3/19/2016
Foreign Corrupt Practices Act (FCPA)
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3/19/2016
Foreign Corrupt Practices Act (FCPA)
Copyright© 2010 WeComply, Inc. All rights reserved.
FCPA Overview
Enacted in 1977 to deal with questionable payments to
foreign officials
Purposes
•Halt bribery of foreign officials
• Restore public confidence in American business system
• Promote stronger foreign legal regimes
Enforced by Department of Justice and Securities and Exchange Commission
Augmented by international anti-corruption laws
8/11/2010
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3
FCPA Overview (cont’d)
Enacted in 1977 to deal with questionable payments to
foreign officials
Purposes
•Halt bribery of foreign officials
• Restore public confidence in American business system
• Promote stronger foreign legal regimes
• Enforced by Department of Justice and Securities and Exchange Commission
Augmented by international anti-corruption laws
8/11/2010
Copyright© 2010 WeComply, Inc. All rights reserved.
4
FCPA Overview (cont’d)
Enacted in 1977 to deal with questionable payments to
foreign officials
Purposes
•Halt bribery of foreign officials
• Restore public confidence in American business system
• Promote stronger foreign legal regimes
• Enforced by Department of Justice and Securities and Exchange Commission
Augmented by international anti-corruption laws
8/11/2010
Copyright© 2010 WeComply, Inc. All rights reserved.
5
Pop Quiz!
In which of the following ways does the FCPA "level the playing field" for U.S.
companies doing business internationally?
A.By encouraging other countries to regulate bribery in a manner similar to the
FCPA.
B.By allowing U.S. companies to pay bribes if other countries allow them.
C.By regulating bribery in all countries through one law: the FCPA.
8/11/2010
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6
The Importance of Compliance
Recent FCPA prosecutions:
•KBR/Halliburton (2009): $559 million settlement and
possible prison sentence
•Siemens (2008): $800 million to settle U.S. charges and
$850 million to settle related charges in Germany
•Baker Hughes (2007): $44 million
•Vetco International (2007): $26 million
8/11/2010
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The Importance of Compliance (cont’d)
You and the Company can be implicated in bribery or
corruption activities that were carried out by others without
your direct knowledge
Involvement in any type of bribery or corruption activity is
costly:
•Creates adverse publicity
•Hurts employee morale
•Consumes management time and legal fees
•Can lead to substantial penalties
•Employees can face possible prison terms
8/11/2010
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Scope of the FCPA
FCPA prohibits individuals and companies from bribing
foreign officials directly or indirectly
Broad application:
•Any citizen or resident of the U.S.
•Any U.S. business entity and certain foreign entities
• Any act in furtherance of unlawful payments anywhere in the world
FCPA could apply to any individual, any company, any officer, employee or agent of
that company, and any stockholder acting on behalf of that company
8/11/2010
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Prohibited Recipients
Prohibited recipients include —
•Any foreign official, political party, party official, or
candidate
•Any third person who will use payment to gain
influence with foreign official
Foreign official includes —
•Officers and employees of foreign government
•Departments, instrumentalities or agencies of foreign government
•Anyone acting in an official capacity for foreign government
•Officers and employees of public international organizations
•Officers and employees of state-owned or -controlled enterprises
•Members of a royal family or a legislative body
8/11/2010
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Corrupt Payments
FCPA prohibits an offer, payment, promise or
authorization of giving "anything of value"
Bribe need not be successful or accepted
Anything of value
•Charitable donations and entertainment-related items
•Something of benefit to official's family
•Value of payment or gift is immaterial
8/11/2010
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11
In the news…
8/11/2010
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Intent and the "Knowing" Standard
FCPA prohibits payments made with intent to influence
the recipient to misuse an official position in order to
secure an improper advantage
Corrupt intent is determined in hindsight
Company may not bypass FCPA by making payments through intermediaries
FCPA prohibits corrupt payments made while knowing that all or portion will be
given or offered — directly or indirectly — to foreign official
8/11/2010
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13
Pop Quiz!
While your sales staff works to get a contract with the procurement department in
a small foreign country, you become friendly with other government officials in
that country and offer to fly them to the U.S. to see a World Series baseball game.
Is this likely to be a problem?
A.Yes, since it appears that you’re trying to influence the foreign officials to help
your company win the contract.
B.Maybe, if the foreign officials accept your offer and come to the game.
C.No, because your sales staff is working to win the contract; you’re just developing
relationships.
8/11/2010
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14
Due Diligence and Red Flags
We must use due diligence when negotiating international
business relationships
Red flags:
•History of corruption in the country
• Associate's shareholders, directors, officers or relatives are foreign officials
• Associate was recommended by a government official
• Associate refuses to disclose other parties
• Associate appears to lack resources or qualifications
8/11/2010
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Due Diligence and Red Flags (cont’d)
Red flags:
•Reputation of a business associate
•Unusually high commissions or fees
•Unusual payment patterns
•Request for payment outside of the country where the
associate resides or the services are performed
• Request for payments to third parties or checks made out to "cash"
Don't ignore red flags — report them to your supervisor or the Legal Department
8/11/2010
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16
Pop Quiz!
Our Company is bidding on a huge contract for which we need a special license
from the Canadian Ministry of Tourism, Culture and Recreation. It so happens that
one of our Company's employees went to college with the Tourism Minister's
daughter. She has offered to "make the right introductions" that would help us
secure the license, but she has asked for a $20,000 payment to be deposited into a
Bermuda bank account. How many red flags, if any, do you see in this offer?
A.None.
B.One.
C.Two.
D.Three.
E.Four.
8/11/2010
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Exceptions and Defenses
Facilitating payments facilitate or expedite routine
governmental action
•Providing police protection or mail delivery
•Obtaining permits, licenses, or other official documents
•Processing governmental papers
•Scheduling inspections
•Providing phone, power, water, cargo loading, etc.
•Protecting perishable products from deterioration
8/11/2010
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In the news…
8/11/2010
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Exceptions and Defenses (cont’d)
Defenses
•Payment was lawful under the laws or regulations of the
foreign official's country
•Laws/regulations must be written
•Payment was spent on demonstration or performance of
contract
•Must be reasonable and bona fide
8/11/2010
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Exceptions and Defenses (cont’d)
Defenses
•Payment was lawful under the laws or regulations of the
foreign official's country
•Laws/regulations must be written
•Payment was spent on demonstration or performance of
contract
•Must be reasonable and bona fide
8/11/2010
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21
Accounting and Recordkeeping
Accounting and recordkeeping provisions apply to public
companies
Requirements:
•Keep records that accurately and fairly reflect all
transactions
•Maintain internal accounting controls
•Perform audits at reasonable intervals
•Take appropriate action on discrepancies
We must maintain records for all expenditures
8/11/2010
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22
Pop Quiz!
The Company has retained a consultant to help prepare a bid for a contract with a
foreign government. In order to avoid any hassles, the consultant's commission will
be shown in the Company books as "office supplies and services," rather than
"commissions and fees." Which of the following is the most accurate?
A.As long as the amount of the commission is accurately recorded in the
Company's books, the Company would not be violating the FCPA.
B.As long as the consultant doesn't bribe any foreign government officials, the
Company would not be violating the FCPA.
C. As long as the consultant's fee could be considered "office
supplies and services," the Company would not be
violating the FCPA.
D. If the Company is a public company, it would probably
violate the FCPA if it accounted for the consultant's
commission in this way.
8/11/2010
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Penalties for FCPA Violations
Accounting and recordkeeping provisions apply to public
companies
•Companies may be fined up to $2 million
•Individuals may be fined up to $100,000 and imprisoned
•Fines on individuals may not be paid by employer
•Civil and criminal forfeiture of property
•Debarment
•Private actions under RICO
8/11/2010
Copyright© 2010 WeComply, Inc. All rights reserved.
24
Penalties for FCPA Violations (cont’d)
Accounting and recordkeeping provisions apply to public
companies
•Companies may be fined up to $2 million
•Individuals may be fined up to $100,000 and imprisoned
•Fines on individuals may not be paid by employer
•Civil and criminal forfeiture of property
•Debarment
•Private actions under RICO
8/11/2010
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25
3/19/2016
Final Quiz
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3/19/2016
Questions?
Copyright© 2010 WeComply, Inc. All rights reserved.
3/19/2016
Thank you for participating!
This course and the related materials were developed by
WeComply, Inc. and the Association of Corporate Counsel.
Copyright© 2010 WeComply, Inc. All rights reserved.