Transcript CHAPTER XXVIII FOREIGN CORRUPT PRACTICES ACT & …

CHAPTER XXVIII
FOREIGN CORRUPT PRACTICES
ACT & ANTIBOYCOTT LAWS
Foreign Corrupt Practices Act (FCPA)
Antiboycott Law
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Foreign Corrupt Practices Act
(FCPA)
 Prohibits bribery of a foreign government official, a
foreign political party or a candidate for political
office in order to obtain or retain a business
 Omnibus Trade and Competitiveness Act of 1988
changed responsibility of corporate officers from
"having reason to know" to "know of or authorize"
illegal payments.
 In mid-1970s, Lockheed Corporation’s bribery to
Kakuei Tanaka, then prime minister of Japan, to sell
airplanes to Japan Airlines.
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Foreign Corrupt Practices Act
Five Elements
1) Who:

U.S. firms. employees, directors, stockholders,
and foreign agents of U.S. firms
2) Corrupt Intent:

An intent to wrongfully influence recipient to
benefit payer, whether succeeded or not
3) Payment:

Offering, paying, promising to pay or
authorizing to offer or to pay money or anything
of value
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Foreign Corrupt Practices Act
Five Elements
4)
Recipient:

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5)
Foreign official, political party, party
official, candidate for political office
Not only those of foreign governments &
public international organizations, but
also foreign government-controlled
entities
Business Purpose:

To assist the firm in obtaining or
retaining business
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Foreign Corrupt Practices Act
Penalties
Criminal penalties: For a firm, max. $2
million and for a individual, 5 years
imprisonment or $100,000 or both per
violation
Civil penalties for a firm and an
individual: $10,000 per violation
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Foreign Corrupt Practices Act
Penalties
 Stock Exchange Commission(SEC)'s Fines:
 Greater of gross amount of pecuniary gain or
specified dollar limitation, $5,000 to $100,000 for
individual and $50,000 to $500,000 for corporation
 Barred from doing business with Federal
Government
 Ineligible to receive export licenses
 Illegal payments are not tax-deductible
expenses
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Foreign Corrupt Practices Act
Facilitating Payment
 “Grease or Lubrication Payment”
Allowed, if the payment is:
(1) Permitted under the written laws of the host
country or for demonstrating a product or
performing a contractual obligation
(2) To speed up routine government actions
such as processing papers, stamping visas,
scheduling inspections, securing permits or
licenses and obtaining adequate police
protection
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Foreign Corrupt Practices Act
International Cooperation
• 1970s: Lockheed-Kakuei Tanaka
• 1977: U.S. Foreign Corrupt Practice Act
• In 1996, Organization of American States (OAS)
– Adopted Inter-American Convention Against Corruption by 35
member states
• In 1997, Organization for Economic Cooperation and
Development (OECD)
– Signed OECD Convention on Combating Bribery of Foreign
Public Officials in International Business Transactions by 34
member countries
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Foreign Corrupt Practices Act
Violators
• In 1989, Goodyear Int’l Corp. paid $250,000 fine for
bribing an official of Iraqi state-owned trading firm to get
the tire business with “commission.”
• In 1989, Napco International paid $1 million fine for
bribing officials in Niger.
• In 1995, Lockheed Martin paid $24 million in fines, more
than twice the profits for paying $1 million bribe to
Egyptian parliament.
• In 2007, Baker Hughes Services International paid a $44
million fine for bribing officials of Kazakhstan’s national
oil company to win an oil field services contract.
• In 2008, Siemens paid a $800 million fine ($450 M to
USDJ & $350 M to the SEC) for many foreign briberies
from 2000 to 2006.
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Foreign Corrupt Practices Act
Violators
• In 2009, Control Components, Inc. paid a $18.2 M fine
for bribing officials and employees of state-owned
companies in 30 countries’
• In 2009, Avery Dennison Corp. paid $200,000 for bribing
Chinese officials.
• In 2010, GE paid $23.4 m fine to the SEC for bribing
Iraqi officials under the U.N. oil-for-food program.
• On May 10, 2011, a jury convicted Lindsay Mfg
Company, two of its executives, a Mexican sales agent
for bribing officials of Mexican state-owned utilities
company. First conviction for 34-year history of the
FCPA of 1977.
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Antiboycott Laws
Two antiboycott laws
Ribicoff Amendment to the 1976 Tax
Reform Act (TRA): Does not prohibit
conduct but denies tax benefits-foreign tax
credit: Not covered here
1977 Amendment to Export Administration
Act (EAA): Does prohibit some conducts
of exporters and facilitators
Only EAA Antiboycott laws are covered in the
chapter
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Antiboycott Laws
• EAA Antiboycott covers U.S. exports
and imports, financing, forwarding and
shipping, and banking
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Antiboycott Laws
 Prohibit U.S. exporters from
 Refusing or agreeing to refuse to do business
with others because of unsanctioned foreign
boycott
 Furnishing information about business
relationships with boycotted countries and
blacklisted companies (prohibited information)
 Prohibit Banks from Implementing letters of
credit which contain prohibited boycott
terms and conditions
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Antiboycott Laws
 Required to report receipt of boycott
requests to the, Office of Antiboycott
Compliance (OAC) Bureau of Industry and
Security (BIS), USDC on a quarterly basis
 The scope of the EAR is limited to actions
taken with intent to comply with, further, or
support an unsanctioned foreign boycott
 Also illegal to include any statement "comply
with or support an unsanctioned foreign
boycott" in commercial invoice or in any
document.
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Antiboycott Laws
 Example of Prohibited Statement
 "We are neither blacklisted by the Arab boycott of
Israel, nor are we a boycotted company, no Israel
capital is invested in our firm, no company capital
or capital of its owners is invested in any Israel
company, our products are not of Israel origin and
do not contain Israel raw material or labor."
 Most members of Arab League, except Egypt and
Jordan, boycott goods and service from Israel.
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Antiboycott Laws
• Voluntary Self-Disclosure of Antiboycott
Violations
– Voluntary Self Disclosure of violations of the
antiboycott provisions of the Export Administration
Regulations (EAR)
– To the Office of Antiboycott Compliance (OAC),
Bureau of Industry and Security, U.S. Dept of
Commerce (www.bis.doc.gov) according to the
procedures provided for in Part 764.8 of the
Regulations.
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Antiboycott Laws
Penalties
Violations of EAA Antiboycott
 Administrative (Civil) penalty:
• Denial or suspension of export privileges
• Fines of up to $11,000 per violation, and/or
• Exclusion from practice
 Criminal penalty:
• Up to $50,000 or 5 times the value of exports
involved, which is greater
• 5 years imprisonment or both
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Antiboycott Laws
Violators
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Rosement, Inc.: Fined $10,000
Brooks Instruments: Fined $7,000
Panalpina,Inc.: Fined $20,000
BDP Int’l: Fined $4,000
Best Power Technology: Fined $4,000
Itochu Project Management: Fine $4,000
Kenclaire Electrical Agencies, Inc.: Fine
$104,000
• Bailey Int’l, Inc.: Fine $4,000
• GM Daewoo Auto: $88,000 fine for 59
violations 2000-2006
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