Tyco nets a non-prosecution agreement

Oct 10, 2012
<p>Why should a board of directors be interested in the state of its company&rsquo;s Foreign Corrupt Practices Act (FCPA) compliance program?</p>

Tyco International’s Non-Prosecution Agreement is a clear case demonstrating why companies should have a robust FCPA compliance program. Tyco was a poster child for excess and securities laws violations in the first decade of the 21st century. In fact, it had entered into a Deferred Prosecution Agreement (DPA) for FCPA violations in 2006. In this DPA, Tyco basically promised to clean its house of FCPA violations and not to engage in any further violations going forward.

And Tyco did work very hard to clean its house. After it entered into the 2006 DPA, the company trained over 4,000 middle managers, reviewed business agents, added an ombudsman, and terminated 90 people. It also identified over 66,000 third party vendors, a group that needed to be risk-assessed in order to determine which were high risk and should therefore be subject to an FCPA compliance review. Tyco eventually whittled this group down to 1,800 or so and performed enhanced due diligence on them.

Tyco also self-disclosed the violations reported in the Non Prosecution Agreement (NPA). The key fact arising was that most of the misconduct occurred after the 2006 DPA.  Additionally, the alleged misconduct was carried out over a lengthy period; and the conduct occurred in approximately 25 countries. As noted in an article by the FCPA Professor ‘even so, against this backdrop of an injunction being violated and widespread misconduct in approximately 25 countries, Tyco was offered a non-prosecution agreement by the DoJ and the government did not require an imposition of a corporate monitor.’

Boards need to understand that even as a recidivist under the FCPA, Tyco was not prosecuted.

Tyco still paid a fine but it was significantly reduced. The robustness of Tyco’s response and its FCPA compliance program saved the company from a hefty fine and the truly invasive situation of having a corporate monitor appointed over it.

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