Ride-sharing pioneer Uber Technologies Inc. (Uber) recently acknowledged that it is cooperating with the U.S. Department of Justice regarding a preliminary investigation into whether its managers violated the Foreign Corrupt Practices Act (FCPA). Enacted in 1977, the FCPA is an anti-bribery law that prohibits U.S. companies from making payments to foreign government officials in exchange for obtaining business.
According to some observers, the ongoing probe is likely to last a year or more and has far-reaching legal and compliance implications for Uber. The ride-sharing company has reportedly launched an internal review of its Asian operations and notified federal authorities about potential payments made by staff members to Indonesian police officers.
The internal investigation is being conducted by a large U.S. law firm that will provide its findings to the Justice Department. Although it is unclear whether the DOJ will file charges, the FCPA probe will invariably impact Uber financially by way of legal fees and increased compliance costs as it implements compliance training for its employees.
Because the FCPA is a criminal statute, the responsible individuals can face bribery charges and prison sentences if convicted. Generally, however, companies enter into settlement agreements with the DOJ and/or the U.S Securities and Exchanges Commission (SEC), and pay heavy penalties to close the investigations. The payments, in turn, are based on a number of factors, including the level of cooperation with federal authorities, the extent of the wrongdoing, and the ability to pay.
If significant violations are found, federal authorities often seek the appointment of an independent monitor to ensure the company adheres to the terms of the settlement agreement. A monitor has broad access to employees and internal documents, reports its findings to the Justice Department, recommends compliance policies and practices to be implemented.
Other High Profile FCPA Cases
Although it is too early to say how costly the FCPA investigation will be to Uber, other U.S. companies have incurred stiff penalties and other costs for violating the FCPA. Wal-Mart Stores, for example, faced an extensive FCPA investigation of its operations in Mexico several years ago. It has been reported that the retail giant paid $865 million in FCPA-related compliance expenses in the last five and a half years.
In 2008, Siemens AG entered into a record $800 million settlement with the U.S. government for FCPA violations. That same year, cosmetics seller Avon Products Inc. initiated an investigation of its China operations and, in 2014, entered into a plea deal with the federal government where it paid $135 million.
It remains to be seen whether Uber will be pay significant penalties. But the company may be forced to modify its growth strategy, particularly when entering new markets where bribery is common. This case highlights how FCPA investigations require the advice and counsel of experienced financial fraud and complex litigation attorneys.