Bribery and corruption cases rarely go to trial, largely because when the government brings a charge, it has both the individuals and companies dead to rights and, if an individual goes to trial for an FCPA violation and loses, the jail time can be significant.
A trial that recently concluded in San Francisco of the former chief financial officer from the U.K. company Autonomy speaks to that discussion. Sushovan Hussain, is alleged to have falsified the company’s financial statements and exaggerated the company’s value to Hewlett-Packard before the sale of the entity to Hewlett-Packard in 2011 for some $11 billion; in less than three years, HP had written off $8.8 billion in value of the deal.
Hussain was convicted on 16 counts of wire and securities fraud that deceived both the company’s investors and HP about the firm’s overall financial shape and prospects into the future. Hussain was found to have engaged in artificially inflating the company’s revenues, issuing misleading statements about Autonomy’s finances, and trying to intimidate those who openly criticized the company’s financial practices and performance.
Interestingly, one of the unsuccessful defenses was that HP knew of the true finances of Autonomy and the debate within HP prior to the acquisition showed the company had its eyes wide open during the process. The jury found it was a poor defense and there was no excuse for Hussain to make false representations and engage in wire fraud.
What is interesting from an FCPA perspective is that defendants usually claim that (1) paying bribes is simply the way that country (whichever country they are in) does business, (2) it is a pay-to-play state, or (3) that everyone knew about it. The guilty verdict in the Autonomy case clearly shows that it is not the bribe receiver’s conduct but the bribe payor’s conduct that matters.