Note: This is a guest post by attorney and compliance expert Ramsey Kazem.  It is the third in a five-part series that we will be sharing in the next weeks. In this part, we will provide a brief discussion of FCPA third-party liability and identify red flags that should have put Budweiser on high alert of its increasing FCPA risk. 
 
FIFA’s relentless effort to secure the repeal of the alcohol ban did not come from a benevolent desire to improve the fan experience or to promote the good of the game.  FIFA’s singular motivation was to obtain a lucrative business opportunity for the exclusive benefit of its official beer sponsor.  In this capacity, FIFA was effectively acting as Budweiser’s third-party agent.  And, to the extent FIFA engaged in any corrupt conduct in lobbying the Brazilian government, Budweiser, as the sole beneficiary of the governmental action, may be in violation of the FCPA. 
 
The most straight-forward example to illustrate Budweiser’s indirect liability is a scenario where Budweiser wires funds to FIFA for the express purpose of paying “gratuities” to FIFA’s contacts in the Brazilian legislature.  Under this hypothetical, the fact that Budweiser had no direct contact with the Brazilian government is of no significance as the FCPA prohibits using a third-party to do indirectly what cannot legally be done directly.  Budweiser is not any less culpable under this scenario than if it had directly negotiated the bribe payments with the Brazilian officials.    
 
While the above hypothetical provides a clear illustration of an FCPA violation triggered through the use of a third-party, it is unlikely that such a blatant scheme would pass through the internal controls of an organization as sophisticated and well-respected as Budweiser.  However, that such an obvious violation is likely to be red flagged does not end the analysis.  Budweiser’s indirect liability under the FCPA is not limited to scenarios where it actively participates in, or has actual knowledge of, the corrupt scheme.  An organization can be indirectly liable for the conduct of its agents when it is “aware of a high probability” that a corrupt act has or will occur.  This standard prevents an organization from insulating itself from liability by burying its head in the sand.       
 
Red Flags
 
To date, enforcement agencies have not alleged that FIFA acted corruptly in dealing with the Brazilian government.  Time will tell if such allegations surface.  However, two facts are certain:  (1) FIFA was adamant that the alcohol ban be repealed; and (2) FIFA would not take “no” for an answer.  These two facts alone should have raised FCPA concerns within Budweiser.  Moreover, Budweiser should have identified the following red flags:
 

These and other red flags should have alerted Budweiser of its increasing FCPA risk.  Moreover, as will be discussed in more detail in Part IV, Budweiser should have begun the process of mitigating its exposure to potential FCPA violations. 

Ramsey Kazem can be reached by phone at +1-404-872-5615 or by email at info@thethreetwelvegroup.com.

[1] See ESPN FC article, “FIFA fires employees over sponsorship dealings”, December 12, 2006.  Article can be found here.  

[2] See BBC News article, “Beer ‘must be sold’ at Brazil World Cup, says FIFA”, January 19, 2012.  Article can be found here.