How to Steer Clear of the Foreign Corrupt Practices Act
In some parts of the world, it's considered a matter of course that foreign government officials get a "taste" of the contracts that they negotiate with suppliers. But for the last thirty years, US law has prohibited American individuals and corporations from bribing foreign government officials. The rules came out of a Securities and Exchange Commission investigation in the early 1970's that uncovered the fact that more than 400 American corporations made illegal payments to foreign officials averaging close to a million dollars per company.
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Instructions
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The Foreign Corrupt Practices Act , FCPA, prohibits offering anything of value to foreign officials for the purpose of improperly influencing an official decision. It also prohibits unlawful political contributions to obtain or retain business. Not only contract procurement, but favorable regulatory decisions are also covered.
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A very important provision of the act is that it requires accurate record keeping. No off the book payments can be made. The FCPA prohibits the use of false records or accounts in the conduct of foreign business.
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The FCPA imposes criminal liability whether the party pays the bribe directly or uses a third party as an intermediary knowing that the payment will be used as a bribe. The prohibition is broadly interpreted. For example if a foreign banker is bribed and his brother is a government official, the party who supplies the bribe is liable. Architects in private business on a government job, or private businesses owned by foreign governments are also covered.
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Since 1998, the FCPA can also apply to foreign firms and individuals doing business in the United States offering a corrupt payment to a foreign government. While working here they have to adhere to the same rules as US individuals and corporations.
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A person can be excused from bribery under the act through a 1988 amendment if the defendant can show that the payment was lawful under the written laws of the country in which the payment was made. The best way to make this defense is prior determination of legality by the corporate legal department.
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The second exemption under the 1988 amendment is if the defendant can show that the payment was a bona fide, reasonable expenditure essential to execute the contract. Sometimes these are referred to as "grease payments" not changing but expediting the outcome by encouraging an official to perform in a more timely manner. Again this activity has to be ruled legal under the terms of the country in which it was performed.
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Tips & Warnings
A firm can be fined up to $2 million and an individual can be fined up to $100,000 and imprisoned for five years for violating the bribe ban.
Any information relating to a possible violation of the FCPA is usually brought to the immediate attention of the Fraud Section of the Criminal Division of the United States Department of Justice, even if the lead is cultivated during the course of an unrelated investigation.
The SEC has the power to obtain an injunction prohibiting further FCPA activity by a company while the initial charges are under investigation.
