Foreign corrupt practices Act

(ANTIBRIBERY PROVISIONS)

Introduction

U.S. firms seeking to do business in foreign markets must be familiar with the Foreign Corrupt Practices Act (FCPA). In general, the FCPA prohibits corrupt payments to foreign officials for the purpose of obtaining or keeping business. The Department of Justice is the chief enforcement agency, with a coordinate role played by the Securities and Exchange Commission (SEC). The Office of General Counsel of the Department of Commerce also answers general questions from U.S. exporters concerning the FCPA basic requirements and constraints.

The antibribery provisions of the FCPA make it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person. Since 1998, they also apply to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States.

The FCPA also requires companies whose securities are listed in the United States to meet its accounting provisions. These accounting provisions, which were designed to operate in tandem with the antibribery provisions of the FCPA, require corporations covered by the provisions to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.

Enforcement

The Department of Justice is responsible for all criminal enforcement and for civil enforcement of the antibribery provisions with respect to domestic concerns and foreign companies and nationals. The SEC is responsible for civil enforcement of the antibribery provisions with respect to issuers.

Antibribery Provisions

Basic Prohibition

The FCPA makes it unlawful to bribe foreign government officials to obtain or retain business. With respect to the basic prohibition, there are five elements which must be met to constitute a violation of the Act:

A. Who - 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. Individuals and firms may also be penalized if they order, authorize, or assist someone else to violate the antibribery provisions or if they conspire to violate those provisions.

B. Corrupt intent - The person making or authorizing the payment must have a corrupt intent, and the payment must be intended to induce the recipient to misuse his official position to direct business wrongfully to the payer or to any other person. You should note that the FCPA does not require that a corrupt act succeed in its purpose. The offer or promise of a corrupt payment can constitute a violation of the statute. The FCPA prohibits any corrupt payment intended to influence any act or decision of a foreign official in his or her official capacity, to induce the official to do or omit to do any act in violation of his or her lawful duty, to obtain any improper advantage, or to induce a foreign official to use his or her influence improperly to affect or influence any act or decision.

C. Payment - The FCPA prohibits paying, offering, promising to pay (or authorizing to pay or offer) money or anything of value.

D. Recipient - The prohibition extends only to corrupt payments to a foreign official, a foreign political party or party official, or any candidate for foreign political office. 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. You should consider utilizing the Department of Justice's Foreign Corrupt Practices Act Opinion Procedure for particular questions as to the definition of a "foreign official," such as whether a member of a royal family, a member of a legislative body, or an official of a state-owned business enterprise would be considered a "foreign official."

Third Party Payments

The FCPA prohibits corrupt payments through intermediaries. It is unlawful to make a payment to a third party, while knowing that all or a portion of the payment will go directly or indirectly to a foreign official. The term "knowing" includes conscious disregard and deliberate ignorance. The elements of an offense are essentially the same as described above, except that in this case the "recipient" is the intermediary who is making the payment to the requisite "foreign official."

Intermediaries may include joint venture partners or agents. To avoid being held liable for corrupt third party payments, U.S. companies are encouraged to exercise due diligence and to take all necessary precautions to ensure that they have formed a business relationship with reputable and qualified partners and representatives. Such due diligence may include investigating potential foreign representatives and joint venture partners to determine if they are in fact qualified for the position, whether they have personal or professional ties to the government, the number and reputation of their and their reputation with the U.S. Embassy or Consulate and with local bankers, clients, and other business associates. In addition, in negotiating a business relationship, the U.S. firm should be aware of so-called "red flags," i.e., unusual payment patterns or financial arrangements, a history of corruption in the country, a refusal by the foreign joint venture partner or representative to provide a certification that it will not take any action in furtherance of an unlawful offer, promise, or payment to a foreign public official and not take any act that would cause the U.S. firm to be in violation of the FCPA, unusually high commissions, lack of transparency in expenses and accounting records, apparent lack of qualifications or resources on the part of the joint venture partner or representative to perform the services offered, and whether the joint venture partner or representative has been recommended by an official of the potential governmental customer.

 

Now, let’s unite the points 8 – 11 and answer the following employee’s questions from the position of top manager and give him or her advice on behalf of the company:

11.1. Can we keep a gift of candy and fruit that our work group received from a long-standing vendor at holiday time?

11.2. May I pay for the lunch of a government official with whom we are discussing interpretations of the company regulations?

11.3. A consulting firm offered four tickets to the baseball game with a value of $100 per ticket. Does this mean that I can’t go? What if I give the tickets to my staff instead?

11.4. Frank is a salesman for a heavy equipment supplier. On behalf of our company I do business with his company. He knows that I am an amateur photographer. He sent me an expensive camera. Can I keep it?

12. Define the term fraud and give your opinionsubject to theft and fraud inside the company. Answer the following employee’s questions from the position of top manager and give him or her advice on behalf of the company:

12.1. Someone in my workgroup agreed to spend $300,000 on consulting services that were budgeted for next year but only has spending authority up to $200,000. He asked me to issue two separate purchase orders so that he can avoid asking his boss for approval. What should I do?

12.2. When it comes down to it, I’m a salesperson. Like everybody else, I have mouths to feed at home and have to make my numbers every quarter. I work with some of the same customers every quarter, and know about how much they are going to purchase from us. Why can’t I just book my sales ahead of time? Aren’t they as good as sold?

13. What do confidential information and confidentiality agreements mean for your company’s business? What basic features do the information assets of your company include? What information can’t be considered as confidential one? Answer the following employee’s questions from the position of top manager and give him or her advice on behalf of the company:

13.1. Our company is using local contractor to provide catering at an all-office event. I like their work and may want to use them for my daughter’s wedding. Can I look at their pricing information to determine how expensive they are?

13.2. One of my close friends is starting a consulting company and asked for a copy of our organizational charts and personnel policies. He explained that this could give him some informal benchmarking advice. May I help him out?

13.3. Once my former employees has contacted me to provide an employment reference. What can I say?

14. Define the terms discrimination and harassment. What does sexual harassment mean in business? Read and translate the following broadcast and be ready to discuss it from the positions of business ethics and linguistics: