In its most recent 10-K, CHS, Inc., a global agribusiness dealing in energy, grains and food, revealed that it had self-disclosed to the Department of Justice and the SEC:
“potential violations of the FCPA in connection with a small number of reimbursements the Company made to Mexican customs agents in the 2014-2015 time period for payments the customs agents made to Mexican customs officials in connection with inspections of grain crossing the U.S.-Mexican border by railcar.”
Although seemingly insignificant when compared to the three quarters of a billion dollars of net income for the company last year, these potential violations could trigger something much more costly to the agribusiness sector in general. When it comes to enforcing the FCPA, both the DOJ and the SEC are known to conduct industry “sweeps” after finding that one or more industry players have paid bribes to accomplish certain things. These sweeps can put other companies in the affected industry behind the eight ball and facing potential government investigations.
This announcement gives other agribusiness companies a head-start in reviewing their own anti-corruption compliance programs. Any effective compliance program should be reviewed and audited in the normal course, taking into account the latest industry standards as well as recent enforcement activity. CHS Inc.’s disclosure is a reminder for companies to ensure that their compliance programs address this kind of specific risk that occurs when transporting grains and goods across borders. As part of such a review, companies should consider asking:
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Do we have in place procedures to ensure that we conduct appropriate due diligence on any customs broker or agent that helps us clear customs?
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Have we sufficiently documented the due diligence that we have conducted on our brokers and agents?
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Has our accounting and/or auditing departments looked for any unusual payments or activities associated with transportation across borders?
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Have we reviewed our petty cash and expense reimbursements for our offices that are assigned to handle customs issues?
Depending on your answers, you may wish to conduct a more thorough review of the potential issues.
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