What’s next, a cup of coffee bought for a custom’s official while you are waiting for the inspection? That is the question which came to the mind of The Man From FCPA when he read about the self-disclosure made to the Justice Department by Lennox International over a $475 facilitation payment made by the company in Russia. In its October, 10-Q filing the company stated, “In October 2016, the company self-reported to the Securities and Exchange Commission (SEC) and the Department of Justice (DoJ) an alleged payment in the amount of 30,000 rubles (approximately U.S. $475) to a Russian customs broker or official. The company, under the oversight of its Audit Committee, has initiated an investigation into this matter with the assistance of external legal counsel and external forensic accountants.”
The howling over this disclosure was far and wide. The FCPA Professor asked if this was “the most absurd voluntary disclosure ever?” The FCPA Blog said the company was hoping to obtain a declination under the Justice Department Pilot Program. The Man From FCPA certainly finds it to be a head-scratcher because this payment, standing along, should not give any company the idea that it needs to self-disclose to the Justice Department and SEC. Yet, the company did voluntarily disclose to both the department and the agency.
There is no requirement under the FCPA that a company self-disclose any potential FCPA violations. Assuming Lennox Industries has competent legal counsel, with some modicum of knowledge on the FCPA, it is difficult to understand why the company would not document the incident, remediate through training and other means and then monitor on an ongoing basis. Not only would such a response be more cost efficient, it would keep the federal agencies charged with enforcing the FCPA from having dockets clogged with cases which should not be on their collective desks. If there was more to the story than simply a $475 payment and the company failed to report such information, that could raise the interest of the SEC regarding the company’s public reporting requirements.
My advice, the next time you come across a one-time alleged bribe payment of $475 to a CCO, senior executive, or board of director is to sit back, have a cup of coffee and let your compliance professionals handle the matter.