The Foreign Corrupt Practices Act (FCPA) contains anti-bribery provisions and accounting provisions that can be used to prosecute and punish U.S. individuals and business entities, as well as certain foreign entities that issue securities.
The primary focus of the FCPA is to eliminate bribery that is designed to influence foreign officials and negatively affect fair market competition.
Who can be held liable under the FCPA?
In terms of potentially liable parties, the FCPA’s anti-bribery provisions refer to “domestic concerns” and “issuers.” Domestic concerns and issuers can be held liable for FCPA violations.
Under the Act, a “domestic concern” is any citizen or resident of the United States — or any business entity that operates principally in the U.S. or is organized under U.S. law. An “issuer” is any business entity that issues securities or is required to report in accordance with the Securities Exchange Act.
The FCPA also states broadly that “any person” who acts to further a corrupt payment may be held liable for violations. That means the FCPA’s anti-bribery provisions also apply individually to employees, agents, officers and directors of domestic concerns and issuers.
Note: your employer does not have to be found guilty in order for you to be prosecuted for an alleged FCPA violation.
What is a “routine governmental action” under the FCPA?
Under the FCPA, payments that expedite the performance of “routine governmental action” can be exempted from anti-bribery prohibitions. This so-called “grease payment” exception applies when a foreign official is paid to perform a routine governmental action, such as processing government documents.
Exempted payments may relate to processing work orders and visas; obtaining licenses and permits that allow you to conduct business in the home country of the foreign official; providing phone, mail and utility services; and conducting routine inspections associated with a legal contract.
Seek experienced legal counsel if you are unsure of whether a payment is exempted from the anti-bribery provisions.
What are the defense options?
There are two affirmative defenses built into the FCPA. Each defense can significantly limit your liability, even if you do not dispute the facts presented by the government. The two affirmative defenses are:
- Asserting that the payment or offer in question was a “bona fide expenditure” — for example, a foreign official’s travel expenses related to conferences or negotiations
- Asserting that the payment was lawful under the foreign country’s laws
Depending on the circumstances, resolving an FCPA case may also involve negotiating a nonprosecution agreement, a deferred-prosecution agreement or a plea agreement.
If you have questions about these or other defense options, contact Hilder & Associates, P.C. Our attorneys have extensive experience in representing individuals and corporations accused or suspected of FCPA violations.
How can a company ensure that expenses are “reasonable and bona fide?”
The Department of Justice offers guidance to companies to help them comply with the FCPA’s anti-bribery provisions. Following are some ways companies can ensure that expenditures for foreign officials are reasonable and bona fide:
- Never indicate that expenses will be paid contingent on the actions of a foreign official
- Avoid using cash to pay reimbursements
- Pay lodging vendors directly and pay reimbursements only after a receipt has been presented
- Ensure that stipends reflect the approximate costs the official will likely incur
- Keep accurate records of any costs incurred on behalf of foreign officials
- Do not provide additional stipends or compensation beyond the amount required to cover the expenses actually incurred
How are FCPA cases prosecuted?
The U.S. Department of Justice has jurisdiction over criminal FCPA prosecutions, and the Securities and Exchange Commission handles civil prosecutions. Each agency may conduct its own investigation while sharing information with the other agency. The DOJ and the SEC may also seek separate and distinct penalties.
Additionally, the FCPA provides for private causes of action from business competitors who claim to have lost business because of an FCPA violation. In these cases, the plaintiffs may pursue treble damages.
What are the possible criminal penalties for FCPA violations?
A fine of up to $2 million may be levied against a business entity found to be in violation of the FCPA’s bribery provisions. An individual may be fined up to $100,000 and sentenced to up to five years in prison for a bribery violation.
For accounting violations, each count carries a maximum fine of $25 million for business entities and a maximum fine of $5 million for individuals. An individual may also face up to 20 years in prison for each accounting offense.
The Alternative Fines Act also allows the court to increase FCPA fines if the defendant pleads guilty or is found guilty, and if evidence supports an increased fine.