Lessons From FCPAscam

That’s a Smith and Wesson and you’ve had your six.

        ~ James Bond to an out-of-ammo assailant in “Dr. No”

Twenty-two people from military and law-enforcement supply companies — including the vice president of sales for American gun-maker Smith & Wesson — were arrested Tuesday on charges of violating the Foreign Corrupt Practices Act, and conspiracy to violate the FCPA and launder money.

Our six shots. Here’s an early look at what the case means:

1. The feds’ new playbook. It was an undercover sting operation, the first big one in FCPA history. There was no real foreign official, only an FBI agent posing as “a sales agent who the defendants believed represented the minister of defense for a country in Africa.” Can you have an FCPA violation without an actual foreign official? We’ll find out.

2. Five plus five plus twenty (years that is). Even if the FCPA charges don’t stick, the feds also charged the defendants with conspiracy to violate the FCPA and to commit money laundering. Conspiracy can be easier for the government to prove than substantive FCPA offenses. Just ask William Jefferson and Frederic Bourke. The FCPA count carries a 5-year penalty, as does the FCPA conspiracy charge. But the conspiracy to commit money laundering packs a 20-year punch.

3. Who squeals first, squeals best. When the government indicts en masse, the defendants who offer early cooperation usually make out best, often with much lighter sentences. Having cooperating witnesses makes life a lot easier for the prosecutors. The tactic has been used for years by the Justice Department in price-fixing and antitrust cases.

4. They’re everywhere. The DOJ said “approximately 150 FBI agents executed 14 search warrants in locations across the country.” How many agents were involved in the actual investigation and sting, we aren’t told. Whatever the number, this was a big operation. 

5. The Brits are in the game. The DOJ said the City of London Police “executed seven search warrants in connection with their own investigations” into companies involved in the DOJ busts. The U.K. authorities snoozed for decades on overseas bribery. But lately they’ve also arrested Jeffrey Tesler at the DOJ’s request, launched an investigation into Halliburton, look set to charge BAE, charged a former Johnson & Johnson / DePuy executive, and banned some Kenyan kleptocrats.

 6. Low-hanging fruit. White collar types aren’t used to being targeted by investigators. Unlike drug dealers and Mafioso, they haven’t had much practice being careful not to get caught. What’s that mean for the FCPA? More of the same on the way. As Assistant Attorney General Lanny A. Breuer said Tuesday: “From now on, would-be FCPA violators should stop and ponder whether the person they are trying to bribe might really be a federal agent.”