The FCPA Files: Kenny International (1979)
Finbar Kenny was a philatelist and entrepreneur: postage stamps were his game. After decades as the manager of Macy’s stamp department, he was intimately familiar with both the community and the economy of stamp collectors.
In the early 1960s, Kenny saw an opportunity: a number of Persian Gulf sheikhdoms, informal British protectorates, had wrested domestic control over their mail systems. With few other sources of revenue (oil wasn’t yet a force in that part of the Arabian Peninsula), they could leverage their newfound franking authority into a valuable novelty for the philatelic market. Within a few years, these “Dunes” stamps—garishly decorated and generally bearing no thematic relation to their jurisdiction of origin—accounted for a significant share of the issuers’ budgets. The buzz eventually died down, and the stamps were mostly worthless by the time the sheikhdoms formed the United Arab Emirates in 1971.
Kenny made a similar deal in 1965 with the new prime minister of the Cook Islands, Albert Henry. It was a win-win: Kenny’s company printed the stamps, sold them abroad, and kept half the profits. The government, for its part, enjoyed a convenient source of passive income—a full fifth of its budget by the late 1970s.
In 1978, Henry was facing a tough re-election. Turnout was going to be key: the contest would eventually hinge on which party could fly in more expats from New Zealand. Air travel not being cheap, Henry asked Kenny to help him divert $337,000 of stamp revenue to charter flights for friendly voters. The scheme worked and Henry stayed in office. But not for long: the ruse was discovered, the subsidized votes were nullified, and Henry’s rival, Thomas Davis, became prime minister.
Guilty pleas followed: Henry for conspiracy and corruption, Kenny International for violating the FCPA’s anti-bribery provision—the very first conviction under the infant law. Kenny was levied a fine of $50,000 and required to make good on the diverted $337,000. Ironically, the company was invited to continue printing and selling stamps under the new government, as there really wasn’t anyone else who could do the job. No matter: soon enough collectable stamps would be displaced in the islands’ economy by the burgeoning industries of offshore financial services and tourism. There’s more than one way to leverage sovereignty and a sense of the exotic.
This post is part of "The FCPA Files" series, examining key enforcement cases under the Foreign Corrupt Practices Act and the lessons they offer for modern compliance. |