71 The Alabama Lawyer 382 (2010). When Doing Business Internationally Becomes a Crime: Assisting Clients in Understanding and Complying with the Foreign Corrupt Practices Act.

• Author: By William C. Athanas

Alabama Lawyer

2010.

71 The Alabama Lawyer 382 (2010).

When Doing Business Internationally Becomes a Crime: Assisting Clients in Understanding and Complying with the Foreign Corrupt Practices Act

When Doing Business Internationally Becomes a Crime: Assisting Clients in Understanding and Complying with the Foreign Corrupt Practices ActBy William C. AthanasAs global markets expand and economic turmoil increases, American companies of all sizes and types _ have initiated or intensified efforts to sell their products and services in foreign countries, particularly in emerging markets such as Brazil, Russia, India, China, and Africa. Those doing business overseas face a host of operational, cultural and legal challenges. Compliance with the Foreign Corrupt Practices Act (FCPA) had rapidly ascended toward the top of that list as a result of the recent proliferation of criminal prosecutions and civil enforcement actions under the statute.

The FCPA prohibits improper payments to foreign officials for the purpose of obtaining or retaining business and creates a thicket of legal issues impacting virtually every aspect of international commerce. From obtaining permits and licenses necessary to do business to securing contracts from foreign governments to hiring intermediaries to participating in joint ventures overseas, any interaction with those vested with official discretion and authority creates an opportunity for payments which may be intended to or interpreted as attempts to improperly influence official action. Failing to understand or comply with the FCPA's framework carries potentially severe civil and criminal consequences, including fines, disgorgement of profits, debarment from eligibility to receive government contracts, prohibition on receiving or revocation of export licenses, and, perhaps most significantly, substantial terms of imprisonment for violators.

Originally enacted in 1977 to combat corruption in the wake of Watergate, the FCPA received relatively little attention during much of its first three decades of existence. To the extent the statute was enforced, large corporations were the most frequent target, with civil and criminal actions typically resulting when those entities discovered and self reported violations to the government. Everything changed in 2005, when the Department of Justice dramatically increased its commitment to investigate and prosecute foreign bribery. Those efforts triggered a virtual explosion of activity under the statute, producing more criminal enforcement actions in the last four years than in the previous 29 of the statute's existence, with the rate of increase likely to continue to grow.

This striking surge in the volume of FCPA enforcement actions coincides not just with a substantial increase in the volume of investigative and prosecutorial resources dedicated to the statute, but also with a dramatic overhaul in the investigative tools employed to build cases. As the world continues to get smaller and American businesses continue their efforts to expand into countries where corruption runs rampant and bribes to government officials represent the status quo, these efforts will only continue to develop, causing the FCPA's impact to swell in breadth and depth. Those unprepared to adhere to the statute's mandates-or, even worse, those unaware of their existence-face an environment of elevated risks and dangerous consequences.

ELEMENTS OF THE STATUTE

The FCPA contains two main components, commonly referred to as the "anti-bribery" and "accounting" provisions. The anti-bribery provisions speak in prohibitive terms, forbidding anyone-including American companies of all sizes, U.S. citizens and permanent residents-from corruptly offering, promising or giving anything of value, directly or indirectly, to a foreign official for the purpose of obtaining or retaining business anywhere in the world. 15 U.S.C. §§ 78dd-l, dd-2 and dd-3. In contrast, the accounting provisions create affirmative obligations, requiring those companies registered with the Securities and Exchange Commission to maintain "books, records and accounts which, in reasonable detail, accurately and fairly reflect the transactions ... of the issuer," and to devise and maintain internal controls designed to provide reasonable assurances that financial transactions are executed in accordance with generally accepted accounting standards. 15 U.S.C. § 78m(b)(2). Recognizing that corrupt activity flourishes when concealed, the accounting provisions seek to negatively reinforce compliance with the anti-bribery prohibitions by imposing separate and additional penalties where any registered company pays a bribe and fails to declare and disclose it as such in the company's books, records and accounts.

While the process of understanding of the FCRA starts with its language, as with any statute, achieving a full grasp of the provision involves review of interpretive sources. Normally, reported decisions from courts serve to offer practical guidance on statutory requirements, and facilitate...