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Everything You Need to Know About the Foreign Corrupt Practices Act

September 20, 2016
Weisberg Kainen Mark, PL

The Foreign Corrupt Practices Act (FCPA) was enacted in 1977 as a response to investigations into improper contributions by U.S. companies to foreign governments, their officials, and their politicians. The FCPA makes it illegal for U.S. businesses and individuals and certain foreign entities that issue securities to make payments (to bribe) to foreign government officials in order to obtain business in return.The FCPA also makes accounting transparency a requirement.
The penalties for violations are severe. The penalties include civil actions by the SEC and criminal actions by the U.S. Department of Justice – which can mean large fines, imprisonment, and exclusion from federal procurement.
Companies, executives, employees, and shareholders need to understand the FPCA so they can know what foreign business behavior is acceptable and what behavior might lead to an investigation and criminal charges or civil complaints.
Which individuals and entities are subject to the FCPA?
The following people and firms must comply with the FCPA:

  • Companies
  • Officers of the company
  • Directors of the company
  • Employees of the company
  • Agents of the company
  • Company stockholders acting for the firm

These people and firms can also be liable if they direct someone else or create a third-party entity such as joint venture to make a bribe or otherwise violate the provisions of the FCPA
The Act applies to:

  • Foreign companies and individuals who make an illegal payment while in the United States
  • Individual citizens, residents, and nationals
  • Any corporation or business concern created through the US laws or any state laws or that has its principal business office in the United States
  • U.S. and foreign corporations that issue securities and are required to comply with the Securities and Exchange Act

What constitutes an improper payment?
The payment must be made to induce the payee to improperly use his/her status to provide the payor an improper edge/advantage. Knowledge of the provisions of the FCPA is not required. Ignorance is no excuse. All individuals and entities are presumed to know of the Act and its provisions. Intent can be inferred by the actions, statements, and evidence of those involved. Bad intent does not need to be proven directly.
Examples of FCPA violations
There are many different ways the FCPA is violated. A few examples are:

  • Falsifying papers and transactions to hide the payment and the identity of the official or party that was paid.
  • Improper accounting techniques that alter the business’ financial records to hide the payment.
  • Accounting for the bribe but identifying it as a legitimate payment such as a commission.

Business purpose test
The FCPA was enacted to prevent companies and individuals from making corrupt payments to benefit a business. The Act has been broadly construed so that benefiting the business encompasses a wide range of definitions.
A payment defined
An actual payment does not have to be made. The FCPA covers offering or agreeing to make a payment or promising that another person will make the payment. Payment also includes more the money. Payment includes:

  • Gifts
  • A business interest in the company
  • Favorable loan terms
  • An offer of a job
  • Payments to third parties
  • Other nonmonetary payments defined in the Act

Even payments that seem small, such as $100 payments, can be considered a bribe.
Who is a foreign official?
Foreign officials include:

  • Employees of a foreign government or government agency
  • Officers of a foreign government or government agency
  • Officers or members of a foreign military
  • Government advisors
  • Anyone acting in an official foreign government capacity. For example, payments to doctors and lawyers who work for a government agency, may be considered an FCPA violation.

Contact Weisberg Kainen Mark, PL, today
Businesses and individuals should be sure to understand the FCPA before operating abroad and should understand the foreign laws on corruption as well. The lawyers at Weisberg Kainen Mark, PL are experienced criminal defense trial attorneys. Our firm provides strong tough advocacy for anyone charged with a violation of the Foreign Corruption Practices Act. For help now, contact us by calling (305) 374-5544

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