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The Foreign Corrupt Practices ActThe Foreign Corrupt Practices Act (FCPA) prohibits bribery of foreign officials by U.S. companies and their foreign representatives, and requires such companies to maintain accurate books and records. A company can face fines in the tens or hundreds of millions of dollars for FCPA violations. Company employees and agents can also be fined individually (with the company prohibited from paying the fine on behalf of the employee or agent, or reimbursing the employee or agent who pays the fine), and can be imprisoned for up to five years for violating the FCPA.
FCPA prosecutions are often brought by the U.S. Department of Justice or the U.S. Securities and Exchange Commission out of their Washington, D.C. offices. It is important to have lawyers familiar with investigations and prosecutions by these government agencies advise you specifically on the provisions of the FCPA and standard practice under the Act for your company and your business.
On the surface, the FCPA’s requirements are relatively straightforward: don’t bribe foreign officials, and keep accurate records. However, in practice FCPA issues can arise without the obvious signs of improper dealing typically associated with international bribery, and it is important that any company or individual that does business internationally be familiar with the requirements of the Act in order to avoid inadvertent violations.
The FCPA’s Anti-Bribery ProvisionsBroadly speaking, the FCPA’s anti-bribery provisions prohibit a covered person from giving or promising “anything of value” to foreign officials or other prohibited recipients with the corrupt intent to have such officials or recipients use their influence to assist that person obtain, retain, or direct business. The anti-bribery provisions explicitly prohibit not only payments made directly to a foreign official, but also to an intermediary while “knowing” that all or some of the payment will be passed on improperly to a foreign official. The FCPA defines “foreign official” broadly to include any officer or employee of a foreign government or a public international organization; the definition is generally understood to include officers and employees of a commercial enterprise owned by a foreign government.
Knowledge of unlawful conduct is an essential element of a violation of the anti-bribery provisions of the FCPA. For purposes of the FCPA, a “knowing” state of mind exists “with respect to conduct, a circumstance, or a result” if a person “is aware that such person is engaging in such conduct” or “is aware” or “has a firm belief” that “such circumstance exists, or that such result is substantially certain to occur.” Knowledge of a particular circumstance exists “if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist.” A mere generalized knowledge or belief that corrupt business practices occur in a given country is unlikely to provide a sufficient basis to impute liability up the corporate ladder.
The statute exempts so-called “grease payments,” i.e., payments to government officials to expedite or facilitate “routine governmental action” that is non-discretionary in nature, such as issuing certain types of permits. The anti-bribery provisions also contain two affirmative defenses for payments that: (1) were lawful under the “written laws or regulations” of the foreign country or (2) were “reasonable and bona fide” expenditures “directly related” to “the promotion, demonstration or explanation of products or services” or “the execution or performance of a contract.”
The FCPA anti-bribery provisions apply to the following legal and natural persons: (1) “issuers” (United States and foreign companies listed on United States securities exchanges and their employees); (2) “domestic concerns” (business entities organized under United States laws or with their principal place of business in the United States, as well as any individual “who is a citizen, national or resident of the United States”); and (3) “persons other than issuers or domestic concerns” whose prohibited conduct occurs “while [they are] in the territory of the United States.” As a general matter, therefore, the conduct of a foreign subsidiary of a United States company is not covered by the anti-bribery provisions of the FCPA unless that subsidiary is listed on a securities exchange in the United States or acts within the United States to further a prohibited transaction. However, the U.S. parent could be subject to FCPA liability if it “knowingly” contributed to the improper payment made by the foreign subsidiary.
The FCPA’s Books and Records ProvisionsThe FCPA’s books and records and internal control provisions require covered companies to keep records that “in reasonable detail, accurately and fairly reflect the transactions and disposition of assets of the issuer.” These provisions also require an issuer to “devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances” of accuracy and transparency. In general, these requirements are designed to ensure the integrity of financial information of covered companies and to prevent the use of funds to finance improper activities. Unlike the FCPA’s anti-bribery provisions, the books and records provisions apply only to “issuers” and to foreign subsidiaries in which an “issuer” holds more than a 50% voting interest. A parent issuer can be held liable for a books and records violation of a majority-owned foreign subsidiary even if the parent had no knowledge of the violation or of any associated improper payments.
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