Prosecuting individuals under the FCPA: it is, believes the DOJ, the best way 'to capture the attention of the business community.'.

• Author: Zacharias, Carol A.N.
• Position: RISK MATTERS

THE Foreign Corrupt Practices Act of 1977 (FCPA) is no longer a seldom used and little known statute. Today, teams of prosecutors in two federal agencies are devoted to pursuing cases under the statute, billions of dollars in penalties are recouped under the law, and millions are spent by corporations dealing with a single investigation. The threat of individual prosecutions is not insignificant, as defendants risk imprisonment and considerable financial penalties.

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FCPA: The FCPA prohibits U.S. companies from bribing foreign government officials to obtain or retain business, by making unlawful the payment of anything of value to any officer or employee of a foreign government or state-owned company. Things of value may include gifts, trips, professional training, and even tickets to events. The FCPA also requires internal accounting controls to prevent or identify a violation.

While knowledge of the improper conduct is a required element, corrupt intent may be shown by actual knowledge or conscious disregard of a high probability that a payment or offer will be made. For example, this could include permitting unusual or suspicious all cash payments, payments to odd locations, or payments to third parties that lack expertise and apparent involvement in the transaction at issue. The Department of Justice (DOJ) may bring criminal and civil cases, and the Securities and Exchange Commission (SEC) may bring civil complaints against issuers. There is no private right of action.

Increased Prosecutions: Few FCPA cases were brought in the immediate decades following passage in 1977. The SEC typically brought one enforcement case a year between 1978 and 2000. The DOJ charged only two individuals in 2004 and five individuals in 2005, and collected only $11 million and $16.5 million in individual penalties in each year, respectively. (Data cited in this column come from various sources, including the SEC, DOJ, Shearman & Sterling, Gibson Dunn, and others.)

However, by 2009 and 2010, the DOJ had reconstituted a team dedicated to FCPA actions, increased the number of prosecutors to more than a dozen, and began to focus on individuals. The managing Assistant Attorney General stated that "... prosecuting individuals--and levying substantial criminal fines against corporations--are the best ways to capture the attention of the business community." The DOJ charged 50 individuals with FCPA violations and collected more than $2 billion in...