Corruption in the transportation industry has been a problem for many years. From Volkswagen’s diesel scandal, to the most recent investigation into illegal payments made by Fiat Chrysler to United Auto Workers’ former vice president, the auto industry has struggled with keeping things honest. In an industry focused increasingly on innovation and adaptation, the “old ways” nevertheless die hard. Uber, a relatively a new entrant into the transportation field, is wrestling with the same issues the auto industry has battled for years.
In recent SEC filings, the ubiquitous ride-hailing company disclosed that it has been under investigation by the DOJ for two years for potential violations of the Foreign Corrupt Practices Act (“FCPA”). The investigation relates to conduct that allegedly occurred in Indonesia, Malaysia, China and India. The disclosure was made in documents Uber filed this April as part of its initial public offering, in which it seeks a valuation of around $100 billion.
In simple terms, the FCPA is an anti-bribery law. It prohibits companies or their representatives from corruptly offering, paying, promising to pay, or authorizing payment of anything of value, either directly or through a third party, to a foreign government official or its representative to obtain or to retain business or to gain an unfair advantage. The phrase “anything of value” has been broadly interpreted to include all kinds of gifts, including jewelry, cars, travel and entertainment. Because the statute has no monetary threshold, meaning that even the smallest gifts are prohibited. To be illegal, the payments must be made with a “corrupt” motive and must be intended to cause an official to take an action that would benefit the payor. Willful blindness or deliberate ignorance of bribery will also support a violation. Moreover, the payment need not be made directly to the foreign official; payments to friends or family may also violate the Act if made to influence the official.
Several auto manufacturers have faced FCPA investigations and prosecutions, including AB Volvo, Daimler, and Fiat. In 2017, the DOJ charged five individuals for participating in a bribery scheme involving Rolls-Royce and its American subsidiary. Rolls-Royce paid $170 million to resolve the DOJ charges and the majority of the individuals charged pleaded guilty.
In Uber’s case, the problematic conduct ranges from “small payments” made to police in Indonesia, to a corporate donation of “tens of thousands of dollars” made to a government-backed entrepreneurial program in Malaysia. According to reports, after the donation, a Malaysian government pension plan sponsor invested $30 million in Uber, and the government passed favorable legislation benefitting Uber’s growing presence in the country.
So, what does this mean for Uber? At the moment, it’s unclear. FCPA violations carry both civil and criminal penalties, with penalties up to $2 million for each violation. In its disclosure, Uber relayed that it is cooperating with the DOJ and it remains to be seen whether any charges will be filed. Under the DOJ’s Corporate Enforcement Policy, companies that self-disclose and remediate FCPA violations may be offered leniency and even declination of prosecution.
Uber’s disclosure is yet another reminder that all companies operating overseas would be wise to have a compliance program aimed at identifying and preventing these types of illegal grease payments. If Uber finds itself on the wrong side of the law on this, it could mean substantial fines and increased compliance costs, which will inevitably impact the Company’s bottom line, along with its 22,000 employees and drivers in the U.S. and around the World.