FOREIGN CORRUPT PRACTICES ACT

The FCPA prohibits U.S. companies from making corrupt payments to foreign officials for the purpose of obtaining or keeping business. Companies paying bribes to foreign officials are subject to criminal and civil actions which can result in fines, suspension and exclusion from government procurement contracts, while the employees and directors can be sentenced to prison. The act was extended to apply to foreign companies and nationals taking part in any such act while in the U.S.

In addition, the Foreign Corrupt Practices Act requires companies with securities listed in the U.S. to meet its accounting requirements. These accounting requirements were designed to function in parallel with the anti-bribery requirements of the Foreign Corrupt Practices Act, which require companies to keep records that account for the transactions of the company, while devising and maintaining a process of accounting controls.

The Department of Justice is responsible for all criminal and civil enforcement of the anti-bribery requirements, as it pertains to domestic as well as foreign companies and nationals are concerned. In respect to issuers, the Securities and Exchange Commission is responsible for civil enforcement of the anti-bribery requirements.

In order to constitute an FCPA violation, 5 stipulations must be met:

A .Who: The Foreign Corrupt Practices Act is applicable to any person or entity and or stockholder acting on behalf of an organization. Persons and organizations can be penalized if they command, authorize, or help someone to violate the anti-bribery laws or if they conspire to break those laws. Under the Foreign Corrupt Practices Act, U.S. authority over corrupt payments to foreign nationals will depend upon if the violator is an issuer, a domestic and or foreign national or firm.

An issuer is a company that has issued securities which are registered in the U.S. or who are required to submit regular financial statements to the Securities and Exchange Commission.

A domestic concern is a person who is a citizen, national or residing in the U.S., or any legal entity which has its primary place of business in the U.S., or is organized under the laws of a state of the U.S.

Domestic and issuer concerns can be held liable under the Foreign Corrupt Practices Act under both territory and national jurisdiction principles. For acts committed inside the U.S., issuers and domestic concerns are liable if they commit an act to further a corrupt payment to a foreign national by using the United States mail or other vehicles of interstate commerce. In addition, domestic and issuer concerns can be held liable if they commit an act to further a corrupt payment outside of the U.S. Therefore, a United States firm or national can be held liable for a corrupt payment that is authorized by employees or agents working outside of the U.S., using funds from foreign banking accounts and without any involvement by personnel inside the U.S.

In 1998, several amendments empowered the Foreign Corrupt Practices Act to assert territory jurisdiction over foreign businesses and nationals. A foreign business or individual is subject to the Foreign Corrupt Practices Act if they cause, directly or through another, an act to further the corrupt payment to take place inside of the U. S.

U.S. parent companies can be held liable for the acts of its foreign subsidiaries if they authorize, direct, or control the activity in question, as can United States citizens or residents, considered domestic concerns and employed by or acting for a foreign-incorporated subsidiary.

B. Intent to corrupt:: The individual making or approving the payment must have intent to corrupt and the payment must be meant to procure the recipient to misuse his official position to send business wrongfully to the payer or to any other individual. The Foreign Corrupt Practices Act prohibits any corrupt payment meant to influence any act or decision by a foreign official in their official capacity, to procure the official to commit an act in violation of their lawful duty, to receive any improper advantage, or to procure a foreign official to use their influence in an improper manner which would affect or influence any act or decision.

C. Payments:: The Foreign Corrupt Practices Act makes it illegal to pay, offer, promise a payment or authorize a payment or to offer money or anything of value.

D. Recipient: This prohibition only extend only to corrupt payments to foreign officials, a foreign political party or party officials and or any candidate for foreign political office. The Foreign Corrupt Practices Act focuses on the purpose of the payment rather than the specific duties of the official who receives the payment, offer or promise of payment.

E. Business Purpose Test:: The Foreign Corrupt Practice Act makes it illegal to make payments to assist a company to obtain or retain business for, with or directing business to an individual.

The Foreign Corrupt Practice Act makes it illegal to proffer corrupt payments through third parties. It’s against the law to pay an intermediary, knowing that the payment or a portion of it will go directly or indirectly to a foreign official. An intermediary can be an agent and or a joint venture partner.

In order to avoid being held liable for corrupt payments made by intermediaries, companies in the U.S. are urged to conduct due diligence and take precaution to ensure that they have engaged in a commercial relationship with qualified and reputable partner and or representative. When negotiating a commercial relationship, the U.S. company should be aware of "red flags". For example, a history of corruption in the country, unusual payment patterns or financial arrangements, refusal by the foreign joint venture partner or representative to provide a certification that it will not take any action to further an unlawful act that would cause the U.S. company to violate the Foreign Corrupt Practices Act.

An exception exists to the anti-bribery prohibition concerning payments to facilitate expediting the performance of a routine governmental action. The following are examples listed in the statute:

• Obtaining licenses, permits or other official documents
• Processing governmental papers, for example: work orders and visas
• Giving police protection
• Picking-up mail and delivering it
• Providing water supple, power and phone service
• Loading and unloading cargo
• Protecting perishable products
• Schedule inspections associated to performance of a contract
• Cross country transit of goods

Decisions made by foreign officials awarding new business or continue business with a particular party are excluded from routing government actions.

An individual charged with a violation of the Foreign Corrupt Practices Act’s anti-bribery laws can claim as a defense that the payment was legal under the laws of the foreign country or that the funds were spent as part of a product demonstration or performing a contractual obligation. Because these are affirmative defenses, the defendant is required to demonstrate that the payment fulfilled these requirements.

The following criminal penalties can be imposed for violating the Foreign Corrupt Practices Act anti-bribery laws: companies and other businesses are subject to fines up to $2,000,000; individuals are subject to a fine up to $100,000 and incarceration up to 5 years. The Alternative Fines Ac can exact even higher fines; fines may be as much as twice the benefit that the defendant wanted to receive making the corrupt payment. The fines imposed on persons cannot be paid by the employer or principal.

The Securities and Exchange Commission and or Attorney General can bring a civil action for a fine up to $10,000 against any company, individual or stockholder acting on behalf of the firm, who violates the anti-bribery laws. In a Securities and Exchange Commission enforcement action, the court can decree an additional fine not to exceed the gross amount of the illegal gain as a result of the violation or a specified dollar limitation. The specified dollar limitations are based on the egregiousness of the violation, ranging from $5,000 to $100,000 for a natural person and $50,000 to $500,000 for any other person.

The Securities and Exchange Commission and or the Attorney General can also bring a civil action to enjoin any act or practice of a company when it appears that the company or person acting as an agent of the company is in violation of the anti-bribery laws.
The Office of Management and Budget has issued guidelines stating that an individual or company that is found violating the Foreign Corrupt Practices Act can be excluded from doing business with the Federal government. A company under indictment can be suspended from doing business with the government.

An individual or company found guilty of violating the Foreign Corrupt Practices Act can be ruled ineligible to receive an export licenses. The Securities and Exchange Commission can suspend or deny individuals from the securities industry and impose civil penalties on individuals in the securities industry for violating the Foreign Corrupt Practices Act. the Commodity Futures Trading Commission and the Overseas Private Investment Corporation provide for possible suspension or debarment from agency programs for violating the Foreign Corrupt Practices Act. Payments made to a foreign government official that are illegal under the Foreign Corrupt Practices Act can’t be deducted as a business expense.

Any conduct that violates the anti-bribery laws of the Foreign Corrupt Practices Act can also trigger a private cause of action for triple damages under the (RICO) Racketeer Influenced and Corrupt Organizations Act, or to actions under other federal or state laws. Take for example a case where a competitor brings a case under RICO alleging that the bribery caused the defendant to win a foreign contract.

The Justice Department has established a FCPA opinion procedure by which any U.S. company or national can ask for a statement from the Justice Department's of their enforcement intentions under the anti-bribery laws of the Foreign Corrupt Practices Act regarding any proposed business conduct. Under this procedure, the Attorney General will issue an opinion in response to a specific inquiry from a person or firm within 30 days of the request. Conduct for which the Department of Justice issues an opinion stating that the conduct complies with enforcement policy shall be entitled to a presumption, in any subsequent enforcement action, of conformity with the Foreign Corrupt Practices Act