Foreign Corrupt Practices Act
|Enacted by the||95th United States Congress|
|Public Law||Pub.L. 95–213|
|Stat.||91 Stat. 1495|
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.
Provisions and scope
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 United States, American nationals, citizens, and residents acting in furtherance of a foreign corrupt practice whether or not they are physically present in the United States. In the case of foreign natural and legal persons, the Act covers their actions if they are in the United States at the time of the corrupt conduct. 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 just monetary forms and may include anything of value.
Persons subject to the FCPA
- 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
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. 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, and amended in 1998 by the International Anti-Bribery Act of 1998 which was designed to implement the anti-bribery conventions of the Organization for Economic Co-operation and Development.
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 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 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. There is no materiality to this act, making it illegal to offer anything of value as a bribe, including cash or non-cash items. The government focuses on the intent of the bribery rather than on the amount.
The FCPA also requires companies whose securities are listed in the United States to meet its accounting provisions. See 15 U.S.C. § 78m. These accounting provisions, which were designed to operate in tandem with the anti-bribery 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. An increasing number of corporations are taking additional steps to protect their reputation and reducing exposure by employing the services of due diligence companies. Identifying government-owned companies in an effort to identify easily overlooked government officials is rapidly becoming a critical component of more advanced anti-corruption programs.
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 are made to an official to expedite his performance of the duties he is already bound to perform. 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.
Notable cases of the application of FCPA are with Walmart, BAE Systems, Baker Hughes, Daimler AG, Halliburton, KBR, Lucent Technologies, Monsanto, Siemens, Titan Corporation, Triton Energy Limited, Avon Products, and Invision Technologies.
An April 2012 article in The New York Times reported that a former executive of Walmart de Mexico 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 United States "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.
Former Representative William J. Jefferson, Democrat of Louisiana, was charged with violating this act by bribing African governments for business interests. 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.
The U.S. Justice Department and the Securities and Exchange Commission are currently 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 €35 million-dollar contract to supply computer equipment throughout Russia." Stronger USDOJ and SEC enforcement increased the prominence of the FCPA from 2010 onwards.
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 will examine whether News Corporation violated the FCPA by bribing British police officers.
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 S.A., Snamprogetti Netherlands B.V., Kellogg Brown & Root Inc. (KBR), 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.
Other settlements for FCPA violations in 2012 include Smith & Nephew, who paid US$22.2 million to the DOJ and SEC, and BizJet International Sales and Support Inc., who paid US$11.8 million to the DOJ for bribery of foreign government officials. Both companies entered into a deferred prosecution agreement.
- Convention against Corruption (disambiguation)
- Politically exposed person
- The UK Bribery Act
- Corruption of Foreign Public Officials Act
- OECD Anti-Bribery Convention
- Funk, T. Markus (September 10, 2010). "Getting What They Pay For: The Far-Reaching Impact Of the Dodd-Frank Act's 'Whistleblower Bounty' Incentives on FCPA Enforcement". White Collar Crime Report (Bureau of National Affairs) 5 (19): 1–3.
- Posadas, Alejandro. "Combating Corruption Under International Law" (pdf). School of Law, Duke University.
- Rich, Ben R. and Janos, Leo. Skunk Works: A Personal Memoir of My Years at Lockheed. New York: Little Brown & Co., 1994, p. 10. ISBN 0-7515-1503-5.
- Barstow, David (April 21, 2012). "Vast Mexican Bribery Case Hushed Up by Wal-Mart After High-Level Struggle". The New York Times. Retrieved April 23, 2012.
- Miguel Bustillo (April 23, 2012). "Wal-Mart Faces Risk in Mexican Bribe Probe". Unknown parameter
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- Welch, David; Weidlich, Thom (April 23, 2012). "Wal-Mart Bribery Probe May Exposes Retailer to U.S. Fines". Bloomberg. Retrieved April 23, 2012.
- "Mexican watchdog group says Mexico's federal government should probe alleged Wal-Mart bribes". The Washington Post. Associated Press. April 22, 2012. Retrieved April 23, 2012.
- Hamburger, Tom; Dennis, Brady; Yang, Jia Lynn (April 24, 2012). "Wal-Mart took part in lobbying campaign to amend anti-bribery law". The Washington Post. Retrieved November 18, 2012.
- Stout, David (2009-08-06). "Ex-Rep. Jefferson Convicted in Bribery Scheme". The New York Times. p. A14.
- Crawford, David; Searcey, Dionne (April 16, 2010). "U.S. Joins H-P Bribery Investigation". The Wall Street Journal.
- T. Markus Funk, "Another Landmark Year: 2010 FCPA Enforcement Year-in-Review and Trends for 2011," Bloomberg Law Reports (January 3, 2010).
- "News Corp shares hit two-year low on hacking arrest". BBC World News. 18 July 2011.
- US Department of Justice (17 January 2012). "Marubeni Corporation Resolves Foreign Corrupt Practices Act Investigation and Agrees to Pay a $54.6 Million Criminal Penalty". US Department of Justice.
- Smith & Nephew (6 February 2012). "Smith & Nephew reaches settlement with US Government". Smith & Nephew.
- Reuters (14 March 2012). "U.S. says BizJet settles foreign bribery charges". Reuters.
- The FCPA Blog (26 March 2012). "Biomet Pays $22.8 Million To Settle Bribe Charges". The FCPA Blog.
||This article includes a list of references, but its sources remain unclear because it has insufficient inline citations. (August 2009)|
- US Department of Justice page on the FCPA, including a lay person's guide (PDF)
- The American Bar Association's Global Anti-Corruption Initiatives Task Force Webpage.
- Foreign Corrupt Practices Act Reporting Center (a website provided by a private law firm)
- The European Anti-Bribery Blog. The FCPA and anti-bribery news with a European slant
- Indictments allege bribes were paid for Kazakstan oil 2 Americans accused -- but not U.S. firms, by Marlena Telvick, April 2003
- Lucent fires four executives in China over allegations of bribery
- Report requests for bribes on BRIBEline
- Foreign Corrupt Practices Act, a CRS Report to U.S. Congress
- "Monsanto Company Charged with Bribing Indonesian Official" U.S. Department of State, 1/10/2005
- “Payload: Taking Aim at Corporate Bribery,” by Nelson Schwartz and Lowell Bergman. Additional reporting by Marlena Telvick, New York Times, November 25, 2007.
- "At Siemens, Bribery Was Just a Line Item," by Siri Schubert, New York Times 12/21/2008. Corruption helped to build Siemens, but also cost it $1.6 billion, the largest fine for bribery in modern corporate history. This article is a joint report by ProPublica, a nonprofit investigative journalism organization, PBS’s "Frontline," the Investigative Reporting Program at UC Berkeley and The New York Times. A related documentary will be broadcast on “Frontline” on April 7, 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.
-  Compliance with FCPA
-  Compliance
- "The Business of Bribes" PBS Frontline and FRONTLINE/World (February 2009)
- A Pocket Guide to The FCPA (June 2009)
- 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).
- For information about the UK Bribery Act (occasionally referred to as the FCPA on steroids) thebriberyact.com
- For more information about the UK Bribery Act and the FCPA see New York Law Journal, November 4, 2010, "White Collar Experts Are Recruited to Handle Expected Increase in Government Enforcements," and a quote in that article from M. Scott Peeler, a partner at Chadbourne & Parke, who when asked to compare the two acts, said, "It's the FCPA on steroids."