The Foreign Corrupt Practices Act and Other Cross-Border Compliance Issues
| Author | David A. Steiger |
| Pages | 127-192 |
As new overseas operations are considered and plans put together to take
them from concept to implementation, there are a host of issues that can
affect whether they will result in prot or loss, strategic success or under-
performing disappointment. Hands down though, the rst notice of a
governmental investigation that could impose millions of dollars of penalties
on the books and years of personal jail time for senior management—
perhaps including you—can make for the worst of exceptionally bad days.
Perhaps that explains why the Association of Corporate Counsel’s Chief
Legal Ofcer (CLO) 2013 Survey shows that for 87 percent of CLOs
surveyed in over 1,100 legal departments in 36 countries, “dealing with
increasing scrutiny related to compliance and ethics issues is how the major-
ity of their time is spent.”1
It stands to reason then that as you lay the groundwork for your next
cross-border expansion, you must take the necessary steps to protect your
bottom line and your personal liberty from the very beginning, no matter
the industry to which you belong. Attempting to touch on all the various
regulatory regimes that a given business might be subject to is clearly beyond
1. Steven T. Taylor, ACC Survey Explores the Concerns of CLOs and Reveals... Opportuni-
ties for Law Firms, 32 O C (March 2013), http:// www .acc .com /aboutacc /newsroom
/accinthenews /upload /Of -Counsel -March -2013 .pdf.
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Chapter 7
The Foreign Corrupt Practices
Act and Other Cross-Border
Compliance Issues
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the scope of this book. Given its broad application across sectors and the
potential penalties for violations however, examination of the Foreign Cor-
rupt Practices Act (FCPA) is perhaps the best vehicle to assess regulatory
risks and construct the appropriate compliance response.
Overview and History of the FCPA
“The FCPA can be a very difcult mineeld for an unsophisticated com-
pany,” notes Eric O’Neill, formerly with the FBI and now the head of The
Georgetown Group, an investigative and risk management company based in
Washington, D.C. “The FCPA itself is very straightforward, though,” O’Neill
quips, “if you violate it, you may get arrested.” Even large corporate legal
departments nd compliance issues such as this to be a signicant challenge
in an era where every line item is scrutinized. For many companies, associ-
ated costs are expensive, and resources and real buy-in from management
are often in limited supply.2
Still, with recognition that enforcement is much increased in recent years,
there has been a noticeable change in the deal making arena, observes Har-
vey Cohen of Dinsmore Shohl. Years ago, it was not uncommon for Cohen
to get pushback from clients or opposing parties abroad at the suggestion
that they insert FCPA clauses into contracts and require certications peri-
odically etc. “I sometimes had to force them in,” Cohen recalls. Now? “No
one pushes back . . . at this point, it would really be malpractice not to put
it in and not best practice for a contracting party to resist.” Third-party
vendors are slowly adapting as well, relates Arvind Vij, Senior Counsel for
JPMorgan (India):
We see they are now being more professional about these issues, given
that they need to compete on the international stage for developed
market work and international companies pay attention to these
2. Best Practices in Preventing Fraud and Corruption in a Global Business, Lex Mundi Pub-
lications 2009, http:// www .lexmundi .com /images /lexmundi /PDF /BestPractices /BestPractice
_FraudCorruption .pdf.
CHAPTER 7128
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matters when conducting their due diligence, so this is a priority for
the vendors.
Prior to enactment of the FCPA, there was nothing in U.S. law that explic-
itly prohibited the bribing of foreign ofcials or that mandated disclosure
of such activity.
3
In fact, in some countries, commercial bribery was actually
tax deductible.4 This, unfortunately, included the United States.5
As often happens, the impetus for change was an unintended consequence
of an entirely unrelated phenomenon: investigations into the Nixon Admin-
istration’s connection to the break-in at Democratic National Committee
headquarters at the Watergate hotel in 1972.6 What began as a probe into
illegal corporate contributions to Richard Nixon’s reelection campaign
expanded when the Securities and Exchange Commission (SEC) determined
that hundreds of companies had hidden hundreds of millions of dollars in
secret, mislabeled accounts that were used to make many other forms of
illicit payments, including bribes to high ofcials of foreign governments.7
The SEC’s enforcement chief, Stanley Sporkin, sought a law requiring com-
panies to identify bribery payments on their books, reasoning that it would
have a deterrent effect on companies making such payments.
8
Congress did
Sporkin one better and drafted legislation that made the bribing of foreign
ofcials itself a crime.
9
President Jimmy Carter signed the FCPA into law
on December 19, 1977.10
The FCPA has had two major amendments. The rst, in 1988, saw Con-
gress among other things clarify that the scope of facilitation or so-called
“grease” payments (which were exempted from prohibition) would not
3. D R. C, C F C P A: A G
U.S. F D B I M 1–2 (2d ed. 1999).
4. March 2003 Update on the Implementation of the OECD Recommendation on the Tax
Deductibility of Bribes to Foreign Public Ofcials, OECD, http:// www .oecd .org /document /7
/0 ,2340 ,en _2649 _34551 _2514631 _1 _1 _1 _37447 ,00 .html.
5. Paul D. Carrington, Enforcing International Corrupt Practices Law, 32 M. J. I’
L. 129, 148 (2010).
6. John Gibeaut, Battling Bribery Abroad, ABA J. (March 2007), http:// www .abajournal .com
/magazine /article /battling _bribery _abroad /.
7. Id.
8. Id.
9. Id.
10. C, supra note 3, at 8.
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