Foreign Corrupt Practices Act

Foreign Corrupt Practices Act

Overview
The Foreign Corrupt Practices Act of 1977 (FCPA) (15 U.S.C. §§ 78dd-1, et seq.) is a United States federal law known primarily for two of its main provisions, one that addresses accounting transparency requirements under the Securities Exchange Act of 1934
Securities Exchange Act of 1934
The Securities Exchange Act of 1934 , , codified at et seq., is a law governing the secondary trading of securities in the United States of America. It was a sweeping piece of legislation...

 and another concerning bribery
Bribery
Bribery, a form of corruption, is an act implying money or gift giving that alters the behavior of the recipient. Bribery constitutes a crime and is defined by Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or...

 of foreign official
Foreign official
Foreign official, until recently, referred to a person who held a political office in a government other than one's own. However, the term has now taken a new meaning due to roles and statuses created by legislation such as the Foreign Corrupt Practices Act . From a business perspective, the need...

s.

The anti-bribery provisions of the FCPA prohibit:

Issuers, domestic concerns, and any person from making use of interstate commerce corruptly, in furtherance of an offer or payment of anything of value to a foreign official, foreign political party, or candidate for political office, for the purpose of influencing any act of that foreign official
Foreign official
Foreign official, until recently, referred to a person who held a political office in a government other than one's own. However, the term has now taken a new meaning due to roles and statuses created by legislation such as the Foreign Corrupt Practices Act . From a business perspective, the need...

 in violation of the duty of that official, or to secure any improper advantage in order to obtain or retain business.

Issuers
Includes any U.S.
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Encyclopedia
The Foreign Corrupt Practices Act of 1977 (FCPA) (15 U.S.C. §§ 78dd-1, et seq.) is a United States federal law known primarily for two of its main provisions, one that addresses accounting transparency requirements under the Securities Exchange Act of 1934
Securities Exchange Act of 1934
The Securities Exchange Act of 1934 , , codified at et seq., is a law governing the secondary trading of securities in the United States of America. It was a sweeping piece of legislation...

 and another concerning bribery
Bribery
Bribery, a form of corruption, is an act implying money or gift giving that alters the behavior of the recipient. Bribery constitutes a crime and is defined by Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or...

 of foreign official
Foreign official
Foreign official, until recently, referred to a person who held a political office in a government other than one's own. However, the term has now taken a new meaning due to roles and statuses created by legislation such as the Foreign Corrupt Practices Act . From a business perspective, the need...

s.

Provisions and scope


The anti-bribery provisions of the FCPA prohibit:

Issuers, domestic concerns, and any person from making use of interstate commerce corruptly, in furtherance of an offer or payment of anything of value to a foreign official, foreign political party, or candidate for political office, for the purpose of influencing any act of that foreign official
Foreign official
Foreign official, until recently, referred to a person who held a political office in a government other than one's own. However, the term has now taken a new meaning due to roles and statuses created by legislation such as the Foreign Corrupt Practices Act . From a business perspective, the need...

 in violation of the duty of that official, or to secure any improper advantage in order to obtain or retain business.

Persons subject to the FCPA


Issuers
Includes any U.S. or foreign corporation that has a class of securities registered, or that is required to file reports under the Securities and Exchange Act of 1934


Domestic concerns
Refers to any individual who is a citizen, national, or resident of the United States and any corporation and other business entity organized under the laws of the United States or having its principal place of business in the United States


Any person
covers both enterprises and individuals

History


As a result of U.S. Securities and Exchange Commission investigations in the mid-1970s, over 400 U.S. companies admitted making questionable or illegal payments in excess of $300 million to foreign government officials, politicians, and political parties. The abuses ran the gamut from bribery
Bribery
Bribery, a form of corruption, is an act implying money or gift giving that alters the behavior of the recipient. Bribery constitutes a crime and is defined by Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or...

 of high foreign officials to secure some type of favorable action by a foreign government to so-called facilitating payment
Facilitating payment
A facilitating payment is a certain type of payment to foreign officials which is not considered to be bribery according to legislations of some states as well as in the international anti-bribery conventions, e.g., coming from the OECD.-Dangers:...

s that were made to ensure that government functionaries discharged certain ministerial or clerical duties. One major example was the Lockheed bribery scandals
Lockheed bribery scandals
The Lockheed bribery scandals encompassed a series of bribes and contributions made by officials of U.S. aerospace company Lockheed from the late 1950s to the 1970s in the process of negotiating the sale of aircraft....

, in which officials of aerospace
Aerospace
Aerospace comprises the atmosphere of Earth and surrounding space. Typically the term is used to refer to the industry that researches, designs, manufactures, operates, and maintains vehicles moving through air and space...

 company Lockheed
Lockheed Corporation
The Lockheed Corporation was an American aerospace company. Lockheed was founded in 1912 and later merged with Martin Marietta to form Lockheed Martin in 1995.-Origins:...

 paid foreign officials to favor their company's products. Another was the Bananagate scandal in which Chiquita Brands had bribed the President of Honduras
Honduras
Honduras is a republic in Central America. It was previously known as Spanish Honduras to differentiate it from British Honduras, which became the modern-day state of Belize...

 to lower taxes. Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....

 enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system.

The Act was signed into law by President Jimmy Carter
Jimmy Carter
James Earl "Jimmy" Carter, Jr. is an American politician who served as the 39th President of the United States and was the recipient of the 2002 Nobel Peace Prize, the only U.S. President to have received the Prize after leaving office...

 on December 19, 1977, and amended in 1998 by the International Anti-Bribery Act of 1998
International Anti-Bribery Act of 1998
The International Anti-Bribery and Fair Competition Act of 1998 is a United States federal law that amends the Foreign Corrupt Practices Act by implementing the provisions of the Organization for Economic Cooperation and Development's Convention on Combating Bribery of Foreign Public Officials in...

 which was designed to implement the anti-bribery conventions of the Organization for Economic Co-operation and Development.

Requirements


The anti-bribery provisions of the FCPA make it unlawful for a U.S. person, and certain foreign issuers of securities, to make a payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person. Since 1998, they also apply to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States. The meaning of foreign official
Foreign official
Foreign official, until recently, referred to a person who held a political office in a government other than one's own. However, the term has now taken a new meaning due to roles and statuses created by legislation such as the Foreign Corrupt Practices Act . From a business perspective, the need...

 is broad. For example, an owner of a bank who is also the minister of finance would count as a foreign official according to the U.S. government. Doctors at government-owned or managed hospitals are also considered to be foreign officials under the FCPA, as is anyone working for a government-owned or managed institution or enterprise. Employees of international organizations such as the United Nations are also considered to be foreign officials under the FCPA. There is no materiality to this act, making it illegal to offer anything of value as a bribe, including cash or non-cash items. The government focuses on the intent of the bribery rather than on the amount.

The FCPA also requires companies whose securities are listed in the United States to meet its accounting provisions. See 15 U.S.C. § 78m. These accounting provisions, which were designed to operate in tandem with the anti-bribery provisions of the FCPA, require corporations covered by the provisions to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. An increasing number of corporations are taking additional steps to protect their reputation and reducing exposure by employing the services of due diligence companies. Identifying government-owned companies in an effort to identify easily overlooked government officials is rapidly becoming a critical component of more advanced anti-corruption programs.

Regarding payments to foreign officials, the act draws a distinction between bribery and facilitation or "grease payments", which may be permissible under the FCPA but may still violate local laws. The primary distinction is that grease payments are made to an official to expedite his performance of the duties he is already bound to perform. Payments to foreign officials may be legal under the FCPA if the payments are permitted under the written laws of the host country. Certain payments or reimbursements relating to product promotion may also be permitted under the FCPA.

Application


Notable cases of the application of FCPA are with BAE Systems
BAE Systems
BAE Systems plc is a British multinational defence, security and aerospace company headquartered in London, United Kingdom, that has global interests, particularly in North America through its subsidiary BAE Systems Inc. BAE is among the world's largest military contractors; in 2009 it was the...

, Baker Hughes
Baker Hughes
Baker Hughes Baker Hughes provides the world's oil & gas industry with products and services for drilling, formation evaluation, completion, production and reservoir consulting. Baker Hughes operates in over 90 countries worldwide mainly based in countries with a mature petroleum industry as is...

, Daimler AG, Halliburton
Halliburton
Halliburton is the world's second largest oilfield services corporation with operations in more than 70 countries. It has hundreds of subsidiaries, affiliates, branches, brands and divisions worldwide and employs over 50,000 people....

, KBR, Lucent Technologies
Lucent Technologies
Alcatel-Lucent USA, Inc., originally Lucent Technologies, Inc. is a French-owned technology company composed of what was formerly AT&T Technologies, which included Western Electric and Bell Labs...

, Monsanto
Monsanto
The Monsanto Company is a US-based multinational agricultural biotechnology corporation. It is the world's leading producer of the herbicide glyphosate, marketed in the "Roundup" brand of herbicides, and in other brands...

, Siemens
Siemens
Siemens may refer toSiemens, a German family name carried by generations of telecommunications industrialists, including:* Werner von Siemens , inventor, founder of Siemens AG...

, Titan Corporation, Triton Energy Limited
Triton Energy Limited
Triton Energy Limited was founded in Dallas, Texas by E.R. Wiley in 1962...

, Avon Products
Avon Products
Avon Products, Inc. is a US cosmetics, perfume and toy seller with markets in over 140 countries across the world and sales of $9.9 billion worldwide as of 2007.-Business Model:...

, and Invision Technologies
InVision Technologies
InVision Technologies, Inc. was a publicly traded company based in Newark, California, that manufactured and sold airport security screening devices to detect explosives in passenger baggage...

. Former Representative William J. Jefferson
William J. Jefferson
William Jennings "Bill" Jefferson is a former American politician, and a published author from the U.S. state of Louisiana. He served as a member of the U.S. House of Representatives for nine terms from 1991 to 2009 as a member of the Democratic Party. He represented , which includes much of the...

, Democrat of Louisiana, was charged with violating this act by bribing African governments for business interests. In 2008, Siemens AG
Siemens AG
Siemens AG is a German multinational conglomerate company headquartered in Munich, Germany. It is the largest Europe-based electronics and electrical engineering company....

 paid a $450 million fine for violating the FCPA. This is one of the largest penalties ever collected by the DOJ for an FCPA case.

The U.S. Justice Department and the Securities and Exchange Commission are currently investigating whether Hewlett Packard Company executives paid about $10.9 million in bribery
Bribery
Bribery, a form of corruption, is an act implying money or gift giving that alters the behavior of the recipient. Bribery constitutes a crime and is defined by Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or...

 money between 2004 and 2006 to the Prosecutor General of Russia
Prosecutor General of Russia
The Prosecutor General of Russia heads the system of official prosecution in courts known as the Office of the Prosecutor General of Russian Federation ....

 "to win a million-dollar contract to supply computer equipment throughout Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...

." Indeed, ramped up USDOJ and SEC enforcement transformed 2010 into the FCPA's break-out year, and all indications are that 2011 and beyond will witness increasingly vigorous enforcement efforts and additional record-breaking prosecutions, fines, and disgorgements.

In July 2011, the DOJ opened an inquiry into the News International phone hacking scandal that brought down News of the World
News of the World
The News of the World was a national red top newspaper published in the United Kingdom from 1843 to 2011. It was at one time the biggest selling English language newspaper in the world, and at closure still had one of the highest English language circulations...

, the recently-closed UK tabloid newspaper. In cooperation with the Serious Fraud Office (United Kingdom), the DOJ will examine whether News Corporation
News Corporation
News Corporation or News Corp. is an American multinational media conglomerate. It is the world's second-largest media conglomerate as of 2011 in terms of revenue, and the world's third largest in entertainment as of 2009, although the BBC remains the world's largest broadcaster...

 violated the FCPA by bribing British Police Officers.

See also

  • Convention against Corruption (disambiguation)
  • Politically exposed person
    Politically exposed person
    PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used...

  • The UK Bribery Act
    Bribery Act 2010
    The Bribery Act 2010 is an Act of the Parliament of the United Kingdom that covers the criminal law relating to bribery. Introduced to Parliament in the Queen's Speech in 2009 after several decades of reports and draft bills, the Act received the Royal Assent on 8 April 2010 following cross-party...

  • Corruption of Foreign Public Officials Act
    Corruption of Foreign Public Officials Act
    The Corruption of Foreign Public Officials Act is a corruption law in force in Canada. It was passed in 1999, ratifying the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and is often referred to as the Canadian equivalent to the Foreign...

  • OECD Anti-Bribery Convention
    OECD Anti-Bribery Convention
    The OECD Anti-Bribery Convention is a convention of the OECD aimed at reducing corruption in developing countries by encouraging sanctions against bribery in international business transactions carried out by companies based in the Convention member countries...


External links