Vol. 7, No. 5, Pg. 38. Foreign Corrupt Practices Act.

• Author: By James K. Lehman

South Carolina Lawyer

1996.

Vol. 7, No. 5, Pg. 38.

Foreign Corrupt Practices Act

38FOREIGN CORRUPT PRACTICES ACTBy James K. LehmanThe Foreign Corrupt Practices Act (FCPA or Act) was enacted in response to the disdosure of a number of questionable payments by US. companies to foreign officials. The Act prohibits payments to government officials intended to gain a business advantage.

The Act has recently gained increased prominence with prosecutors and government regulators because: (1) the strong trend of U.S. businesses to expand the marketing of products and services abroad and (2) the increased emphasis on white collar corporate investigations by the Department of Justice (DOD and the Securities and Exchange Commission (SEC). While the Act has always been enforced, it has generally only been invoked in cases of egregious misconduct. However, the Act is not limited to bribery or other extreme behavior, but arguably covers payments that may not otherwise be considered improper under established business practices in a particular country.

Accordingly, while US. companies are pushing to expand into new overseas markets, they are finding the FCPA to be a barrier to "doing business as usual" in certain foreign countries. For example, last year a major aircraft manufacturer was fined $25 million on a FCPA charge involving the sale of aircraft to Egypt and an alleged $1 million payment to a "consultant." At about the same time, one of the Big Six accounting firms publicly withdrew as the accountant for a California corporation, informing the board of directors that certain payments to officials at a Russian bank may have violated the Act.

This article provides information about and an overview of the FCPA as it relates to business activities by U.S. entities. It does and cannot provide legal advice about specific transactions or conduct, but it will hopefully assist lawyers in advising clients about general provisions of the Act.

Prohibited Practices Under the Act

The Act has two major sections-the anti-bribery and accounting provisions. Under the anti-bribery provision, the Act prohibits individuals and business entities from directly or indirectly offering, promising or authorizing to give anything of value to "any officer or employee of a foreign government" entity "or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality." See 15 U.S.C. § 78dd-1.

It also prohibits giving anything of value to any other person while "knowing" that all or a portion of the value will be offered, given or promised, directly or indirectly, to any foreign official, party or candidate for purposes prohibited by the Act. Id. § 78dd-1(a)(3). For example, if a U.S. entity knows that a local agent is making payments to foreign officials, the U.S. entity is not...