Foreign Corrupt
Practices Act
New York State Bar Association
And
American Bar Association
April 1, 2014
Waldorf Astoria Hotel N.Y.C.
Presentation By Carole Basri
©Basri 2014
What is the Foreign Corrupt Act (FCPA)?
Enacted in 1977, the FCPA makes it
a crime for an American Company to
bribe or have others bribe on its
behalf, foreign officials in an effort to
win or retain business.
Carole Basri
Under the FCPA, it’s a crime to do
the following:
• Pay a bribe;
• Offer to make a bribe; or
• Authorize a payment to make a bribe.
Carole Basri
The FCP covers payments to the
following:
• Government employees;
• Political parties;
• Party officials;
• Candidates;
• Employees of state owned enterprises; or
• Employee of public international
organizations, i.e. UN, IMF, World Bank.
Carole Basri
What is “anything of value”?
“Anything of value” could be
“anything” given “corruptly” or
for the “evil motive or purpose”
of inducing “the recipient to
misuse his/her official position in
order to wrongfully” obtain
business.
Carole Basri
BUT Some Payments are OKAY!
Carole Basri
Three Payment Exceptions under
the FCPA:
• Grease payments;
• Reasonable and bona fide entertainment
expenses; and
• Defense against prosecution payments.
Carole Basri
Grease payments are allowed.
Grease payments are to “expedite or
…secure…a routine governmental action”.
Examples of grease payments are payment for:
 Obtaining permits, licenses, or other official documents to
qualify a person to do business in a foreign country;
 Processing governmental papers, such as visas and work
orders;
 Providing police protection, mail pick-up and delivery, or
scheduling inspections associated with contract
performance or inspections related to transit or goods
across country;
 Providing phone service, power and water supply, loading
and unloading cargo, or protecting perishable products or
commodities from deterioration; or
 Actions of a similar nature.
Carole Basri
Critical Point
The payment must be for a “routine
governmental action.” This would
never cover payments to influence:
 “Any decision by a foreign official
whether, or on what terms, to award
new business to or to continue business
with a particular party”
Carole Basri
Reasonable and bona fide
entertainment expenses are allowed.
This includes “travel and lodging
expenses” for foreign officials
provided that the expenses are
directly related to:
• The promotion, demonstration, or
explanation of products or services; or
• The execution or performance of a
contract with a foreign government of
agency thereof.
Carole Basri
Defense against prosecution payments
are allowed.
This only applies if the payment are
permitted under the laws of the
foreign country. This is rare.
Carole Basri
Caution!
The biggest risk under the FCPA is
not that American employees will
pay bribes, but that foreign business
consultants and/or joint venture
partners will.
Carole Basri
Remember!
Ignorance is not a defense if you
should have known and did not ask.
Carole Basri
Standard precautions in hiring foreign
agents or participating in joint ventures
include:
1.
2.
3.
Due diligence checks on agents;
Inserting standard clauses in
contracts; and
Setting up “red flags” to provide
internal controls in accounting.
Carole Basri
1. Due Diligence Checks on Agents
Due Diligence checks on agents
should include:
• Background checks;
• Investigating family and business ties
with government officials;
• Inquiring about agents at U.S. Embassy,
State Department and Commerce
Department.
Carole Basri
2. Insert Standard Clauses in Contracts
Standard contracts clauses with
agents and joint ventures should
include representations that will
comply with the FCPA
Carole Basri
3. Set up “Red Flags” to Provide internal
Controls
One you hire and agent, look for ‘red flags”
including:
•
•
•
•
•
•
•
Lack of standard invoices;
Bank accounts in a third country;
Check drawn to cash;
Unusual bonuses;
Rumors about kickbacks or bribes in the company;
Lack of internal controls;
Country in questions has traditionally had corruption
issues;
• Agent’s commission is excessive or paid in cash;
• Agent is related to government official;
• Agent’s company is owned by government official or his
family;
• Agent has requested false documentation; and
• Under local law, its illegal for agent to act as an agent.
Carole Basri
Penalties for Violating the FCPA include:
• Up to 5 years in jail;
• $100,000 for each participant including
officers, employees, directors, agents
and stockholders;
• Fines up to $2,000,000 to the company
plus pecuniary loss;
• Barred from doing business with Federal
Government; and
• Competition can sue for treble damages
under RICO.
Carole Basri
Five-Phase Approach
APPROACH
PHASE I
PHASE II
PHASE III
PHASE IV
PHASE V
High-level
Compliance
Assessment
Develop or
Enhance
Overall FCPA
Corporate
Compliance
Program
Evaluate and
Enhance
Polices and
Procedures
Communication,
training and
Implementation
Ongoing SelfAssessment,
Monitoring
and Reporting
Carole Basri
Five-Phase Approach- Phase I
High level compliance Assessment
• Communicate and Educate
• High-level Review

Risks and Controls
• Baseline review

Risks and Controls
• Best Practices and Gaps
• Work Plan, Responsibility Assignment and
Time line
• Senior Management Meetings (s)
Carole Basri
Five-Phase Approach- Phase II
Develop or Enhance Overall FCPA
Corporate Compliance Program
• Code of Conduct
• FCPA Corporate Compliance Program
Guidelines
• Compliance Function
• Compliance Help Line (Ethics Line)
Carole Basri
Five-Phase Approach- Phase III
Evaluate and Enhance Policies and
Procedures
• Gift and Entertainment Policy
• Expense Approval and Documentation
Policy
• Hiring of Foreign Partners, Agents,
Consultants and Marketing
Representatives Policy
• Background Check Policy
• FCPA Contract Clauses
Carole Basri
Five-Phase Approach- Phase IV
Communication, Training and
Implementation
• Introduce Code of Conduct and FCPA
Program
• Ongoing Communication Plan
• Training plan
• Training materials/Video Tapes
• Training Schedule
Carole Basri
Five-Phase Approach- Phase IV
Ongoing Self-Assessment, Monitoring
and Reporting
• Management Controls
• Monitoring Tools
• Self-Assessment Tools
• Internal Audit
Carole Basri
Thank You
Carole Basri
President, Corporate Lawyering Group, LLC
www.corporatelawyeringgroup.com
Executive Director of the Fordham University Law
School Compliance Program
Adjunct Professor, Fordham University Law School
Adjunct Professor, School of Transnational Law,
Peking University
Carole Basri
917-822-2447
cbasri@yahoo.com