A recent $185m USD settlement between Daimler AG and the US government, as well as this article from Time Magazine, highlight the increasing efforts of the DOJ to enforce the FCPA and collect big money from violating corporations. As the article highlights, the DOJ collected $627m USD in FCPA fines in 2009, up from $87m in 2007. In the first 2 months of 2010, fines collected were up to $1.2b, not including the Daimler AG settlement.
Part of the appeal of enforcing the FCPA, aside from the easy money, is the fact that the FCPA is a broadly written piece of legislation that has been even more broadly interpreted by the courts and the feds. This has allowed them to reach into places where many businessmen have felt safe and secure and catch them exercising a little less restraint than they should be.
Further, companies who face FCPA-violation allegations fear the black-eye a federal indictment would inflict, and are in no rush to insist on their Constitutionally-guaranteed day in court. Therefore, a cash settlement/fine proves to be a very attractive option and the government is able to secure such a payment with relative ease.
That being said, it may be a good idea to review the anti-bribery provisions of the FCPA.
Who the FCPA applies to:
Honestly, just about everyone. Public companies, private companies, partnerships, they should all be wary of the FCPA. The FCPA contains language referring to “any issuer which has a class of securities…” which seems to imply it only applies to companies that have issued stock on US stock exchange. However, this is not the case as Sec. 78dd-2(a) states the act also applies to “any domestic concern” which conveniently means “any corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship which has its principal place of business in the United States, or which is organized under the laws of a State of the United States…”
Where the FCPA applies:
Again, just about everywhere. The acts forbidden by the FCPA do not have to take place on American soil, not even a little bit. Due to the Alternative Jurisdiction clause, Sec. 78dd-1(g), US companies and citizens are forbidden “to corruptly do any act outside the United States”, namely bribing a foreign official.
Who cannot be bribed:
The FCPA forbids the bribing of “foreign officials” only. However, the definition of foreign officials is not limited to government officials but also extends to employees of state-owned entities (SOEs). And in a place like China, where just about any corporation could, in fact, be a state-owned entity, briber beware.
What cannot be gained from a bribe:
Business. The FCPA states that bribes cannot be used to “obtain or retain business.” However, the courts and the DOJ have broadly construed this to go beyond obtaining contracts and interpreted it to mean the gaining of an improper advantage. So if the bribe leads to an advantage over competitors, it most likely runs afoul of the FCPA. And what bribe doesn’t?
What constitutes a bribe:
Money. Gifts. Discounts. Transportation. Food. Anything of value, which really means anything worth giving.
Exceptions:
There are two affirmative defenses recognized by the FCPA, 1) where the “bribe” is completely legal under the laws of the foreign official’s country; 2) where the “bribe” is actually a reasonable expenditure to promote/explain a product or service or to execute a contract with a foreign government. There is also an exception for payments that are made to grease the wheels, so to speak, rather than obtain business. The best advice here is that if your actions need to be justified by looking to the FCPA exceptions, it’s a good time to consult your attorney to make sure you’re in compliance.
For further discussion of the FCPA, you may visit:
The FCPA Explained http://www.fcpaenforcement.com/explained/explained.asp
The Foreign Corrupt Practices Act http://library.findlaw.com/1997/Jan/1/126234.html
Jason Lee
U.S. Legal Consultant
Allen & John Law Firm
www.allenjohn.com
Date: April 15, 2010
One Comment on "Enforcement of the Foreign Corrupt Practices Act (FCPA) Increases"
[...] the federal government continues to enthusiastically enforce the FCPA, another US corporation was forced to pony up for shady dealings in China. Veraz, a Calif.-based [...]