The 2015 indictment of the owner of a consulting company demonstrated DOJ’s willingness to pursue individual prosecutions of not only the mid-market, but their leadership.

The former owner and President of Chestnut Consulting Group Inc. and Chestnut Consulting Group Co. (generally referred to as the “Chestnut Group”) was indicted by a federal grand jury in January 2015 for his alleged participation in a scheme to pay bribes to a foreign official in violation of the Foreign Corrupt Practices Act (FCPA) and the Travel Act, and to launder proceeds of those crimes.

According to allegations in the indictment, the former owner and others paid bribes for the benefit of a senior official at the European Bank for Reconstruction and Development (EBRD) in exchange for influencing the official’s actions on applications for financing submitted by the Chestnut Group’s clients and for directing business to the Chestnut Group. The Chestnut Group allegedly earned approximately $8 million in “success fees” as a result of the EBRD’s approval of these two applications.

What Does CohnReznick Think?
If your company has any existing or potential foreign operations or sales, CohnReznick recommends assessing your environment for any red flags in your Anti-Bribery/Anti-Corruption program. The FCPA and its growing number of foreign analogues continue to judiciously investigate and prosecute companies with lapses in internal controls and compliance. Small to mid-sized companies are now at greater risk for non-compliance due to increased scrutiny from the FCPA enforcement unit.

“Global markets have become increasingly attractive growth opportunities for technology and life sciences companies, and with the advances in technology, they are more accessible than ever,” said Alex Castelli, CohnReznick partner and Technology and Life Sciences Industry Practice Leader. “At CohnReznick, we encourage our clients to pursue opportunities and mitigate risks with the belief that regulatory compliance is one of the building blocks for the sustainable and long-term growth of their company. As such, we recommend full and complete compliance with all the provisions of the FCPA. If a technology or life sciences company has an interest in conducting business internationally, they must be knowledgeable of and comply with FCPA.”

CohnReznick has created a checklist, available here, to help you assess whether your company may be at risk for FCPA violations.


If you have questions or concerns about any FCPA or other anti-corruption legislation vulnerabilities, please contact your CohnReznick partner, or contact William Monks, a CohnReznick director, at or 732-590-3948, or Andrew Masini, senior manager, at or 732-635-3137.

To learn more about our Technology Industry Practice, visit our webpage.

1 See
2 See
3 Highlights from SEC Speaks 2015: Enforcement and Litigation Trends, The National Law Review, April 24, 2015
4 FBI Establishes “Dedicated International Corruption Squads” to Bust FCPA Violators, The National Law Review, April 24, 2015.*

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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