The Foreign Corrupt Practices Act of 1977 (FCPA) (15 U.S.C. § 78dd-1, et seq.) is a United States federal law known primarily for two of its main provisions, one that addresses accounting transparency requirements under the Securities Exchange Act of 1934 and another concerning bribery of foreign officials. The act was amended in 1988 and in 1998. As of 2012 there were continued congressional concerns.
Video Foreign Corrupt Practices Act
Provisions and scope
The idea of Foreign Corrupt Practices Act (FCPA) is to make it illegal for companies and their supervisors to influence foreign officials with any personal payments or rewards. The FCPA applies to any person who has a certain degree of connection to the United States and engages in foreign corrupt practices. The Act also applies to any act by U.S. businesses, foreign corporations trading securities in the U.S., American nationals, citizens, and residents acting in furtherance of a foreign corrupt practice whether or not they are physically present in the U.S. This is considered the nationality principle of the act. Any individuals that are involved in those activities may face prison time. This act was passed to make it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. In the case of foreign natural and legal persons, the Act covers their deeds if they are in the U.S. at the time of the corrupt conduct. This is considered the protective principle of the act. Further, the Act governs not only payments to foreign officials, candidates, and parties, but any other recipient if part of the bribe is ultimately attributable to a foreign official, candidate, or party. These payments are not restricted to monetary forms and may include anything of value. This is considered the territoriality principle of the act.
An ongoing debate asks about the law's effects. Scholars have found that the FCPA discourages US firms from investing in foreign markets. Companies engaging in mergers and acquisitions in emerging markets face a uniquely increased level of regulatory and corruption risk.
Persons subject to the FCPA
- Issuers
- Includes any U.S. or foreign corporation that has a class of securities registered, or that is required to file reports under the Securities and Exchange Act of 1934
- Domestic concerns
- Refers to any individual who is a citizen, national, or resident of the United States and any corporation and other business entity organized under the laws of the United States or of any individual US State, or having its principal place of business in the United States
- Any person
- Covers both enterprises and individuals
Maps Foreign Corrupt Practices Act
History
As a result of U.S. Securities and Exchange Commission investigations in the mid-1970s, over 400 U.S. companies admitted making questionable or illegal payments in excess of $300 million to foreign government officials, politicians, and political parties. The abuses ran the gamut from bribery of high foreign officials to secure some type of favorable action by a foreign government to so-called facilitating payments that were made to ensure that government functionaries discharged certain ministerial or clerical duties. If the official has no choice but to bribe, and bribery is legal in the country, bribing is seen as greasing the wheels. One major example was the Lockheed bribery scandals, in which officials of aerospace company Lockheed paid foreign officials to favor their company's products. Another was the Bananagate scandal in which Chiquita Brands had bribed the President of Honduras to lower taxes. Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system.
The Act was signed into law by President Jimmy Carter on December 19, 1977. It was first amended by the Omnibus Trade and Competitiveness Act of 1988, where Title V is known as the 'Foreign Corrupt Practices Act Amendments of 1988'. It introduced a "knowing" standard in order to find violations of the Act, encompassing "conscious disregard" and "willful blindness." Other amendments were for "bona fide", "reasonable" and lawful gifts under the laws of the foreign country.
The second amendment was the International Anti-Bribery Act of 1998 which was designed to implement the OECD Anti-Bribery Convention--i.e., to include certain foreign persons and extending the scope beyond U.S. borders.
Enforcement
The Securities and Exchange Commission (SEC) and the Department of Justice are both responsible for enforcing the FCPA. This is because the FCPA both amends an SEC Act and the criminal code. The SEC enforces the Act for companies it regulates and the Department of Justice enforces the bill regarding all other domestic companies. This split was criticized even before the act was passed. In 2010 the SEC created a specialized unit for FCPA enforcement. In 2012, the SEC and the DOJ issued their first joint guide to the FCPA.
In April 2017, Attorney General Jeff Sessions traveled to an ethics lawyers conference to assure them that he would continue prosecutions under the FCPA, regardless of new SEC Chairman Jay Clayton's expressed skepticism and of President Donald Trump's comments that it is a "horrible law" and "the world is laughing at us".
Requirements
The anti-bribery provisions of the FCPA make it unlawful for a U.S. person, and certain foreign issuers of securities, to make a payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person. Since the 1998 Amendment of FCPA they also apply to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the U.S. The meaning of foreign official is broad. For example, an owner of a bank who is also the minister of finance would count as a foreign official according to the U.S. government. Doctors at government-owned or managed hospitals are also considered to be foreign officials under the FCPA, as is anyone working for a government-owned or managed institution or enterprise. Employees of international organizations such as the United Nations are also considered to be foreign officials under the FCPA. A 2014 federal appellate court decision has provided guidance on how the term "foreign official" is defined under FCPA.
Because the Act concerns the intent of the bribery rather than the amount, there is no requirement of materiality. Offering anything of value as a bribe, whether cash or non-cash items, is prohibited.
The FCPA also requires companies whose securities are listed in the U.S. to meet its accounting provisions. These accounting provisions operate in tandem with the anti-bribery provisions of the FCPA, and require respective corporations 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. An increasing number of corporations are taking additional steps to protect their reputation and reduce their exposure by employing the services of due diligence companies tasked with vetting third party intermediaries and identifying easily overlooked government officials embedded in otherwise privately held foreign firms. This strategy is one element of an effective FCPA Compliance Program, as it shows a sincere attempt to avoid business situations where high risk (prior history or proximity to unethical behavior) individuals are concerned.
Regarding payments to foreign officials, the act draws a distinction between bribery and facilitation or "grease payments", which may be permissible under the FCPA, but may still violate local laws. The primary distinction is that grease payments or facilitation payments are made to an official to expedite his performance of the routine duties he is already bound to perform. The exception focuses on the purpose of the payment rather than on its value.Payments to foreign officials may be legal under the FCPA if the payments are permitted under the written laws of the host country. Certain payments or reimbursements relating to product promotion may also be permitted under the FCPA.
A U.S. company acquiring a foreign firm could face successor liability for FCPA violations committed by the foreign firm prior to being acquired. Generally, acquiring companies may be liable as a successor for pre-existing FCPA violations committed by an acquired company where those violations were subject to the FCPA's jurisdiction when committed. This position was further confirmed by the DOJ in a 2014 opinion stating that pre-acquisition conduct by a foreign target company without a jurisdictional nexus to the U.S. would not be subject to FCPA enforcement.
Anti-bribery/anti-corruption (ABAC) solutions
Businesses increasingly focus on their core competencies, and as a result engage more third parties to provide critical business functions. Companies do not have direct control over their third-party providers, which expose them to regulatory and reputational risk of FCPA violations by those third parties. Under the FCPA, businesses are accountabile for activities involving both their internal and external relationships. Companies that operate internationally, or that engage third parties in countries with a high Corruption Perceptions Index, are especially at risk. Many companies have now adopted "anti-bribery/anti-corruption" (ABAC) solutions to combat this risk and help protect themselves from fines and reputational damage.
ABAC compliance solutions are a subset of third party management. These systems can automatically manage third party information and monitor their ongoing activities in compliance with FCPA regulation.
Application
Stronger DOJ and SEC enforcement has increased the prominence of the FCPA from 2010 onwards. The SEC website shows a complete list of enforcement cases since 1978. Notable select cases of the application of FCPA since 2008 are with ALCOA, Biomet, Bizjet, Hewlett Packard Company, KBR, Marubeni Corporation, News Corporation, Siemens, Smith & Nephew and Walmart de Mexico as follows:
In 2008, Siemens AG paid a $450 million fine for violating the FCPA. This is one of the largest penalties ever collected by the DOJ for an FCPA case.
In 2012, Japanese firm Marubeni Corporation paid a criminal penalty of US$54.6 million for FCPA violations when acting as an agent of the TKSJ joint venture, which comprised Technip, Snamprogetti Netherlands B.V., Kellogg Brown & Root Inc., and JGC Corporation. Between 1995 and 2004, the joint venture won four contracts in Nigeria worth more than US$6 billion, as a direct result of having paid US$51 million to Marubeni to be used to bribe Nigerian government officials.
In 2012 Smith & Nephew paid US$22.2 million to the DOJ and SEC, and Bizjet International Sales and Support Inc. paid US$11.8 million to the DOJ for bribery of foreign government officials. Both companies entered into a deferred prosecution agreement.
In March 2012, Biomet Inc. paid a criminal fine of US$17.3 million to resolve charges of FCPA violations and US$5.5 million in disgorgement of profits and pre-judgment interest to the SEC.
In January 2014, ALCOA paid $175 million in disgorgement of revenues and a fine of $209 million to settle charges that its Australian bauxite mining subsidiary retained an agent that made bribes to government officials in Bahrain and to officers of Aluminum Bahrain B.S.C. to secure long-term contracts to supply the company with bauxite ore.
In March 2014, Marubeni Corporation agreed with the DOJ to pay a US$88 million fine after pleading guilty to taking part in a scheme to pay bribes to high ranking Indonesian officials in order to secure a lucrative power project.
On February 24, 2015, the Goodyear Tire and Rubber Company "Goodyear" agreed to pay more than $16 million to settle FCPA charges that two of its African subsidiaries allegedly paid $3.2 million in bribes that generated $14,122,535 in illicit profits. The SEC FCPA charges involved Goodyear subsidiaries in Kenya and Angola for allegedly paying bribes to government and private-sector workers in exchange for sales in each country. According to the SEC because "Goodyear did not prevent or detect these improper payments because it failed to implement adequate FCPA compliance controls at its subsidiaries" and, for the Kenyan subsidiary, "because it failed to conduct adequate due diligence" prior to its acquisition. It was not alleged that Goodyear had any involvement with or knowledge of its subsidiaries' improper conduct.
Charges
In 2009, former Representative William J. Jefferson, Democrat of Louisiana, was charged with violating the FCPA by bribing African governments for business interests.
In 2010 the DOJ and the SEC were investigating whether Hewlett Packard Company executives paid about $10.9 million in bribery money between 2004 and 2006 to the Prosecutor General of Russia "to win a EUR35 million-dollar contract to supply computer equipment throughout Russia." On September 11, 2014 HP Russia pleaded guilty before U.S. District Judge D. Lowell Jensen of the Northern District of California to conspiracy and substantive violations of the anti-bribery and accounting provisions of the FCPA. The court sentenced HP Russia to pay a $58,772,250 fine.
In July 2011, the DOJ opened an inquiry into the News International phone hacking scandal that brought down News of the World, the recently closed UK tabloid newspaper. In cooperation with the Serious Fraud Office (United Kingdom), the DOJ was to examine whether News Corporation violated the FCPA by bribing British police officers. Nine police officers were convicted including a senior officer in the Met counter-terrorism command, Det Ch Insp April Casburn, former Met anti-terrorism officer Timothy Edwards, former police officer Simon Quinn, former Met officer Paul Flattley and Scott Chapman, an ex-prison officer.
An April 2012 article in the New York Times reported that a former executive of Walmart de México y Centroamérica alleged in September 2005 that Walmart de Mexico had paid bribes to officials throughout Mexico in order to obtain construction permits, that Walmart investigators found credible evidence that Mexican and American laws had been broken, and that Walmart executives in the U.S. "hushed up" the allegations. According to an article in Bloomberg, Wal-Mart's "probe of possible bribery in Mexico may prompt executive departures and steep U.S. government fines if it reveals senior managers knew about the payments and didn't take strong enough action, corporate governance experts said." Eduardo Bohorquez, the director of Transparencia Mexicana, a "watchdog" group in Mexico, urged the Mexican government to investigate the allegations. Wal-Mart and the US Chamber of Commerce had participated in a campaign to amend FCPA; according to proponents, the changes would clarify the law, while according to opponents, the changes would weaken the law.
Other cases are with Avon Products, Invision Technologies, BAE Systems, Baker Hughes, Daimler AG, Monsanto, Halliburton, Titan Corporation, Triton Energy Limited, Lucent Technologies.
See also
- Convention against Corruption (disambiguation)
- Corruption of Foreign Public Officials Act
- OECD Anti-Bribery Convention
- Politically exposed person
- The UK Bribery Act
References
External links
- US Department of Justice page on the FCPA
- The American Bar Association's Global Anti-Corruption Committee Webpage.
- Incidents of actual or alleged bribery
- Telvick, Marlena (2003-04-07). "Indictments allege bribes were paid for Kazakstan oil / 2 Americans accused -- but not U.S. firms". sfgate.com. Retrieved 2015-02-18.
- Lucent fires four executives in China over allegations of bribery Stephen Taub April 7, 2004 CFO.com
- "Monsanto Company Charged with Bribing Indonesian Official" U.S. Department of State, 2005-01-10
- Schwartz, Nelson; Bergman, Lowell (November 25, 2007). "Payload: Taking Aim at Corporate Bribery". New York Times. Retrieved 2015-02-18.
- "At Siemens, Bribery Was Just a Line Item," by Siri Schubert, New York Times 12/21/2008. joint report by ProPublica, PBS's Frontline, the Investigative Reporting Program at UC Berkeley and The New York Times; related documentary on Frontline April 7, 2009.
- "The Business of Bribes" PBS Frontline and FRONTLINE/World February 2009
- "KBR charged with bribing Nigerian officials for contracts" CNN.com, February 2009
- "Detailed coverage on Wal-Mart FCPA Issues in India" Fraudtoday.net, December 2012
- "Halliburton, U.S. Reach Settlement In Bribery Probe," All Things Considered, NPR, January 26, 2009. Halliburton Corp. has announced it will pay out more than $560 million to the Justice Department and the Securities and Exchange Commission to settle a probe into bribery and bid-rigging in contracts around the world. Investigative journalist Lowell Bergman talks about the settlement.
- David C. Weiss, The Foreign Corrupt Practices Act, SEC Disgorgement of Profits, and the Evolving International Bribery Regime: Weighing Proportionality, Retribution, and Deterrence, 30 Michigan Journal of International Law 471 (2009).
- thebriberyact.com information about the UK Bribery Act
- New York Law Journal, November 4, 2010, "White Collar Experts Are Recruited to Handle Expected Increase in Government Enforcements," quote in that article from lawyer M. Scott Peeler, who when asked to compare the two acts, said, "It's the FCPA on steroids."
- The European Anti-Bribery Blog. The FCPA and anti-bribery news with a European slant
- Google's 'Regime Change' Agent, Jared Cohen
Source of the article : Wikipedia
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