Bill Mongelluzzo | Apr 08, 2011 9:46AM EDT
The U.S. government will not tolerate bribes in the international transportation industry, attorneys and officials told customs brokers and forwarders Thursday.
David Monroe, a partner in GKG Law in Washington, cited as a clear indicator the November 2010 settlement in which international logistics provider Panalpina paid more than $80 million in fines and disgorgement of profits for violations of the Foreign Corrupt Practices Act.
"The Panalpina settlement should be seen as a wakeup call to the industry," Monroe told the annual conference of the National Customs Brokers and Forwarders Association of America in Phoenix.
Panalpina allegedly paid bribes in seven countries in order to secure expedited permitting, avoidance of inspections and other types of preferential treatment from government agencies in those countries.
Now that a major forwarder has been successfully prosecuted, the U.S. Department of Justice will be on alert for violations of the Foreign Corrupt Practices Act by logistics companies or their overseas agents, Monroe said.
"The Department of Justice isn't going to assume Panalpina was an isolated case," he said.
International logistics companies operate in a number of countries, and in some countries paying bribes is recognized as a way to get business done, said William Stuckwisch, acting assistant chief of the fraud section at the Justice Department.
The U.S. government expects companies that operate overseas to be familiar with the business practices of each country and to take preventive measures so its employees and agents do not pay bribes where the practice is commonplace.
If not, the consequences could be dire. In recent years, companies that violated the act often paid millions of dollars in fines. Prison terms for their executives ranged as high as 87 months, Stuckwisch said.
Logistics companies must maintain tight control over their overseas offices, agents and subcontractors. "Put some discipline into the process," said Matthew Shelhorse, a partner in the forensic services practice of PricewaterhouseCoopers.
Companies should have a written code of conduct, and they should periodically test the system to ensure that it is working, Shelhorse said.
Logistics companies should also perform thorough background checks before contracting with overseas agents. The agents should sign statements confirming that they are aware of the provisions contained in the Foreign Corrupt Practices Act. The agents should agree in advance to abide by those provisions.
Some smaller payments are not considered to be bribes. The Department of Justice tends to look skeptically upon what are called "facilitation" payments to foreign entities to secure routine government services such as permits and licenses, but it may allow the payments if they are reasonably priced, Stuckwisch said. Nevertheless, he urged companies with any questions to seek advice from the Justice Department.
-- Contact Bill Mongelluzzo at bmongelluzzo@joc.com. Follow him on Twitter @BillMongelluzzo.