The U.S. Foreign Corrupt Practices Act
The U.S. Foreign Corrupt Practices Act
Corrupt payments to foreign officials to obtain or keep business are prohibited by the U.S. Foreign Corrupt Practices Act. Violations of the Act are punishable by fines up to $100,000 and prison terms up to five years for individuals and fines up to $2 million for companies. Also, civil fines up to $10,000 may be sought by the Department of Justice or the Securities and Exchange Commission against any violator of the Act, and the Commission may seek additional fines depending upon gains of the defendant from the violation.
There are five elements of a violation of the provisions of the Act prohibiting bribery of foreign government officials:
1. Persons subject to the Act, including any individual, firm, officer, director, employee, or agent of a firm and any stockholder acting on behalf of a firm, and any person, such as a U.S. parent corporation with a foreign subsidiary, who authorizes, assists, or conspires with another person to violate the Act;
2. Corrupt intent in the making or authorizing of the payment as indicated by an intent that the person receiving the payment will misuse his or her position to direct business in a wrongful manner;
3. Payment or the offer or promise to pay money or anything of value;
4. A recipient that is a foreign official, foreign political party, or foreign party official or that is a candidate for a foreign political office, including officials of public international organizations, regardless of rank or position, if the purpose of the payment is bribery; and
5. A business purpose to obtain, continue, or direct business with any person, including but not limited to foreign governments and agencies.
Payments needed to obtain routine governmental action, such as obtaining permits or licenses, visas and work orders, or inspections, are excepted from the anti-bribery provisions of the Act. This exception does not apply to obtaining new business or continuing business.
A person charged with violating the Act may have an affirmative defense if it can be shown that the payment was lawful under a foreign government's written laws or that the payment was made in demonstrating a product or in performance of a contract. The U.S. Department of Justice has a Foreign Corrupt Practices Act Opinion Procedure through which guidance may be obtained concerning lawfulness of an anticipated payment.
Violations of the Act may result in consequences beyond penalties, fines, and imprisonment. Indictment under the Act may result in suspension of the right to do business with the U.S. Government. Persons or firms found guilty of violating the Act may be denied export licenses. The Securities and Exchange Commission may bar persons convicted under the Act from participating in the securities business, and violation of the Act may result in suspension by the Commodity Futures Trading Commission and the Overseas Private Investment Corporation. Treatment of payments in violation of the Act as deductible business expenses is improper and could result in imposition of penalties by the Internal Revenue Service.
International organizations and other countries have adopted laws or regulations that are analogous to the U.S. Foreign Corrupt Practices Act, and compliance with those parallel provisions by U.S. companies doing business overseas will be necessary.
Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.
