The FCPA Files: Vitusa Corporation (1994)

Denny Herzberg was still an infant when his parents fled Nazi Germany in 1940. They had managed the difficult task of securing exit visas for themselves, but the Gestapo agent at the ship’s on-ramp wouldn’t let their baby aboard with only a birth certificate. So they did what they had to do: cleared out one of their suitcases, placed the boy inside, and carried him past the guard, his cries muffled by the tape on his mouth and the remaining clothes wrapped around his head. Thirty days later, the family arrived safe at their new home in the Dominican Republic.

The DR was unique among nations in its welcoming of Jewish refugees. Its dictator, Rafael Trujillo—perhaps eager to distract from his own recent massacre of thousands of Haitians caught on the wrong side of the Dajabón river—had offered to take in as many as 100,000. Though only a few hundred were able to complete the journey, those that did were each given upwards of 80 acres of land along the northern coast and enough livestock to start building a thriving dairy industry in the newly-founded beach town of Sosúa.

While the farms would endure, most of the original settlers moved on after the war, many of them—including Denny Herzberg—to the United States. Eventually taking residence in New Jersey, Herzberg drew upon his agricultural background to establish the Vitusa Corporation in 1956, specializing in the sale of dairy and animal-nutrition products. Among its customers was Herzberg’s childhood homeland, where the appetite for milk significantly exceeded the domestic supply, and where the post-Trujillo democratic government had long wielded food policy and distribution as means of maintaining patrimonial political support.

Not surprising, then, that in May 1990, in the midst of a long-term balance-of-payments crisis and on the eve of an air-tight presidential election, the DR’s government would ask for early release from bonded storage of more than 600 metric tons of Vitusa’s powdered milk. Herzberg went along with the request—just as he would later go along with an extortionate demand for a $50,000 “service fee” in exchange for final payment. And as he would go along still later with the U.S. government’s characterization of this “service fee” as a bribe under the FCPA (facilitation-payment exception be damned), paying a $20,000 penalty and getting on with his life.

BriberyMatters

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.