In November I appeared on a panel about the media at the American Conference Institute’s 28th National Forum on the Foreign Corrupt Practices Act at National Harbor outside Washington.
As a 20-year veteran of daily newspapers, I was asked to give my view of how companies with FCPA issues can expect to be covered these days. I told an anecdote about being a reporter at the Wall Street Journal in the mid 2000s and suggesting the paper follow the foreign bribery statute full time.
Editors weren’t much interested back then.
Now, following Wal-Mart, there’s something of a media frenzy to come up with the next big FCPA story. On the panel I noted that companies that disclose any FCPA probe at all can expect to be written about somewhere - not the least in Just Anti-Corruption, which publishes all such disclosures from Securities and Exchange Commission filings.
But if you’re a household name company and have an FCPA matter - no matter how relatively insignificant - watch out!
Case in point is the prominent B-1 section displays today in the Wall Street Journal and in the New York Times of the story, first reported by the Journal on Tuesday, that Microsoft Corp. is under U.S. scrutiny following a whistleblower allegation about conduct in China and elsewhere.
It’s a legitimate story and not easy to nail down, so kudos to the reporters (both Main Justice-trained alumni) for getting it.
But ….. how should it have been played?
The pedestrian details of the Microsoft case apply to any number of big global tech companies that are technically “under investigation” as we speak, but — like Microsoft - haven’t disclosed the matters in securities filings because they’re deemed to be relatively immaterial to their overall operations.
That’s where news judgment of editors should come in but doesn’t, because of the aforementioned frenzy to find FCPA stories. Editors don’t have the context to know when an FCPA matter is a big deal and when it’s not.
They just hear “FCPA” and ______ (insert household-name company here) and that’s all that’s needed to get the juices flowing. And reporters are keen to bask in the glory of breaking a story that their competitors have to follow.
Companies fuel this coverage by not disclosing the probes in their securities filings - thus creating the conditions for a “scoop” that ensures that when the issue does emerge, it generates more damaging headlines than it otherwise would have. See: “Did Microsoft Bribe Foreign Governments for Software Deals?”
Some FCPA stories are truly sensational - think News Corp., Las Vegas Sands, Wal-Mart Stores Inc..
But with Microsoft we have a mature $236 market cap global company already spending millions on a compliance department with some 170 employees working on matters including FCPA.
An apparently disgruntled former representative of the company - after making allegations the company investigated and decided were without merit in 2010 - then apparently goes in through the SEC whistleblower program and starts the process over again. (See Microsoft’s response here.)
The SEC and DOJ look into the matter - hence the “investigation,” a term that used to pack some wallop when it wasn’t a procession of companies just submitting their own probes to be evaluated by authorities.
So unless there is evidence of a deliberate cover-up, as we saw at Wal-Mart, the story really should have gone “inside” and not on one of the section fronts. (Not that in the electronic age the display in the physical paper matters much anymore, but it does signal the importance editors place on a story).
Companies like Optimer, NCR Corp., Net 1 and Teva Pharmaceuticals are also under FCPA investigation - but no one knows their names, so they don’t make the front pages.
At some point, you have to ask yourself whether the bigger news in the Foreign Corrupt Practices Act world is which big multinational company isn’t under FCPA investigation of some sort?