Risk Management and Crisis Response Blog

DOJ launches FCPA investigation into Major League Baseball

Oct 12, 2018 3 MIN READ
Lawrence E. Ritchie

Partner, Disputes, Toronto

Malcolm Aboud

Counsel, Disputes, Toronto

The U.S. Department of Justice (the DOJ) has reportedly commenced an investigation into Major League Baseball centering on alleged Foreign Corrupt Practices Act (FCPA) violations in connection with MLB’s recruitment of international players and prospects. The DOJ probe reportedly targets the use of bribery and fraud in the league’s recruitment of players from countries including Cuba, Haiti and the Dominican Republic, and stems from allegations that teams utilize schemes involving bribery, kickbacks, smuggling and fraudulent immigration documents to sign and move baseball players from Caribbean countries into the United States.

The DOJ investigation

The report, initially published by Sports Illustrated, details a far-reaching investigation and provides access to documents the DOJ is said to have acquired in its probe, including video tapes, emails, photographs and legal briefs. The conduct said to be investigated by the DOJ includes human smuggling from Caribbean countries into the United States, dealings with local agents responsible for interactions with prospects, altered books and records and other “shady dealings”.

Major League Baseball has long been associated with sensational stories of efforts made to defect to the U.S. to play baseball – including, for example, White Sox first baseman Jose Abreu eating his falsified passport prior to arriving on American soil or late Marlins pitcher Jose Fernandez diving into the ocean after his mother was swept overboard while defecting from Cuba. However, focus has turned in recent years to potential compliance issues surrounding the process, including the Atlanta Braves being penalized by MLB last year after an investigation showed they were circumventing international signing rules. These developments fit into a larger trend of regulators looking into compliance by sporting bodies, including the arrest of several FIFA officials by the DOJ in 2015.

The role of the FCPA

The FCPA is a U.S. statute which seeks to criminalize foreign bribery and corrupt practices implemented by American businesses abroad. The Act, and its corresponding Canadian legislation the Corruption of Foreign Public Officials Act (CFPOA), make it an offence for individuals and entities to make payments to foreign government officials for assistance in obtaining or retaining business, and ban the use of corrupt efforts to secure an improper business advantage. The conduct reportedly alleged by the DOJ, including corrupt practices by MLB teams to move players from the Caribbean into the United States, would thus fall within the scope of behavior criminalized under the FCPA.

The FCPA provides the DOJ with far-reaching jurisdictional powers to investigate and prosecute the corrupt practices of individuals and corporations outside of the United States. The DOJ’s investigation into Major League Baseball highlight the DOJ’s increasingly aggressive use of the Act to prosecute individuals and businesses for their involvement in foreign bribery schemes. Canadian businesses are not immune from investigation and prosecution under the FCPA, since companies based in Canada that trade on an American stock exchange may be subject to prosecution under both the CFPOA and the FCPA.

Canadian companies should be sure to maintain appropriate compliance programs to confirm that their activities abroad are not in violation of Canadian or U.S. anticorruption laws. Companies facing the prospect of an investigation by U.S. regulators should seek advice from counsel as to how to navigate both Canadian and American foreign bribery laws.