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Think "bribery" and you'll likely conjure images of
"goateed" men in shades opening briefcases just wide enough to
confirm their contents. While that sort of thing happens more on the silver
screen than in reality, subtler, yet just as illegal, "pay for
play" arrangements are made every day. When a business is trying to
gain a foothold on foreign soil, the temptation to use payments to
government officials to expedite the process can be strong. With an eye
toward discouraging such payments, the federal government enacted the Foreign Corrupt Practices Act (FCPA).
US companies operating in foreign countries are required to
comply with the FCPA of 1977, as amended in 1988. The FCPA makes it a
criminal offense for a US person to pay a bribe to a foreign government
official to obtain business. However, the FCPA also establishes a much
broader requirement for public companies to keep accurate records so that bribes may not be concealed or disguised in the corporate books. It also requires management to establish internal accounting controls designed to prevent loss of assets or improper transactions.
Violations of the FCPA result in fines and, in some cases,
imprisonment. Companies convicted of FCPA violations can be fined up to $2
million, and individuals can be fined from $10,000 to $100,000 and sentenced
to up to five years in prison. Additionally, violations of the FCPA
frequently carry many adverse consequences for a company and the affected employees. Companies convicted of FCPA violations may suffer unfavorable publicity and may also have violated other laws as a result of the FCPA violation. For example, bribery payments in violation of the FCPA are not tax deductible. Certain actions may also violate the Robinson-Patman Act (unfair competition), the Federal Trade Commission Act and various SEC requirements. The FCPA also applies to individual officers, directors, employees and agents of companies.
Foreign subsidiaries of US companies are not included in the
direct provisions of the act, but the domestic parent that engages in
bribery of foreign officials indirectly through foreign subsidiaries is
liable. Every company and employee directly or indirectly involved in a
foreign operation should have a working knowledge of the FCPA.
The bribery provision of the FCPA, in general terms, makes it
a criminal offense for any director, employee, SEC registered company or
agent of a US domestic concern to corruptly influence foreign officials or
to make payments to any person when they have reason to know that part of
the payments will go to a foreign official for the purpose of influencing an
official action or decision in order to obtain, retain or direct business to
any person. Materiality of the amounts generally is not considered. A
"government official" has been interpreted broadly to mean not only
government officials, but also officials of government agencies or
government-owned entities. The term "governmental official" specifically excludes governmental employees whose duties are essentially clerical in nature.
In some circumstances, a company may be held liable for
actions of agents and other third parties. For example, if an agent makes an
improper payment to a government official on behalf of the company and the
company knows about the payment (or consciously disregards the information
that the payment likely took place) and authorizes it either explicitly or implicitly, the company has violated the FCPA.
Not all payments to government officials violate the FCPA. A
payment made to a government official for the purpose of expediting or
securing a routine governmental action is not necessarily a violation.
Routine governmental actions include such ordinary, routine and commonly
performed activities such as obtaining permits, licenses or other official documents to qualify a company to do business in a foreign country, processing government documents (e.g., visas, work permits, etc.), providing police protection, mail pickup and delivery or scheduling inspections associated with contract performance or inspections related to the transit of goods and providing phone service, power and water supply, loading and unloading cargo or protecting perishable product from spoilage.
Virtually every country has some kind of law prohibiting
bribery of a governmental official. However, enforcement of these laws
varies. Although the payment to a governmental official may be within the
definition of "routine governmental action" described above, it may be a
violation of the FCPA if the payment violates local laws. The FCPA requires
the permissibility of the payment be evidenced by "written" laws or regulations.
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