Transcript Foreign Corruption - International Trade Relations

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BY:
Galya Brown
Lauren Cisek
Katarzyna Conolly
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* In the mid 1970’s the Securities and Exchange
Commission (SEC) started an investigation that
resulted in over 400 U.S. companies admitting
to making questionable or illegal payments in
excess of $300 million to foreign government
officials, politicians, and political parties.
* Out of these 400 companies, 117 ranked in the
top Fortune 500 industries.
* 2 major examples of these findings were:
* Lockheed bribery scandal
* Chiquita Brands- Bananagate scandal
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* As a result, Congress enacted the Foreign
Corrupt Practices Act to bring a halt to the
bribery of foreign officials and restore public
confidence and the integrity of American
businesses.
* This was later followed by an amendment in
1998 by the International Anti-Bribery Act
which was designed to apply anti-bribery to
the OECD members.
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* The act was enacted for the purpose of making
it unlawful for certain classes of persons and
entities to make payments to foreign
government officials to assist in obtaining or
retaining business.
* The FCPA has 2 provisions:
* Anti-bribery
* Accounting
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* Anti-bribery: Prohibits U.S Companies, citizens,
foreign companies listed on a U.S. stock exchange, or
any person acting while in the U.S. from corruptly
paying, offering, whether directly or indirectly, money
or anything of value to foreign officials, parties, or
candidates.
* DOJ is responsible for all criminal and civil enforcement.
* Accounting: All companies whose securities are listed
in the U.S. must meet accounting provisions such as:
* Make and keep books & records current; accurately
reflecting transactions & dispositions of assets.
* Maintain adequate system of internal accounting
controls.
* The SEC is responsible for civil enforcement.
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* International Agreements combatting
bribery and corruption:
(signed and ratified by the US and its trading partners)
*OECD Anti-Bribery Convention
*UN Convention Against Corruption
*Inter-American Convention Against Corruption
*Council of Europe Convention
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Source: The James Mintz Group, “Where the Bribes Are,” 2009. http://www.fcpamap.com/
The countries that have generated the most FCPA cases
between 1999-2009:
Nigeria (11 cases),
China (10 cases),
Iraq (10 cases)
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* BAE Systems
* Avon Products
* Siemens
* Invision Technologies
* Baker Hughes
* Titan Corporation
* IBM
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* Disregards Cultural Differences
* Rice Cake expenses in Korea.
* Historic traditions in some countries do not agree
with legislation.
* Infringes upon sovereignty of other countries
* State owned or controlled entities
* China
* Need for “relationship” companies to win contracts
in foreign countries
* Decreases the Competitiveness of U.S. Companies.
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* Willfulness
* Corporation must engage in willful criminal conduct
in order for DOJ to prosecute.
* Affirmative Defenses
* Payments may be lawful under the written laws of
foreign country.
* Lack of clarity in language/terms used in FCPA of
1977 such as:
* “Anything of value”
* How do you define value?
* “Foreign Official”
* Definition is too broad and vague
* Should employees of state owned enterprises be
considered as “foreign officials”?
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* Foreign officials are defined as “officers or
employees of foreign governments as well as any
department, agency or instrumentality thereof…
any person acting in an official capacity for or on
behalf of any government, department, agency
or instrumentality.”
* Assumed to include employees of state-owned or
controlled entities
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* Enforcement agencies interpret “foreign official”
to include:
* Government employees
* People employed by commercial enterprises that
are owned or controlled by foreign governments
(“instrumentalities”)
* Company may still be considered an instrumentality of
the government has significant share of enterprise
* Everyone employed by instrumentalities, regardless
of rank
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* Because the definition is so broad, US companies
are unable to determine when the FCPA applies and
when they are not complying with it
* Increased trade with China
* Many Chinese companies are either state-owned, statecontrolled or supervised by the State-owned Assets
Supervision and Administration Commission of the Sate
Council (SASAC)
* Difficult for US companies to know how Chinese
companies are defined under the FCPA
* Puts American companies at a disadvantage
* Difficult to identify state-owned enterprises If they
are joint ventures with multinational companies
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* Cases regarding the what constitutes a “foreign
official”
* Lindsey Manufacturing
* US vs. Carson et al.
* The “Sting” Case
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* On May 10, 2011, a California federal jury convicted two of
its executives, and a Mexican sales agent of participation in
a scheme to bribe Mexican government officials at a stateowned utility company in U.S. v. Niriega.
* The court provided a list of characteristics to identify what
qualifies as foreign official under FCPA.
* Provides a service to the citizens of the jurisdiction
* Government officials act as or appoint the key officers &
officials
* The entity is being financed through governmental
appropriations, or through revenues obtained as a result of
government-mandated taxes, licenses, fees or royalties;
* The entity is widely perceived to be performing official
functions.
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* Clarifying the definition of foreign official
* “foreign official” is defined as “any officer or
employee of a foreign government or any department,
agency, or instrumentality thereof . . . or any person
acting in an official capacity for or on behalf of any
such government or department, agency or
instrumentality. . .”
* Therefore we would like to propose an amendment to
the existing Foreign Corruption Practices Act that
further clarifies the definition of foreign officials
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* Clearly defined to include the following:
* The percentage ownership by a foreign
government that will qualify a corporation as an
“instrumentality”
* Whether ownership by a foreign official
necessarily qualifies a company as an
instrumentality
* If so, whether the foreign official must be of a
particular rank or the ownership must reach a
certain percentage threshold
* To what extent “control” by a foreign
government or official will qualify a company as
an “instrumentality.”
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* Furthermore we propose that this issue
be brought up in the next round of the
WTO.
* Therefore all countries can come into a
consensus as to what constitutes not only
on the specific term: foreign official; but
also come into an international
agreement to prevent foreign corruption
and bribery
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* It would provide the Courts for a clearer
definition of the term foreign officials, and
would leave less room for interpretation.
* U.S. Business would be able to more easily
identify entities or employees that could be
considered “foreign officials,” under the FCPA.
* Increase U.S. ease of doing business abroad
* Decrease the number of cases brought to the
courts for lack of clarity of definitions.
* Could save American companies time and
money by decreasing the number of cases they
are involved in.
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* Narrowing the definition of “foreign official” under
the statute might be interpreted as a permission to
bribe employees of those companies and thus
weaken internationally recognized significance of
FCPA
* The Department of Justice argues that narrowing
the definition of “foreign officials” is unnecessary
and ignores congressional intent
* By working through the WTO, US lawmakers will
lose the ability to determine how “foreign official”
is defined on a case-by-case basis
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* The purpose of the proposal is not to
encourage bribery but to clarify the current
legislation
* Due to increased international trade
collaboration with the WTO would put all
companies on a common ground without taking
away power from the Department of Justice
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* On US and Foreign Trade Policies
* The US, as the most experienced prosecutor of foreign
bribery, has a lot to bring to the table to share with other
countries
* The US has made huge progress in building international
coalitions to fight bribery and corruption. Because of this,
bribery and corruption have been positively battled by many
international treaties. Therefore, the US, by establishing
clear rules with regard to the term “foreign official,” will
encourage other international agencies to address this issue
* Even though anticorruption instruments are not traditionally
recognized as trade agreements, they play a significant role
in supporting open trade, leading to sustained economic
growth
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* On the Private Sector
* American companies would be able to more
easily identify entities or employees that could
be considered “foreign officials” under this
statute
* Lower risk of noncompliance with the FCPA
regulations
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References
Foreign Corrupt Practices Act. Bribery Provisions.
http://www.justice.gov/criminal/fraud/fcpa/docs/lay-persons-guide.pdf
Ingber, Matthew. "Litigation: Who Is a Foreign Official under the FCPA?" InsideCounsel. 02 June 2011. Web. 19 Nov. 2011.
http://www.insidecounsel.com/2011/06/02/litigation-who-is-a-foreign-official-under-the-fcp
McBride, Thaddeus, and Reid Whitten. "Federal Judge Upholds DOJ's Expansive Application Of FCPA : Government Contracts, Investigations &
International Trade Blog." Government Contracts, Investigations & International Trade Blog : Government Contracts Lawyer & Attorney :
Sheppard Mullin Law Firm : Bids, Licenses, Awards, Conflict of Interest. 11 May 2011. Web. 18 Nov. 2011.
http://www.governmentcontractslawblog.com/2011/05/articles/fcpa/federal-judge-upholds-dojs-expansive-application-of-fcpa/.
Lee, Judith A., and James D. Slear. “Unique problems with FCPA compliance in the People's Republic of China.” Business Law Today 16, no. 5
(2007). http://apps.americanbar.org/buslaw/blt/2007-05-06/slear.shtml
"Proposed Amendments to the FCPA." Infosec Island. 06 Nov. 2010. Web. 19 Nov. 2011.
https://www.infosecisland.com/blogview/9263-Proposed-Amendments-to-the-FCPA.html
The United States Department of Justice. Foreign Corrupt Practices Act.
http://www.justice.gov/criminal/fraud/fcpa/
Trade Compliance Center. Bribery.
http://tcc.export.gov/Bribery/index.asp
U.S. Department of State. Corruption and Bribery.
http://www.state.gov/e/eeb/cba/gc/
U.S. Securities and Exchange Commission. Division of Enforcement.
http://www.sec.gov/divisions/enforce.shtml
United States Department of Commerce. Transparency and Anti-Bribery Initiatives.
http://www.ogc.doc.gov/trans_anti_bribery.html
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