FCPA Enforcement Comes to the Technology Sector: Critical Developments in Industry-Wide Scrutiny

Over the past several years, the Securities and Exchange Commission ("SEC") and the Department of Justice ("Justice Department") have increased their focus on industry-wide investigations under the Foreign Corrupt Practices Act ("FCPA"), demonstrating that no industry is immune. Notable industries targeted thus far include the pharmaceutical and medical device, financial services, telecommunications, and oil and gas services industries. Recent developments have illustrated the FCPA exposure that technology companies with international operations face.

This year, the SEC reached a settlement with IBM concerning IBM's improper payments in China and South Korea. Also this year, both the SEC and the Justice Department imposed penalties on Maxwell Technologies and Comverse Technology, Inc. for violations of the FCPA. Additionally, Hewlett-Packard Co. disclosed that it is under government investigation for possible bribes in connection with contracts obtained in Russia.

Doing business in the technology sector often requires extensive interaction with foreign government officials regarding such matters as regulatory licenses and approvals, and contracting directly with government agencies, government-sponsored entities, and enterprises engaging in government-related functions. Moreover, many technology companies rely on an extensive network of consultants, agents, suppliers, and distributors in conducting global business, an area of major FCPA risk.

Recognizing the potential for FCPA violations in the technology industry, the SEC's San Francisco Regional Office created a new FCPA unit. With dedicated SEC resources to focus on high-tech companies, FCPA enforcement activity in the technology industry appears afoot.