What is the Foreign Corrupt Practices
Act?
The Foreign Corrupt Practices Act (FCPA) is a law
that Congress initially passed in 1977. The purpose of the
FCPA was to punish and eliminate the bribery designed to influence
the acts and/or decisions of foreign officials. The policy
behind the FCPA was to combat the negative impact of bribery on free
and fair market competition.
The FCPA was amended in 1988
and then again ten years later. The latest amendment to the
FCPA is known as the International Bribery Act of 1998, an act that
implemented the anti-bribery provisions of a convention put forth by
the Organization for Economic Cooperation and Development.
How did the International Bribery Act of 1998 expand
the Foreign Corrupt Practices Act (FCPA)?
The International Bribery Act of 1998 expanded the FCPA in two important
ways: (1) It tried to strike a fine balance between combating
illicit business practices while facilitating the ability of
American businesses to compete overseas; and (2) it expanded the
list of those held accountable under the act to include foreign
nationals and corporations.
What are the two
major parts of the Foreign Corrupt Practices Act
(FCPA)?
The two major parts of the FCPA are the
anti-bribery provisions and the record-keeping and internal
accounting control provisions. The FCPA also details how it is
to be enforced as well as the penalties for violating its
provisions.
The anti-bribery provisions of the
Foreign Corrupt Practices Act (FCPA) refer to "issuers" and
"domestic concerns"—who are issuers and domestic concerns under the
FCPA?
Under the FCPA, an "issuer" is any company whose
securities are issued in accordance with section 12 of the Exchange
Act or any company that is required to make periodic reports in
accordance with section 15 of the Exchange Act.
The FCPA
defines a domestic concern as "any individual who is a citizen,
national, or resident of the United States, and any corporation,
partnership, association, joint-stock company, business trust,
unincorporated organization, or sole proprietorship which has its
principal place of business in the United States, or which is
organized under the laws of a State of the United States or a
territory, possession, or commonwealth of the United States."
15 U.S.C.A. § 78dd-2(h)(1)(A)-(B).
Just to sew up any
loose ends, the FCPA also refers to "any persons" other than issuers
and domestic concerns who do anything in furtherance of a corrupt
payment.
If I’m just an employee, can I be held
liable under the Foreign Corrupt Practices Act (FCPA)?
The anti-bribery provisions of the FCPA
also apply to the officers, directors, employees, or agents of an
issuer or domestic concern. Interestingly, even a stockholder
who acts on behalf on an issuer or domestic concern falls under the
provisions of the FCPA.
Does the company I
work for have to be found guilty in order for me to incur criminal
or civil liability under the Foreign Corrupt Practices Act
(FCPA)?
The 1988 amendment to the FCPA
removed the requirement that the issuer or domestic concern be found
guilty before its employees or agents could be prosecuted.
What are the elements of bribery under the Foreign
Corrupt Practices Act (FCPA)?
The FCPA makes it a crime to (1) make a
payment of, offer or promise to pay, or authorize a payment of money
or anything of value, directly or indirectly; (2) to any foreign
official, politician, party official, candidate for office, or to an
intermediary who knows that the payment will go to any of the
aforementioned people; (3) with a corrupt motive; (4) for the
purpose of influencing one of these person’s official acts or
decisions in violation of his or her lawful duty; (5) in order to
assist in obtaining or retaining business.
What constitutes a
payment under the Foreign Corrupt Practices Act (FCPA)?
As the Department of Justice points out
succinctly in its brochure of the FCPA, "[t]he FCPA prohibits
paying, offering, promising to pay (or authorizing to pay or offer)
money or anything of value." The FCPA does not define the term
"anything of value," nor is there any legislative history or case
law that defines exactly what this term means. The courts,
however, are likely to interpret the phrase broadly and look at the
subjective value the defendant placed on the payment.
How is a foreign official
defined under the Foreign Corrupt Practices Act (FCPA)?
The Department of Justice (DOJ)
brochure on the FCPA points out that a "foreign official means any
officer or employee of a foreign government, a public international
organization, or any department or agency thereof, or any person
acting in an official capacity." The DOJ suggests using its
FCPA Opinion Procedure in determining exactly who constitutes a
foreign official. For example, a member of a royal family, a
legislative body, or an official of a state-owned business
enterprise would be considered a "foreign official" for the purposes
of the act.
Exactly what is a "public international
organization" for the purposes of the Foreign Corrupt Practices Act
(FCPA)?
Under the FCPA, a public international
organization is any organization designated such by Executive order
in accordance with the International Organizations Immunities Act or
any other organization that the President decides to designate as
such.
The International Organizations Immunities Act (IOIA)
grants designated international organizations the capacity to
contract, acquire and dispose of personal property, and to institute
legal proceedings. The IOIA also, as the name implies,
provides designated organizations immunity from suit.
How does the Foreign Corrupt Practices Act (FCPA)
define an "intermediary?"
The FCPA defines an
intermediary as a third party who knows that all or part of a
corrupt payment will either be offered or otherwise make it into the
hands of any foreign official.
How is "knowing" defined under the Foreign Corrupt
Practices Act (FCPA)?
The "knowing" or "knowingly"
requirement of the FCPA is satisfied when the intermediary either
knows that all or part of the payment is going directly or
indirectly to a foreign official, or when the intermediary engages
in either conscious disregard or deliberate ignorance.
What’s the best way to avoid being held liable for
corrupt third-party payments under the Foreign Corrupt Practices Act
(FCPA)?
The Department of Justice recommends doing your
due diligence by investigating potential foreign representatives and
joint venture partners (1) to determine whether they are in fact
qualified for the position; (2) whether they have personal or
professional ties to the government; (3) to determine the number and
reputation of their clientele; and (4) to figure out what their
reputation is with the U.S. Embassy or consulate and with local
business people and clients.
What else does the
Department of Justice (DOJ) recommend to keep from running afoul of
the Foreign Corrupt Practices Act (FCPA) because of possible corrupt
third-party payments?
The DOJ recommends that you seek
the advice of counsel and consider utilizing their FCPA Opinion
Procedure for particular questions relating to third-party payments.
What is the "facilitating" or "grease payment"
exception of the Foreign Corrupt Practices Act
(FCPA)?
When Congress put the FCPA together, it
explicitly exempted from the anti-bribery prohibitions payments made
to facilitate or expedite performance of a "routine governmental
action."
Under the Foreign Corrupt Practices
Act (FCPA), what exactly is does a "routine governmental action"
mean in relation to the "facilitating" or "grease payment"
exception?
The FCPA defines a "routine governmental
action" as one that a foreign official ordinarily performs in (1)
obtaining permits, licenses, or other official documents to enable
you to do business in that country; (2) processing governmental
papers such as visas and work orders; (3) providing police
protection, mail services, or conducting inspections associated with
contract performance; (4) providing phone and utility services,
loading and unloading cargo, or protecting perishable from
deterioration; or (5) anything of a similar nature.
Remember
that a "routine governmental action" does not include a foreign
official’s decision to award new business or to continue business
with a particular party.
What is an affirmative
defense, and what are the affirmative defenses built into the
Foreign Corrupt Practices Act (FCPA)?
First of all, an
affirmative defense is something that limits a defendant’s criminal
and/or civil liability, even if the defendant admits to or the
government proves the factual allegations.
The FCPA has two built-in affirmative
defenses: (1) assertion that the payment in question was lawful
under the laws of the foreign country; and (2) assertion that "the
payment, gift, offer, or promise of anything of value was a bona
fide expenditure."
Under all circumstances, you should consider
seeking the advice of counsel and/or utilizing the DOJ’s FCPA
Opinion Procedure when considering the legality of a payment.
What constitutes a bona fide expenditure under the
Foreign Corrupt Practices Act (FCPA)?
The FCPA defines a
bona fide expenditure as things like travel and lodging expenses
incurred by or on behalf of a foreign official that was directly
related to the promotion, demonstration, or explanation of products
and services, or related to the performance of a contract with a
foreign government or agency.
Who can take advantage
of the affirmative defenses built into the Foreign Corrupt Practices
Act (FCPA)?
Under the FCPA, both the lawful payment and
the bona fide expenditure affirmative defenses are available to any
party charged, be it an issuer, domestic concern, or other person.
Does the Foreign Corrupt Practices Act (FCPA) provide
for the issuance of opinion letters?
The FCPA allows
issuers and domestic concerns to obtain the Attorney General’s
opinion as to whether the party’s prospective conduct conforms to
FCPA’s anti-bribery provisions.
To obtain an opinion
letter, the request must relate to an actual transaction and the
request must be prospective (i.e. before the requesting party
initiates the transaction).
Do the accounting
provisions of the Foreign Corrupt Practices Act (FCPA) apply only to
dealings with foreign officials?
The record-keeping and
internal accounting control provisions of the FCPA apply
domestically as well as abroad.
Who is covered
under the accounting provisions of the Foreign Corrupt Practices Act
(FCPA)?
The accounting and record-keeping requirements of
the FCPA apply only to issuers, those companies whose securities are
issued in accordance with section 12 of the Exchange Act or any
company that is required to make periodic reports in accordance with
section 15 of the Exchange Act.
What do the
accounting and record-keeping provisions of the Foreign Corrupt
Practices Act (FCPA) require an issuer to do exactly?
The
bookkeeping requirements of the FCPA require an issuer to "make and
keep books, records, and accounts, which, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of
the assets of the issuer."
The FCPA also requires an issuer
to maintain a system of internal accounting controls.
What are the internal accounting requirements for an
issuer under the Foreign Corrupt Practices Act
(FCPA)?
The internal accounting requirements of the FCPA
require an issuer to provide reasonable assurances that (1)
transactions are executed in accordance with management’s general or
specific authorization; (2) transactions are recorded as necessary
to permit preparation of financial statements in conformity with
generally accepted accounting principles or any other criteria
applicable to such statements, and to maintain accountability for
assets; (3) access to assets is permitted only in accordance with
management’s authorization; and (4) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
What sorts of
sanctions does the Foreign Corrupt Practices Act (FCPA) provide
for?
The FCPA provides for both criminal and civil
penalties. A person or firm may also be barred from doing
business with the federal government. In addition, violation
of the of the FCPA’s anti-bribery provisions may also give rise to a
private lawsuit under the Racketeer Influenced and Corrupt
Organizations (RICO) Act.
What are the possible
criminal penalties for violating the Foreign Corrupt Practices Act
(FCPA)?
If a corporation or other business entity
violates the anti-bribery provisions of the FCPA, it may be subject
to a fine of up to $2,000,000. Officers, directors,
stockholders, employees, and agents who violate the FCPA’s
anti-bribery provisions are subject to a fine of up to $100,000 and
as much as five years in prison.
Under the Alternative Fines
Act, the above-mentioned fines might actually be higher. In
some instances, the actual fine could be twice the benefit the
defendant sought to obtain by making the corrupt payment.
Keep in mind that an employer or principal cannot pay a fine
levied against an individual.
What are the possible
civil consequences for violating the anti-bribery provisions of the
Foreign Corrupt Practices Act (FCPA)?
Either the Attorney
General or the Securities and Exchange Commission (SEC) can bring a
civil action against any firm or officer, director, employee, agent,
or stockholder acting on behalf of a firm. The fine can be as
much as $10,000.
In SEC enforcement actions, a court could
impose an additional fine not greater than (1) the gross amount of
the defendant’s monetary gain resulting from the violation; or (2) a
specified dollar limitation, based on the egregiousness of the
violation, ranging from $5000 to $100,000 for a person and $50,000
to $500,000 for a company.
What other sorts of action may the
government take for violating the anti-bribery provisions of the
Foreign Corrupt Practices Act (FCPA)?
Any person or firm
found in violation of the FCPA may be barred from doing business
with the federal government. Bear in mind that simply being
indicted may preclude you or your firm from doing business with the
government.
Moreover, any person or firm found in violation
of the FCPA may be prevented from receiving export licenses, and the
Securities and Exchange Commission may suspend or bar persons from
the securities business, in addition to imposing civil penalties.
The Commodity Futures Trading Commission and the Overseas
Private Investment Corporation can also suspend or bar a firm from
their agency programs for violations of the
FCPA. | 
