2. U.S. Anti-bribery Efforts
1. Foreign Corrupt Practices Act: Leading By Example
In 1977, with the passage of the Foreign Corrupt Practices Act (“FCPA”)1 , the U.S. took a revolutionary stand against the bribery of foreign officials in the context of international business transactions. After some startling discoveries by the federal government concerning the extent to which U.S. businesses utilized bribery as a means for obtaining business overseas, Congress passed the FCPA in an effort to restore citizen confidence in the integrity of U.S. business practices.2
In essence, the FCPA prevents U.S. individuals and business entities from paying, or offering to pay, money or in kind benefits to foreign public officials in exchange for obtaining or maintaining business. In terms of content, the statute has two main thrusts: (i) anti-bribery provisions, and (ii) accounting standards designed to work in conjunction with the anti-bribery provisions. This paper will address only the anti-bribery provisions.
1. Elements
There are five elements of an offense under the FCPA anti-bribery provisions:3
a. Jurisdiction: Who May Be Liable
The FCPA potentially applies to any individual, firm, officer, director, employee, or agent of a firm and any stockholder acting on behalf of a firm. The statute refers to “issuers,” “domestic concerns,” and “persons other than issuers or domestic concerns.”
- Issuer: A corporation that has issued securities that have been registered in the U.S. or that is required to file periodic reports with the SEC.4
- Domestic Concern: Any individual who is a citizen, national, or resident of the U.S. Any corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship that has its principle place of business in the U.S., or that is organized under the laws of a State of the U.S. or a territory, possession, or commonwealth of the U.S.5
- Other: A “person” other than an issuer or domestic concern means any natural person other than a national of the U.S. or any corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship organized under the law of a foreign nation or political subdivision thereof.6
Liability for FCPA violations may be imposed on issuers and domestic concerns under either of two means of obtaining jurisdiction. Under “territorial jurisdiction,” issuers and domestic concerns may be liable for acts taken within the territory of the U.S. in furtherance of a corrupt payment to a foreign official using the U.S. mails or any means or instrumentalities of interstate commerce.7 Under “nationality jurisdiction,” issuers and domestic concerns may be liable for any act in furtherance of a corrupt payment taken outside the U.S.8
Liability for FCPA violations may be imposed on persons other than issuers and domestic concerns under territorial jurisdiction. That is, a foreign company or person may be liable if it causes an act in furtherance of a corrupt payment to take place within the territory of the U.S. It should be noted that these persons may be liable under the FCPA irrespective of any utilization of means or instrumentalities of interstate commerce.9
b. Corrupt Intent
To be liable under the FCPA, the person making or authorizing the payment must corruptly intend to cause the foreign official to misuse his official position to direct business to that or some other person.10 The FCPA prohibits corrupt payments intended: to influence any act or decision of a foreign official in his official capacity; to induce a foreign official to do or omit to do any act in violation of his lawful duty; to secure an improper advantage; or to induce a foreign official to use his influence with a foreign government or instrumentality thereof to affect any act or decision of that entity.11
c. Payment
The FCPA prohibits paying, offering to pay, promising to pay, or authorizing to pay or offer, money or anything of value.12
d. Recipient
The FCPA prohibits corrupt payments to a foreign official, a foreign political party, a foreign political party official, and any candidate for foreign political office. The term “foreign official” is defined in the statute as follows:
The term “foreign official” means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government of department, agency, or instrumentality, or for or on behalf of any such public international organization.13
The statute provides a very broad definition, making the provisions potentially applicable to any public official, regardless or rank or official duty.
e. Business Purpose Test
The FCPA prohibits corrupt payments made for the purpose of obtaining or retaining business for or with, or directing business to, any person.14
2. Exceptions and Affirmative Defenses to the FCPA
Not every payment made to a foreign official falls within the scope of the FCPA. The FCPA does not apply to “facilitating” or “expediting” payments the purpose of which is to expedite or secure the performance of a routine governmental action by a foreign official, political party, or party official.15 Routine governmental actions include: (1) obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; (2) processing governmental papers, such as visas and work orders; (3) providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country, (4) providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities for deterioration; or (5) actions of a similar nature.16
It is an affirmative defense to the FCPA that (i) the payment, gift, offer, or promise of anything of value that was made, was lawful under the written laws and regulations of the recipient’s country, or (ii) the payment, gift, offer, or promise of anything of value that was made, was a reasonable and bona fide expenditure incurred on behalf of the recipient and directly related to the promotion, demonstration, or explanation of products or services or the execution or performance of a contract with a foreign government or agency thereof.17
3. Enforcement and Potential Sanctions18
The Department of Justice is responsible for all criminal enforcement of the anti-bribery provisions19 , and for civil enforcement against domestic concerns.20 The Securities and Exchange Commission has the authority for the investigation and civil prosecution of both the accounting and anti-bribery provisions of the FCPA with regard to issuers.21 There is no private cause of action under the FCPA.22
Criminal: Corporations and other business entities that violate the FCPA face a fine of up to $2,000,000.23 Officers, directors, stockholders, employees and agents face a fine of up to $100,000 and imprisonment of not more than five years, or both.24
Civil: A civil action may be brought against any firm as well as any officer, director, employee, or agent of a firm, or a stockholder acting on behalf of a firm for a civil penalty of not more than $10,000.25 Additionally, the FCPA provides for injunctive relief when it appears that the anti-bribery provisions are being, or are about to be, violated.26