Chapter 1. Foreign Corrupt Practices Act Overview
Author | Robert W. Tarun |
Pages | 1-55 |
CHAPTER 1
Foreign Corrupt Practices Act
Overview
The Foreign Corrupt Practices Act (FCPA)1 contains two types of provisions: anti-
bribery provisions, which prohibit corrupt payments to foreign officials, foreign
political parties or party officials, or candidates for foreign political office to influ-
ence the official in the exercise of his or her official duties to assist in obtaining
or retaining business or securing any improper advantage; and record-keeping
and internal controls provisions, which impose certain obligations on all compa-
nies whose securities are registered in the United States or that are required to file
reports with the Securities and Exchange Commission (SEC), regardless of whether
the companies have foreign operations.
I. ANTI-BRIBERY
A. Application
The FCPA’s anti-bribery provisions apply to three categories of persons: (1) “issu-
ers”2 (or an agent thereof); (2) “domestic concerns”3 (or an agent thereof); and
(3) foreign nationals or businesses4 (or an agent or national thereof) who take
any action in furtherance of a corrupt payment while within the territory of the
United States. “Issuer” means any company whose securities are registered in the
United States or that is required to file periodic reports with the SEC.5 “Domestic
concern” and “any officer, director, employee or agent of such domestic concern
or any stockholder thereof acting on behalf of such domestic concern” mean any
individual who is a citizen, national, or resident of the United States and any cor-
poration, partnership, association, joint-stock company, business trust, unincor-
porated organization, or sole proprietorship that has its principal place of business
in the United States, or that is organized under the laws of a state of the United
States, or a territory, possession, or commonwealth of the United States.6 Issuers
and domestic concerns, along with their officers, directors, employees, agents, and
shareholders, are prohibited from using “the mails or any other instrumentality
of interstate commerce corruptly in furtherance of” an offer or an actual payment
to any foreign official.7 “Interstate commerce” has been expansively interpreted to
mean phone calls, e-mails, and text messages.
The third category significantly increases the exposure of non–U.S. companies
and their employees or agents, regardless of whether the person is a resident or
1
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2 CHAPTER 1
does business in the United States.8 The FCPA now covers foreign persons who,
while in the territory of the United States, corruptly make use of instrumentalities
of interstate commerce or do “any act in furtherance of an illegal payment to a for-
eign official.”9 The legislative history is clear that Congress intended that “the ter-
ritorial basis for jurisdiction . . . be interpreted broadly so that an extensive physical
connection to the bribery act is not required.”10 In United States v. Syncor Taiwan, the
Department of Justice (DOJ) alleged that the mere e-mailing of budgets to the par-
ent company in the United States containing line items for corrupt payments was
sufficient to establish jurisdiction.11
Issuers and domestic concerns may be held liable for violating the anti-bribery
provisions of the FCPA whether or not they took any action in the United States in
furtherance of the corrupt foreign payment. Prior to the 1998 FCPA amendments,
only issuers and domestic concerns could be held liable, and only if they used the
U.S. mails or instrumentalities of interstate commerce in furtherance of the illicit
foreign payment. The FCPA defines “interstate commerce” as “trade, commerce,
transportation, or communication among the several States, or between any for-
eign country and any State or between any State and any place or ship outside
thereof.”12 The term also includes the intrastate use of a telephone or any interstate
means of communication, or any other interstate instrumentality. The DOJ–SEC
Resource Guide to the U.S. Foreign Corrupt Practices Act (Resource Guide) offers the fol-
lowing illustrations of interstate commerce:
Placing a telephone call or sending an e-mail, text message, or fax
from, to, or through the United States involves interstate commerce—
as does sending a wire transfer from or to a U.S. bank or otherwise
using the U.S. banking system, or traveling across state borders or
internationally to or from the United States.13
The 1998 amendments expanded the FCPA’s jurisdiction to cover corrupt for-
eign payments outside the United States by U.S. persons without any link to inter-
state commerce; the FCPA amendments make it illegal for any United States person
to violate the FCPA “irrespective of whether such United States person makes use
of the mails or any means or instrumentality of interstate commerce in further-
ance of [the illegal foreign activity].”14 Thus, a U.S. company or issuer can be liable
for the conduct of overseas employees or agents, even if no money was transferred
from the United States and no U.S. person participated in any way in the foreign
bribery. The DOJ–SEC Resource Guide offers the following examples:
Thus, for example, a foreign national who attends a meeting in the
United States that fur thers a foreign bribery scheme may be subject
to prosecution, as may any co-conspirators, even if they did not
themselves attend the meeting. A foreign national or company may
also be liable under the FCPA if it aids and abets, conspires with,
or acts as an agent of an issuer or domestic concern, regardless of
whether the foreign national or company itself takes any action in
the United States.15
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Foreign Corrupt Practices Act Overview 3
Until 1998, foreign persons were not subject to the FCPA’s anti-bribery provi-
sions unless they were issuers or domestic concerns. The amendments, however,
expanded the statute to allow for the prosecution of any (foreign) person who takes
any act in furtherance of a corrupt payment while in the territory of the United
States.16 Thus, for example, a foreign subsidiary that causes directly, or through
agents, an act in furtherance of a bribe to take place within the United States is
liable under the FCPA. The 1998 amendments were passed to implement the 1997
Organization for Economic and Cooperative Development (OECD) Convention
on Combating Bribery of Foreign Officials in International Business Transactions
(the OECD Convention).
B. Elements
A violation of the anti-bribery prohibition by a person as defined above consists of
five elements:
1. A payment, offer, authorization, or promise to pay money or anything of
value, directly or through a third party;
2. To (a) any foreign official, (b) any foreign political party or party official,
(c) any candidate for foreign political office, (d) any official of a public inter-
national organization, or (e) any other person while “knowing” that the pay-
ment or promise to pay will be passed on to one of the above;
3. Using an instrumentality of interstate commerce (such as telephone, telex,
e-mail, or the mail) by any person (whether U.S. or foreign) or an act outside
the United States by a domestic concern or U.S. person, or an act in the
United States by a foreign person in furtherance of the offer, payment, or
promise to pay;
4. For the corrupt purpose of (a) influencing an official act or decision of that
person, (b) inducing that person to do or omit doing any act in violation of
his or her lawful duty, (c) securing an improper advantage, or (d) inducing
that person to use his influence with a foreign government to affect or influ-
ence any government act or decision;
5. In order to assist the company in obtaining or retaining business for or with
any person or directing business to any person.17
C. Key Concepts
1. Offers, Payments, Promises to Pay, or Authorizations of Payments
A company or person can be liable under the FCPA not only for making improper
payments, but also for an offer, promise, or authorization of a corrupt payment,
even if the employees or agents do not ultimately make a payment. In other words,
a bribe need not actually be paid, and a corrupt act need not succeed in its purpose.
2. Recipients
The FCPA prohibition extends only to corrupt payments (or offers, promises to
pay, or authorizations of payment) to a foreign official, foreign political party,
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