Sovereign Wealth Funds And The FCPA

Dionne Searcey and Randall Smith at the Wall Street Journal are reporting today that the SEC is investigating whether banks and private-equity firms violated the FCPA in their dealings with sovereign wealth funds. The SEC, they said, has sent letters to around ten firms, including Citigroup and Blackstone.

“Though the letters didn’t contain specific allegations of bribery,” the WSJ reported, “they requested that firms retain documents and asked about the firms’ dealings with sovereign-wealth funds . . . . One person familiar with a firm that received a letter said it was brief, indicating the investigation is at the early stages.”

In October 2008, the FCPA Blog said:

We’ve never seen empirical studies on the subject, but we’ve noticed that FCPA cases generally spring from industries that deal in scarce commodities — whatever those happen to be at any moment in history. It could be energy, telecommunications licenses, access to hospital patients, metals, food, cash and so on. . . .

These days, a commodity in short supply is cash. Sovereign wealth funds have it and banks need it. Will the financial institutions succumb to market pressures? Will they abandon FCPA compliance to save their balance sheets? Some might . . . And if that happens, pin-striped tragedies are sure to follow.

The letters to the firms, today’s WSJ report said, “appear to be tied to a broad Foreign Corrupt Practices Act investigation of the banking industry.” It noted that foreign employees who work on sovereign wealth funds would be considered government officials and covered by the FCPA.