Foreign Corrupt Practices Act Overview

• Author: Robert W. Tarun
• Profession: Former Executive Assistant U.S. Attorney in Chicago
• Pages: 1-56

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. ANTIBRIBERY

A. Application

The FCPA’s antibribery provisions apply to three categories of persons: (1) “issuers”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 fur-

therance 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 act-

ing on behalf of such domestic concern” mean any individual who is a citizen, national,

or resident of the United States and any corporation, partnership, association, joint-

stock company, business trust, unincorporated 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, direc-

tors, 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

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

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2 CHAPTER 1

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 antibribery

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 furthers 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

Until 1998, foreign persons were not subject to the FCPA’s antibribery provi-

sions unless they were issuers or domestic concerns. The amendments, however,

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Foreign Corrupt Practices Act Overview 3

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 antibribery 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

international organization, or (e) any other person while “knowing” that

the payment 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,

party official, or a candidate for foreign political office, and any other person while

the payer “knows” that the payment or promise to pay will be passed on to one of

the above.

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