Foreign Corrupt Practices Act,
1977, prohibits
• Any individual, firm, officer, director, employee,
agent of firm, stockholder acting on behalf of
firm, from
• acting with corrupt intent, to make payment to a
foreign official (regardless of rank), foreign
political party or official, candidate for foreign
political office,
• To induce the recipient to misuse his official
position or wrongfully direct business.
Sanctions
• Criminal
– Up to 5 years in prison and up to $2 million
fine.
• Civil
– AG or SEC or Competitor may bring action to
enjoin or punish.
• Those in violation may be barred from
doing business with the Federal govt.
Foreign Corrupt Practices Act of
1977
• Causes of Bribery (Group Misconduct)
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A few bad apples
Banality of evil
Narrow Focus on insiders and on short term
Failure of leadership
Dilution of personal responsibility in groups
Organizational process, structure and culture
Lack of Oversight
Political Environment
Prisoner’s dilemma
FCPA as a response
• Bad apples/ banality of evil/ Dilution of personal
responsibility in groups
– Individuals can be fined up to $100,000 and imprisoned for up to
5 years.
• Narrow Focus, Failure of leadership, Organizational
process, structure and culture
– Organizations can be fined up to $2 million, individuals can be
fined up to $100,000 and imprisoned for up to 5 years.
• Prisoner’s dilemma
– International Agreements
• Political Environment
– Ongoing struggle
History of FCPA
• 1977: President Carter signs in response
to SEC investigation
– 400 American companies had spent hundreds
of millions of dollars bribing everyone from
prime ministers to police overseas.
• 1978-1998: Organization for Economic
Cooperation and Development adopts ban
on bribery. 38 countries sign on.
Recent DOJ Enforcement
• In 2004, two individuals charged and $11 million
in criminal fines.
• In 2005, 5 charged and $16½ million in fines.
• 2009-10, 50 individuals charged and nearly $2
billion in fines.
• Today: 35 defendants awaiting trial on FCPA
charges in the United States – in Houston,
Miami, Los Angeles, and Washington, D.C.
– http://www.justice.gov/criminal/pr/speeches/2010/crmspeech-101116.html
Objections to FCPA
• Bad for business
– DOJ response: “FCPA enforcement is not bad
for business; it is, instead, vital to ensuring the
integrity of our markets. Our FCPA
enforcement program serves not only to hold
accountable those who corrupt foreign
officials, but in doing so it also serves to make
the international business climate more
transparent and fair for everyone.”
http://www.justice.gov/criminal/pr/speeches/20
10/crm-speech-101116.html
Objections to FCPA
• Puts American business at a competitive
disadvantage.
– DOJ response:
• “First, we do not only prosecute U.S. companies
and individuals under the FCPA. Indeed, over the
last five years, more than half of our corporate
FCPA resolutions have involved foreign companies
or U.S. subsidiaries of foreign companies.
• Second, the United States, through its FCPA
enforcement efforts, leads by example; and other
countries are following.”