This week’s Shot Show in Las Vegas started off with a bang, courtesy of the
The FBI used the annual firearms industry trade show as an opportunity to
sweep up 21 of the 22 defendants targeted by a large-scale undercover sting
operation. The defendants were charged in 16 indictments with violations of the
Foreign Corrupt Practices Act (FCPA), and conspiracy to violate the FCPA and to
commit money laundering. Each defendant faces up to 30 years in prison if
convicted on all counts.
This widely publicized sting marks a dramatic shift in federal law
enforcement’s approach to FCPA investigations. It indicates that recent
pronouncements regarding the development of specialized investigatory units, an
increase in cross-border cooperation and a focus on individuals are being backed
up in practice and are producing real results. The operation’s known
demographics are enough to indicate it had an impressive scope for a white
collar, much less FCPA, sting:
- 22 executives and employees from military and law
enforcement equipment suppliers and sales agents, from three countries and
- One fictitious minister of defense of a foreign country, to whom bribes
of 20 percent commissions were offered through an undercover FBI agent
posing as a sales agent. The bribes were meant to obtain part of $15 million
in contracts to outfit the country’s presidential guard.
- Two years of investigation.
- 150 FBI agents executing 14 search warrants in several cities in
Florida, Virginia and California.
- One coordinated sting at a 60,000-person trade show that included all
but one of the defendants.
The sting provides some preliminary lessons worth noting.
FCPA Enforcement is No Longer Reactive
The last several years of increasing FCPA enforcement activities have been
predominantly reactive. However, any period of consistent focus on one area of
enforcement is going to result in increasing sophistication and experience among
investigators and prosecutors, and an increasing ability to reach out and target
Although this type of sting is somewhat outside the norm of the typical white
collar case, federal law enforcement is clearly intent on redefining what the
norm is for FCPA investigations. While there is nothing currently in the public
record about what triggered this investigation, it appears that an industry
insider cooperated with the FBI in laying the trap for these defendants.
Assistant Attorney General Lanny Breuer of the DOJ’s Criminal Division has
already made public pronouncements indicating an intent to target the
pharmaceutical and medical device industries, as well as individuals (see our
alert). This week’s operation is a strong demonstration of the resources the
federal government is willing to put behind that effort, and the proactive steps
it will take to achieve results.
Individuals are in the Crosshairs
The DOJ has already stated that the investigation and prosecution of
individuals is a significant focus in FCPA cases because “[e]ffective deterrence
requires no less . . . for our enforcement efforts to have real deterrent
effect, culpable individuals must be prosecuted and go to jail" (see our
alert). This week’s arrests drive the point home.
Cross-border Cooperation is Working
As part of this week’s operations, City of London police executed seven
search warrants in connection with parallel investigations in the UK. This is
indicative of an increasingly vigorous approach to anticorruption enforcement in
the UK, and an increasingly seamless interaction between U.S. law
enforcement and its foreign counterparts (see our
Government, Regulatory and Criminal Investigations Department has attorneys
with extensive experience with FCPA/anticorruption matters, as well as the
defense of white collar criminal investigations. The most valuable weapons a
corporation and its officers and directors have against potential FCPA/anticorruption
issues are preparedness, responsiveness and the deployment of a robust
compliance program designed to identify, address and prevent issues before they
become government investigations.
McGuireWoods is prepared to assist with everything from defending such
investigations, to conducting FCPA/anticorruption risk assessments, audits and
internal investigations, and designing and helping to implement overall and FCPA/anticorruption-specific
corporate compliance programs and training.
For more information about our capabilities in this or any other area, please
contact the authors.